AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 9, 1997
REGISTRATION NO. 333-26439
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
AMENDMENT NO. 1
to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
SECURACOM, INCORPORATED
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 7373 22-2817302
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
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50 TICE BOULEVARD
WOODCLIFF LAKE, NEW JERSEY 07675
(201) 930-9500
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
------------------
RONALD C. THOMAS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SECURACOM, INCORPORATED
50 TICE BOULEVARD
WOODCLIFF LAKE, NEW JERSEY 07675
(201) 930-9500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------
COPIES TO:
MICHAEL JOSEPH, ESQ. THOMAS R. DENISON, ESQ.
DYER ELLIS & JOSEPH P.C. GIBSON, DUNN & CRUTCHER LLP
600 NEW HAMPSHIRE AVE., N.W. 1801 CALIFORNIA STREET
SUITE 1000 SUITE 4100
WASHINGTON, D.C. 20037 DENVER, COLORADO 80202
(202) 944-3000 (303) 298-5700
------------------
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 to be 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, please 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. |_|
------------------
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>
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 June 9, 1997
PROSPECTUS
2,000,000 SHARES
[Securacom Logo]
COMMON STOCK
Of the 2,000,000 shares of Common Stock of the Company (the "Common
Stock") offered hereby, 1,400,000 shares are being issued and sold by Securacom,
Incorporated ("Securacom" or the "Company") and 600,000 are being sold by a
stockholder of the Company (the "Selling Stockholder"). See "Principal and
Selling Stockholders." The Company will not receive any of the proceeds from the
sale of shares by the Selling Stockholder.
Prior to this offering (the "Offering"), there has been no public
market for the Common Stock. It is currently estimated that the initial public
offering price will be between $8.50 and $10.50 per share. See "Underwriting"
for a discussion of the factors to be considered in determining the initial
public offering price. Application has been made to list the Common Stock on the
Nasdaq SmallCap Market under the proposed symbol "SECU."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE
OF RISK. SEE "RISK FACTORS" AT PAGE 6.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE 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>
PRICE TO UNDERWRITING PROCEEDS TO PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2) SELLING STOCKHOLDER
<S> <C> <C> <C> <C>
Per Share................................. $ $ $ $
Total (3)................................. $ $ $ $
- ------------------------------------------ ------------------- -------------------- -------------------- ------------------
</TABLE>
(1) See "Underwriting" for information concerning the compensation and
indemnification of the Underwriters and other information.
(2) Before deducting expenses payable by the Company estimated at $520,000.
(3) The Company and the Selling Stockholder have granted the Underwriters
an option, exercisable within 30 days of the date hereof, to purchase up
to an additional 210,000 and 90,000, respectively, shares of Common Stock
solely to cover over-allotments, if any, at the Price to Public less the
Underwriting Discount. If such option is exercised in full, the total
Price to Public, Underwriting Discount, Proceeds to Company, and Proceeds
to Selling Stockholder will be $ , $ , $ , and $ , respectively. See
"Underwriting."
The shares of Common Stock are offered by the several Underwriters
subject to receipt and acceptance of such shares by them. The Underwriters
reserve the right to withdraw, cancel, or reject any order in whole or in part.
It is expected that the shares will be available for delivery against payment in
New York, New York on or about , 1997.
HANIFEN, IMHOFF INC. SCOTT & STRINGFELLOW, INC.
The date of this Prospectus is , 1997
<PAGE>
Securacom,
Incorporated
[Diagram of Services
Offered by Securacom]
Single Source Security
Through Technology
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF
THE COMMON STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN
CONNECTION WITH THE OFFERING, AND MAY BID FOR AND PURCHASE SHARES OF
COMMON STOCK IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
2
<PAGE>
Securacom, Incorporated is a fully integrated single source security company.
The Company provides consulting and planning, engineering and design, systems
integration, and maintenance and technical support services to commercial and
government clients worldwide. Securacom's capabilities enable it to provide
clients with single source turn-key solutions for medium and large scale complex
security projects. Securacom has completed security projects for airports,
corporations, utilities, prisons, universities, and federal, state and local
governments.
[Picture of New York City's [Picture of Tennessee Valley
World Trade Center] Authority Facility]
Federal, State and Local Utilities
Government
<PAGE>
[Picture of NationsBank [Picture of Processing
Headquarters] Facility]
Corporations Process and Manufacturing
Facilities
[Picture of Washington
Dulles International Airport]
Airports
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Except as otherwise indicated, all information in
this Prospectus assumes no exercise of the Underwriters' over-allotment option.
THE COMPANY
Securacom is a single-source provider of comprehensive technology-based
security solutions for medium and large commercial and government facilities in
the United States and abroad. The Company offers a broad range of services,
consisting of: (i) consulting and planning; (ii) engineering and design; (iii)
systems integration; and (iv) maintenance and technical support. The solutions
provided by the Company include integrated security systems comprised of a
command center managing one or more subsystems and components, primarily access
control systems, intrusion detection systems, closed circuit television systems,
critical condition monitoring systems and fire detection systems. The Company
is not aware of any other company providing this comprehensive range of services
on a national basis.
The Company believes that the multi-billion dollar market for
technology-based security solutions is growing rapidly due to the following
factors: (i) many existing security systems are becoming technologically
obsolete and inadequate or consist of internally incompatible subsystems,
creating a need for re-engineering, upgrading and integration; (ii)
technological advancements provide the opportunity to increase the scope and
cost-efficiency of many routine security tasks, such as the replacement of
guards with electronic surveillance; (iii) the proliferation of computers and
advanced communications systems has created a new and growing security need for
clients to prevent the misuse of proprietary information and other intellectual
property; and (iv) a number of highly publicized acts of terrorism have
heightened corporate and government officials' awareness of an increased need
for physical safety.
The security industry is highly fragmented and consists of a broad array of
equipment manufacturers and distributors, consultants and engineers and systems
integrators, each of which provides only a portion of the services required to
deliver an integrated security solution. As a result, clients are frequently
required to coordinate the planning, design and implementation of a project
through multiple service providers and vendors. This approach causes client
frustration with project delays, cost inefficiencies, lack of vendor
accountability and incompatible subsystems. Securacom believes that as a
single-source provider of security solutions it can expedite project completion
and reduce its clients' manpower requirements and aggregate project costs. In
addition, the Company has the flexibility to respond to each of its client's
particular needs, whether the client requires only one of the services offered
by the Company, various services on an ongoing basis, or a comprehensive turnkey
security solution using all of the Company's areas of expertise and its national
network of offices.
Securacom's objective is to become the leading provider of
comprehensive, high-value-added, technology-based security solutions for medium
and large commercial and government facilities in the United States and abroad.
The Company's strategy focuses on developing long-term client relationships.
These relationships allow the Company to integrate itself into clients'
decision-making processes by identifying solutions for new security systems
upgrades and other ongoing security needs. Additional key elements of the
Company's strategy include: (i) capitalizing on its position as a national
single-source
3
<PAGE>
provider of security solutions; (ii) continuing to expand its client base in
targeted industries; (iii) maintaining its high level of technological
sophistication; (iv) enhancing its ability to pursue bidding opportunities on
larger projects; and (v) continuing to focus on providing high-value-added
services.
The Company began operations in 1987 in association with a large
privately held engineering firm. In 1992, the Company became independent from
the engineering firm in conjunction with a capital infusion from a private
investment group. At the same time, the Company hired new management with
extensive experience in the security industry. Since then, the Company has
devoted a substantial amount of resources and capital to enhancing its technical
capability and services offerings, hiring and training key personnel and
expanding its client base. As part of this effort, the Company has opened four
regional offices in the United States and one international office in Moscow,
Russia. Securacom believes that it now has in place the infrastructure and
capabilities to substantially increase revenues and profitability.
As a result of these initiatives, revenues have grown from $2.4 million in
1994 to $3.2 million in 1995 and $5.8 million in 1996. The Company achieved its
first profitable quarter of operations during the three months ended March 31,
1997, with net income of $206,000 on revenues of $3.3 million. Over the past
three years, the Company has served more than 50 clients including airports,
hospitals, prisons, corporations, utilities, universities and government
facilities. Current clients include Washington Dulles International Airport,
Hewlett-Packard Company, EDS, United Airlines, Gillette Corporation, MCI
Telecommunications Corporation and New York City's World Trade Center.
RECENT DEVELOPMENTS
During the first quarter of 1997, the Company contracted to provide
services to several new clients. The Company signed an agreement to provide a
broad range of services in connection with the upgrading of Amtrak's access
control systems at eight facilities in the northeast and California.
Additionally, it contracted to prepare a security master plan for Xerox
Corporation's manufacturing and engineering facilities in Rochester, New York.
The Company also finalized an agreement to provide a comprehensive access
control system upgrade at the headquarters of Rostelecom, the primary Russian
long distance telephone service provider. This project expands Securacom's
Moscow client base which also includes Moscow Local Telephone System and US
WEST. In April, the Company signed a joint venture agreement with Ahmad N.
AlBinali & Sons Co., a large Saudi Arabian engineering and construction company,
to develop and conduct business in the Kingdom of Saudi Arabia.
The Company's headquarters are located at 50 Tice Boulevard, Woodcliff
Lake, New Jersey 07675, and its telephone number is (201) 930-9500.
4
<PAGE>
THE OFFERING
Common Stock offered by the Company 1,400,000 shares
Common Stock offered by the Selling Stockholder 600,000 shares
Common Stock to be outstanding after the Offering 5,834,140 shares(1)
Use of proceeds to the Company To repay certain indebtedness,
to expand and upgrade the
Company's management
information systems, to
further develop and document
the Company's command center
integration software and for
working capital and general
corporate purposes. See "Use
of Proceeds."
Proposed Nasdaq SmallCap Market symbol SECU
(1) Based upon the number of shares outstanding as of March 31, 1997. Does
not include 1,557,962 shares issuable upon the exercise of warrants
outstanding as of March 31, 1997, of which warrants to purchase 979,629
shares were exercisable as of that date.
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------------- -------------------------
1992 1993 1994 1995 1996 1996 1997
---------- ----------- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Earned revenues............. $6,775,971 $3,245,145 $2,395,254 $3,176,523 $5,824,448 $ 656,022 $3,297,899
Gross profit............ 381,966 341,109 808,939 996,559 1,408,062 402,137 971,676
Selling, general and
administrative
expenses................ 1,884,316 2,122,715 2,670,092 2,870,570 3,700,698 739,907 645,656
Net income (loss)........... (1,502,350) (1,781,606) (1,887,717) (1,767,692) (2,512,833) (356,623) 206,143
Net income (loss) per share. $ (1.52) $ (0.57) $ (0.52) $ (0.43) $ (0.56) $ (0.08) $ 0.04
Weighted average number of
common shares outstanding. 986,533 3,141,492 3,648,653 4,064,324 4,523,021 4,222,869 5,105,274
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1997
ACTUAL AS ADJUSTED(1)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................................................................... $ 130,741 $ 7,280,741
Working capital.............................................................................. 334,910 7,484,910
Total assets................................................................................. 6,116,761 15,266,761
Long-term debt, less current maturities...................................................... 3,300,548 111,048
Total stockholders' equity (deficiency)...................................................... (1,327,584) 11,011,916
</TABLE>
(1) As adjusted to give effect to the sale of Common Stock in the Offering by
the Company at an assumed offering price of $10.00 and the application of
the net proceeds therefrom. Does not give effect to the potential issuance
of 1,557,962 shares issuable upon the exercise of warrants outstanding as
of March 31, 1997, of which warrants to purchase 979,629 shares were
exercisable as of that date.
5
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, the
following factors should be carefully considered in evaluating an investment in
the Common Stock offered hereby.
HISTORY OF LOSSES AND ACCUMULATED DEFICIT
The Company has incurred net losses in each year since inception. The
Company reported net losses of $1.9 million, $1.8 million and $2.5 million for
the years ended December 31, 1994, 1995 and 1996, respectively. The Company's
accumulated deficit through March 31, 1997 was $12.0 million. Although the
Company reported net income of $206,000 for the three months ended March 31,
1997, its first quarter of profitable operations, there can be no assurance the
Company will maintain profitable operations in the future. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's financial statements and the notes thereto.
RISKS ASSOCIATED WITH GROWTH STRATEGY
The Company's strategy envisions a period of rapid growth that may put
a strain on its administrative and operational resources. While the Company
believes that it has established a significant infrastructure to support growth,
its ability to effectively manage growth will require it to continue to expand
the capabilities of its operational and management systems and to attract,
train, manage and retain qualified project managers, engineers and technicians.
There can be no assurance that it will be able to do so. If the Company is
unable to successfully manage its growth, the Company's business, operating
results and financial condition could be adversely affected.
DEPENDENCE UPON MANAGEMENT
The Company is dependent upon the continued services of key members of
its management, including its President and Chief Executive Officer, Ronald C.
Thomas. The loss of one or more key members of management could have a material
adverse effect on the Company. The Company does not maintain key-man life
insurance policies on members of management. See "Management."
DEPENDENCE ON LIMITED NUMBER OF CLIENTS
For the year ended December 31, 1996 the Company's three largest
clients, New York City's World Trade Center, the Metropolitan Washington Airport
Authority and MCI Telecommunications Corporation, in the aggregate, accounted
for 64% of its revenues, and three additional clients together accounted for an
additional 18% of its revenues. The Company anticipates that its three largest
clients will continue to account for the majority of its revenues during 1997.
The loss of any of the Company's major clients could adversely affect the
Company's business, operating results and financial condition. Several of the
projects for the Company's major clients will be substantially completed in
1997, and the Company's future operating results will depend on its ability to
develop future sales prospects and generate orders from new and existing
clients.
CANCELLATION OF CONTRACTS
A majority of the Company's contracts are subject to cancellation by
the Company's clients upon short notice. The Company's contracts with government
entities are subject to modification or
6
<PAGE>
termination for the convenience of the government. Although these government
contracts generally extend over several years, such contracts are typically
funded on an annual basis and may be terminated prior to completion because of
lack of funding. Contracts with corporations also frequently permit the client
to terminate the Company's services for any reason, with limited notice to the
Company. Although to date none of the Company's contracts has been terminated
prior to completion, there can be no assurance that this will not occur in the
future, resulting in a loss of a significant portion of the Company's backlog
with little warning.
EXPOSURE TO PROFESSIONAL LIABILITY
In the event of a breach of a security system designed, installed,
maintained, or engineered by the Company, the Company may be subject to a claim
that an error or omission on the part of the Company contributed to the damages
resulting from such breach, which damages could be substantial. While the
Company maintains insurance covering such risk, there can be no assurance that
such coverage, currently limited to $1.0 million, will be adequate or that such
insurance will cover all such risks associated with the Company's services. Any
such claim, even if covered by insurance, could materially and adversely affect
the Company.
COMPETITION
The security industry is highly competitive. The Company competes on a
local, regional and national level with security equipment manufacturers,
systems integrators, consulting firms and engineering and design firms. Many of
its competitors have greater name recognition and financial resources than the
Company. The Company may also face competition from potential new entrants into
the security industry or increased competition from existing competitors that
may attempt to develop the ability to offer the full range of services offered
by the Company. The Company believes that competition is based primarily on the
ability to deliver solutions that meet a client's requirements and, to a lesser
extent, on price. While the Company believes its position as the only national,
single-source provider of comprehensive, technology-based security solutions
gives it a competitive advantage, there can be no assurance that the Company's
competitors will not expand the scope of their services or that other
participants in the security industry will not enter the markets served by the
Company. There can be no assurance that the Company will be able to compete
successfully in the future against existing or potential competitors.
CONTROL BY CURRENT STOCKHOLDERS
Upon completion of the Offering, approximately 34.7% of the outstanding
shares of the Common Stock will be owned by two limited partnerships, the
general partner of which is KuwAm Corporation ("KuwAm"). Wirt D. Walker, III,
the Company's Chairman, is the Managing Director of KuwAm. Accordingly, Mr.
Walker, acting through these partnerships, may have the ability to control the
Company's Board of Directors and, therefore, the business, policies and affairs
of the Company. Such control could preclude unsolicited acquisitions of the
Company and, consequently, adversely affect the market price of the Common
Stock. The individual limited partners of such partnerships, including Mr.
Walker, will own an additional 24.9% of the outstanding Common Stock after the
Offering. See "Principal and Selling Stockholders" and "Description of Capital
Stock."
7
<PAGE>
LENGTHY SALES CYCLE
The sale of the Company's services frequently involves a substantial
commitment of resources to evaluate a potential project and prepare a proposal.
In addition, approval of proposals often involves a lengthy process due to
clients' internal procedures and capital expenditure approval processes.
Accordingly, the sales cycle associated with the Company's services is typically
lengthy and subject to certain risks that are beyond the Company's control,
including risks relating to client's budgetary constraints and internal
priorities or procedures.
FLUCTUATIONS IN QUARTERLY RESULTS
The Company's quarterly results have varied significantly in the past
and will likely continue to do so in the future due to a variety of factors,
including the timing and nature of projects from which revenues are recognized
during any particular quarter. Such fluctuations may contribute to volatility in
the market price for the Common Stock. In particular, the Company has only had
one profitable quarter to date. If the Company has one or more unprofitable
quarters in the future, the market price for the Common Stock could be adversely
affected.
BROAD DISCRETION IN APPLICATION OF PROCEEDS
Approximately $7.1 million, or 56.8%, of the estimated net proceeds of the
Offering to the Company have been allocated to working capital and general
corporate purposes. Accordingly, the Company will have broad discretion as to
the application of such proceeds. See "Use of Proceeds."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF PRICE
Prior to the Offering there has been no public market for the Common
Stock. Accordingly, there can be no assurance that an active trading market will
develop or be sustained upon completion of the Offering or that the market price
of the Common Stock will not decline below the initial public offering price.
The initial public offering price of the Common Stock will be determined by
negotiations among the Company and the Representatives of the Underwriters and
may not be indicative of the prices that will prevail in the public market. The
trading prices of the Common Stock could be subject to wide fluctuations in
response to quarter-to-quarter variations in the Company's operating results,
material announcements by the Company, general conditions in the security
industry, or other events or factors, many of which are beyond the Company's
control. In addition, the stock market as a whole and individual stocks have
experienced extreme price and volume fluctuations, which have often been
unrelated to the performance of the related corporations. The Company's
operating results in future quarters may be below the expectations of securities
analysts and investors. In such event, the price of the Common Stock will likely
decline, perhaps substantially. See "Underwriting."
ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Certificate of Incorporation and
certain provisions of the Delaware General Corporation Law may make it difficult
to change control of the Company and replace incumbent management. For example,
the Certificate of Incorporation permits the Board of Directors, without
stockholder approval, to issue additional shares of Common Stock or establish
one or more classes or series of Preferred Stock having such number of shares,
designations, relative voting rights, dividend rates, liquidation and other
rights, preferences and limitations as the Board of Directors may
8
<PAGE>
determine. In addition, the Company's Board of Directors has adopted a
stockholder rights plan that could further discourage attempts to acquire
control of the Company. See "Description of Capital Stock." The Company has also
entered into employment and consulting agreements with certain officers which
provide that upon the occurrence of certain events following certain changes in
control of the Company, such officers may be entitled to receive two times
their annual base salaries. See "Management--Employment and Consulting
Agreements." The significant ownership position of certain stockholders may also
have the effect of deterring a change of control. See "Principal and Selling
Stockholders."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Common Stock in the public market
following the Offering, or the perception that such sales might occur, could
adversely affect prevailing market prices of the Common Stock and could impair
the future ability of the Company to raise capital through the sale of its
equity securities. The Company is unable to make any prediction as to the
effect, if any, that future sales of Common Stock or the availability of Common
Stock for sale may have on the market price of the Common Stock prevailing from
time to time. Subsequent to 180 days following the Offering, the limited
partnerships that will own 2,022,127 shares of the Common Stock after the
Offering will be able to sell their Common Stock and/or distribute it to their
limited partners. Following such a distribution, the limited partners will be
able to freely sell such shares. Certain existing stockholders, holding
3,597,251 shares of Common Stock, have the right to include their shares in
future registrations of Common Stock and certain preferential rights that must
be satisfied in connection with future financings. See "Description of Capital
Stock" and "Shares Eligible for Future Sale."
DILUTION
Based on an assumed public offering price of $10.00 per share,
purchasers of the Common Stock offered hereby will incur an immediate and
substantial dilution of $8.11 per share in net tangible book value from the
initial public offering price. The Company has issued and outstanding warrants
to purchase up to 1,557,962 shares of Common Stock at exercise prices ranging
from $1.00 to $7.00 with a weighted average exercise price of $5.92 per share.
The existence of such warrants may hinder future financings by the Company and
the exercise of such warrants may further dilute the interests of all other
stockholders. The possible future resale of Common Stock issuable on the
exercise of such warrants could adversely affect the prevailing market price of
the Common Stock. Further, the holders of warrants may exercise them at a time
when the Company would otherwise be able to obtain equity capital on terms more
favorable to the Company. See "Dilution."
DIVIDENDS
The Company has never paid cash dividends on its Common Stock and does
not currently intend to pay cash dividends. It is not likely that any cash
dividends will be paid in the foreseeable future. See "Dividend Policy."
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain information and trend statements that
are forward-looking statements which involve risk and uncertainty, including
those risks discussed in the "Prospectus Summary," "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and
9
<PAGE>
Results of Operations." Actual results may differ materially from the results
described in such forward-looking statements. When used in this Prospectus, the
words "anticipate," "believe," "estimate," "expect," "intend" and other similar
expressions as they relate to the Company or its market, may be forward-looking
statements.
10
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company of the Offering, after deducting expenses
payable by the Company and assuming an initial public offering price of $10.00
per share, will be approximately $12.5 million ($14.5 million if the
Underwriters' over-allotment option is exercised in full). The Company
anticipates that it will use the net proceeds as follows: (i) approximately $3.4
million will be used to repay outstanding debentures; (ii) approximately $1.0
million will be used to expand and upgrade the Company's management information
systems; (iii) approximately $1.0 million will be used to further develop and
document the Company's command center integration software; and (iv) the balance
of approximately $7.1 million will be used for working capital and general
corporate purposes including $0.4 million for the addition of two regional
offices. The increase in working capital will enhance the Company's ability to
obtain performance bonding and thus enable it to bid on larger contracts as a
primary contractor. See "Business--Marketing." The proceeds from the debentures,
which bear interest at 10% per annum and mature on December 31, 2000, were used
for working capital, except for $700,000 thereof which was invested in a limited
partnership interest in Special Situations Investment Holdings, Ltd. ("SSIH"),
the Company's largest stockholder. See "Management--Certain Transactions" and
"Principal and Selling Stockholders." The debentures to be repaid with proceeds
of the Offering are held by certain limited partners of SSIH.
Pending application of the net proceeds as described above, the
Company intends to invest the net proceeds in short-term, interest-bearing
securities. The Company will not receive any of the proceeds from the sale of
shares by the Selling Stockholder.
DIVIDEND POLICY
The Company has never paid cash dividends on its Common Stock. The
Company currently intends to retain any earnings to finance the growth and
development of its business and does not anticipate paying cash dividends in the
foreseeable future. Any payment of cash dividends in the future will depend upon
the financial condition, capital requirements and earnings of the Company, as
well as other factors the Board of Directors may deem relevant.
11
<PAGE>
DILUTION
The Company's net tangible book value at March 31, 1997 was $(1,373,584) or
approximately $(0.31) per share. Net tangible book value per share represents
total assets, less intangible assets and total liabilities, divided by the
number of shares outstanding. After giving effect to the sale of the shares of
Common Stock offered by the Company hereby at an assumed initial offering price
of $10.00 per share and the application by the Company of the estimated net
proceeds therefrom as described in "Use of Proceeds," the net tangible book
value of the Company would have been $11.0 million, or $1.89 per share of Common
Stock. This represents an immediate increase in net tangible book value of $2.20
per share of Common Stock to existing stockholders and an immediate dilution in
net tangible book value of $8.11 per share of Common Stock to purchasers of
Common Stock in the Offering. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share....................................... $ 10.00
Net tangible book value per share before the Offering.............................. (0.31)
Increase in net tangible book value attributable to new investors.................. $ 2.20
-----------
Net tangible book value per share after the Offering.................................. $ 1.89
-----------
Dilution per share to new investors................................................... $ 8.11
===========
</TABLE>
The following table summarizes, as of March 31, 1997, the total shares
of Common Stock purchased and the total consideration and average price per
share paid by existing stockholders, and paid by the new investors purchasing
the shares offered hereby, assuming an initial public offering price of $10.00
per share.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average Price
Number Percent Amount Percent Per Share
<S> <C> <C> <C> <C> <C>
Existing stockholders............ 4,434,140 76.0% $ 10,741,335 43.4% $ 2.42
New investors.................... 1,400,000 24.0 14,000,000 56.6 10.00
----------- ---------- ------------ ------------ -------------
Total....................... 5,834,140 100.0% $ 24,741,335 100.0% $ 4.24
=========== ========== ============ ============ =============
</TABLE>
The foregoing calculations do not give effect to the exercise of (i)
outstanding warrants to purchase 1,557,962 shares of Common Stock at a weighted
average exercise price of $5.92 per share outstanding at March 31, 1997, and
(ii) options to purchase an additional 500,000 shares of Common Stock available
for issuance under the Company's stock option plan, none of which are
outstanding.
12
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at
March 31, 1997 and as adjusted to reflect the sale by the Company of the Common
Stock offered hereby, assuming an initial public offering price of $10.00 per
share and after deducting the applicable underwriting discount and estimated
expenses payable by the Company, and the application of the estimated net
proceeds therefrom as described under "Use of Proceeds." This table should be
read in conjunction with the Company's financial statements and the notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1997
ACTUAL AS ADJUSTED
<S> <C> <C>
Current maturities of long-term debt and
capital lease obligations.................................................... $ 21,454 $ 21,454
------------- --------------
Long-term debt and capital lease obligations,
less current maturities(1)................................................... 3,300,548 111,048
------------- --------------
Stockholders' equity(2):
Preferred Stock, par value of $0.01 per share,
5,000,000 shares authorized; no shares issued
and outstanding....................................................... -- --
Common Stock, par value $0.01 per share,
20,000,000 shares authorized; 4,434,140 shares
issued and outstanding; 5,834,140 shares
issued and outstanding as adjusted.................................... 44,341 58,341
Additional paid-in capital................................................ 10,644,197 23,130,197
Accumulated deficit(1).................................................... (12,016,122) (12,176,622)
----------- --------------
Total stockholders' equity (deficiency)............................... (1,327,584) 11,011,916
------------- --------------
Total capitalization.................................................. $ 1,994,418 $ 11,144,418
============= --------------
</TABLE>
(1) The as adjusted amount reflects the payment of $3,350,000 face value of
subordinated debt. The difference between the face value and the recorded
value of $3,189,500 represents $160,500 of unamortized discount, which is
reflected as an adjustment to stockholders' deficiency.
(2) Does not include 1,557,962 shares issuable upon the exercise of warrants
outstanding as of March 31, 1997, of which warrants to purchase 979,629
shares were exercisable as of that date.
13
<PAGE>
SELECTED FINANCIAL DATA
The statement of operations data set forth below for the years ended
December 31, 1994, 1995 and 1996, and the balance sheet data at December 31,
1995 and 1996 are derived from, and should be read in conjunction with, the
audited financial statements of the Company, and the notes thereto, included
elsewhere in this Prospectus. The statements of operations data set forth below
for the three months ended March 31, 1996 and 1997 and the balance sheet data at
March 31, 1997 are derived from, and should be read in conjunction with, the
unaudited financial statements of the Company, and the notes thereto, included
elsewhere in this Prospectus. The statement of operations data for the years
ended December 31, 1992 and 1993, and the balance sheet data at December 31,
1992, 1993 and 1994 are derived from audited financial statements not included
in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------------------ ----------------------
1992 1993 1994 1995 1996 1996 1997
----------- ---------- ---------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Earned revenues....................... $6,775,971 $3,245,145 $2,395,254 $3,176,523 $ 5,824,448 $ 656,022 $3,297,899
Cost of earned revenues............... 6,394,005 2,904,036 1,586,315 2,179,964 4,416,386 253,885 2,326,223
---------- ---------- ---------- ---------- ----------- --------- ----------
Gross profit....................... 381,966 341,109 808,939 996,559 1,408,062 402,137 971,676
Selling, general and administrative
expenses........................... 1,884,316 2,122,715 2,670,092 2,870,570 3,700,698 739,907 645,656
---------- ---------- ---------- ---------- ----------- --------- ----------
Operating income (loss)............ (1,502,350) (1,781,606) (1,861,153) (1,874,011) (2,292,636) (337,770) 326,020
Interest and financing fees........... (34,181) (101,707) (241,716) (21,851) (127,276)
Interest and other income............. 7,617 208,026 21,519 2,998 7,399
---------- ---------- ---------- ---------- ----------- --------- ----------
Net income (loss).................. (1,502,350) (1,781,606) (1,887,717) (1,767,692) (2,512,833) (356,623) 206,143
========== ========== ========== ========== =========== ========= ==========
Net income (loss) per share........ $ (1.52) $ (0.57) $ (0.52) $ (0.43) $ (0.56) $ (0.08) $ 0.04
========== ========== ========== ========== =========== ========= ==========
Weighted average number of
shares outstanding.............. 986,533 3,141,492 3,648,653 4,064,324 4,523,021 4,222,869 5,105,274
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, March 31,
1992 1993 1994 1995 1996 1997
----------- ---------- ---------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............ $ 232,219 $ 236,979 $ 265,692 $ 555,345 $ 609,342 $ 130,741
Working capital (deficit)............ 105,051 682,965 (30,676) 696,079 150,880 334,910
Total assets......................... 1,298,648 1,999,391 2,033,846 3,045,942 4,567,087 6,116,761
Long-term debt, less current maturities -- 25,359 6,289 597,000 2,657,399 3,300,548
Total stockholders' equity (deficiency) 42,583 702,447 315,673 554,106 (1,595,727) (1,327,584)
</TABLE>
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is a single-source provider of comprehensive, technology-based
security solutions for medium and large commercial and government facilities in
the United States and abroad. The Company offers a broad range of services,
including: (i) consulting and planning; (ii) engineering and design; (iii)
systems integration; and (iv) maintenance and technical support.
The Company began operations in 1987 in association with a large
privately held engineering firm. As a start-up, the Company expended significant
capital on the development of the Company's business and infrastructure, and it
accumulated losses of approximately $2.8 million from 1987 through 1991 on
aggregate revenues of approximately $17.2 million. The Company's revenues from
1990 through 1994 were generated primarily by a contract to design and integrate
extensive security upgrades at three nuclear facilities for the Tennessee Valley
Authority (the "TVA"). In 1992, the Company became independent from the
engineering firm in conjunction with a capital infusion from a private investor
group. At the same time, the Company hired new management with extensive
expertise in the security industry. Since 1992, the Company has devoted a
substantial amount of resources and capital to enhancing its technical
capability and services offerings, hiring and training key personnel and
expanding its client base. As part of this effort, the Company opened four
regional offices in the United States and one international office in Moscow,
Russia.
The Company derives its revenues primarily from long-term, fixed-price
contracts. Earnings are recognized based upon the Company's estimates of the
cost and percentage of completion of individual contracts. Earned revenues equal
the project's total contract amount multiplied by the proportion that direct
project costs incurred on a project bear to estimated total project costs.
Project costs include direct labor and benefits, direct material, subcontract
costs, project related travel and other direct expenses.
Clients are invoiced based upon negotiated payment terms for each
individual contract. Terms usually include a 25% downpayment and the balance as
stages of the work are completed. Maintenance contracts are billed either in
advance, monthly, or quarterly. As a result, the Company records as an asset
costs and estimated earnings in excess of billings and as a liability billings
in excess of costs and estimated earnings.
RESULTS OF OPERATIONS
The following table sets forth the percentages of earned revenues
represented by certain items reflected in the Company's statements of
operations.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------- --------------------
1994 1995 1996 1996 1997
---------- ----------- ----------- --------- --------
<S> <C> <C> <C> <C> <C>
Earned revenues................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of earned revenues........................ 66.2 68.6 75.8 38.7 70.5
--------- --------- --------- --------- --------
Gross profit................................ 33.8 31.4 24.2 61.3 29.5
Selling, general and administrative expenses... 111.5 90.4 63.5 112.8 19.6
--------- --------- --------- --------- --------
Operating income (loss)..................... (77.7) (59.0) (39.3) (51.5) 9.9
Interest and financing fees.................... (1.4) (3.2) (4.2) (3.3) (3.9)
Interest and other income...................... 0.3 6.5 0.4 0.5 0.2
--------- --------- --------- --------- --------
Net income (loss)........................... (78.8)% (55.7)% (43.1)% (54.3)% 6.2%
========= ========= ========= ========= =======
</TABLE>
15
<PAGE>
THREE MONTHS ENDED MARCH 31, 1997 COMPARED WITH THREE MONTHS
ENDED MARCH 31, 1996
Revenues increased by more than 400% from $0.7 million in the three months
ended March 31, 1996 to $3.3 million in the three months ended March 31, 1997.
The increase was due to work completed for new clients and an increase in work
completed on existing projects. Revenues from the World Trade Center project,
which commenced in October 1996, were $1.9 million in the first three months of
1997. In addition, revenues from the Metropolitan Washington Airport Authority
increased from $0.3 million in the first three months of 1996 to $0.7 million in
the first three months of 1997. In addition, $0.1 million of revenue was
recognized in the first three months of 1997 on a project for which all of the
costs were accrued during 1996.
Cost of earned revenues increased from $0.3 million in the three months
ended March 31, 1996 to $2.3 million in the three months ended March 31, 1997,
primarily due to the increase in revenues. Gross margin declined from 61.3% in
the first three months of 1996 to 29.5% in the first three months of 1997. The
reason for the decline in gross margin is that in the first three months of 1996
there was a one-time adjustment of $0.2 million to the cost of earned revenues
to reflect a reduction in a subcontractor's costs upon the final closeout of the
TVA project. Net of this adjustment, gross margin was 25.0% in the first three
months of 1996.
Selling, general and administrative expenses decreased by 12.7% from
$0.7 million in the three months ended March 31, 1996 to $0.6 million in the
three months ended March 31, 1997, due to a $0.1 million reduction in legal fees
relating to certain litigation.
Interest expense and financing fees increased 482.5% from $0.02 million
in the three months ended March 31, 1996 to $0.1 million in the three months
ended March 31, 1997 due to an increase in outstanding indebtedness resulting
from the issuance of $2.1 million of subordinated debentures during 1996 and
$700,000 of subordinated debentures during the first three months of 1997.
Net income increased from a net loss of $0.4 million in the three
months ended March 31, 1996 to net income of $0.2 million in the three months
ended March 31, 1997. This increase in net income was primarily due to the
significant increase in revenues while selling, general and administrative
expenses remained constant.
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995
Revenues increased by 83.4% from $3.2 million in 1995 to $5.8 million
in 1996. In October 1996, the Company was awarded an $8.3 million contract as
part of the security upgrade at the World Trade Center. Revenues of $1.6 million
were recognized from this project in 1996. Work for the Metropolitan Washington
Airport Authority increased by $1.0 million from $0.2 million in 1995 to $1.2
million in 1996. Work for MCI Telecommunications Corporation increased by $0.2
million from $0.6 million in 1995 to $0.8 million in 1996.
Cost of earned revenues increased by 102.6% from $2.2 million in 1995
to $4.4 million in 1996 primarily due to the increase in revenues. Gross margin
declined from 31.4% in 1995 to 24.2% in 1996 as a result of a change in the mix
of work performed. In 1996, a greater proportion of the work performed involved
system integration projects, which historically have had lower margins than the
other services provided by the Company. The Company believes that its gross
margin will be less sensitive to changes in the mix of work performed in the
future because it recently has changed its pricing strategy to yield
16
<PAGE>
margins on its systems integration projects consistent with its other work and
has reduced its material costs through volume discounts as the Company has
achieved a greater volume of sales.
Selling, general and administrative expenses increased by 28.9% from
$2.9 million in 1995 to $3.7 million in 1996. The increase was due to increases
in legal fees of $0.4 million incurred in the successful defense of certain
litigation, increased staffing expense of $0.3 million and increased office
expenditures of $0.1 million. The increases in staffing and office expenditures
were due to the Company's investment in infrastructure and capabilities to
accommodate future growth in revenues.
Interest expense and financing fees increased 137.7% from $0.1 million
in 1995 to $0.2 million in 1996 as a result of the issuance of $2.1 million of
10% subordinated debentures during 1996.
The net loss increased 42.2% from $1.8 million in 1995 to $2.5 million
in 1996 as a result of lower project margins, higher selling, general and
administrative expenses, increased financing fees, and proceeds from a
litigation settlement of $0.2 million which was recognized in 1995.
YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994
Revenues increased by 32.6% from $2.4 million in 1994 to $3.2 million
in 1995. Contract revenue from the TVA project in 1994 was $1.6 million as
compared with $1.3 million in 1995. Revenue from work completed for MCI was $0.1
million in 1994 as compared with $0.6 million in 1995. In 1995, the Company also
initiated and completed work on the Baltimore Correctional Intake Facility,
resulting in revenue of $0.4 million during that year. The Company's first major
preventive maintenance contract for Dulles Airport (Metropolitan Washington
Airport Authority) was also initiated in 1995 and generated revenue of $0.3
million.
Cost of earned revenues increased by 37.4% from $1.6 million in 1994 to
$2.2 million in 1995 due primarily to the increase in revenue. Gross margin on
projects declined from 33.8% in 1994 to 31.4% in 1995 as a result of a change in
the mix of work performed to include a greater proportion of system integration
projects in 1995.
Selling, general and administrative expenses increased 7.5% from $2.7
million in 1994 to $2.9 million in 1995. The increase was due to an increase in
staffing and office rents.
Interest expense and financing fees increased 197.6% from $0.03 million
in 1994 to $0.1 million in 1995.
The net loss of $1.8 million represents a $0.1 million improvement from
the net loss of $1.9 million in 1994 as the higher volume of work and the
proceeds of a litigation settlement more than offset the impact of lower margins
and higher spending for selling, general and administrative expenses and
interest expense.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of cash have been the proceeds from
private placements of Common Stock and notes from 1992 through 1995 and of
subordinated debentures and warrants during 1995 and 1996. During each of those
years, the Company's operations had negative cash flows as the Company increased
its marketing efforts, opened new offices and hired additional staff to support
17
<PAGE>
anticipated growth. The net use of cash from operations in 1994, 1995 and 1996
was $1.9 million, $1.9 million and $1.6 million, respectively.
From 1992 through 1995, members of the KuwAm private investor group
purchased an aggregate of 3.6 million shares of Common Stock at a total purchase
price of $8.3 million, generating net proceeds to the Company of $8.0 million,
and $0.5 million aggregate principal amount of 10% demand notes, generating an
equal amount of net proceeds to the Company. The demand notes were converted in
1995 into 103,000 shares of Common Stock.
In addition, from 1995 through March 31, 1997, members of the same
investor group purchased $3.4 million aggregate principal amount of 10%
subordinated debentures, together with warrants to purchase 478,580 shares of
Common Stock at an exercise price of $7.00 per share, generating net proceeds to
the Company of $3.2 million. In 1996, an additional $0.2 million was raised
through the exercise of warrants by members of the Board of Directors.
The Company's anticipated capital requirements include approximately
$0.4 million to open two new regional offices during 1997, $1.0 million to
expand and upgrade its management information systems, $1.0 million to further
develop and document its command center integration software and $3.4 million to
repay outstanding subordinated debentures. The Company intends to fund these
requirements with its net proceeds from the Offering and other available working
capital. See "Use of Proceeds."
The Company has in the past experienced cash flow shortages. The
Company believes that the net proceeds of the Offering and cash generated from
future operations will enable it to meet its cash requirements for the
foreseeable future and enable it to pursue its current plans for expansion.
18
<PAGE>
BUSINESS
GENERAL
Securacom is a single-source provider of comprehensive technology-based
security solutions for medium and large commercial and government facilities in
the United States and abroad. The Company offers a broad range of services,
including: (i) consulting and planning; (ii) engineering and design; (iii)
systems integration; and (iv) maintenance and technical support. This full range
of capabilities enables the Company to provide its clients with any combination
of these services or complete turnkey solutions for complex security projects.
The solutions provided by the Company include integrated security systems
comprised of a command center managing one or more subsystems or components,
primarily access control systems, intrusion detection systems, closed circuit
television systems, critical condition monitoring systems and fire detection
systems. The Company is not aware of any other company providing this
comprehensive range of services on a national basis.
The Company began operations in 1987 in association with a large
privately held engineering firm. In 1992, the Company became independent from
the engineering firm in conjunction with a capital infusion from a private
investment group. At that time, the Company also hired new management, including
its current Chief Executive Officer, who was formerly Vice President, Integrated
Systems of ADT Security Systems, Inc. and has over 20 years of experience in
security system engineering and design and project planning. Since 1992, the
Company has devoted a substantial amount of resources and capital to enhancing
its technical capability and services offerings, hiring and training key
personnel and expanding its client base. As part of this effort, the Company has
opened four regional offices in the United States and one international office
in Moscow, Russia. The Company currently plans to open additional regional
offices in Boston and Chicago in 1997.
INDUSTRY OVERVIEW
The Company believes that the multi-billion dollar market for
technology-based security solutions is growing rapidly due to the following
factors: (i) many existing security systems are becoming technologically
obsolete and inadequate or consist of internally incompatible subsystems,
creating the need for their re-engineering, upgrading and integration; (ii)
technological advancements provide the opportunity to increase the scope and
cost-efficiency of many routine security tasks, such as the replacement of
guards with electronic surveillance; (iii) the proliferation of computers and
advanced communications systems has created a new and growing security need to
prevent the misuse of proprietary information and other intellectual property;
and (iv) a number of highly publicized acts of terrorism have heightened
corporate and government officials' awareness of an increased need for physical
safety.
The security industry is highly fragmented and consists of a broad
array of equipment manufacturers and distributors, consultants and engineers and
systems integrators, each of which provides only a portion of the services
required to deliver an integrated security solution. Due to the lack of
single-source providers, the implementation of a medium or large scale security
project has traditionally been performed by a number of different parties. A
company interested in establishing or enhancing a security system typically
retains a consulting firm to define objectives, analyze requirements, and
prepare engineering and design specifications. The security specifications are
then distributed to systems integrators to obtain proposals to implement the
project. The systems integrator in turn, engages software and hardware
manufacturers and installation contractors to perform the components of the
project. In addition, companies seeking to implement security systems at
multiple locations may have to purchase separate systems for each location from
different vendors. This approach causes client frustration with project delays,
cost inefficiencies, lack of vendor accountability and incompatible subsystems.
In
19
<PAGE>
addition, the Company believes that as security systems are becoming more
technologically advanced, clients are recognizing that in-house personnel
lack the skills and time necessary to coordinate security projects and that
outsourcing such responsibilities offers significant cost and efficiency
advantages.
THE SECURACOM SOLUTION
The Company believes that as a single-source provider of comprehensive
technology-based security solutions it can expedite project completion and
reduce its client's manpower requirements and aggregate project costs. The
Company has the flexibility to respond to its clients' particular needs, whether
the client requires only one of the services offered by the Company, various
services on an ongoing basis, or a comprehensive turnkey security solution which
capitalizes on all of the Company's expertise and its national network of
offices.
The continually evolving security requirements of commercial and
government entities, together with rapidly advancing technology, provide
numerous opportunities for the Company to assist its clients with their
security needs. The services required throughout this process are generally
divided into the following four phases:
Consulting and Planning
Maintenance and Technical Support
Systems Integration
Engineering and Design
A client's security requirements at any particular time may involve services in
only one phase of this cycle or may necessitate a complete solution. The Company
is able to begin a new client relationship during any phase; however, new
relationships typically begin with a consulting or maintenance contract. The
following key attributes of Securacom enable it to provide comprehensive
solutions:
Experience and Expertise. The Company has a wide range of experience,
having provided security solutions to airports, hospitals, prisons,
corporations, utilities, universities and government facilities. The Company's
senior managers have an average of 17 years experience in security systems and
related industries, and its technical and engineering employees have an average
of 11 years of security industry experience. The Company applies this
specialized industry expertise to effectively manage the entire security
solution process.
Network of Regional Offices. The Company's network of regional offices
enables it to provide a consistently high level of service to its national
clients with geographically dispersed facilities. Securacom believes that
clients value the access to company personnel and timely service made possible
by the close proximity of its offices. Additionally, the Company believes that
the regional offices allow it to capitalize on local marketing opportunities.
20
<PAGE>
Technological Sophistication. Securacom and its personnel have
expertise in the design, development and implementation of advanced security
system technology. The Company emphasizes continuing education and training and
recruits skilled engineers and technicians. The Company believes that its
expertise enables it to offer its clients technologically advanced security
solutions, which enhance system effectiveness and reduce operating costs. For
example, the Company has developed its Engineered Maintenance System ("EMS"), a
database system used by the Company to effectively manage a security system's
components, maintenance planning and scheduling, and costs.
Independence from Vendors. The Company has made a strategic decision
not to represent any equipment manufacturer exclusively, thereby maintaining
objectivity and flexibility in equipment selection. This independence allows the
Company to offer solutions utilizing components that best meet its clients'
needs. In addition, the Company believes that this objectivity generates trust
because clients understand that equipment selection is based upon their needs
and not the Company's relationship with any particular manufacturer.
Quality Control. Securacom has implemented a company-wide system of
quality control policies and procedures designed to ensure that all of its
services are of consistently high quality. All engineering and design work is
reviewed by senior members of the technical staff, and all work is subject to
periodic review and inspection by senior management.
STRATEGY
Securacom's objective is to become the leading provider of
comprehensive, high-value-added, technology-based security solutions for medium
and large commercial and government facilities in the United States and abroad.
The Company's strategy is focused on the following elements:
Maintain and Develop Long-Term Relationships. The Company focuses on
pursuing and maintaining long-term client relationships. These long-term
relationships allow the Company to integrate itself into the client's
decision-making process by identifying solutions for new security requirements,
system upgrades and other ongoing security needs. The Company believes that the
demand by large commercial or governmental clients for security services is
growing. Demand is generated whenever a client identifies new security
requirements, requires changes in existing systems to accommodate changes in its
operations and facilities, upgrades its existing systems, or needs ongoing
maintenance of such systems. The Company seeks to establish long-term
relationships that provide such recurring revenue opportunities and has found
that clients that initially retain the Company in a limited capacity frequently
engage it to provide a broader range of services as the relationship develops.
For example, the Company's relationship with MCI started with an initial
consulting contract at a single location and has grown into a relationship in
which the Company has provided design, project management and maintenance
services to over 90 MCI facilities.
Focus on High-Value-Added Services. The Company focuses on providing
services that require a high degree of technical skill and expertise, such as
engineering, design and project management. The Company subcontracts services
requiring lower skill levels and intermittent use of personnel for short
periods, such as wire installation and basic construction. By concentrating on
high-value-added services, the Company believes that it will face less
competition, improve its gross margin and be in a position to leverage its
resources to effectively and efficiently manage a greater number of projects.
21
<PAGE>
Capitalize on Position as a National Single-Source Provider of Security
Solutions. To become a national provider of comprehensive security solutions,
Securacom has expanded its capabilities and its geographic presence from two to
five domestic locations since 1992. Each regional office has the capability to
offer the full range of security services, either directly or by utilizing the
resources of the Company's other offices. The Company's centralized financial
management and design and engineering staffs support the regional operations.
The Company believes that its national presence enables it to provide effective
and timely service to large clients with multiple locations. The Company intends
to utilize this national infrastructure to expand its client base.
Continue to Expand Client Base in Targeted Industries. The Company
intends to target several key industries and facility types that it believes
have substantial and increasing requirements for security services. These
include facilities for which security systems are required by regulation such as
airports and nuclear power plants, as well as facilities of telecommunication
and technology companies. The Company believes that the expertise it has
developed in providing services to such facilities and industries will enable it
to effectively compete for and service additional clients with similar
requirements.
Enhance Ability to Pursue Bidding Opportunities. Many large projects
require prime contractors to furnish performance bonds in amounts that the
Company has not had sufficient financial strength to obtain. As a result, the
Company currently participates in such projects as a subcontractor or through
joint ventures, which are generally less profitable than those in which it is
the prime contractor. The proceeds of the Offering will enable the Company to
obtain performance bonds necessary to pursue substantial new projects as a prime
contractor.
Maintain High Level of Technological Sophistication. Securacom
maintains a high level of technological sophistication in an industry that is
increasingly dependent upon advanced technology. The Company believes that it
has been a leader in applying advanced technology to meet clients' needs in a
cost-effective manner. The Company is developing proprietary command center
integration software to effectively manage the various subsystems of a single
site or the systems at multiple sites. The Company intends to maintain a high
level of technical expertise in its employees by emphasizing continuing
education and training and by recruiting additional highly skilled engineers and
technicians.
INTEGRATED SECURITY SYSTEMS
Integrated security systems are comprised of one or more subsystems and
components that perform a variety of security functions for a facility or group
of facilities under the direction of a single command center. The command center
consists of a central processor, a common database and software that enable
various subsystems and components to communicate with each other and integrate
the subsystems and components into a single system. Subsystems and components
consist primarily of the following:
Access control systems, which are designed to exclude unauthorized
personnel from specified areas and provide access control that is
typically card-activated. Entry and exit activity can be monitored or
recorded and may be controlled on the basis of time and authority
level.
Intrusion detection systems, which incorporate ultrasonic, infrared,
microwave and other sensors to detect unauthorized door and window
openings, glass breakage, vibration, motion and noise, and alarms and
other peripheral equipment.
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Closed circuit television systems, which monitor and record entry and
exit activity or provide surveillance of designated areas. These
systems can deter theft and vandalism and support other access control
systems. They can be monitored either by a video recorder or by a
monitoring screen.
Critical condition monitoring systems, which provide supervision of
various systems and processes such as sprinkler systems, heating and
refrigeration systems, power levels, water levels and general
manufacturing processes.
Fire detection systems, which incorporate heat, ionization, smoke and
flame sensing devices, manual pull stations, evacuation sounders and
systems, sprinkler systems and elevator controls.
SERVICES
The Company offers a full range of security services, consisting of: (i)
consulting and planning; (ii) engineering and design; (iii) systems integration;
and (iv) maintenance and technical support. At the beginning of each new client
relationship, the Company designates one of its professional staff as the client
service contact. This individual is the focal point for communications between
the Company and the client and often acts as the client's project manager for
all of its security needs. The Company's engagement may include one or more of
the elements described below.
Consulting and Planning. Security consulting and planning are the
initial phases of determining a security solution for a project. The Company has
developed a planning process that identifies all systems, policies and
procedures that are required for the successful operation of a security system
that will both meet a client's current needs and accommodate its projected
future requirements. The Company's consulting and planning process includes the
following steps:
o Identify the client's objectives and security system requirements
o Review the existing security system plan
o Survey the site, including inventory of physical components
and software and evaluation of client's existing
infrastructure and security system
o Identify and prioritize the client's vulnerabilities
o Develop and evaluate system alternatives
o Recommend a conceptual security plan design
o Estimate the cost of implementing the conceptual plan
o Develop a preliminary implementation schedule
As a result of this process, the Company provides the client with a
master plan for security services which recommends an effective security
solution that addresses routine operating needs as well as emergency situations.
The Company believes that its comprehensive planning process enables its clients
to budget for their security requirements on a long-term basis, identify
opportunities for cost reduction and prepare for future risks.
Engineering and Design. The engineering and design process involves
preparation of detailed project specifications and working drawings by a team of
the Company's engineers, systems designers and computer-aided design system
operators. These specifications and drawings detail the instrument sensitivity
requirements, layout of the control center, placement of equipment and
electrical requirements. Throughout the engineering and design process, the
Company utilizes its expertise in advanced
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<PAGE>
technologies and its understanding of its client's operational preferences to
design a system that is functional, cost-effective and accommodates the client's
present and future requirements. In addition, the Company attempts to
incorporate its client's existing personnel, equipment and other physical
resources into the system design.
When retained as a single-source provider for turnkey security
solutions, the Company also selects the system components required under the
specifications and drawings it has prepared. To the extent possible, the Company
uses off-the-shelf equipment to minimize the cost of developing custom
equipment. The Company has made a strategic decision not to represent any
equipment manufacturer exclusively, thereby maintaining objectivity and
flexibility in equipment selection. The Company believes that its technical
proficiency with the products of a wide range of manufacturers enables it to
select components that will best meet a project's requirements.
Systems Integration. Systems integration involves (i) equipment
procurement; (ii) custom systems modeling and fabrication; (iii) facility
installation; (iv) hardware, software and network integration; and (v) system
validation and testing. In addition to these basic integration services, the
Company provides engineering services to enhance the compatibility of the
client's subsystems. The Company prepares technical documentation of the system
and operations manuals and provides on-site training to client personnel.
Under the supervision of a project manager, the Company's technicians
conduct hardware installation, hardware and software integration, system
validation and testing. The aspects of systems integration that do not require a
high level of technical expertise, such as wire installation and basic
construction, are typically performed by the Company's subcontractors.
Maintenance and Technical Support. The Company provides maintenance and
technical support services on a scheduled, on-call, or emergency basis. These
services include developing and implementing maintenance programs both for
security systems designed, engineered, or integrated by the Company and for
existing systems.
Maintenance services offered by the Company include its EMS, a database
used by the Company to effectively manage a security system's components,
maintenance planning and scheduling, and costs. The system configuration
function monitors system activity and capacity, and identifies the need to
reconfigure or expand the system. The system maintenance function schedules and
records maintenance activity, and identifies equipment replacement and upgrading
requirements.
MARKETING
The Company's marketing activities are conducted on both national and
regional levels. The Company obtains engagements through direct negotiation with
clients, competitive bid processes and
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<PAGE>
referrals. At the national level, the Company conducts analyses of various
industries and targets those with significant potential demand for security
solutions. At a regional level, under the supervision of senior management, each
office develops and implements a marketing plan for its region. The plan
identifies prospective clients within the region and sets forth a strategy for
developing relationships with them. Each regional office works with the
headquarters office in expanding relationships with existing national clients to
include facilities within the region.
The Company has identified several key industries or facility types
that it believes have substantial and increasing requirements for security
services, including telecommunication and technology companies, corporate
complexes and industries and facilities for which security systems are required
by regulation. The Company has developed expertise in the security regulations
applicable to airports, pharmaceutical companies, prisons and nuclear utilities.
See "--Clients" and "Management."
The Company's marketing strategy emphasizes developing long-term
relationships with clients so that the Company can provide additional services
as the clients' security requirements evolve. The Company undertakes significant
pre-assessment of a prospective client's needs before an initial contact is
made. A long-term relationship typically begins with an engagement to provide
consulting and planning or maintenance and technical support services.
Consulting and planning assignments place the Company in an advantageous
position, often as the client's project manager, to be engaged to implement the
plan ultimately adopted by the client. Engagements for maintenance and technical
support enable the Company to identify new requirements as they arise and to
offer its solutions to such requirements.
The Company employs a variety of pricing strategies for its services.
Proposals for consulting services are priced based on an estimate of hours
multiplied by standard rates. Systems integration engagements are priced based
upon the estimated cost of the components of the engagement, including
subcontractors and equipment, plus a profit margin. Pricing for engineering and
maintenance services vary widely depending on the scope of the specific project
and the length of engagement. All proposals are reviewed by the Company's senior
management.
Many projects require that the primary contractor obtain a performance
bond in the amount of the contract. The amount of bonding that the Company is
able to obtain depends upon the level of its working capital and net worth. The
Company believes that its ability to compete for larger projects as a primary or
independent contractor, rather than through a joint venture or subcontract
arrangement, has been constrained by its inability to obtain adequate bonding.
The Company believes that the proceeds of the Offering will enable it to obtain
bonding of between approximately $50 million and $75 million and thus enhance
its ability to bid for larger projects as a primary contractor which is
generally more profitable than participation as a subcontractor or through a
joint venture.
The Company currently conducts limited international operations from
its Moscow office from which it has provided services to several clients in
Moscow. In April 1997, the Company signed a joint venture agreement with Ahmad
N. AlBinali & Sons Co., a Saudi Arabian engineering and consulting company, to
develop and conduct business in the Kingdom of Saudi Arabia. The Company is
evaluating several additional opportunities to expand its international
operations, which it anticipates it will initially undertake through joint
ventures or partnerships with local and international companies.
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<PAGE>
CLIENTS
During the past three years the Company has provided services to
approximately 50 clients, including airports, hospitals, prisons, corporations,
utilities, universities and government facilities. The Company's clients have
included the following:
Airports and Aviation Corporations
Fresno Airport EDS
United Airlines Gillette Corporation
Washington-Dulles International Airport Hewlett-Packard Company
Washington National Airport Lazard Freres
Yuma International Airport Mary Kay Cosmetics
MCI Telecommunications Corporation
Mobil Corporation
NationsBank
US WEST
Government Other
Los Alamos National Laboratory City of Baltimore Central
Sandia National Laboratory Booking and Intake Facility
Tennessee Valley Authority Moscow Local Telephone System
U.S. Department of Energy New York City's World Trade Center
U.S. Navy Rostelecom
Rowan County (N.C.) Prison
University of Texas
Although in some cases the Company serves as a subcontractor and does
not have a direct contractual relationship with its clients, it is typically
selected or approved by the client and develops a close working relationship
with the client.
During 1996, the World Trade Center, the Metropolitan Washington
Airport Authority (operator of both Washington National and Washington Dulles
airports), and MCI accounted for 28%, 22% and 14% of the Company's earned
revenues, respectively. The loss of any of these clients could have a material
adverse effect upon the Company's business, operating results and financial
condition. Although these clients each accounted for a substantial portion of
the Company's revenues, work performed for them was comprised of multiple
projects and, in the case of MCI, was performed for multiple facilities.
COMPETITION
The security industry is highly competitive. The Company competes on a
local, regional and national basis with systems integrators, consulting firms
and engineering and design firms. The Company believes that it is the only
provider offering its comprehensive range of services on a national basis. As a
result, the Company competes with different companies depending upon the nature
of the project and the services being offered. For example, the Company has
competed with Johnson Controls, Science Applications International Corporation
and Sensormatic for systems integration work, and Lockwood Greene and Holmes &
Narver for consulting and planning and engineering and design work. Many of its
competitors have greater name recognition and financial resources than the
Company. The Company's competitors also include equipment manufacturers and
vendors that also provide security services. The
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<PAGE>
Company may face future competition from potential new entrants into the
security industry and increased competition from existing competitors that may
attempt to develop the ability to offer the full range of services offered by
the Company. The Company believes that competition is based primarily on the
ability to deliver solutions that effectively meet a client's requirements and,
to a lesser extent and primarily in competitive bid situations, on price. There
can be no assurance that the Company will be able to compete successfully in the
future against existing or potential competitors.
The Company's ability to compete for larger projects as a primary
contractor has been constrained by its inability to obtain adequate bonding. The
Company believes that the proceeds of the Offering will substantially improve
its ability to obtain bonding and thus enhance its ability to compete for larger
projects. See "--Marketing."
BACKLOG
The Company's backlog consists of confirmed orders, including the
balance of projects in process. The backlog also includes projects for which the
Company has been notified it is the successful bidder even though a binding
agreement has not been executed. Projects for which a binding contract has not
been executed may be canceled at any time. Binding contracts may also be subject
to cancellation or postponement, although cancellation generally obligates the
client to pay the costs incurred by the Company. During the last two years none
of the Company's contracts were canceled prior to completion. Long-term
maintenance contracts may be canceled without cause. As of December 31, 1995 and
1996, the Company's backlog was approximately $1.3 million and $8.3 million,
respectively. Backlog as of December 31, 1996 includes projects having a value
of approximately $0.5 million for which binding contracts have not been executed
and includes $1.2 million in projects that are not expected to be completed
during 1997. Backlog orders as of any particular date may not be indicative of
actual operating results for any fiscal period. There can be no assurance that
any amount of backlog will be realized.
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<PAGE>
EMPLOYEES
As of March 1997, the Company had 56 employees, of which 17 were based
in the Company's headquarters office in New Jersey and the balance in its four
regional offices and its office in Moscow. Three of the Company's employees are
engaged exclusively in marketing and sales, 45 in engineering, project
management and technical functions and eight in administration. Most members of
senior management, project managers and technical staff devote a portion of
their time to marketing activities. Approximately 57% of the Company's employees
have degrees in engineering or other technical fields. None of the Company's
employees are represented by a labor union, and the Company believes that its
employee relations are good.
INTELLECTUAL PROPERTY
In addition to the Engineered Maintenance System, the Company is developing
command center software that permits the integration of multi-vendor security
systems into a unified, integrated system. The Company intends to utilize a
portion of the proceeds of the Offering to complete development and
documentation of this software.
The Company relies on a combination of various methods to establish and
protect its proprietary rights. In addition, it limits access to and
distribution of its proprietary information. These measures afford limited
protection, and there can be no assurance that the steps the Company takes to
protect its proprietary rights will be adequate to prevent misappropriation of
its intellectual property or the independent development by others of similar
technology.
INSURANCE
The Company maintains in force commercial umbrella liability insurance
with coverage of $10 million per occurrence and $10 million in the aggregate,
with a $10,000 deductible. The Company also maintains a $1.0 million insurance
policy to cover any error or omission by the Company that may result in a breach
of a security system designed, installed, maintained, or engineered by the
Company. There is no assurance that the amount of insurance carried by the
Company would be sufficient to protect it fully in the event of a significant
liability claim; however the Company believes that the amounts and coverages of
its insurance are reasonable and appropriate for its business operations. There
is no assurance that such insurance will continue to be available on
commercially reasonable terms, and the Company may elect not to retain liability
insurance at any time.
FACILITIES
The Company's headquarters office is located in Woodcliff Lake, New
Jersey, where the Company leases approximately 7,600 square feet of office space
under a lease that expires in 2000. In addition, the Company leases between
approximately 2,000 and 4,000 square feet of office space in each of the
Atlanta, Dallas, San Francisco and Washington, D.C. metropolitan areas to
support its regional operations. The Company believes that its facilities are
adequate and suitable for its current operations, and that additional space is
readily available if needed to support future growth.
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<PAGE>
LEGAL PROCEEDINGS
Although the Company is a defendant in certain suits arising from the
normal conduct of its business, management does not believe that the resolution
of this litigation will have a material adverse effect on the Company's
financial position, results of operations, or cash flows. This litigation
includes a suit pending in the United States District Court for the District of
New Jersey in which the plaintiff alleges, among other things, that the Company
has infringed the plaintiff's claimed service mark. The Company believes the
claim is without merit. Trial is set for September 1997.
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MANAGEMENT
The directors and executive officers of the Company are:
NAME AGE POSITION
Wirt D. Walker, III....................... 51 Chairman and Director
Ronald C. Thomas.......................... 52 President, Chief Executive
Officer and Director
Larry M. Weaver........................... 47 Executive Vice President,
Chief Operating Officer
and Chief Financial Officer
Charles C. Sander......................... 48 Senior Vice President
Franklin M. Sterling...................... 64 Senior Vice President
Albert A. Weinstein....................... 66 Vice President
Matthew V. Wharton........................ 35 Vice President
Michael V. Toto........................... 52 Vice President
Jon W. Balakian........................... 39 Vice President
R. Michael Lagow.......................... 39 Vice President
Mishal Yousef Saud Al Sabah............... 36 Director
Marvin P. Bush(1)......................... 40 Director
Robert B. Smith, Jr.(1)................... 60 Director
(1) Member of Compensation Committee and Audit Committee.
WIRT D. WALKER, III has served as a director of the Company since 1987, and
as Chairman since 1992. Mr. Walker is a director and the Managing Director of
KuwAm, a private investment firm founded in 1982. He has also served as Chairman
of Commander Aircraft Company and Advanced Laser Graphics, Inc. since 1991.
RONALD C. THOMAS has served as President, Chief Executive Officer and
director since 1992. Prior to joining the Company, Mr. Thomas was employed for
16 years by ADT Security Systems Inc., a subsidiary of ADT Ltd., the world's
largest electronic security protection company. During his tenure at ADT, he
held a variety of management positions involving systems engineering and design,
project planning and marketing and business unit management, and was Vice
President, Integrated Systems from 1988 to 1992. Mr. Thomas is Chairman of the
Standing Committee on Physical Security of the American Society for Industrial
Security ("ASIS"), a member of the Board of Directors of the Closed Circuit
Television Manufacturers Association, a member of the Institute of Electrical
and Electronic Engineers ("IEEE"), a member of the National Society of
Professional Engineers and a member of the National Fire Protection Association
("NFPA"). He is a past member of the Nuclear Standards Subcommittee of the IEEE,
the Proprietary Fire Systems Subcommittee of NFPA and the Architect/Engineer
Subcommittee of ASIS.
LARRY M. WEAVER has served as Executive Vice President, Chief Operating
Officer and Chief Financial Officer since June 1996. Prior to joining the
Company, Mr. Weaver was employed by The Conduit and Foundation Corporation, most
recently as its Chief Financial Officer from July 1995 to June 1996. Previously,
Mr. Weaver was employed, from 1988 to 1995, as Group Vice President of Finance
at William Bowman Associates, Inc., a residential real estate site development
company, and from 1980 to 1988, as Partner and Finance Manager at Skelly and
Loy, an energy and environmental consulting and
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<PAGE>
engineering firm. Mr. Weaver has also served as Assistant Controller at Buell
Division of Envirotech and was a Senior Accountant at Price Waterhouse.
CHARLES C. SANDER has served as Senior Vice President for the
Mid-Atlantic Region since 1993. From 1988 to 1992 Mr. Sander was president of
his own aviation consulting firm which he sold to Ogden Services Corporation in
1992. From 1992 to 1993 Mr. Sander was employed as President of the Technical
and Maintenance Services Division of Ogden. Prior to starting his own company,
Mr. Sander had been employed since 1972 by Baltimore/Washington International
Airport, where he served in a variety of positions, most recently as Deputy
Chief, Airport Operations.
FRANKLIN M. STERLING has served as Senior Vice President for the
Western Region since August 1995. Prior to joining the Company, Mr. Sterling
served as President of Franklin M. Sterling and Assoc., Inc., an engineering
consulting firm specialized in integrated building control systems, which he
founded in 1987. Previously, Mr. Sterling was employed by the Bechtel
Corporation for sixteen years, most recently as a project manager for a Bechtel
subsidiary, and has held positions with ITT Data Services and the RCA
Corporation. Mr. Sterling presently serves as Chairman of the Airport
Consultants Council Security System Standards Committee and is a member of the
Federal Aviation Administration's Advisory Committee on Security System
Standards. He is a senior member of the IEEE, the IEEE Control System Society,
the American Society for Industrial Security, the National Fire Protection
Association, the Construction Specification Institute and the National and
California Societies of Professional Engineers.
ALBERT M. WEINSTEIN has served as Vice President overseeing corporate
engineering and design since 1989. Prior to joining the Company, Mr. Weinstein
was Vice President and General Manager of the Electronic Security Systems
Division of Stoller Company, a nuclear consulting company, for 17 years.
MATTHEW V. WHARTON has served as Vice President for the Southwest
Region since 1994. From 1993 to 1994 he served as Manager of Consulting
Engineering for the Company. Prior to joining the Company, Mr. Wharton worked
from 1992 to 1993 as Director of Sales and Marketing for Integrated Security
Control Systems, a California security company.
MICHAEL V. TOTO has served as Vice President for the Northeast Region
since 1994. Prior to joining the Company, Mr. Toto served as a communications
engineer with ADT Security Systems, Inc.
for two years.
JON W. BALAKIAN has served as Vice President for the Southeast Region
since 1996. Prior to joining the Company, Mr. Balakian was a senior manager of
the national physical security program for MCI Telecommunications since 1990.
R. MICHAEL LAGOW has served as Vice President for Business Development
since August 1993. Prior to joining the Company, Mr. Lagow was employed as
National Sales Manager of Control Systems International, a security systems
company, since 1991.
MISHAL YOUSEF SAUD AL SABAH has served as a director of the Company
since 1987. Since 1982, Mr. Al Sabah has been the Chairman of the Board of
Directors of KuwAm. He has also served as a director of Advanced Laser Graphics,
Inc. and Commander Aircraft Company since 1991.
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<PAGE>
MARVIN P. BUSH has served as a director of the Company since 1993. Mr.
Bush is a director of the Winston Partners Group, Inc., a private investment
firm he founded in 1994, and has been a member of the Board of Directors of
Kerrco Inc., an oil and gas company, since 1989. Prior to founding the Winston
Group, Mr. Bush was a partner at John Stewart Darrell & Company, an investment
advisory firm, and was employed by Shearson Lehman Brothers as a Vice
President/Financial Consultant.
ROBERT B. SMITH, JR. has served as a director of the Company since 1995.
Mr. Smith has been a private investor since 1984, and has been a director of
Sunshine Mining Company, a New York Stock Exchange listed silver mining company,
since 1993. He has been a trustee for the Dalkon Shield Claimants Trust, a
public interest trust created to compensate those damaged by the Dalkon Shield,
since 1989. Mr. Smith was formerly Chief Counsel and Staff Director of the
Senate Government Operations Committee.
The Company's Certificate of Incorporation and By-Laws provide that
members of the Company's Board of Directors are elected annually and hold office
until their successors are elected.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established a Compensation Committee and an
Audit Committee. The Compensation Committee reviews on behalf of, and makes
recommendations to, the Board of Directors with respect to the compensation of
executive officers and administers the Company's option plans and makes
recommendations to the Board of Directors with respect to the plans and the
grant of options to persons eligible under the plans. The Audit Committee's
functions include recommending to the Board of Directors the engagement of the
Company's independent public accountants, reviewing with such accountants the
plans for and the results and scope of their auditing engagement and certain
other matters relating to their services provided to the Company, including the
independence of such accountants.
DIRECTOR COMPENSATION
All members of the Board of Directors, including the Company's officers
who are also Board members, receive a fee of $10,000 per year. In addition, each
director is granted options annually to purchase 15,000 shares of Common Stock
at an exercise price equal to the fair market value of such stock on the date of
grant, which vest in annual increments of one-third. All directors are
reimbursed for out-of-pocket expenses incurred in attending meetings of the
Board of Directors or committees thereof and for other expenses incurred in
their capacities as directors.
EMPLOYMENT AND CONSULTING AGREEMENTS
The Company has entered into employment agreements with Messrs. Thomas
and Weaver, to serve in their respective current positions until March 31, 2002
and 2000, respectively, at annual base salaries of $165,000 and $125,000,
respectively. Both agreements provide for annual bonuses, periodic salary
increases and grants of stock options in the sole discretion of the Board of
Directors. In the event either executive's employment is terminated without
cause, he is entitled to continue to receive the salary and certain other
benefits provided for in such agreement for the remainder of its term. If such
termination occurs following a "change in control" of the Company, he is
entitled to receive an additional payment equal to two times his annual base
salary in effect at the time of such change in control. For purposes of the
employment agreements, a change in control occurs upon certain changes in the
stock
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ownership of the Company or upon certain changes in the membership of the Board
of Directors of the Company. A termination following a change in control of the
Company includes certain reductions of the executive's duties and
responsibilities, reductions in the salary paid to the executive, changes in the
location of the executive's office or a failure by the Company to obtain the
written assumption of the employment agreements by any successor of the Company.
The Company has also entered into a consulting agreement with Mr. Walker, to
provide strategic and corporate development services through March 31, 2002 for
an annual fee of $140,000. The consulting agreement also contains provisions
parallel to those of the executive employment agreements.
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned in the year
ended December 31, 1996 by the Chief Executive Officer and each of the most
highly compensated executive officers whose individual remuneration exceeded
$100,000 for the fiscal year (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
Other
Name and Principal Annual All Other
Position Salary Bonuses Compensation Compensation
<S> <C> <C> <C> <C>
Ronald C. Thomas
President and CEO.............. $ 136,078 $ 35,000 $ 10,000(1) $ 28,000(2)
Charles C. Sander
Senior Vice President.......... $ 131,090 $ 25,000 $ 10,000(1) $ --
</TABLE>
(1) Consists of director fees.
(2) In May 1996 Mr. Thomas acquired 53,320 shares of Common Stock upon the
exercise of options, for which the Company waived the exercise price of
$0.53 per share. This amount equals the aggregate exercise price of such
options.
OPTION GRANTS IN FISCAL YEAR 1996
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
Percent of Value at Assumed
Number of Total Options Annual Rates of
Shares Granted to Stock Price
Underlying Employees Exercise Appreciation for
Options in Fiscal Year Price Expiration Option Term(1)
Name Granted 1996 Per Share Date 5% 10%
---- ------------ ------------- ---------- --------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ronald C. Thomas 25,000 7.9 $ 7.00 2/5/99 $ 27,584 $ 57,925
Charles C. Sander 25,000 7.9 $ 7.00 2/5/99 $ 27,584 $ 57,925
</TABLE>
(1) Based upon an estimated initial public offering price of $10.00 per share
and on annual appreciation of such value, through the expiration date of
such options, at the stated rates. These amounts represent assumed rates of
appreciation only and may not necessarily be achieved. Actual gains, if
any, depend on the future performance of the Common Stock, as well as the
continued employment of the Named Executive Officers for the full term of
the options.
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<PAGE>
AGGREGATED OPTION EXERCISES IN 1996
AND OPTION VALUES AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
Number of Number of Value of Unexercised
Shares Underlying Unexercised In-the-Money
Acquired Warrants/Options at Warrants/Options at
on Value December 31, 1996 December 31, 1996(1)
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Ronald C. Thomas 53,320 $ 533,200 159,382 25,000 $1,434,438 $ 75,000
Charles C. Sander -- -- 58,333 41,667 $ 291,665 $ 158,335
</TABLE>
(1) Represents an amount equal to the difference between an estimated initial
public offering price of $10.00 per share of the Company's Common Stock
minus the option exercise price, multiplied by the number of unexercised
options at December 31, 1996.
1997 STOCK OPTION PLAN
The Company has reserved 500,000 shares of Common Stock for issuance
upon the exercise of options under its 1997 Stock Option Plan (the "Stock Option
Plan").
The Stock Option Plan provides for the granting to eligible
participants of options to purchase Common Stock of two types: those that
qualify as "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and those that do not
qualify as incentive stock options, or "non-qualified options." Key employees,
officers, directors and consultants of the Company are eligible to participate
in the Stock Option Plan. The Stock Option Plan is administered by the Board of
Directors, which determines the persons who are to receive options, the terms
and number of shares subject to each option and whether the option is an
incentive stock option or a non-qualified option.
Incentive stock options and non-qualified options may not be granted at
a purchase price less than the fair market value of the Common Stock on the date
of the grant or, for an incentive stock option granted to a person holding
more than 10% of the Company's voting stock, at less than 110% of fair market
value. Aside from the maximum number of shares of Common Stock reserved under
the Stock Option Plan, there is no minimum or maximum number of shares that may
be subject to options. However, the aggregate fair market value of the stock
subject to incentive stock options granted to any optionee that are exercisable
for the first time by an optionee during any calendar year may not exceed
$100,000. Options generally expire three months after the optionee is no longer
an employee of the Company. Options may not be transferred other than by will or
the laws of descent and distribution, and during the lifetime of an optionee may
be exercised only by the optionee. The term of each option, which is fixed by
the Board of Directors at the time of grant, may not exceed ten years from the
date the option is granted (except that according to Section 422(a) of the Code
an incentive stock option granted to a person holding more than 10% of the
Company's voting stock may be exercisable only for five years).
As of March 31, 1997, the Company had granted no options under the
Stock Option Plan.
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CERTAIN TRANSACTIONS
The following information relates to certain transactions since January
1, 1994 in which executive officers, directors, stockholders and other related
persons had an interest. All of such transactions were on terms approved by the
members of the Board of Directors who did not have an interest in such
transactions.
In 1996, the Company purchased a 114B aircraft from Commander Aircraft
Company ("Commander") for $335,000, the list price of the aircraft, which is the
price at which Commander typically sells to retail customers. KuwAm is the
general partner of two stockholders of the Company that currently own in the
aggregate approximately 59% of the outstanding common stock of Commander, and
Wirt Walker, III, the Chairman of the Company, is the Chairman of Commander and
the Managing Director of KuwAm.
During the years 1993 through 1996, the Company paid investment banking
fees to KuwAm of 5% of the capital raised from the private sale of Common Stock
and subordinated debentures to SSIH and affiliated entities. The Company paid
approximately $79,000, $77,000, $103,000 and $35,000 of investment banking fees
under the agreements during 1994, 1995, 1996 and 1997 respectively, which have
been recorded as a reduction of proceeds from sales of equity securities and
interest and financing fees for sales of subordinated debentures.
From time to time, the Company has issued securities to certain of its
officers and directors in private transactions. During 1994, the Company sold an
aggregate of 316,000 shares of Common Stock to SSIH and certain of its limited
partners at a purchase price of $5.00 per share. Also during 1994, the Company
issued promissory notes having an aggregate principal amount of $515,000 to SSIH
for an equal amount of cash proceeds. The notes, which bore interest at an
annual rate of 10% per year, were converted into 103,000 shares of Common Stock
in June 1995. In 1995, the Company issued an aggregate of 247,500 shares of
Common Stock to KuwAm, SSIH, Special Situations Investment Holdings, L.P. II
("SSIH II") and certain of their limited partners at a purchase price of $5.00
per share and an aggregate of 35,294 shares to such entities and persons at a
purchase price of $8.50 per share. In March 1996, KuwAm, Fifth Floor Company for
General Trading and Contracting, a stockholder of the Company, and Mr. Walker
acquired 53,320, 186,620 and 133,300 shares of Common Stock, respectively, upon
exercise of previously outstanding warrants at an exercise price of $0.53 per
share. In May 1996, Ronald C. Thomas acquired 53,320 shares of Common Stock upon
the exercise of options, for which the Company waived the $0.53 per share
exercise price, and Marvin P. Bush, through Andrews-Bush, Inc., of which he is
president, acquired 53,897 shares of Common Stock upon exercise of previously
outstanding warrants at an exercise price of $0.52 per share.
The Company borrowed $75,000 from SSIH II in September 1995 and
$125,000 from KuwAm in October 1995 evidenced by 10% demand notes that were
repaid in 1996.
During 1995, 1996 and 1997 the Company sold $3.4 million aggregate
principal amount of subordinated debentures (the "Debentures") together with
warrants to purchase 478,580 shares of Common Stock at an exercise price of
$7.00 per share to certain limited partners of SSIH. The net proceeds from the
sale of the Debentures, after deduction of the 5% investment banking fee payable
to KuwAm and other expenses, were $3.2 million. The Debentures, all of which
will be repaid with proceeds from the Offering, bear interest at 10% per annum
and provide for repayment of the principal
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<PAGE>
as follows: $837,500 on December 31, 1998, $837,500 on December 31, 1999 and
the balance on December 31, 2000.
Between January 1 and March 10, 1997, an aggregate of $700,000 of the
proceeds from the Debentures was invested in limited partnership interests of
SSIH. At the end of each year, the Company has the option of requiring SSIH to
redeem the limited partnership interests at their then fair market value less a
liquidation fee of up to 1%. The proceeds of such redemption are payable, at
SSIH's option, in cash or portfolio securities of SSIH. Because the assets of
SSIH include both publicly traded and privately held securities, the value of
the SSIH portfolio may be materially different than the cost of the Company's
investment. KuwAm, of which Mr. Walker is the Managing Director and Mr. Al Sabah
is Chairman, is the general partner of SSIH. Under the terms of the limited
partnership subscription agreement, KuwAm received 3% of the amount of the
Company's investment as reimbursement for accounting, legal and administrative
expenses related to the organization and operation of the partnership. In
addition, pursuant to SSIH's limited partnership agreement, KuwAm receives (i)
an annual administration fee equal to 2% of SSIH's assets and (ii) an annual
capital appreciation fee equal to 10% of the increase in the value of SSIH's
assets in each year. The Company does not intend to make such investments in
related parties in the future.
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<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of the date hereof, and as adjusted to reflect
the sale of the shares offered hereby, by (i) each person who is known by the
Company to be the beneficial owner of 5% or more of the outstanding Common
Stock, (ii) each director, (iii) each named executive officer and (iv) all
directors and executive officers as a group. The Company believes that the
individuals listed below each have sole voting and investment power with respect
to such shares, except as otherwise indicated in the footnotes to the table.
Unless otherwise indicated below, the business address of each person listed is:
c/o Securacom, Incorporated, 50 Tice Boulevard, Woodcliff Lake, New Jersey
07675.
<TABLE>
<CAPTION>
Shares Beneficially Owned Shares to be Shares Beneficially
Name and Address Prior to Offering(1) Sold in Owned After Offering(1)
of Beneficial Owner Number Percent Offering Number Percent
<S> <C> <C> <C> <C> <C>
KuwAm Corporation
2600 Virginia Avenue, N.W.
Washington, DC 20037(2)........... 2,622,127 59.1% -- 2,022,127 34.7%
Special Situation Investment
Holdings, Ltd.
c/o KuwAm Corporation
2600 Virginia Avenue, N.W.
Washington, D.C. 20037(2)......... 2,464,333 55.6% 600,000 1,864,333 32.0%
Special Situation Investment
Holdings, L.P. II
c/o KuwAm Corporation
2600 Virginia Avenue, N.W.
Washington, DC. 20037(2).......... 157,794 3.6% -- 157,794 2.7%
Fifth Floor Company for General
Trading and Contracting........... 366,707 8.3% -- 366,707 6.3%
Wirt D. Walker, III(2)(3)............. 2,941,822 66.2% -- 2,341,822 40.1%
Ronald C. Thomas...................... 246,035 5.3% -- 246,035 4.1%
Marvin P. Bush(4)..................... 62,230 1.4% -- 62,230 1.1%
Mishal Yousef Saud Al Sabah(2)(5)..... 3,000,227 67.5% -- 2,400,227 41.1%
Franklin M. Sterling.................. 63,333 1.4% -- 63,333 1.1%
Charles C. Sander..................... 75,000 1.7% -- 75,000 1.3%
Larry M. Weaver....................... -- * -- -- *
Robert B. Smith, Jr................... 16,667 * -- 16,667 *
All officers and directors as a
group (8 persons)................. 3,783,187 79.5 -- 3,183,187 51.7
</TABLE>
* Represents beneficial ownership of less than one percent of the outstanding
Common Stock.
(1) Beneficial ownership is determined in accordance with the rules of the
Commission, and includes voting power and investment power with respect to
shares. Shares issuable upon the exercise of outstanding stock options that
are currently exercisable or become exercisable within 60 days from the date
hereof are considered outstanding for the purpose of calculating the
percentage of Common Stock owned by such person but not for the purpose of
calculating the percentage of Common Stock owned by any other person. The
number of stock options that are exercisable within 60 days of the date
hereof is as follows: Mr. Walker, 8,333; Mr. Thomas, 167,715; Mr. Bush,
8,333; Mr. Smith, 16,667; Mr. Al Sabah, 8,333; Mr. Sterling, 38,333; and
Mr. Sander, 75,000.
(2) KuwAm is the general partner of SSIH and SSIH II. The stockholders of
KuwAm include Wirt D. Walker, III and Mishal Yousef Saud
Al Sabah. Mr. Walker is also the Managing Director and Mr. Al Sabah is
the Chairman of KuwAm. Shares beneficially owned by KuwAm
consist of 2,464,333 shares held by SSIH (1,864,333 shares after the
Offering) and 157,794 shares held by SSIH II.
(3) Consists of 2,464,333 shares held by SSIH (1,864,333 shares after the
Offering), 157,794 shares held by SSIH II, 248,302 shares held by Mr.
Walker, 13,060 shares held by Mr. Walker's son, 50,000 shares held by a
trust for the benefit of Mr. Walker's son and options to purchase 8,333
shares held by Mr. Walker.
(4) Consists of 53,897 shares held by Andrews-Bush, Inc., and options to
purchase 8,333 shares held by Mr. Bush.
(5) Consists of 2,464,333 shares held by SSIH (1,864,333 shares after the
Offering), 157,794 shares held by SSIH II, 366,707 shares held by Fifth
Floor Company for General Trading and Contracting, of which Mr. Al Sabah is
Chairman, 3,060 shares held by Mr. Al Sabah's son and options to purchase
8,333 shares held by Mr. Al Sabah.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon consummation of the Offering, the authorized capital stock of the
Company will consist of 20,000,000 shares of Common Stock, $0.01 par value per
share, of which 5,834,140 shares will be issued and outstanding, and 5,000,000
shares of Preferred Stock, $0.01 par value per share, none of which will be
issued and outstanding.
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held of
record on all matters to be voted on by the stockholders. There is no cumulative
voting with respect to the election of Directors, with the result that the
holders of a majority of the shares of Common Stock voting for the election of
Directors can elect all of the Directors then up for election. The holders of
Common Stock are entitled to receive dividends when, as, and if declared by the
Board of Directors out of funds legally available therefor. In the event of
liquidation, dissolution, or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining which are available
for distribution to them after payment of liabilities and after provision has
been made for each class of stock having preference over the Common Stock.
Holders of shares of Common Stock, as such, have no conversion, preemptive, or
other subscription rights, and there are no redemption provisions applicable to
the Common Stock. All of the outstanding shares of Common Stock are fully paid
and nonassessable.
PREFERRED STOCK
The Board of Directors is authorized, without further approval or
action by the stockholders, to issue shares of Preferred Stock in one or more
series and to determine the rights, preferences, privileges and restrictions
thereof, including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences, sinking fund terms and number of shares
constituting any series of Preferred Stock or the designation of such series.
The rights of the holders of Common Stock will generally be subject to
the prior rights of the holders of any outstanding shares of Preferred Stock
with respect to dividends, liquidation preferences and other matters. Among
other things, the Preferred Stock could be issued by the Company to raise
capital or finance acquisitions. The Preferred Stock could have certain
anti-takeover effects under certain circumstances. The issuance of shares of
Preferred Stock could enable the Board of Directors to render more difficult or
discourage an attempt to obtain control of the Company by means of a merger,
tender offer, or other business combination transaction directed at the Company
by, among other things, placing shares of Preferred Stock with investors who
might align themselves with the Board of Directors, issuing new shares to dilute
stock ownership of a person or entity seeking control of the Company, or
creating a class or series of Preferred Stock with class voting rights.
The Company has no current plans to issue any shares of its Preferred
Stock.
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<PAGE>
DELAWARE ANTI-TAKEOVER LAW
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law. Section 203 provides, with certain exceptions, that a
Delaware corporation may not engage in certain business combinations with a
person or affiliate or associate of such person who is an "interested
stockholder" for a period of three years from the date such person became an
interested stockholder unless: (i) the transaction resulting in the acquiring
person's becoming an interested stockholder, or the business combination, is
approved by the board of directors of the corporation before the person becomes
an interested stockholder; (ii) the interested stockholder acquires 85% or more
of the outstanding voting stock of the corporation in the same transaction that
makes it an interested stockholder (excluding shares owned by directors who are
also officers, and excluding certain employee stock option plans); and (iii) on
or after the date the person becomes an interested stockholder, the business
combination is approved by the corporation's board of directors and by the
holders of at least two-thirds of the corporation's outstanding voting stock at
an annual or special meeting, excluding shares owned by the interested
stockholder. Except as otherwise specified in Section 203, an "interested
stockholder" is defined as (a) any person that is the owner of 15% or more of
the outstanding voting stock of the corporation, (b) any person that is 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, or (c) the
affiliates and associates of any such person. By restricting the ability of the
Company to engage in business combinations with an interested person, the
application of Section 203 to the Company may provide a barrier to hostile or
unwanted takeovers. Under Delaware law, the Company could have opted out of
Section 203 but elected to be subject to its provisions.
CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE OF INCORPORATION AND BY-LAWS
Requirements for Advance Notification of Stockholder Nomination and
Proposals. The Company's By-Laws require 60 to 90 days' notice to the Company
with regard to stockholder proposals and the nomination, other than by or at the
direction of the Board of Directors or a committee thereof, of candidates for
election as directors. Such notice must provide specified information, including
information regarding the ownership of Common Stock by the person giving the
notice, information regarding the proposal or the nominees and information
regarding the interest of the proponent in the proposal or the nominations.
Special Meetings of Stockholders; Actions by Written Consent. The
Company's Certificate of Incorporation and By-Laws provide that special meetings
of stockholders of the Company may only be called by the Chairman of the Board,
the President, or a majority of the then authorized number of Directors. This
provision precludes stockholders from calling a special meeting and taking
actions opposed by the Board of Directors. The Certificate of Incorporation also
provides that stockholder action cannot be taken by written consent in lieu of a
meeting.
Limitation of Director Liability. The Company's Certificate of
Incorporation limits the liability of Directors to the Company and its
stockholders to the fullest extent permitted by Delaware law. Specifically,
under current Delaware law, a director will not be personally liable for
monetary damages for breach of the director's fiduciary duty as a director,
except liability (i) for a breach of the director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions by a director not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for liability arising under Section 174 of the Delaware General
Corporation Law (relating to the declaration of dividends and
39
<PAGE>
purchase or redemption of shares in violation of the Delaware General
Corporation Law), or (iv) for any transaction from which the director derived an
improper personal benefit. The inclusion of this provision in the Company's
Certificate of Incorporation may have the effect of reducing the likelihood of
derivative litigation against directors and may discourage or deter stockholders
or management from bringing a lawsuit against directors for breach of their duty
of care.
Supermajority Provisions. The Company's Certificate of Incorporation
provides that the vote of the Board of Directors or the affirmative vote of at
least two-thirds of the then outstanding shares of capital stock entitled to
vote generally in the election of Directors, voting as a single class, is
required to amend, repeal, or alter any of the Company's By-Laws or the
foregoing provisions contained in the Company's Certificate of Incorporation.
RIGHTS PLAN
Prior to the consummation of the Offering, there will be a dividend
distribution of one right (a "Right") for each outstanding share of Common Stock
of the Company to stockholders of record at the close of business on the date
that the Offering is completed (the "Record Date"). The Board of Directors will
further authorize the issuance of one right for each share of Common Stock that
shall become outstanding between the Record Date and the earlier of the Final
Expiration Date (as defined herein) and the date the Rights are redeemed. Except
as described below, each Right, when exercisable, entitles the registered holder
thereof to purchase from the Company one one-thousandth of a share of Special
Preferred Stock, par value $0.01 per share (the "Special Preferred Shares"), at
a price of $80.00 (the "Purchase Price"), subject to adjustment. Therefore, the
dividend will have no significant initial value and no significant impact on the
financial statements of the Company. The description and terms of the Rights are
set forth in the Rights Agreement (the "Rights Agreement") between the Company
and American Securities Transfer & Trust, Inc., as Rights Agent. A copy of a
form of the Rights Agreement has been filed with the Commission as an exhibit to
the registration statement of which this Prospectus is a part. This summary of
certain provisions of the Rights Agreement and the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement.
Initially, the Rights will be evidenced by Common Stock certificates
representing shares then outstanding, and no separate certificates evidencing
the Rights will be distributed. Until the earlier to occur of (i) 10 days
following a public announcement that a person or group of affiliated or
associated persons, with certain limited exceptions (an "Acquiring Person"), has
acquired, or obtained the right to acquire, beneficial ownership of capital
stock of the Company representing 15% or more of the voting power of the Company
(the "Shares Acquisition Date") or (ii) 10 business days (or such later date as
may be determined by action of the Board of Directors prior to the time that any
person becomes an Acquiring Person) following the commencement of (or a public
announcement of an intention to make) a tender or exchange offer if, upon
consummation thereof, such person or group would be the beneficial owner of
capital stock of the Company representing 15% or more of the voting power of the
Company (such date being called the "Distribution Date"), the Rights will be
evidenced by the Common Stock certificates and not by separate certificates.
The Rights Agreement provides that, until the Distribution Date, the
Rights will be transferred with, and only with, the Common Stock. Until the
Distribution Date (or earlier redemption, expiration, or termination of the
Rights), the transfer of any Common Stock certificates will also constitute the
transfer of the Rights associated with the Common Stock represented by such
certificates. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right
40
<PAGE>
Certificates") will be mailed to holders of record of the Common Stock as of the
close of business on the Distribution Date and, thereafter, such separate Right
Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date, and will
expire upon the earliest of (i) the close of business on the tenth anniversary
of the date of the Rights Agreement (the "Final Expiration Date"), (ii) the
redemption of the Rights by the Company as described below, or (iii) the
exchange of all Rights for Special Preferred Shares as described below.
A person will not become an Acquiring Person under the Rights Agreement
if such person is the Company or an affiliate of the Company or obtained 15% or
more of the voting power of the Company through (i) an issuance of Common Stock
by the Company directly to such person (for example, in a private placement or
an acquisition by the Company in which Common Stock is used as consideration) or
(ii) a repurchase by the Company of Common Stock.
In the event that any person or group becomes an Acquiring Person, each
holder of a Right will thereafter have the right to receive, upon exercise at
the then current exercise price of the Right, shares of Common Stock (or, in
certain circumstances, cash, property or other securities of the Company) having
a value equal to two times the exercise price of the Right.
In the event that, at any time following a Shares Acquisition Date, the
Company is acquired by the Acquiring Person in a merger or other business
combination transaction or 50% or more of the Company's assets or earning power
are sold to the Acquiring Person, proper provision will be made so that each
holder of a Right will thereafter have the right to receive, upon exercise at
the then current exercise price of the Right, common stock of the acquiring or
surviving company having a value equal to two times the exercise price of the
Right.
Notwithstanding the foregoing, following the occurrence of any of the
events set forth in the preceding two paragraphs (the "Triggering Events"), any
Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person will immediately
become null and void.
The Purchase Price payable, the number of Special Preferred Shares,
shares of Common Stock or other securities or property issuable upon exercise of
the Rights and the number of Rights outstanding, are subject to adjustment from
time to time to prevent dilution, among other circumstances, in the event of a
stock dividend on, or a subdivision, split, reverse split, combination,
consolidation or reclassification of, the Special Preferred Shares or the Common
Stock.
With certain exceptions, no adjustment to the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% to
the Purchase Price. Upon the exercise of a Right, the Company will not be
required to issue fractional Special Preferred Shares or fractional shares of
Common Stock (other than fractions in multiples of one one-hundredth of a
Special Preferred Share) and, in lieu thereof, an adjustment in cash may be made
based on the market price of the Special Preferred Shares or Common Stock on the
last trading date prior to the date of exercise.
At any time after a person or group becomes an Acquiring Person and
prior to the acquisition by such person or group of capital stock of the Company
representing 50% or more of the voting power of the Company, the Board of
Directors may exchange the Rights (other than Rights owned by such
41
<PAGE>
person or group, which will become void), in whole or in part, at an exchange
ratio of one share of Common Stock per Right (subject to adjustment).
At any time after the date of the Rights Agreement until the earlier of
the time that a person becomes an Acquiring Person or the Final Expiration Date,
the Board of Directors may redeem the Rights in whole, but not in part, at a
price of $0.01 per Right (the "Redemption Price"), which may (at the option of
the Company) be paid in cash, shares of Common Stock, or other consideration
deemed appropriate by the Board of Directors. Upon the effectiveness of any
action of the Board of Directors ordering redemption of the Rights, the Rights
will terminate and the only right of the holders of Rights will be to receive
the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
The provisions of the Rights Agreement may be amended by the Company,
except that any amendment adopted after the time that a person becomes an
Acquiring Person may not adversely affect the interests of holders of Rights.
Upon consummation of the Offering, each outstanding share of Common
Stock will receive one Right.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
without conditioning the offer on the Rights being redeemed or a substantial
number of Rights being acquired by the Acquiring Person. Under certain
circumstances the Rights beneficially owned by such a person or group may become
void. The Rights should not interfere with any merger or other business
combination approved by the Board of Directors because, if the Rights would
become exercisable as a result of such merger or business combination, the Board
of Directors may, at its option, at any time prior to the time that any person
or entity becomes an Acquiring Person, redeem all (but not less than all) of the
then outstanding Rights at the Redemption Price.
CERTAIN AGREEMENTS WITH STOCKHOLDERS
The Company and certain stockholders who will hold 3,597,251 shares of
Common Stock following the offering are parties to stock purchase agreements
which give them certain rights of refusal, "tagalong" rights and registration
rights. The rights of refusal give the stockholders certain first rights to
purchase securities of the Company that the Company proposes to issue and sell.
The tagalong rights require a stockholder who proposes to sell a majority of the
shares of capital stock of the Company to arrange for the purchase of all the
remaining shares of the Company's capital stock held by the remaining
shareholders at a price and on terms as favorable as those applicable to the
sale of the offeror's shares. For a description of the registration rights, see
"Shares Eligible for Future Sale."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is American
Securities Transfer & Trust, Inc.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this Offering, there has been no public market for the Common
Stock. Sales of substantial amounts of shares of Common Stock in the public
market could adversely affect market prices of the shares and make it more
difficult for the Company to sell equity securities in the future at a time and
price that it deems appropriate.
The 2,000,000 shares sold in this Offering (2,300,000 shares if the
Underwriters' over-allotment option is exercised in full) will be freely
tradeable without restriction or further registration under the Securities Act
of 1933, as amended (the "Securities Act"), except for shares purchased by
"affiliates" of the Company, which will be subject to the resale limitations of
Rule 144 under the Securities Act. As defined in Rule 144, an affiliate of an
issuer is a person who, directly or indirectly, through one or more
intermediaries, controls, is controlled by or is under common control with, such
issuer, and generally includes members of the Board of Directors and senior
management. The remaining 3,834,140 shares of Common Stock that will be
outstanding immediately following this Offering (the "Restricted Shares") were
shares issued in private transactions.
The Restricted Shares, together with 1,557,962 shares of Common Stock
that may be acquired upon exercise of presently outstanding options and
warrants, may not be sold except in compliance with the registration
requirements of the Securities Act or pursuant to an exemption from
registration, such as the exemption provided by Rule 144. The Restricted Shares
held by current stockholders will become eligible for sale, subject to the
restrictions of Rule 144, commencing in 90 days following completion of the
Offering. In general, Rule 144 allows a stockholder (including persons who may
be deemed "affiliates" of the Company under Rule 144) who has beneficially owned
Restricted Shares for at least one year to sell a number of shares within any
three-month period that does not exceed the greater of (i) 1% of the then
outstanding shares of Common Stock (approximately 58,341 shares after giving
effect to this Offering); or (ii) the average weekly trading volume in the
Common Stock during the four calendar weeks immediately preceding such sale.
Sales under Rule 144 are also subject to certain requirements as to the manner
and notice of sale and the availability of public information concerning the
Company. A stockholder who is not an "affiliate" of the Company at any time
during the 90 days immediately preceding a sale, and who has beneficially owned
his or her shares for at least two years as computed under Rule 144, is entitled
to sell such shares under Rule 144 without regard to the volume and manner of
sale limitations described above.
The Company and its Directors, officers and certain stockholders have
agreed not to offer, sell or otherwise dispose of any of their Restricted Shares
for a period of 180 days after the date of this Prospectus without prior written
consent of Hanifen, Imhoff Inc. See "Underwriting."
Upon completion of the Offering, certain holders will have "piggyback"
registration rights with respect to 3,597,251 shares of Common Stock held by
them or issuable to them, which rights allow them to require the Company,
subject to certain conditions, to include their shares in certain future
registration statements filed by the Company. In addition, the Company intends
to file a registration statement covering 500,000 shares of Common Stock
reserved for issuance under the Company's stock option plans.
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<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in the
Underwriting Agreement, dated as of the date of this Prospectus, each of the
underwriters of this Offering (the "Underwriters") for whom Hanifen, Imhoff Inc.
("Hanifen") and Scott & Stringfellow, Inc. are acting as representatives (the
"Representatives"), have severally agreed to purchase the aggregate number of
shares of Common Stock set forth opposite their respective names below:
NUMBER
UNDERWRITERS OF SHARES
Hanifen, Imhoff Inc...........................................
Scott & Stringfellow, Inc.....................................
Total.................................................. 2,000,000
The Underwriting Agreement provides that the obligations of the
Underwriters to purchase shares of Common Stock are subject to the approval of
certain legal matters by counsel and to certain conditions and that if any
shares of Common Stock are purchased by the Underwriters pursuant to the
Underwriting Agreement all shares of Common Stock agreed to be purchased by the
Underwriters must so be purchased.
The Company has been advised that the Underwriters propose to offer
shares of Common Stock offered hereby to the public initially at the public
offering price set forth on the cover page of this Prospectus and to certain
selected dealers (who may include the Underwriters) at such public offering
price less a concession not to exceed $ per share. The Underwriters or such
selected dealers may reallow a concession to certain other dealers not to exceed
$ per share. The Representatives have advised the Company that they do not
expect the Underwriters to make sales to accounts over which any Underwriters
exercise discretionary authority.
The Company and the Selling Stockholder have granted to the
Underwriters an option to purchase up to an additional 300,000 shares of Common
Stock at the initial public offering price, less the same underwriting discount
as set forth on the cover of this Prospectus, solely to cover over-allotments.
The option may be exercised at any time up to 30 days after the date of this
Prospectus. To the extent the Underwriters exercise such option, each such
Underwriter will be committed, subject to certain conditions to purchase a
number of option shares proportionate to such Underwriters initial commitment.
The Representatives will receive stock purchase warrants to purchase an
aggregate of 166,667 shares of Common Stock (191,667 shares if the underwriters
exercise their option), with an exercise price equal to 120% of the initial
public offering price set forth on the cover page of this Prospectus. The
warrants
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<PAGE>
issued to the Representatives may be exercised only during the period beginning
one year from the date of this Prospectus and continuing for two years
thereafter.
The Company, its directors and executive officers and certain security
holders of the Company have agreed that they will not offer to sell, sell or
otherwise dispose of any shares of Common Stock not sold in this offering for a
period of 180 days from the date of this Prospectus without the prior written
consent of Hanifen, on behalf of the Underwriters.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments the Underwriters may be required to make in respect of such
liabilities. The Company has agreed to pay up to $75,000 to Hanifen for
expenses, $50,000 of which has already been paid.
Of the shares of Common Stock offered hereby, up to 200,000 have been
reserved (the "Reserved Shares") for sale to stockholders, directors, officers
and employees of the Company. The Reserved Shares will be sold at a price per
share equal to the public offering price.
Prior to this offering, there has been no public market for the
Company's Common Stock. The initial public offering price for the Common Stock
was determined by negotiations among the Company and the Representatives. The
factors considered by the Representatives in determining the initial public
offering price include the history of and prospects for the industry in which
the Company competes, the ability of the Company's management, the proprietary
interests of the Company in its products, the past and present operations of the
Company, the historical results of the Company, the prospects for future
earnings of the Company, the general condition of the securities market at the
time of the offering and the market prices of similar securities of comparable
companies in recent periods. There can be no assurance, however, that the price
at which the Common Stock will sell in the public market after this offering
will not be lower than the price at which the Common Stock is sold by the
Underwriters.
In order to facilitate the Offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock. Specifically, the Underwriters may over-allot in connection with
the Offering, creating a short position in the Common Stock for their own
account. In addition, to cover over-allotments or to stabilize the price of the
Common Stock, the Underwriters may bid for, and purchase, shares of Common Stock
in the open market. Finally, the underwriting syndicate may reclaim selling
concessions allowed to an underwriter or a dealer for distributing the Common
Stock in the Offering, if the syndicate purchases previously distributed Common
Stock in transactions to cover syndicate short positions, in stabilization
transactions or otherwise. Any of these activities may stabilize the market
price of the Common Stock above independent market levels. The Underwriters are
not required to engage in these activities, and may end any of these activities
at any time.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Dyer Ellis
& Joseph PC, Washington, D.C. Certain legal matters will be passed upon for the
Underwriters by Gibson, Dunn & Crutcher LLP, Denver, Colorado.
45
<PAGE>
EXPERTS
The financial statements and schedule of the Company as of December 31,
1996, included in this Prospectus and elsewhere in the Registration Statement
have been audited by Grant Thornton LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports. The
financial statements and schedule of the Company as of December 31, 1994 and
1995 included in this Prospectus have been audited by Amper, Politziner &
Mattia, independent public accountants, as indicated in their reports with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in giving said reports.
On January 30, 1997, the Company engaged Grant Thornton LLP as its
principal accountants, and dismissed its former accountants, Amper Politziner &
Mattia. The Company decided to change accountants in anticipation of the
Offering. The decision to change accountants was ratified by the Company's Board
of Directors. In connection with the audits for the years ended December 31,
1994 and 1995 and through January 30, 1997, there were no disagreements with
Amper, Politziner & Mattia on any matters of accounting principles or practices,
financial statement disclosure or auditing scope or procedure which
disagreements if not resolved to the satisfaction of Amper, Politziner & Mattia
would have caused them to make reference thereto in their report on the
financial statements for such years. During the years ended December 31, 1994
and 1995 and through January 30, 1997 there were no reportable events (as
defined in Item 304 (A)(1)(v) of Regulation S-K) with Amper, Politziner &
Mattia. Amper, Politziner & Mattia rendered unqualified opinions with respect to
the Company's financial statements for the years ended December 31, 1994 and
1995.
ADDITIONAL INFORMATION
A Registration Statement on Form S-1 including amendments thereto
relating to the Common Stock offered hereby has been filed by the Company with
the Securities and Exchange Commission, Washington, D.C. This Prospectus does
not contain all of the information set forth in the Registration Statement and
the exhibits and schedules thereto. Statements contained in this Prospectus as
to the contents of any contract or other document referred to are not
necessarily complete and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference. For
further information with respect to the Company and the Common Stock offered
hereby, reference is made to the Registration Statement, exhibits, and
schedules. A copy of the Registration Statement may be inspected without charge
at the Securities and Exchange Commission's principal office located at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, the New York Regional
Office located at 7 World Trade Center, Suite 1300, New York, New York 10048,
and the Chicago Regional Office located at Northwestern Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661-2511 and copies of all or any part
thereof may be obtained from the Public Reference Section of the Securities and
Exchange Commission upon the payment of certain fees prescribed by the
Securities and Exchange Commission. The Registration Statement may also be
obtained from the Web site that the Commission maintains at http:\\www.sec.gov.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements certified by an independent public
accounting firm and quarterly reports for each of the first three quarters of
each fiscal year containing unaudited financial information.
46
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Report of independent certified public accountants - Grant Thornton LLP................................... F-2
Report of independent certified public accountants - Amper, Politziner & Mattia........................... F-3
Balance Sheets as of December 31, 1995 and 1996 and March 31, 1997........................................ F-4
Statements of Operations for the years ended December 31, 1994,
1995, and 1996 and the three months ended March 31, 1996 and 1997.................................... F-5
Statement of Stockholders' Equity (Deficiency) for the years ended December 31,
1994, 1995, and 1996 and the three months ended March 31, 1997....................................... F-6
Statements of Cash Flows for the years ended December 31, 1994,
1995, and 1996 and the three months ended March 31, 1996 and 1997.................................... F-7
Notes to Financial Statements............................................................................. F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
SECURACOM, INCORPORATED
We have audited the accompanying balance sheet of Securacom,
Incorporated as of December 31, 1996, and the related statements of operations,
stockholders' equity (deficiency), and cash flows for the year then ended. 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Securacom,
Incorporated as of December 31, 1996, and the results of its operations and its
cash flows for the year then ended, in conformity with generally accepted
accounting principles.
We have also audited Schedule II of Securacom, Incorporated for the
year ended December 31, 1996. In our opinion, this schedule presents fairly, in
all material respects, the information required to be set forth therein.
GRANT THORNTON LLP
Parsippany, New Jersey
March 12, 1997
F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
SECURACOM, INCORPORATED
We have audited the accompanying balance sheet of Securacom, Incorporated at
December 31, 1995, and the related statements of operations, stockholders'
equity and cash flows for each of the two years then ended. 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 from
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
accounting 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 financial position of Securacom, Incorporated at
December 31, 1995 and the results of its operations and its cash flows for each
of the two years then ended in conformity with generally accepted accounting
principles.
We have also audited Schedule II of Securacom, Incorporated for the years ended
December 31, 1995 and 1994. In our opinion, this schedule presents fairly, in
all material respects, the information required to be set forth therein.
AMPER, POLITZINER & MATTIA
June 3, 1996
Edison, New Jersey
F-3
<PAGE>
SECURACOM, INCORPORATED
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
ASSETS 1995 1996 1997
----------- -------------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents................................ $ 555,345 $ 609,342 $ 130,741
Accounts receivable, net of allowance for doubtful
accounts of $120,000 in 1995 and $42,000 in 1996
and 1997................................................ 1,155,173 1,777,456 2,310,856
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 780,391 1,148,560 1,925,667
Prepaid expenses and other............................... 100,006 120,937 111,443
------------ ----------- -----------
Total current assets.................................. 2,590,915 3,656,295 4,478,707
Plant and equipment, net.................................... 261,139 714,989 684,300
Investment in SSIH, Ltd..................................... 700,000
Other assets................................................ 193,888 195,803 253,754
------------ ----------- -----------
$ 3,045,942 $ 4,567,087 $ 6,116,761
============ =========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY)
Current liabilities:
Notes payable-stockholder............................... $ 200,000 $ -- $ --
Current maturities of capital lease obligations......... 6,290 21,454 21,454
Accounts payable........................................ 817,980 2,739,271 2,922,400
Billings in excess of costs and estimated earnings on
uncompleted contracts................................. 442,059 103,184 503,913
Accrued expenses and other.............................. 428,507 641,506 696,030
------------ ----------- -----------
Total current liabilities............................. 1,894,836 3,505,415 4,143,797
Long-term liabilities:
Notes payable........................................... 597,000 2,541,000 3,189,500
Capital lease obligations, less current maturities...... -- 116,399 111,048
Stockholders' equity (deficiency):
Common stock, $0.01 par value per share; authorized;
10,000,000 shares; issued and outstanding, 3,953,683
shares in 1995 and 4,434,140 shares in 1996 and
1997................................................ 39,536 44,341 44,341
Additional paid-in capital.............................. 10,224,002 10,582,197 10,644,197
Accumulated deficit..................................... (9,709,432) (12,222,265) (12,016,122)
------------ ----------- -----------
554,106 (1,595,727) (1,327,584)
------------ ----------- -----------
$ 3,045,942 $ 4,567,087 $ 6,116,761
============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
SECURACOM, INCORPORATED
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------ -----------------------------
1994 1995 1996 1996 1997
------------- ------------- ------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Earned revenues............................... $ 2,395,254 $ 3,176,523 $ 5,824,448 $ 656,022 $ 3,297,899
Cost of earned revenues....................... 1,586,315 2,179,964 4,416,386 253,885 2,326,223
------------- ------------- ------------- ------------ -----------
Gross profit............................... 808,939 996,559 1,408,062 402,137 971,676
Selling, general and administrative expenses.. 2,670,092 2,870,570 3,700,698 739,907 645,656
------------- ------------- ------------- ------------ -----------
Operating income (loss)....................... (1,861,153) (1,874,011) (2,292,636) (337,770) 326,020
Interest and financing fees................... (34,181) (101,707) (241,716) (21,851) (127,276)
Interest and other income..................... 7,617 208,026 21,519 2,998 7,399
------------- ------------- ------------- ------------ -----------
Net income (loss).......................... $ (1,887,717) $ (1,767,692) $ (2,512,833) $ (356,623) $ 206,143
============= ============= ============= ============ ===========
Net income (loss) per share................... $ (0.52) $ (0.43) $ (0.56) $ (0.08) $ 0.04
============= ============= ============= ============ ===========
Weighted average shares outstanding........... 3,649,000 4,064,000 4,523,000 4,223,000 5,105,000
============= ============= ============= ============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
SECURACOM, INCORPORATED
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
TOTAL
ADDITIONAL STOCKHOLDERS'
COMMON STOCK PAID-IN ACCUMULATED EQUITY
SHARES AMOUNT CAPITAL DEFICIT (DEFICIENCY)
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994.................. 3,226,889 $ 32,269 $ 6,724,201 $ (6,054,023) $ 702,447
Net loss.................................... (1,887,717) (1,887,717)
Proceeds from issuance of common stock...... 316,000 3,160 1,576,780 1,579,940
Common stock issuance costs................. (78,997) (78,997)
------------ ------------ ------------- --------------- --------------
Balance at December 31, 1994................ 3,542,889 35,429 8,221,984 (7,941,740) 315,673
Net loss.................................... (1,767,692) (1,767,692)
Proceeds from issuance of common stock...... 410,794 4,107 2,075,818 2,079,925
Common stock issuance costs................. (76,800) (76,800)
Issuance of warrants........................ 3,000 3,000
------------ ------------ ------------- --------------- --------------
Balance at December 31, 1995................ 3,953,683 39,536 10,224,002 (9,709,432) 554,106
Net loss.................................... (2,512,833) (2,512,833)
Exercise of warrants........................ 480,457 4,805 247,195 252,000
Issuance of warrants........................ 111,000 111,000
------------ ------------ ------------- --------------- --------------
Balance at December 31, 1996................ 4,434,140 44,341 10,582,197 (12,222,265) (1,595,727)
Net income (unaudited)...................... 206,143 206,143
Issuance of warrants (unaudited)............ 62,000 62,000
------------ ------------ ------------- --------------- --------------
Balance at March 31, 1997 (unaudited)....... 4,434,140 $ 44,341 $ 10,644,197 $ (12,016,122) $ (1,327,584)
============ ============ ============= =============== ==============
</TABLE>
The accompanying notes are an integral part of this statement.
F-6
<PAGE>
SECURACOM, INCORPORATED
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------- --------------------------
1994 1995 1996 1996 1997
-------------- --------------- -------------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................. $ (1,887,717) $ (1,767,692) $ (2,512,833) $ (356,623) $ 206,143
------------- --------------- ------------- ----------- -----------
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization............. 47,503 62,457 91,859 15,031 30,689
Noncash compensation...................... 27,500 28,000
Amortization of debt discount............. 5,000 1,000 10,500
Changes in operating assets and liabilities:
Accounts receivable....................... 183,225 (767,135) (622,283) 264,378 (533,400)
Costs and estimated earnings in excess of
billings on uncompleted contracts....... (700,481) 177,124 (368,169) 120,275 (777,107)
Prepaid expenses and other................ 209,311 (30,043) (20,931) 23,669 9,494
Other assets.............................. 13,361 (146,978) (1,915) 1,220 (57,951)
Accounts payable.......................... 153,897 115,265 1,921,291 (263,114) 183,129
Billings in excess of costs and estimated
earnings on uncompleted contracts....... 192,213 249,846 (338,875) (3) 400,729
Accrued expenses and other................ (119,646) 145,620 212,999 (179,194) 54,524
------------- --------------- ------------- ----------- -----------
Total adjustments......................... (20,617) (166,344) 906,976 (16,738) (679,393)
------------- --------------- ------------- ----------- -----------
Net cash used in operating activities..... (1,908,334) (1,934,036) (1,605,857) (373,361) (473,250)
------------- --------------- ------------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in SSIH, Ltd....................... (700,000)
Acquisition of plant and equipment............ (63,661) (17,868) (396,460) (6,161) --
------------- --------------- ------------- ----------- -----------
Net cash used by investing activities......... (63,661) (17,868) (396,460) (6,161) (700,000)
------------- --------------- ------------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable................... 515,000 800,000 2,050,000 700,000
Principal payments on notes payable -
stockholder................................. (200,000) (125,000)
Principal payments of capital lease
obligations................................. (15,235) (19,068) (17,686) (7,390) (5,351)
Proceeds from issuance of common stock and
exercise of warrants........................ 1,579,940 1,537,425 224,000 196,000
Common stock issuance costs................... (78,997) (76,800)
------------- ---------------
Net cash provided by financing activities..... 2,000,708 2,241,557 2,056,314 63,610 694,649
------------- --------------- ------------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 28,713 289,653 53,997 (315,912) (478,601)
Cash and cash equivalents at beginning of period.. 236,979 265,692 555,345 555,345 609,342
------------- --------------- ------------- ----------- -----------
Cash and cash equivalents at end of period........ $ 265,692 $ 555,345 $ 609,342 $ 239,433 $ 130,741
============= =============== ============= =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period
Interest and financing fees............... $ 23,000 $ 97,000 $ 165,000 $ 22,000 $ 140,000
Income taxes.............................. 2,000 2,000 7,000 5,000 5,000
</TABLE>
During 1996, the Company acquired equipment totaling approximately $149,000
through capital lease transactions.
During 1995, the Company issued 103,000 shares of common stock in payment of
notes payable totaling $515,000.
The accompanying notes are an integral part of these statements.
F-7
<PAGE>
SECURACOM, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 and 1996
NOTE A - BUSINESS AND SUMMARY OF ACCOUNTING POLICIES
Securacom, Incorporated (the "Company") is a single-source provider of
comprehensive technology-based security solutions primarily for medium and large
commercial and government facilities in the United States and abroad. At
December 31, 1996, the Company was approximately 90% owned by KuwAm Corporation,
two private investment partnerships of which KuwAm serves as general partner,
Special Situations Investment Holdings, Ltd. and Special Situations Investment
Holdings L.P. II, and certain individual limited partners of the investment
partnerships (the "KuwAm Group").
A summary of the significant accounting policies applied in the
preparation of the accompanying financial statements follows:
1. REVENUE RECOGNITION
The Company derives its revenues principally from long-term contracts
which are generally on a fixed price basis. Earnings are recognized on the basis
of the Company's estimates of the percentage of completion of individual
contracts, whereby total estimated income is earned based upon the proportion
that costs incurred bear to the Company's estimate of total contract costs.
The percentage of completion of individual contracts includes
management's best estimates of the amounts expected to be realized on these
contracts. It is at least reasonably possible that the amounts the Company will
ultimately realize could differ materially in the near term from the amounts
estimated in arriving at the earned revenue and costs and earnings in excess of
billings on uncompleted contracts.
Contract costs include all direct material, direct labor and
subcontract costs. Provisions for estimated losses on uncompleted contracts are
made in the period in which such losses are determined. Changes in job
performance, job conditions and estimated profitability, including those arising
from contract revisions and final contract settlements may result in revisions
to costs and income and are recognized in the period in which the revisions are
determined.
The asset "Costs and estimated earnings in excess of billings on
uncompleted contracts" represents revenues recognized in excess of amounts
billed to clients. The liability "Billings in excess of costs and estimated
earnings on uncompleted contracts" represents billings in excess of revenues
recognized.
F-8
<PAGE>
SECURACOM, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995 and 1996
2. CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with
a maturity of three months or less to be cash equivalents.
3. INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 ("SFAS No. 109"), "Accounting for Income
Taxes." SFAS No. 109 requires recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been included in
the financial statements or tax returns. Under this method, deferred tax assets
and liabilities are determined based on the temporary differences between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.
4. PLANT AND EQUIPMENT
Plant and equipment are stated at cost. Depreciation is provided using
the straight-line method based on the estimated useful lives of the related
assets. Leasehold improvements are amortized over the shorter of the economic
life of the improvements or the lease term.
5. USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements as
well as the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. In addition to the
estimates of revenues earned on contracts as described in Note A-1, the Company
estimates an allowance for doubtful accounts based on the creditworthiness of
its clients, as well as general economic conditions. Consequently, an adverse
change in those factors could affect the Company's estimate.
6. CONCENTRATIONS OF CREDIT RISK AND FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments that are exposed to concentrations
of credit risk consist primarily of cash, money market funds and trade accounts
receivable. The Company places its cash and money market funds with high credit
quality institutions. In general, such investments exceed the FDIC insurance
limit.
F-9
<PAGE>
SECURACOM, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995 and 1996
The Company provides credit to its clients in the normal course of
business. The Company routinely assesses the financial strength of its clients
and, as a consequence, believes that its trade accounts receivable exposure is
limited.
The carrying value of financial instruments potentially subject to
valuation risk (principally consisting of cash, accounts receivable, long-term
debt and accounts payable) approximates fair market value due to their
short-term nature or market interest rates.
7. INCOME (LOSS) PER SHARE
Net income (loss) per common share is calculated by dividing the net
income (loss) by the weighted average number of shares of common stock
outstanding. Except as noted in the following paragraph, stock warrants have not
been included in the calculation as their inclusion would be antidilutive.
Warrants issued for the purchase of shares of Common Stock at an
exercise price below the estimated initial public offering price of $10.00 per
share during the 12 months preceding the date of the Company's initial filing of
a registration statement with the Securities and Exchange Commission have been
included in the number of weighted average shares outstanding for all periods
presented calculated based on the treasury stock method.
The Company believes that the implementation of Statement of Financial
Accounting Standards 128, Earnings Per Share, will not have a material impact on
the calculation of earnings per share.
8. INTERIM FINANCIAL STATEMENTS (UNAUDITED)
The unaudited balance sheet as of March 31, 1997 and the unaudited
statements of operations, stockholders' equity and statements of cash flows for
the three months ended March 31, 1996 and 1997 are condensed financial
statements in accordance with the rules and regulations of the Securities and
Exchange Commission. Accordingly, they omit certain information included in
complete financial statements and should be read in connection with the
information for the years ended December 31, 1994, 1995 and 1996.
In the opinion of the Company, the unaudited financial statements at
March 31, 1997 and for the three months ended March 31, 1996 and 1997, include
all adjustments, consisting only of normal recurring adjustments necessary for a
fair presentation of the financial position and results of operations for such
periods. Results of operations for the three months ended March 31, 1997 are not
necessarily indicative of results to be expected for the full year.
F-10
<PAGE>
SECURACOM, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995 and 1996
Per share data for the three months ended March 31, 1997 is based on
the weighted average number of common shares and common share equivalents
(warrants) outstanding during the period using the modified treasury stock
method.
In April 1997, the Board of Directors approved an increase in the
number of shares of Common Stock authorized to 20,000,000 shares.
NOTE B - LIQUIDITY
As shown in the accompanying financial statements, Securacom,
Incorporated has incurred recurring operating losses and has an accumulated
deficit of $12,222,265 at December 31, 1996. In addition, the Company has been
dependent on its principal stockholders for the financing of ongoing operations.
In these circumstances, the Company's continued existence is dependent upon its
ability to generate profitable operations and secure financing to fund future
operations. Management is addressing these matters by implementing a
comprehensive business strategy. The Company anticipates that it will generate
sufficient cash flow from 1997 operations to meet its working capital needs. The
Company has, in the past, been able to secure additional financing to meet its
operating requirements, although there can be no assurance that it will be able
to continue to do so.
NOTE C - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Costs and estimated earnings on uncompleted contracts at December 31,
1995 and 1996 and March 31, 1997 which are expected to be collected within one
year are as follows:
<TABLE>
<CAPTION>
MARCH 31, 1997
1995 1996 (UNAUDITED)
---------------- --------------- --------------
<S> <C> <C> <C>
Costs incurred on contracts.................... $ 28,205,341 $ 32,222,489 $ 6,740,259
Estimated earnings............................. 2,701,352 3,889,963 2,127,625
---------------- --------------- ---------------
30,906,693 36,112,452 8,867,884
Less billings to date.......................... 30,568,361 35,067,076 7,446,130
---------------- --------------- ---------------
$ 338,332 $ 1,045,376 $ 1,421,754
================ =============== ===============
</TABLE>
In addition, included in accounts receivable and accounts payable at
December 31, 1996 were retainages of $76,983 and $111,278, respectively. At
March 31, 1997 retainages included in accounts receivable were $199,905 and in
accounts payable $174,865 (unaudited). The Company anticipates that retainages
will be collected and paid within one year. There were no such amounts at
December 31, 1995.
F-11
<PAGE>
SECURACOM, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995 and 1996
In February 1996, the Company negotiated a final settlement on a major
contract with the Tennessee Valley Authority. As a result, the Company wrote off
approximately $238,000 of amounts owed to a subcontractor and reduced cost of
earned revenues.
NOTE D - PLANT AND EQUIPMENT
Plant and equipment are summarized as follows:
<TABLE>
<CAPTION>
USEFUL
1995 1996 LIFE
<S> <C> <C> <C>
Computer equipment....................................... $ 232,599 $ 275,110 5 years
Equipment and fixtures................................... 214,158 328,885 10 years
Aircraft (a)............................................. 335,000 10 years
Leasehold improvements................................... 53,471 5 years
---------- -----------
446,757 992,466
Accumulated depreciation and
amortization............................................ 185,618 277,477
---------- -----------
$ 261,139 $ 714,989
========== ===========
</TABLE>
(a) The aircraft was purchased from a firm whose principal
stockholders are the same as those of the Company.
F-12
<PAGE>
SECURACOM, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995 and 1996
NOTE E - NOTES PAYABLE
During the years ended December 31, 1995 and 1996, the Company issued
subordinated debentures to the KuwAm Group totaling $600,000 and $2,050,000,
respectively, and 85,716 and 292,862, respectively, of warrants to purchase
common stock of the Company at $7.00 per share. The debentures bear interest at
10% and the principal is payable as follows: $663,000 on December 31, 1998,
$663,000 on December 31, 1999 and the balance on December 31, 2000. The value of
the warrants, $3,000 and $111,000 at December 31, 1995 and 1996, respectively,
was determined based upon an appraisal of the securities by an independent firm
and was recorded as additional paid-in capital and reduction of notes payable.
All 378,578 warrants are outstanding at December 31, 1996.
Interest expense on these notes amounted to approximately $37,000 and
$125,000 (including $5,000 of amortization of debt discount) for the years ended
December 31, 1995 and 1996, respectively.
At December 31, 1995, the Company had $200,000 of notes payable to
stockholders which were repaid in 1996.
NOTE F - ACCRUED EXPENSES
Accrued expenses and other are summarized as follows:
DECEMBER 31,
1995 1996
Payroll...................................... $ 225,979 $ 237,515
Employee expense reimbursements.............. 16,735 107,236
Professional fees............................ 73,656 87,875
Deferred rent obligation..................... 81,915 74,295
Other........................................ 30,222 134,585
----------- -----------
$ 428,507 $ 641,506
=========== ===========
F-13
<PAGE>
SECURACOM, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995 and 1996
NOTE G - OBLIGATIONS UNDER CAPITAL LEASE AGREEMENTS
The Company has entered into various capital lease agreements for
equipment with a cost of $48,646 and $197,895 at December 31, 1995 and 1996,
respectively. The leases expire at various times through 2001. Accumulated
amortization amounted to $10,372 and $29,447 at December 31, 1995 and 1996,
respectively. The related future minimum lease payments, as of December 31,
1996, are as follows:
FISCAL CAPITAL
YEAR LEASES
------ -----------
1997..................................................... $ 48,713
1998..................................................... 48,713
1999..................................................... 45,144
2000..................................................... 46,544
2001..................................................... 28,531
-----------
Net minimum lease payments............................... 217,645
Amount representing interest............................. (79,792)
-----------
$ 137,853
NOTE H - RELATED PARTY TRANSACTIONS
The Company had agreements (the "Agreements") with KuwAm Corporation
whereby the Company paid a fee of five percent of the capital raised from the
private sale of common stock and subordinated debentures under the Agreements.
The Company incurred approximately $79,000, $77,000 and $103,000, of investment
banking fees under the Agreements during 1994, 1995 and 1996, respectively,
which have been recorded as a reduction of proceeds from sales of equity
securities and interest and financing fees for sales of subordinated debentures.
NOTE I - EMPLOYEE STOCK WARRANTS
From time to time the Company has granted warrants for the purchase of
its common stock to employees and directors. The Company has elected to follow
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees," and related interpretations in measuring compensation expense for
its stock warrants. Under APB No. 25, because the exercise price of the
Company's employee stock warrants is not less than the fair market value of the
underlying stock on the date of grant, no compensation expense is recognized.
However, SFAS No. 123, "Accounting for Stock-Based Compensation," requires
presentation of pro forma net income and earnings per share as if the Company
had accounted for its employee stock warrants granted subsequent to December 31,
1994, under the fair value method of that statement. For purposes of pro forma
disclosure, the estimated fair value of the warrants is amortized to expense
over the vesting period. Under the fair value method, the Company's net loss and
loss per share would not have had a material change.
F-14
<PAGE>
SECURACOM, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995 and 1996
Because SFAS No. 123 is applicable only to options and warrants granted
subsequent to December 31, 1994, and the warrants have a three-year vesting
period, its pro forma effect will not be fully reflected until 1998.
The weighted average fair value of the individual warrants granted
during both 1995 and 1996 is estimated as $0.04 on the date of grant. The fair
values were determined using a Black-Scholes option-pricing model with the
following assumptions:
1995 1996
Dividend yield...................... -- --
Volatility.......................... 50% 50%
Risk-free interest rate............. 6.70 6.06
Forfeiture rate..................... -- --
Expected life....................... 3 years 3 years
Stock warrant activity during 1994-1996 is summarized below:
<TABLE>
<CAPTION>
SHARES OF WEIGHTED
COMMON STOCK AVERAGE
ATTRIBUTABLE EXERCISE PRICE
TO WARRANTS OF WARRANTS
<S> <C> <C>
Unexercised at December 31, 1993............................ 785,634 $ 1.91
Granted...................................................... 33,260 0.53
Expired...................................................... 16,667 5.00
--------------
Unexercised at December 31, 1994............................. 802,227 1.78
Granted...................................................... 245,148 4.63
Exercised.................................................... -- --
Expired...................................................... 35,000 5.00
--------------
Unexercised at December 31, 1995............................. 1,012,375 2.36
Granted...................................................... 400,797 6.58
Exercised.................................................... 480,457 0.53
Expired...................................................... 48,333 5.41
--------------
Unexercised at December 31, 1996............................. 884,382 5.10
==============
</TABLE>
F-15
<PAGE>
SECURACOM, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995 and 1996
The following table summarizes information concerning outstanding and
exercisable warrants at December 31, 1996:
WARRANTS OUTSTANDING
WEIGHTED-AVERAGE
EXERCISE NUMBER REMAINING WARRANTS
PRICE OUTSTANDING CONTRACTUAL LIFE EXERCISABLE
$1 159,382 0.7 159,382
5 360,000 1.1 209,998
7 365,000 2.2 --
Warrants exercisable at December 31, 1994, 1995 and 1996, were 562,639,
689,248 and 369,382, respectively. Reference is made to Note E relating to
outstanding warrants issued relating to notes payable.
During the year ended December 31, 1996, the President of the Company
exercised warrants for the purchase of 53,320 shares of common stock at an
exercise price of $0.53 per share. Since no amount was paid upon exercise of the
warrants, the Company recorded compensation expense of $28,000.
NOTE J - INCOME TAXES
Deferred tax attributes resulting from differences between financial
accounting amounts and tax bases of assets and liabilities at December 31, 1995
and 1996 follow:
<TABLE>
<CAPTION>
1995 1996
------------ -------------
<S> <C> <C>
Current assets and liabilities
Allowance for doubtful accounts............................... $ 29,000 $ 17,000
Accrued vacation pay.......................................... 15,000 38,000
Deferred rent obligation...................................... 19,000 --
------------- -------------
63,000 55,000
Valuation allowance............................................. (63,000) (55,000)
------------- -------------
Net current deferred tax asset (liability)...................... $ -- $ --
============= =============
Noncurrent assets and liabilities:
Depreciation.................................................. $ (26,000) $ (58,000)
Net operating loss carryforward............................... 2,250,000 4,744,000
------------- -------------
2,224,000 4,686,000
Valuation allowance............................................. (2,224,000) (4,686,000)
------------- -------------
Noncurrent deferred tax asset (liability)....................... $ -- $ --
============= =============
</TABLE>
F-16
<PAGE>
SECURACOM, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995 and 1996
The valuation allowance has been established for those loss
carryforwards and deductible temporary differences which are not presently
considered more likely than not to be realized.
The provision for income taxes differs from the effective tax rate used
in the financial statements as a result of current year net operating losses,
the benefit of which has not been recognized in the current year.
As of December 31, 1996, the Company had net operating loss
carryforwards of approximately $12,200,000, which expire in 2002 through 2011.
In 1992, a major stockholder of the Company significantly increased its
ownership of the Company. As a result of a complex set of rules limiting the
utilization of net operating loss carryforwards in tax years following a
corporate ownership change (enacted in the Tax Reform Act of 1986), the ability
of the Company to utilize net operating losses of approximately $3.5 million may
be limited.
Also, the shares issued in connection with the Offering are expected to
create an ownership change. However, based on the expected value of the Company
immediately before such ownership change and the resulting limitation as
defined, the Company expects to be able to utilize its net operating losses of
approximately $8.7 million incurred after August 1992.
NOTE K - EMPLOYEE BENEFIT ARRANGEMENTS
The Company established a contributory employee savings plan under
Section 401(k) of the Internal Revenue Code. The Company contributes amounts to
individual participant accounts based on specific provisions of the plan. The
cost to the Company for the employer match under the plan was $8,111, $8,238 and
$12,728, for the years ended December 31, 1994, 1995 and 1996, respectively.
The Company had an employee profit-sharing plan providing for the
provision of an amount equal to 10% of the Company's income before income taxes.
The Company did not make a contribution to the plan for the years ended December
31, 1994, 1995 or 1996.
NOTE L - COMMITMENTS AND CONTINGENCIES
Leases
The Company conducts all of its operations from leased facilities
consisting of its corporate headquarters and branch office locations. All
facility leases are classified as operating leases with terms ranging from one
to five years.
F-17
<PAGE>
SECURACOM, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995 and 1996
The following is a schedule by years of approximate future minimum
rental payments required under operating leases that have initial or remaining
noncancelable lease terms in excess of one year as of December 31, 1996:
YEAR ENDING DECEMBER 31, AMOUNT
----------------------- ---------
1997................................................. $ 269,000
1998................................................. 260,000
1999................................................. 253,000
2000................................................. 152,000
2001................................................. 32,000
-----------
$ 966,000
Rent expense for the years ended December 31, 1994, 1995 and 1996 was
$279,000, $236,000 and $286,000, respectively.
Contingencies
The Company is a party in certain legal actions arising from the normal
conduct of its business. While the outcome of such actions is not presently
determinable, in the opinion of management, based on discussions with legal
counsel, the resolution of these actions will not have a material adverse effect
on the Company's financial position, results of operations, or cash flows.
NOTE M - INTEREST AND OTHER INCOME
Included in interest and other income for the year ended December 31,
1995 is a gain on settlement of litigation, net of expenses and fees of
$205,179.
NOTE N - ACQUISITION
Effective August 1, 1995, Securacom, Incorporated acquired the assets
and certain liabilities of Franklin M. Sterling & Associates, Inc. in exchange
for issuing 25,000 shares of common stock to, and employment of, Franklin M.
Sterling, P.E. as Senior Vice President in charge of Securacom's West Coast
offices. The Company recorded compensation expense of $27,500 in 1995 relating
to the issuance of these shares of common stock.
NOTE O - SIGNIFICANT CLIENTS
During the year ended December 31, 1994, one client accounted for
approximately 67% of earned revenue.
F-18
<PAGE>
SECURACOM, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995 and 1996
During the year ended December 31, 1995 contracts with three clients
accounted for approximately 41%, 18% and 13% of earned revenue.
During the year ended December 31, 1996, contracts with four clients
accounted for approximately 28%, 22%, 14% and 11% of earned revenue.
NOTE P - SUBSEQUENT EVENTS
Proposed Initial Public Offering
The Company entered into an agreement with an underwriter pursuant to
which the Company intends to prepare and file with the Securities and Exchange
Commission a registration statement for the initial public offering of 1,400,000
shares to be issued by the Company and 600,000 shares by existing stockholders.
Issuance of Notes Payable
Through March 10, 1997, the Company issued $700,000 of subordinated
debentures to the KuwAm Group with warrants to purchase 100,002 shares of the
Company's common stock at an exercise price of $7.00 per share. The debentures
bear interest at 10% and the principal is payable as follows: $175,000 on
December 31, 1998, $175,000 on December 31, 1999 and the balance on December 31,
2000. The warrants were valued at $62,000 based upon an appraisal of the
securities by an independent firm and were recorded as additional paid-in
capital and a reduction of notes payable.
Investment
Of the total $3,350,000 proceeds received from the issuance of notes
payable, the Company invested $700,000 in a limited partnership interest of
Special Situations Investment Holdings, Ltd. ("SSIH") recorded at cost which is
deemed to be equivalent to fair market value. (Reference is made to Note A). At
the end of each year, the Company has the option of requiring SSIH to redeem the
limited partnership interest at their then fair market value less a liquidation
fee of up to 1%. The proceeds of such redemption are payable, at SSIH's option,
in cash or portfolio securities of SSIH. Because the assets of SSIH include both
publicly traded and privately held securities, the value of the SSIH portfolio
may be materially different than the cost of the Company's investment. Under the
terms of the governing agreements KuwAm receives 3% of the amount of the
Company's investment as reimbursement for accounting, legal and administrative
expenses, an annual fee equal to 2% of the assets and an annual capital
appreciation fee equal to 10% of the increases in the value of SSIH's assets
each year.
Common Stock and Warrants
In January and February 1997, the Company issued to employees and
directors 195,000 warrants to purchase shares of the Company's common stock at
$7.00 per share.
F-19
<PAGE>
SECURACOM, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995 and 1996
Employment and Consulting Agreements
In 1997, the Company entered into employment agreements with its
President and Chief Financial Officer that provide for annual base salaries of
$165,000 and $125,000, respectively, through March 31, 2002 and 2000,
respectively. The agreements provide for an additional payment equal to two
times the annual base salary if the executive is terminated without cause
following a change in control as defined in the agreement. The Company also
entered into a consulting agreement with the Chairman of the Company (and
managing partner of KuwAm Corporation) that provides for an annual consulting
fee of $140,000 through March 31, 2002.
Stock Option Plan
In 1997, the Board of Directors approved the adoption of the 1997 Stock
Option Plan. The 1997 Stock Option Plan provides for the grant of options to
purchase up to 500,000 shares of the Company's Common Stock. Options may be
granted to employees, officers, directors and consultants of the Company for
the purchase of Common Stock of the Company at a price not less than the fair
market value of the Common Stock on the date of the grant.
F-20
<PAGE>
SECURACOM, INCORPORATED
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
------------- -------------- ------------- -------------- ----------
Additions
(1) (2)
Charged to
Balance at Charged to other Balance at
beginning costs and accounts - Deductions - end of
Description of period expenses describe describe period
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1994
Allowance for doubtful accounts $ 97,000 $ 97,000
============ =============
Year ended December 31, 1995
Allowance for doubtful accounts $ 97,000 $ 23,000 $ 120,000
============ ============ =============
Year ended December 31, 1996
Allowance for doubtful accounts $ 120,000 $ 78,000 (a) $ 42,000
============ ============ =============
</TABLE>
(a) Uncollectible accounts written off
S-1
<PAGE>
Securacom,
Incorporated
[Diagram of Services
Offered by Securacom]
Single Source Security
Through Technology
<PAGE>
NO DEALER, SALESPERSON, OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR
MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE
OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY BY ANYONE
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR
TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF OR THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
TABLE OF CONTENTS
Page
Prospectus Summary...............................
Risk Factors.....................................
Use of Proceeds..................................
Dividend Policy..................................
Dilution.........................................
Capitalization...................................
Pro Forma Consolidated Financial Information.....
Selected Financial Data..........................
Management's Discussion and Analysis
of Financial Condition and Results of
Operations....................................
Business.........................................
Management.......................................
Certain Transactions.............................
Principal and Selling Stockholders...............
Description of Capital Stock.....................
Shares Eligible for Future Sale..................
Underwriting.....................................
Legal Matters....................................
Experts..........................................
Additional Information...........................
Index to Financial
Statements....................................
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS 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.
2,000,000 Shares
[SECURACOM LOGO]
COMMON STOCK
PROSPECTUS
, 1997
HANIFEN, IMHOFF INC.
SCOTT & STRINGFELLOW, INC.
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses payable in connection with
the registration of the Common Stock that is the subject of this Registration
Statement, all of which shall be borne by the Company. All the amounts shown are
estimates except for the registration fee, the New York Stock Exchange listing
fee, and the NASD filing fee.
<TABLE>
<CAPTION>
To Be Paid By
Registrant
<S> <C>
Securities and Exchange Commission registration fee..................... $ 6,970.00
Nasdaq listing fee...................................................... *
National Association of Securities Dealers filing fee...................
Printing and engraving expenses......................................... *
Legal fees and expenses................................................. *
Accounting fees and expenses............................................ *
Blue sky filing fees.................................................... *
Miscellaneous........................................................... *
-----------
Total............................................................... $ *
</TABLE>
* To be supplied by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Certificate of Incorporation and By-Laws provide for
indemnification of directors, officers, agents, and employees of the Company to
the fullest extent permitted by law. Under Delaware law, a corporation may
indemnify any person who was or is a party or is threatened to be made a party
to an action (other than an action by or in the right of the corporation) by
reason of his service as a director or officer of the corporation, or his
service, at the corporation's request, as a director, officer, employee or agent
of another corporation or other enterprise, against expenses (including
attorneys' fees) that are actually and reasonably incurred by him ("Expenses"),
and judgments, fines and amounts paid in settlement that are actually and
reasonably incurred by him, in connection with the defense or settlement of such
action, provided that he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the corporation's best interests and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
that his conduct was unlawful. Although Delaware law permits a corporation to
indemnify any person referred to above against Expenses in connection with the
defense or settlement of an action by or in the right of the corporation,
provided that he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the corporation's best interests, if such person has
been judged liable to the corporation, indemnification is only permitted to the
extent that the Court of Chancery (or the court in which the action was brought)
determines that, despite the adjudication of liability, such person is entitled
to indemnity for such Expenses as the court deems proper. The determination as
to whether a person
II-1
<PAGE>
seeking indemnification has met the required standard of conduct is to be made
(1) by a majority vote of a quorum of disinterested members of the board of
directors, or (2) by independent legal counsel in a written opinion, if such a
quorum does not exist or if the disinterested directors so direct, or (3) by the
stockholders. The General Corporation Law of the State of Delaware also provides
for mandatory indemnification of any director, officer, employee or agent
against Expenses to the extent such person has been successful in any proceeding
covered by the statute. In addition, the General Corporation Law of the State of
Delaware provides the general authorization of advancement of a director's or
officer's litigation expenses in lieu of requiring the authorization of such
advancement by the board of directors in specific cases, and that
indemnification and advancement of expenses provided by the statute shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since January 1, 1994, the Registrant has sold or issued the following
unregistered securities:
During 1994, the Company issued an aggregate of 316,000 shares of
Common Stock to eight individuals and five entities at a purchase price of $5.00
per share. Also during 1994, the Company issued $515,000 aggregate principal
amount of promissory notes to one entity at a purchase price equal to the
principal amount of the promissory notes.
From January 1995 through June 1995, the Company issued an aggregate of
247,500 shares of Common Stock to three individuals and three entities at a
purchase price of $5.00 per share. In June 1995, $515,000 aggregate principal
amount of promissory notes held by one entity was converted into 103,000 shares
of Common Stock at a conversion price of $5.00 per share.
During July and August 1995, the Company issued an aggregate of 35,294
shares of Common Stock to one entity at a purchase price of $8.50 per share. In
August 1995, the Company issued 25,000 shares of Common Stock to one individual
in connection with the acquisition of the assets and certain liabilities of a
security consulting business.
In March and May 1996, two entities and two directors exercised
warrants to purchase an aggregate of 427,137 shares of Common Stock at an
exercise price of $0.53 per share.
From October 1995 through March 1997 the Company issued $3,350,000
aggregate principal amount of 10% subordinated debentures and warrants to
purchase 478,580 shares of Common Stock at an exercise price of $7.00 per share
to nine entities and 19 individuals at a purchase price equal to the principal
amount of the debentures.
The issuances of securities in the above transactions were deemed to be
exempt from registration under the Act in reliance on Section 4(2) thereof as
transactions not involving a public offering.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following is a list of exhibits furnished:
1.1 Form of Underwriting Agreement
1.2 Form of Underwriter's Warrant
II-2
<PAGE>
3.1 Form of Restated Certificate of Incorporation of Securacom,
Incorporated
3.2 Form of Bylaws of Securacom, Incorporated
4 Form of Rights Agreement
5* Opinion of Counsel
10.1 Stock Option Plan
10.2 Employment Agreement with Ronald C. Thomas
10.3 Employment Agreement with Larry M. Weaver
10.4 Consulting Agreement with Wirt D. Walker, III
10.5+ Agreement and Certificate of Limited Partnership for Special
Situation Investment Holdings, Ltd.
10.6 Form of Stock Purchase Agreement
11+ Computation of Net Income (Loss) Per Share
23.1 Consent of Grant Thornton LLP
23.2 Consent of Amper, Politziner & Mattia
23.3 Consent of Counsel (included as part of Exhibit 5)
24+ Power of Attorney
27+ Financial Data Schedule
* To be filed by amendment
+ Previously filed
(b) The following is a list of the financial statement schedule furnished:
Schedule II - Valuation and Qualifying Accounts.
Schedules not listed above have been omitted because they are not
applicable or because required information is included in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
II-3
<PAGE>
(1) To provide to the Underwriters at the closing specified in the
Underwriting Agreement 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 of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, 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 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 Act and will
be governed by the final adjudication of such issue.
(3) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the 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 the registration
statement as of the time it was declared effective.
(4) For the purpose of determining any liability under the Securities
Act of 1933, 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-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Woodcliff
Lake and State of New Jersey on the 9th day of June, 1997.
SECURACOM, INCORPORATED
By: *
Ronald C. Thomas
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
* June 9, 1997
- --------------------------------------
Ronald C. Thomas President, Chief Executive
Officer, and Director
(Principal Executive Officer)
* June 9, 1997
- --------------------------------------
Larry M. Weaver Executive Vice President,
Chief Operating Officer and
Chief Financial Officer
(Principal Financial Officer)
* Chairman and Director June 9, 1997
- --------------------------------------
Wirt D. Walker, III
* Director June 9, 1997
Mishal Yousef Saud Al Sabah
* Director June 9, 1997
- --------------------------------------
Marvin Bush
* Director June 9, 1997
- --------------------------------------
Robert B. Smith, Jr.
</TABLE>
By: /s/ MICHAEL JOSEPH
Michael Joseph
Attorney-in-Fact
II-5
[2,000,000] SHARES OF COMMON STOCK
SECURACOM, INCORPORATED
UNDERWRITING AGREEMENT
June __, 1997
Hanifen, Imhoff Inc.
Scott & Stringfellow, Inc.
As Representatives of the Several Underwriters
1125 17th Street, Suite 1600
Denver, Colorado 80202
Ladies and Gentlemen:
Securacom, Incorporated (the "Company"), confirms its agreement to
issue and sell to the several underwriters (the "Underwriters") named in
Schedule A hereto for whom you are acting as representatives (the
"Representatives") an aggregate of [1,400,000] shares (the "Company Firm
Shares") of the Company's Common Stock, $0.01 par value per share (the "Common
Stock"). Moreover, a certain stockholder of the Company named in Schedule B
hereto (the "Selling Stockholder") confirms its agreement to sell to the
Underwriters [600,000] shares of the Common Stock (the "Stockholder Firm
Shares"). The Company Firm Shares and the Stockholder Firm Shares are
hereinafter collectively referred to as the "Firm Shares." The respective
amounts of the Firm Shares to be purchased by the several Underwriters are set
forth opposite their names in Schedule A. In addition, for the sole purpose of
covering over-allotments in connection with the sale of the Firm Shares, the
Company and the Selling Stockholder confirm their agreement to grant to the
Underwriters options to purchase up to an additional 210,000 shares and 90,000
shares, respectively of Common Stock (collectively, the "Option Shares"). The
Firm Shares and any Option Shares purchased pursuant to this Agreement are
hereinafter referred to as the "Shares." The Company and the Selling Stockholder
are hereinafter collectively referred to as the "Sellers."
As the Representatives, you have advised the Company that you are
authorized to enter into this Agreement on behalf of the several Underwriters
and that the several Underwriters are willing, acting severally and not jointly,
to purchase the number of Firm Shares set forth opposite their respective names
in Schedule A plus their pro rata portion of the Option Shares if you elect to
exercise the over allotment option in whole or in part for the accounts of the
several Underwriters.
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto hereby agree as follows:
1. Representations and Warranties of the Company. In order to induce the
Underwriters to enter into this Agreement, the Company represents and warrants
to each Underwriter that:
(A) A registration statement on Form S-1 (File No. _________) with
respect to the Shares has been prepared by the Company and executed by its
directors in conformity with the requirements of the Securities Act of 1933, as
amended (the "Act") and the rules and regulations (the "Rules and Regulations")
of the Securities and Exchange Commission (the "Commission") promulgated
thereunder and has been filed with the Commission. Copies of such registration
statement and all forms of the prospectuses included therein and the exhibits,
financial statements and schedules thereto, as finally amended and revised, have
heretofore been delivered by the Company to the Representatives. Such
registration statement, and the prospectus therein, Part II thereof, any
documents incorporated by reference therein, and all financial schedules and
exhibits thereto, as amended at the time when it became effective, and including
all information omitted therefrom in reliance upon Rule 430A of the Rules and
Regulations is hereinafter referred to as the "Registration Statement." Such
Registration Statement has been declared effective under the Act and no
post-effective amendment to the Registration Statement has been filed as of the
date of this Agreement. No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceeding for that purpose has
been instituted or threatened by the Commission. The prospectus included as part
of the Registration Statement on file with the Commission when it became
effective or, if the procedure in Rule 430A of the Rules and Regulations is
followed, the prospectus that discloses all the information that was omitted
from the prospectus on the effective date pursuant to such Rule, and in either
case, together with any changes contained in any prospectus filed with the
Commission by the Company after the effective date of the Registration
Statement, is hereinafter referred to as the "Prospectus." Each prospectus
included in the Registration Statement and any amendments thereto prior to the
effective date of the Registration Statement or which is filed with the
Commission pursuant to Rule 424(a) of the Rules and Regulations is referred to
herein as a "Preliminary Prospectus."
(B) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission and no proceedings have been
instituted for that purpose; each Preliminary Prospectus, at the time of filing
thereof, (a) conformed in all material respects to the requirements of the Act
and the Rules and Regulations and (b) did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(C) As of the time it became effective, as the case may be, and at all
times subsequent thereto, the Registration Statement and any post-effective
amendment thereto and the Prospectus and any supplement thereto conformed and
will conform in all material respects with the requirements of the Act and the
Rules and Regulations. Neither the Registration Statement nor any amendment
thereto, and neither the Prospectus nor any supplement thereto, at the time the
Registration Statement or any amendment thereto became or will become effective,
and, with respect to the Prospectus or any supplement thereto, at the effective
date, the date the Prospectus or any supplement is filed with the Commission and
at each Closing Date (as such term is defined below), contained or will contain,
as the case may be, any untrue statement of a material fact or omitted or will
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading.
(D) Except as disclosed in the Registration Statement, the Company does not
have any beneficial or record ownership of, or control, any corporation,
partnership, joint venture, limited liability company, unincorporated
association or other entity.
(E) There are no contracts, leases, indentures, instruments or other
documents which are required by the Act and the Rules and Regulations to be
filed as exhibits to the Registration Statement or described in the Prospectus
which have not been so filed or described. All such contracts and other
documents to which the Company is a party have been duly authorized, executed
and delivered by the Company, constitute valid and binding agreements of the
Company and are enforceable by and against the Company in accordance with the
terms thereof. Neither the Company, nor, to the Company's knowledge, any other
party is in default in the observance or performance of any term or obligation
to be performed by it under any such agreement, and no event has occurred which
with notice or lapse of time or both would constitute such a default, in any
such case in which a default or event would have a material adverse effect on
the assets or properties, business, results of operations, prospects or
financial condition of the Company. No default exists, and no event has occurred
which with notice or lapse of time or both would constitute a default, in the
due performance and observance of any term, covenant or condition by the Company
of any other agreement or instrument to which the Company is now a party or by
which it or its properties or business may be bound or affected which default or
event would have a material adverse effect on the assets or properties,
business, results of operations, prospects or condition (financial or otherwise)
of the Company.
(F) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
organization, with full power and authority (corporate and other) to own or
lease its properties and to conduct its business as described in the Prospectus.
The Company is duly qualified to transact business as a foreign corporation and
is in good standing in all jurisdictions in which the character of the business
conducted by it or the properties owned or leased by it requires such
qualification, except where the failure to so qualify would not have a material
adverse effect on the business, condition (financial or otherwise), results of
operations, assets, properties or prospects of the Company. Complete and correct
copies of the certificate of incorporation and of the bylaws of the Company and
all amendments thereto have been delivered to the Underwriters and, with respect
to the Company, filed with the Commission as part of the Registration Statement
and no changes therein will be made subsequent to the date hereof and prior to
each Closing Date.
(G) The capitalization of the Company as of March 31, 1997 is as set
forth under the caption "Capitalization" in the Prospectus, and the Common Stock
conforms to the description thereof contained under the caption "Description of
Capital Stock" in the Prospectus. The outstanding shares of Common Stock have
been duly authorized, validly issued, fully paid and are non-assessable. The
Shares, the Representatives' Warrants, and the Common Stock underlying the
Representatives' Warrants and the shares of Common Stock to be issued upon the
exercise of the warrants and options described in the Prospectus upon issuance
and delivery and payment therefor in the manner herein described, will be duly
authorized, validly issued, fully paid and non-assessable. There are no
preemptive rights or other rights to subscribe for or to purchase, or any
restriction upon the voting or transfer of, any shares of Common Stock pursuant
to the Company's certificate of incorporation, bylaws or other governing
documents or any agreement or other instrument to which the Company is a party
or by which it may be bound other than certain rights pursuant to the stock
purchase agreements entered into between the Company and certain of its current
stockholders that have been waived or satisfied in connection with the offering
or sale of the shares contemplated by this Agreement. Neither the filing of the
Registration Statement nor the offering or sale of the Shares as contemplated by
this Agreement will give rise to any right, other than those which have been
waived or satisfied, for or relating to the registration of any shares of Common
Stock. The Representatives' Warrants (as defined in Section 3(e) hereof) conform
to all statements with regard to them in the Registration Statement. Except as
disclosed in the Registration Statement and the Prospectus, there is no
outstanding option, warrant or other right calling for the issuance of, and
there is no commitment, plan or arrangement to issue, any share of stock of the
Company or any security convertible into, or exercisable or exchangeable for,
such stock.
(H) Grant Thorton LLP and Amper, Politziner & Mattia, whose reports
appear in the Prospectus, are independent certified public accountants as
required by the Act and the Rules and Regulations. The consolidated financial
statements and schedules of the Company, together with the related notes
included in the Registration Statement, each Preliminary Prospectus or the
Prospectus, comply in all material respects with the requirements of the Act and
the Rules and Regulations and present fairly the financial condition, results of
operations and cash flows of the entities purported to be shown thereby at the
dates and for the periods indicated. All of such financial statements have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, and all adjustments
necessary for a fair presentation of results for such periods have been made.
The information set forth in the Registration Statement under the captions
"Summary Financial Information," "Capitalization" and "Selected Financial Data"
present fairly the information shown therein and have been compiled on a basis
consistent with the financial statements presented in the Registration
Statement. The pro forma financial information set forth in the Registration
Statement reflects, subject to the limitations set forth in the Registration
Statement as to such pro forma financial statements, the results of operations
of the entities purported to be shown thereby for the periods indicated and
conforms to the requirements of Regulation S-X of the Rules and Regulations.
(I) Except as described in the Prospectus, there is no litigation or
governmental action or proceeding pending or threatened before any court or
governmental, administrative or regulatory agency, domestic or foreign or, to
the knowledge of the Company, contemplated, to which the Company or any officer
thereof in their capacity as such is a party or of which any of the Company's
property is the subject and which, either (i) if determined adversely to the
Company would have a material adverse effect on the business, condition
(financial and otherwise), results of operations, assets, properties or
prospects of the Company, or (ii) is required to be disclosed in the Prospectus.
(J) The Company has good and marketable title in fee simple to all
items of real property and good and marketable title to all personal property
owned by them, in each case clear of all liens, encumbrances and defects except
such as are disclosed in the Prospectus or such as do not materially affect the
value of such property and do not interfere with the use made or proposed to be
made of such property by the Company; and any real property and buildings held
under lease by the Company are held by it under valid, existing and enforceable
leases with such exceptions as are not material and do not interfere with the
uses made or proposed to be made of such property and buildings by the Company.
(K) The Company has correctly and timely filed all necessary federal,
state, local and foreign income, property and franchise tax returns and paid all
taxes required to be shown as due thereon and all assessments received by it to
the extent that the same are material and have become due. Neither the Company
nor any of its officers has any knowledge of any tax deficiency of the Company
or any tax proceeding or action pending or threatened against the Company. There
are no liens for taxes on the assets of the Company, except for taxes not yet
due. There are no audits pending of the Company's tax returns (federal, state,
local or foreign), and there are no claims which have been or, to the best of
the Company's knowledge, may be asserted relating to any such tax returns which,
if determined adversely, would result in the assertion by any governmental
agency of any deficiency material to the Company. There have been no waivers of
any statute of limitations by the Company relating to tax returns (federal,
state, local and foreign). The Internal Revenue Service has not asserted or
threatened to assert any assessment, claim or liability for taxes due or to
become due in connection with any review or examination of the tax returns of
the Company for any year.
(L) The Company is not, and with the giving of notice or lapse of time
or both, would not be, in violation of or in default under, nor will the
execution or delivery of this Agreement, the consummation of the transactions
contemplated herein or the fulfillment of the terms hereof conflict with or
result in a violation of or default under, (i) the certificate of incorporation,
bylaws or other governing documents of the Company, (ii) any foreign or domestic
permit, judgment, decree, order, statute, rule or regulation applicable to the
Company, or (iii) any lease, license, contract, indenture, mortgage, deed of
trust, loan agreement or other agreement, instrument, obligation, arrangement or
understanding to which the Company is a party or by which it or any of its
respective properties is bound, or result in the creation or imposition of any
lien, charge, claim or encumbrance upon any property or assets of the Company,
which violation or default would have a material adverse effect on the business,
condition (financial and otherwise), results of operations, assets, properties
or prospects of the Company. Each approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory, administrative or
other governmental body or court necessary in connection with the execution and
delivery by the Company of this Agreement and the consummation of the
transactions contemplated herein (except such additional steps as may be
required by the Act, the Exchange Act, the National Association of Securities
Dealers, Inc. ("NASD") or which may be necessary to qualify the Shares for
public offering by the Underwriters under state securities or Blue Sky laws, all
of which have been or will be completed before the Closing Date) has been
obtained or made and is in full force and effect.
(M) The Company is not an "investment company" or an "affiliated person"
of, or a "promoter" or "principal underwriter" for, an "investment company," as
such terms are defined in the Investment Company Act of 1940, as amended.
(N) Since the respective dates as of which information is given in the
Registration Statement or, if later, the Prospectus, as each may be amended or
supplemented, there has not been any material adverse change in, or any
development which materially affects the business, condition (financial and
otherwise), results of operations, assets, properties or prospects of the
Company, whether or not occurring in the ordinary course of business. Since the
respective dates as of which information is given in the Registration Statement
or, if later, the Prospectus, as each may be amended or supplemented, and except
as set forth in the Prospectus, there has not been any change in the capital
stock of the Company, or any transactions entered into by the Company (other
than those in the ordinary course of business consistent with past practices)
that are material with respect to the Company, or any dividend or distribution
of any kind declared, paid or made by the Company on any class of its capital
stock or any issuance of warrants, options, convertible securities or other
rights to purchase or acquire capital stock of the Company.
(O) The business and operations conducted by the Company are being
conducted in accordance with all applicable laws, rules, regulations and decrees
of all public authorities, foreign or domestic, having jurisdiction over the
Company. The Company has all requisite corporate authority and owns or possesses
all authorizations, approvals, orders, licenses, registrations, other
certificates and permits of and from all governmental regulatory officials and
bodies, necessary to conduct the business of the Company as presently described
in or contemplated in the Prospectus except where the failure to own or possess
all such authorizations, approvals, orders, licenses, registrations, other
certificates and permits would not have a material adverse effect on the Company
or its business, condition (financial or otherwise), results of operations,
assets, properties or prospects; there is no proceeding pending or threatened
(or any basis therefor known to the Company) that may cause any such
authorization, approval, order, license, registration, certificate or permit to
be revoked, withdrawn, canceled, suspended or not renewed.
(P) The Company owns, licenses or possesses adequate rights to use all
patents, patent applications, trademarks, service marks, trade names, trademark
registrations, service mark registrations, copyrights, licenses, inventions,
trade secrets and other proprietary and similar rights necessary for the conduct
of its business as currently conducted. Neither the Company, nor any of their
products has infringed upon, or is presently infringing upon, any patents,
patent rights, trademarks, service marks, trade names, copyrights, licenses,
inventions, trade secrets or other proprietary rights of other persons. The
Company is not aware that any other party has infringed upon, or is presently
infringing upon, any patents, patent rights, trademarks, service marks, trade
names, copyrights, licenses, inventions, trade secrets or other proprietary
rights of the Company.
(Q) Any document hereafter filed by the Company pursuant to Section 12,
13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), prior to the termination of the offering of the Shares, at the
time such documents were or are filed with the Commission, complied or will
comply in all material respects with the requirements of the Act and the Rules
and Regulations and the Exchange Act and the rules and regulations thereunder,
and did not at the time of filing, or will not when filed, include an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein not misleading.
(R) The Company has the full power and authority (corporate and other)
to execute, deliver and perform this Agreement. This Agreement has been duly and
validly authorized, executed and delivered by the Company and constitutes a
legal, valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms, except as to rights to either indemnity
hereunder which may be limited by federal or state securities laws and except as
such enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting the rights of creditors generally and subject to general
principles of equity.
(S) The Company has adequate liability and other insurance policies
insuring it against the risks of loss arising out of or related to its
businesses, issued by insurers of recognized financial responsibility.
(T) All transactions during the Company's current fiscal year and last
three (3) full fiscal years between the Company and any person who is or was
during such period an officer, director or 5% or greater stockholder of the
Company have been (i) on terms which were fair to and in the best interest of
the Company, (ii) approved by a majority of the Company's directors who did not
have an interest in such transactions and (iii) disclosed in the Prospectus to
the extent required under the Act or the Rules and Regulations.
(U) Other than the over-allotment option granted to the Underwriters,
the Company has not taken and will not take, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of shares of Common Stock to facilitate the sale or resale of the Shares.
(V) The Company has not distributed and will not distribute any
prospectus or other offering material in connection with the offering and sale
of the Shares other than any Preliminary Prospectus or the Prospectus or other
materials permitted by the Act and the Rules and Regulations to be distributed
by the Company.
(W) The Common Stock and the Shares have been approved for quotation on
the Nasdaq SmallCap Market, subject only to official notification of issuance.
(X) The Company has not and will not incur any liability for any finder's
or broker's fee in connection with the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby.
(Y) The Company is in compliance in all material respects with all
federal, state and local laws and regulations respecting the employment of its
employees and employment practices, terms and conditions of employment and wages
and hours relating thereto. There are no pending investigations involving the
Company by the United States Department of Labor or any other governmental
agency responsible for the enforcement of such federal, state or local laws and
regulations. There is no labor strike, dispute or work stoppage or lockout
pending, or, to the knowledge of the Company, threatened, against or affecting
the Company, and no such labor strike, dispute, work stoppage or lockout has
occurred with respect to any employees of the Company, during the two years
prior to the date of this Agreement. No union organization activity is in
progress with respect to the employees of the Company, and no question
concerning representation exists with respect to such employees. No unfair labor
practice charge or complaint against the Company is pending or, to the knowledge
of the Company, threatened, before the National Labor Relations Board or similar
foreign authorities, and no such charge or complaint against the Company has
been filed during the past two years. There is no pending, or, to the knowledge
of the Company, threatened, grievance that, if adversely decided, would have a
material adverse effect on the business, results of operations, prospects or
financial condition of the Company. No charges with respect to or relating to
the Company are pending before the Equal Employment Opportunity Commission or
any similar state, local or foreign agency responsible for the prevention of
unlawful employment practices, and no such charges have been filed with respect
to the Company.
(Z) No statement, representation, warranty or covenant made by the Company
in this Agreement or made in any certificate or document delivered in connection
with this Agreement to be delivered to the Representatives was or will be, when
made, inaccurate, untrue or incorrect.
(AA) The Company has obtained from each of its officers, directors and
one percent or greater shareholders their written agreement that, for a period
of 180 days from the date of the Prospectus, they will not, without the prior
written consent of the Representatives, sell, contract to sell, grant any option
for the sale of or otherwise dispose of, directly or indirectly, any shares of
Common Stock of the Company owned by them (or any securities convertible into or
exercisable for such shares of Common Stock) or file a registration statement
contemplating such sale or disposition.
(BB) The Company has not engaged in the handling, manufacture,
treatment, storage, use or generation of any Hazardous Materials (as defined
below) upon any real property owned or leased by it. The Company has not been a
party to any litigation in which it is alleged, nor has it at any time received
written notice of any violation, other allegation, or investigation of the
possibility, that any of them or any of their assets is or was subject to any
liability, clean-up or other obligation arising out of or relating to any
discharge, or the storage, handling or disposal, of any Hazardous Material
except such as could not have a material adverse effect on the business,
financial position, stockholders' equity or results of operations present or
prospective, of the Company. To the Company's knowledge there has been no
discharge at any time by the Company of any Hazardous Material that the Company
has reported or is or was obligated to report to any governmental agency the
occurrence of which may have a material adverse effect on the Company. For the
purposes of this Agreement, "Hazardous Material" means any substance: (i) the
presence of which requires investigation or remediation under any federal,
state, provincial, or local statute, regulation, ordinance, order, action,
policy or common law; (ii) that is or becomes defined as a "hazardous waste,"
"hazardous substance," pollutant or contaminant under any federal, state or
local statute, regulation, rule or ordinance or amendments thereto including,
without limitation the Comprehensive Environmental Response Compensation and
Liability Act (42 U.S.C. 9601 et seq.) and/or the Resource Conservation and
Recovery Act (42 U.S.C. section 6901 et seq.); (iii) that is toxic, explosive,
corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic, or
otherwise hazardous and is or becomes regulated by any governmental authority,
agency, department, commission, board, agency or instrumentality of the United
States or of any state or any political subdivision thereof or any similar
Polish political entity; or (iv) which contains polychlorinated biphenyls
(PCBs), asbestos, urea formaldehyde foam insulation or radon gas.
(CC) None of the Company, or any officer or director purporting to act
on behalf of the Company has during the past five years (i) made any
contributions to any candidate for political office, or failed to disclose fully
any such contributions, in violation of law; (ii) made any payment to any
Federal, state, local or foreign governmental officer or official, or other
person charged with similar public or quasi-public duties, other than payments
required or allowed by applicable law; (iii) made any payment outside the
ordinary course of business to any purchasing or selling agent or person charged
with similar duties of any entity to which the Company, sells (or has in the
past sold) or from which the Company, buys (or has in the past bought) products
for the purpose of influencing such agent or person to buy products from or sell
products to the Company; or (iv) engaged in any transaction, maintained any bank
account or used any corporate funds except for transactions, bank accounts and
funds which have been and are reflected in the normally maintained books and
records of the Company.
(DD) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is (or was) taken with respect to
any differences.
(EE) The Company is not required to register as a "broker" or "dealer" in
accordance with the provisions of the Exchange Act or the rules and regulations
promulgated thereunder.
(FF) The Company has complied with all of the requirements and filed
the required forms, if any, as specified in Florida Statutes Section 517.075.
(GG) The Company is in compliance with the Foreign Corrupt Trade Practices
Act.
2. REPRESENTATIONS AND WARRANTIES OF SELLING STOCKHOLDER.
The Selling Stockholder represents and warrants to each Underwriter (a)
that the Selling Stockholder now has valid marketable title to such number of
shares of the Common Stock as are to be sold by the Selling Stockholder pursuant
to this Agreement (the "Stockholder Shares"), and on each Closing Date on which
the Selling Stockholder will sell Common Stock will have valid and marketable
title to the Stockholder Shares free and clear of any security interests,
claims, liens, equities and other encumbrances, (b) that the Stockholder Shares,
when delivered, will have been duly authorized and will be validly issued, fully
paid and nonassessable, (c) that the Selling Stockholder now has, and on each
Closing Date on which such Selling Stockholder will sell Common Stock, will
have, the legal right and power, and all consents, approvals and authorizations
required by law, to enter into this Agreement and to sell, transfer and deliver
the Stockholder Shares in the manner provided in this Agreement and that no such
action will contravene any provision of applicable law or, if Selling
Stockholder is a partnership, the partnership agreement or any other agreement
or other instrument binding upon the Selling Stockholder, (d) that all
information furnished in writing by or on behalf of such Selling Stockholder
expressly for use in the Registration Statement and Prospectus is, and on each
Closing Date will be, true, correct and complete, and does not, and on each
Closing Date will not, contain any untrue statement of a material fact or omit
to state any material fact necessary to make such information not misleading,
(e) that this Agreement has been duly and validly authorized, executed and
delivered by the Selling Stockholder and constitutes a legal, valid and binding
agreement of the Selling Stockholder, enforceable against it in accordance with
its terms, and (f) that all transactions between the Company and the Selling
Stockholder have been (i) on terms which were fair to and in the best interest
of the Company, (ii) approved by a majority of the Company's directors who did
not have an interest in such transaction and (iii) disclosed in the Prospectus
to the extent required under the Act or the Rules and Regulations.
3. PURCHASE OF THE SHARES BY THE UNDERWRITERS.
(A) Subject to the terms and conditions and upon the basis of the
representations, warranties and covenants herein set forth, the Company agrees
to issue and sell to the Underwriters, and each Underwriter agrees, severally
and not jointly, to purchase at a price of $[________] per Share, the number of
Company Firm Shares set forth opposite such Underwriter's name in Schedule A
hereto, and the Selling Stockholder hereby agrees to sell to the Underwriters
and each Underwriter agrees, severally and not jointly, to purchase at a price
of $[________] per Share, the number of Stockholder Firm Shares set forth
opposite the Selling Stockholder's name in Schedule B hereto (in proportion to
the number of Firm Shares set forth opposite such Underwriter's name in Schedule
A hereto), subject to adjustment in accordance with the terms hereof, except
that the respective purchase obligations of each Underwriter shall be adjusted
so that no Underwriter shall be obligated to purchase fractional shares. The
Underwriters agree to offer the Firm Shares to the public as set forth in the
Prospectus.
(B) The Company and the Selling Stockholder hereby grant to the
Underwriters options to purchase from the Company, solely for the purpose of
covering over-allotments in the sale of Firm Shares, all or any portion of the
Option Shares for a period ending thirty (30) days after the date hereof (the
"Option Period") at the purchase price per Share set forth above in Section
3(a). Option Shares shall be purchased from the Company, severally and not
jointly, for the account of each Underwriter as nearly as practicable in
proportion to the number of Firm Shares set forth opposite such Underwriter's
name in Schedule A hereto, except that the respective purchase obligations of
each Underwriter shall be adjusted by the Representatives so that no Underwriter
shall be obligated to purchase fractional Option Shares.
4. DELIVERY OF AND PAYMENT FOR SHARES.
(A) Delivery of certificates for the Firm Shares and certificates for
the Option Shares, if the option to purchase the same is exercised on or before
the third Business Day (as defined below) prior to the Closing Date, to be
purchased by the Underwriters from the Company and the Selling Stockholder and
payments therefor shall be made at the offices of Gibson, Dunn & Crutcher LLP,
1801 California Street, Suite 4100, Denver, Colorado 80202 (or such other place
as mutually may be agreed upon), at 9:00 a.m. Eastern Time on the third business
day following the date of this Agreement (or the fourth business day if
permitted by Rule 15c6-1(c) promulgated under the Exchange Act), or at such time
on such other date, not later than 10 business days after the date of this
Agreement, as shall be agreed upon by the Company and the Representatives (the
"Closing Date").
(B) The option to purchase Option Shares granted in Section 3 hereof,
may be exercised during the Option Period by delivery of written notice to the
Company and the Selling Stockholder from the Representatives. Such notice shall
set forth the aggregate number of Option Shares as to which the option is being
exercised and the time and date, not earlier than either the Closing Date or the
second Business Day after the date on which the option shall have been exercised
or later than the third Business Day after the date of such exercise, as
determined by the Representatives, when the Option Shares are to be delivered
(the "Option Closing Date"). The Option Closing Date may occur after the
expiration of the Option Period provided that the notice of the exercise of the
option to purchase the Option Shares is delivered during the Option Period.
(C) Delivery and payment for such Option Shares is to be at the offices set
forth above for delivery and payment of the Firm Shares. (The Closing Date and
the Option Closing Date are herein individually referred to as a "Closing Date"
and collectively referred to as the "Closing Dates".)
(D) Delivery of certificates for the Shares shall be made by or on
behalf of the Company and the Selling Stockholder to the Representatives, for
the respective accounts of the Underwriters, with any transfer taxes payable in
connection with the transfer of the Shares to the Underwriters duly paid,
against payment by the Representatives, for the several accounts of the
Underwriters, of the purchase price therefor by certified or bank cashier's
check payable to the order of the Company and each Selling Stockholder, as
applicable in next day funds. The certificates for the Shares shall be
registered in such names and denominations as the Representatives shall have
requested at least two (2) full Business Days prior to the applicable Closing
Date, and shall be made available for checking and packaging at the offices of
or other location designated by the Representatives at least one (1) full
Business Day prior to such Closing Date. Time shall be of the essence and
delivery at the time and place specified in this Agreement is a further
condition to the obligations of each Underwriter.
(E) The cost of original issue tax stamps, if any, in connection with
the issuance and delivery of the Shares by the Company to the respective
Underwriters shall be borne by the Company. The Company will pay and save each
Underwriter and any subsequent holder of the Shares harmless from any and all
liabilities with respect to or resulting from any failure or delay in paying
federal and state stamp and other transfer taxes, if any, which may be payable
or determined to be payable in connection with the original issuance or sale to
such Underwriter of the Shares.
(F) In consideration of services provided by the Representatives, the
Company hereby grants to the Representatives certain warrants (the
"Representatives' Warrants"), as set forth in the form of Warrant Agreement
attached to this Agreement as Exhibit 1-A and 1-B hereto (the "Warrant
Agreements"), to purchase an aggregate number of shares of Common Stock equal to
8 1/3% of the total number of Shares purchased hereunder (including the Option
Shares). The Representatives' Warrants will be exercisable beginning one year
from the effective date of the Registration Statement and continuing for 24
months thereafter at an exercise price per share equal to [Offering Price *
120%.]
5. OFFERING BY UNDERWRITERS.
It is understood that the several Underwriters intend to make a public
offering of the Firm Shares as soon as you deem it advisable to do so. The Firm
Shares are to be initially offered to the public at the initial public offering
price set forth in the Prospectus; provided, however, that you may from time to
time increase or decrease the public offering price prior to the Closing Date.
To the extent, if at all, that any Option Shares are purchased pursuant to
Section 3 hereof, the Underwriters will offer them to the public on the
foregoing terms.
6. COVENANTS OF THE COMPANY.
The Company covenants and agrees with each Underwriter that:
(A) The Company shall use its best efforts to cause the Registration
Statement and any post-effective amendment subsequently filed to become
effective promptly or, if the procedure in Rule 430A under the Rules and
Regulations is followed, comply with the provisions of and make all requisite
filings with the Commission pursuant to such Rule and to notify you promptly (in
writing, if requested) of all such filings. The Company shall prepare and file
with the Commission, promptly upon your request, any amendments of or
supplements to the Registration Statement or Prospectus which, in your opinion,
may be necessary or advisable in connection with the distribution of the Shares;
and the Company may not file any amendment of or supplement to the Registration
Statement or the Prospectus, that is not approved by you after reasonable notice
thereof.
(B) The Company will advise you promptly, and, if requested by you,
will confirm such advice in writing, (i) when the Registration Statement shall
have become effective and when any amendment thereto shall have become effective
and when any amendment of or any supplement to the Prospectus shall be filed
with the Commission; (ii) of any request of the Commission for additional
information or for any amendment of or supplement to the Registration Statement
or the Prospectus; (iii) of the issuance by the Commission or any other
governmental body of any order suspending the effectiveness of the Registration
Statement or the use of the Prospectus or of the institution of any proceedings
for such purpose; (iv) of the suspension of the qualification of the Shares for
offering or sale in any jurisdiction or of the institution of any proceedings
for such purpose; (v) of receipt by the Company or any representative or
attorney of the Company of any other communication from the Commission relating
to the Company, the Registration Statement, any Preliminary Prospectus or the
Prospectus; or (vi) of the happening of any event which in the judgment of the
Company makes any material statement in the Registration Statement or Prospectus
untrue or which requires the making of any changes on the Registration Statement
or Prospectus in order to make the statements therein not misleading. The
Company will use its best efforts to prevent the issuance of any such order
preventing or suspending the use of the Prospectus, and, if such an order is
issued, to obtain as soon as possible the lifting thereof.
(C) The Company will cooperate with the Representatives in endeavoring
to qualify the Shares for sale under the securities laws of such jurisdictions
as the Representatives may reasonably have designated and will make such
applications, file such documents, and furnish such information as may be
reasonably required for that purpose. The Company will, from time to time,
prepare and file such statements, reports and other documents as are or may be
required to continue such qualifications in effect for so long as is required
under the laws of such jurisdictions for such offering and sale.
(D) The Company will furnish the Underwriters with as many copies of
any Preliminary Prospectus as the Underwriters may reasonably request and,
during the period when delivery of a prospectus is required under the Act, the
Company will furnish the Underwriters with as many copies of the Prospectus in
final form, or as thereafter amended or supplemented, as the Representatives
may, from time to time, request. In addition, the Company will deliver to each
of the Representatives, at or before the Closing Date and without charge, a
signed copy of the Registration Statement (including the exhibits thereto) and
all amendments and supplements thereto.
(E) Within the time during which a prospectus relating to the Shares is
required to be delivered under the Act, the Company shall comply with all
requirements imposed upon it by the Act and the Rules and Regulations, as from
time to time in force, so far as is necessary to permit the continuance of sales
of or dealings in the Shares as contemplated by the provisions hereof and the
Prospectus. If during such period any event occurs as a result of which the
Prospectus as then amended or supplemented would include any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein not misleading, or if during such period it is necessary to
amend the Registration Statement or supplement the Prospectus to comply with the
Act and the Rules and Regulations, the Company shall promptly notify you and
shall amend the Registration Statement or supplement the Prospectus (at the
expense of the Company) so as to correct such statement or omission or effect
such compliance.
(F) The Company will make generally available to its security holders,
in the manner contemplated by Rule 158(b) under the Act, and will deliver to the
Representatives, as soon as it is practicable to do so, but in any event not
later than 45 days after the end of its fiscal quarter in which the first
anniversary date of the effective date of the Registration Statement occurs (or
not later than 90 days after the end of such fiscal quarter if such fiscal
quarter is the last fiscal quarter of the fiscal year), an earnings statement
satisfying the requirements of Section 11(a) of the Act and covering a period of
at least twelve (12) consecutive months beginning after the effective date of
the Registration Statement, and will advise you in writing when such statement
has been so made available.
(G) The Company will apply the net proceeds from the sale of the Shares
as set forth under the caption "Use of Proceeds" in the Prospectus and shall
file such reports with the Commission with respect to the sale of the Shares and
the application of the proceeds therefrom as may be required in accordance with
Rule 463 under the Act.
(H) During a period of five (5) years from the date hereof, the Company
shall furnish to each Representative and each other Underwriter who may so
request copies of all reports or other communications furnished to stockholders
and copies of any reports or financial statements furnished to or filed with the
Commission or any national securities exchange or quotation system on which any
class of securities of the Company is listed.
(I) The Company will comply with all the provisions of any undertakings
contained in the Registration Statement.
(J) The Company will not at any time, directly or indirectly, take any
action designed, or which might reasonably be expected, to cause or result in,
or which will constitute stabilization of the price of the shares of Common
Stock to facilitate the sale or resale of any of the Shares.
(K) The Company authorizes the Underwriters to use the Prospectus as from
time to time amended or supplemented in connection with the offering and sale of
the Shares.
(L) The Company shall cause the Shares to be listed on the Nasdaq SmallCap
Market and shall use its best efforts to maintain the Common Stock on the Nasdaq
SmallCap Market (or on a national securities exchange) for a period of five
years after the effective date of the Registration Statement.
7. COSTS AND EXPENSES.
The Selling Stockholder agrees to pay or cause to be paid all taxes, if
any, on the transfer and sale of the Stockholder Shares being sold by the
Selling Stockholder and the fees and expenses of counsel and accountants
retained by the Selling Stockholder, all to the extent the Company has not
agreed by separate instrument with the Selling Stockholder to pay such fees and
expenses of the Selling Stockholder. Whether or not the transactions
contemplated hereunder are consummated or this Agreement becomes effective or is
terminated, the Company agrees to pay or reimburse if paid by the
Representatives, all costs, expenses and fees incident to the performance of the
obligations of the Company and the Selling Stockholder under this Agreement
except as set forth above, including, without limiting the generality of the
foregoing, the following: accounting fees of the Company and the Selling
Stockholder; the fees and disbursements of counsel for the Company and the
Selling Stockholder; all expenses incident to the issuance and delivery of the
Shares (including all printing and engraving costs); all fees and expenses of
the registrar and transfer agent of the Common Stock; the cost of preparation,
printing and filing of the Registration Statement, each Preliminary Prospectus
and the Prospectus (including the financial statements therein and all exhibits
thereto) and any amendments and supplements thereto and the printing, mailing
and delivery to the Underwriters and dealers of copies thereof and of this
Agreement, the Agreement Among Underwriters, any Selected Dealers Agreement, any
other underwriting document, the Blue Sky memorandum and any supplements or
amendments thereto; the filing fees of the Commission; the filing fees incident
to securing any required review by the NASD of the terms of the sale of the
Shares; filing fees and listing fees, if any, transfer taxes and the expenses
(including the fees and disbursements of counsel for the Underwriters up to
$20,000) incurred in connection with the qualification of the Shares under state
securities or Blue Sky laws; the Company's slide presentation and travel in
connection with informational meetings for the brokerage community and
institutional and retail investors; and all other costs and expenses incident to
the performance of the obligations of the Company and the Selling Stockholder
hereunder which are not otherwise specifically provided for in this Section 7.
In addition, the Company shall pay Hanifen, Imhoff Inc. ("Hanifen") an aggregate
of $75,000 to reimburse Hanifen for expenses actually incurred by it in
connection with the Offering. Hanifen acknowledges receipt of $50,000 of such
funds which the parties agree shall be non-refundable whether or not the
transactions contemplated hereby are consummated. The remaining $25,000 shall be
due and payable on the Closing Date with respect to the Firm Shares. If the sale
of the Shares provided for herein is not consummated by reason of any failure,
refusal or inability on the part of either the Company or the Selling
Stockholder to perform any agreement on their respective parts to be performed
or because any other condition of the Underwriters' obligations hereunder is not
fulfilled, the Company shall reimburse the several Underwriters for all
reasonable out-of-pocket expenses and disbursements (including fees and
disbursements of counsel) incurred by the Underwriters in connection with their
investigation, preparing to market and marketing the Shares or otherwise in
contemplation of performing their obligations hereunder.
8. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS.
The obligations of the several Underwriters hereunder are subject to
the accuracy as of the date hereof and each Closing Date (as if made at such
Closing Date) of the representations and warranties of the Company and the
Selling Stockholder contained herein, and to the performance and fulfillment by
the Company and the Selling Stockholder of their covenants, obligations and
conditions hereunder, and to the following additional conditions:
(A) The Registration Statement and all post-effective amendments
thereto shall have become effective and any and all filings required by Rule 424
and Rule 430A of the Rules and Regulations shall have been made within the time
required by the Act and the Rules and Regulations; no order suspending the
effectiveness of the Registration Statement or any amendment or supplement
thereto or the qualification or registration of the Shares under the securities
or Blue Sky laws of any jurisdiction, shall have been issued and no proceedings
for such purposes shall have been initiated or threatened, or, to the knowledge
of the Company, shall be contemplated and all requests for additional
information (to be included in the Registration Statement or the Prospectus or
otherwise) shall have been disclosed to the Representatives and complied with to
its satisfaction and the satisfaction of the Commission; and neither the
Registration Statement or Prospectus nor any amendment or supplement thereto
shall have been filed to which counsel to the Underwriters shall have reasonably
objected or have not given their consent.
(B) No Underwriter shall have advised the Company that the Registration
Statement or Prospectus, or any amendment or supplement thereto, contains an
untrue statement of fact which, in the opinion of counsel to the Underwriter, is
material, or required to be stated therein or is necessary to make the
statements therein not misleading.
(C) Subsequent to the respective dates as of which information is given
in the Registration Statement and Prospectus, there shall not have been any
change in, or any development which affects the capital stock of the Company or
the business condition (financial or otherwise), results of operations, assets,
properties or prospects of the Company that, in your judgment, makes it
impractical or inadvisable to market the Shares on the terms and in the manner
contemplated in the Prospectus.
(D) You shall have received on each Closing Date the opinion of Dyer Ellis
& Joseph, P.C., counsel for the Company, dated as of such Closing Date addressed
to the Underwriters, in form and substance satisfactory to you and counsel for
the Underwriters to the effect that:
(I) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its organization, with full corporate power and
authority to own or lease its properties and conduct its business as
described in the Prospectus, and is duly qualified to do business and
is in good standing as a foreign corporation in each jurisdiction in
which the character of the business conducted by it or the location of
the properties owned or leased by it makes such qualification
necessary, except to the extent that the failure to be so qualified or
be in good standing would not have a material adverse effect on the
Company;
(II) The Company has all requisite corporate power and
authority and, to such counsel's knowledge, all necessary
authorizations, approvals, consents, orders, licenses, certificates and
permits required to own, lease and license its assets and properties
and to conduct its business as now being conducted and as described in
the Registration Statement and the Prospectus. The Company has all
requisite corporate power and authority and all necessary
authorizations, approvals, consents, orders, licenses, certificates and
permits to enter into, deliver and perform this Agreement, and, to
issue and sell the Shares and the Representatives' Warrants, other than
those authorizations, approvals, consents, orders licenses,
certificates and permits required under state and foreign securities
laws. To such counsel's knowledge, the Company does not control,
directly or indirectly, any corporation, partnership, joint venture,
association or other business organization.
(III) The Company had authorized, issued and outstanding
capital stock as of March 31, 1997 as described under the caption
"Capitalization" in the Prospectus and the Common Stock, the
Representatives' Warrants, and the rights issued under the shareholder
rights plan conform to the descriptions thereof contained under the
caption "Description of Capital Stock" in the Prospectus. The
outstanding shares of the Company's capital stock have been, and the
Shares, the Representatives' Warrants, the Common Stock underlying the
Representatives' Warrants (the "Warrant Shares") and the shares of
Common Stock to be issued upon the exercise of the warrants and options
described in the Prospectus, upon issuance, delivery and payment
therefor in the manner herein described, will be, duly authorized,
validly issued, fully paid and non-assessable. The certificates for the
Shares, the Representatives' Warrants and the Warrant Shares, are in
due and proper form under the corporations law of the State of the
Company's organization. There are no preemptive or other rights to
subscribe for or to purchase, or any restriction upon the voting or
transfer of, any shares of the Company's capital stock pursuant to the
Company's certificate of incorporation, bylaws, other governing
documents or any agreements or other instruments to which the Company
is a party or by which any of them is bound, other than certain rights
pursuant to stock purchase agreements entered into between the Company
and certain of its current stockholders that have been waived or
satisfied in connection with the offering or sale of the Shares
contemplated by this Agreement; and to such counsel's knowledge, after
conducting a reasonable investigation, neither the filing of the
Registration Statement nor the offering or sale of the Shares as
contemplated by this Agreement gives rise to any rights, which have not
been waived or satisfied, for or relating to the registration of any
shares of the Company's capital stock. All corporate action required to
be taken on the part of the Company for the authorization, issuance and
sale of the Shares, the Representatives' Warrants and the Warrant
Shares by the Company has been duly and validly taken;
(IV) The Registration Statement and all post-effective
amendments thereto have become effective under the Act and, to such
counsel's knowledge, after conducting a reasonable investigation, such
counsel has reasonable grounds to believe and does believe that no stop
order proceedings with respect thereto have been instituted or are
pending before or threatened by the Commission and any and all filings
required by Rule 424 and Rule 430A of the Rules and Regulations have
been made;
(V) The Registration Statement and the Prospectus and any
amendment or supplement thereto, as of their respective effective dates
comply in all material respects with the requirements of the Act and
the Rules and Regulations (except that counsel need express no opinion
on the financial statements or other financial data) and such counsel,
after conducting a reasonable investigation, have no reason to believe
that the Registration Statement or any amendment thereto at the time it
became effective contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or that, on
each Closing Date, the Prospectus or any amendment or supplement
thereto contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading;
(VI) The Company is not, or with the giving of notice or lapse
of time or both will not, in violation of or in default under, nor will
the execution or delivery hereof or consummation of the transactions
contemplated hereby result in a violation of, or constitute a default
under, the certificate of incorporation, bylaws or other governing
documents of the Company, or, to the knowledge of such counsel, any
agreement, indenture or other instrument to which the Company is a
party or by which it is bound, or to which any of their properties are
subject, nor will the performance by the Company of its obligations
hereunder violate any law, rule or regulation of any governmental
agency or body having jurisdiction over the Company, or its properties,
or result in the creation or imposition of any lien, charge, claim or
encumbrance upon any property or assets of the Company. Except for
permits and similar authorizations required under the Act, the NASD,
and the securities or Blue Sky laws of certain jurisdictions and for
such permits and authorizations which have been obtained, no consent,
approval, authorization or order of any court, governmental agency or
body or financial institution is required in connection with execution
and delivery of this Agreement or the consummation of the transactions
contemplated by this Agreement;
(VII) The descriptions of matters in the Registration
Statement and Prospectus under the headings "Description of Capital
Stock" and "Shares Eligible for Future Sale" are accurate and fairly
present the information required to be shown; and such counsel, after
conducting a reasonable investigation, do not know of or believe that
any contracts or documents of a character required to be summarized or
described therein or to be filed as exhibits thereto which are not so
summarized, described or filed, nor after conducting a reasonable
investigation do such counsel know of or believe that there is any
pending or threatened litigation or any governmental proceeding,
statute or regulation, disclosed by the Act, the Exchange Act and the
respective rules and regulations thereunder. All descriptions in the
Prospectus of statutes, regulations, legal or governmental proceedings,
contracts and other documents, insofar as such statements constitute a
summary of the legal matters, documents or proceeding referred to
therein are accurate and fairly present the information required to be
shown; and such counsel, after conducting a reasonable investigation,
do not know of or believe that any contracts or documents of a
character required to be summarized or described therein or to be filed
as exhibits thereto which are not so summarized, described or filed,
nor after conducting a reasonable investigation do such counsel know of
or believe that there is any pending or threatened litigation or any
governmental proceeding, statute or regulation required to be described
in the Prospectus which is not so described;
(VIII) Each of this Agreement, the Warrant Agreements and the
Representatives' Warrants have been duly authorized, executed and
delivered by the Company and constitutes a legal, valid and binding
agreement of the Company and is enforceable against the Company in
accordance with its terms, except as the right to indemnity under this
Agreement may be limited by Federal or state securities laws and except
as (i) may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting creditors' rights generally and (ii) is
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law);
(IX) The Company is not an "investment company" or an
entity "controlled" by an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended;
(X) To such counsel's knowledge, the Company is in
compliance with the Foreign Corrupt Trade Practices Act; and
(XI) To such counsel's knowledge after conducting a reasonable
investigation, there are no persons with registration or other similar
rights to have any securities registered pursuant to the Registration
Statement or otherwise registered by the Company under the Securities
Act, except as waived or disclosed in the Registration Statement and
the Prospectus.
To the extent deemed advisable by such counsel, they may rely
as to matters of fact on certificates of officers of the Company and
public officials and on the opinions of other counsel satisfactory to
the Underwriters as to matters which are governed by laws other than
the Federal laws of the United States and the Delaware General
Corporation Law; provided that such counsel shall state that they
believe that they and the Underwriters are justified in relying on such
other opinions. Copies of such certificates and other opinions shall be
furnished upon request to the Underwriters and counsel for the
Underwriters.
(E) You shall have received on the Closing Date an opinion of
[__________________], counsel for the Selling Stockholder, dated the Closing
Date, to the effect that:
(I) This Agreement has been duly authorized, executed and
delivered by or on behalf of the Selling Stockholder and constitutes a
legal, valid and binding agreement of Selling Stockholder and is
enforceable against the Selling Stockholder in accordance with its
terms, except as the right to indemnity under this Agreement may be
limited by Federal or state securities laws and except as (i) may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting creditors' rights generally and (ii) is subject to general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law);;
(II) The execution, delivery and performance of this Agreement
by the Selling Stockholder will not contravene, any provision of
applicable law, (ii) the certificates of incorporation, bylaws or other
governing documents of the Selling Stockholder that is a corporation,
or the articles of partnership of the Selling Stockholder that is a
limited partnership, or the trust agreement of the Selling Stockholder
that is a trust or (iii) any agreement or other instrument known to
such counsel to be binding upon the Selling Stockholder, no consent,
approval or authorization of any governmental body is required for the
performance of this Agreement by the Selling Stockholder, except such
as are specified and have been obtained and except such as may be
required by federal securities laws and state securities or Blue Sky
laws in connection with the purchase and distribution of the Shares by
the Underwriters;
(III) The Selling Stockholder has valid marketable title to
the Shares to be sold by the Selling Stockholder and has the legal
right and power, and all authorization and approval required by law, to
enter into this Agreement and to sell, transfer and deliver the Shares
to be sold by the Selling Stockholder;
(IV) The Custody Agreement signed by the Selling Stockholder
and the Custodian relating to the deposit of the Shares to be sold by
the Selling Stockholder, and the Power-of-Attorney appointing certain
individuals as the Selling Stockholder's attorneys-in-fact to the
extent set forth therein, relating to the transactions contemplated
hereby and by the Registration Statement, have been duly authorized,
executed and delivered by the Selling Stockholder and are valid and
binding agreements of the Selling Stockholder; and
(V) Delivery of the certificates for the Shares to be sold by
the Selling Stockholder pursuant to this Agreement to each of the
several Underwriters (who such counsel may assume have purchased the
Shares in good faith and without notice of any adverse claim) will pass
to each such Underwriter marketable title to such Shares free and clear
of any security interests, claims, liens, equities and other
encumbrances.
With respect to all of paragraph (e) above, counsel may rely, to the
extent such counsel deems appropriate, as to matters of fact upon the
representations of the Selling Stockholder contained herein and in the
aforementioned Custody Agreements and Powers of Attorney and in other documents
and instruments and opinions of local counsel; provided however, that copies of
such Custody Agreements and Powers of Attorney and of such other documents and
instruments shall be delivered to the Underwriters and shall be reasonably
satisfactory to your counsel and, in the case of local counsel, such local
counsel shall be reasonably satisfactory to your counsel, (a) a copy of each
opinion from local counsel so relied upon shall be delivered to you and shall be
reasonably satisfactory to your counsel and (b) counsel for each Selling
Stockholder shall state that they have no reason to believe that they are not
justified in relying thereon. With respect to all of paragraph (e) above,
counsel may assume the legal capacity and the absence of any legal disability to
contract as to each Selling Stockholder that is a natural person. The opinions
as to all of paragraph (e) above shall state that such opinions may be relied
upon by the Custodian and the attorneys-in-fact appointed under the Powers of
Attorney executed by the Selling Stockholder.
(F) You shall have received on the date of this Agreement and also on
each Closing Date, signed letters from Grant Thorton LLP and Amper, Politziner &
Mattia, in form and substance satisfactory to you and your counsel regarding the
financial information contained in the Prospectus, the Registration Statement,
any Preliminary Prospectus, the Prospectus or any amendment or supplement
thereto or any Blue Sky Application (as defined below).
(G) You shall have received on each Closing Date, a certificate or
certificates signed by the Chairman of the Board, Chief Executive Officer and
the Chief Financial Officer of the Company, in form and substance satisfactory
to you, to the effect that:
(I) The Registration Statement has become effective under the Act, no order
suspending the effectiveness of the Registration Statement has been issued, and
no proceedings for that purpose have been initiated or threatened or are, to
their knowledge, contemplated by the Commission;
(II) The representations and warranties of the Company in this
Agreement are true and correct, as if made at and as of such Closing
Date, and the Company has complied with all the covenants and
agreements and satisfied all the conditions on its part to be performed
or satisfied at or prior to such Closing Date;
(III) Any and all filings required by Rule 424 and Rule 430A
of the Rules and Regulations have been made;
(IV) The signers of said certificate and each director of the
Company have carefully examined the Registration Statement and the
Prospectus, and any amendments or supplements thereto, and such
documents contain all statements and information required to be
included therein, and do not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading;
(V) Since the effective date of the Registration Statement, there has
occurred no event required to be set forth in an amendment or supplement to the
Registration Statement or the Prospectus which has not been so set forth; and
(VI) There has not occurred any material adverse change, or any development
involving a prospective material adverse change, in the condition (financial or
otherwise), results of operations, properties or prospects of the Company from
that set forth in the Registration Statement.
(H) Since the effective date of the Registration Statement, the Company
shall not have sustained any loss by fire, flood, accident or other calamity, or
shall have become a party to or the subject of any litigation, which is material
to the Company, nor shall there have been a material adverse change in the
general affairs, key personnel, or net worth of the Company whether or not
arising in the ordinary course of business, which loss, litigation or change, in
your judgment, shall make it impractical or inadvisable to proceed with the
marketing of the Shares.
(I) The Shares shall be qualified for sale in such jurisdictions as the
Representatives may request and each such qualification shall be in effect and
not subject to any stop order or other proceeding on each Closing Date.
(J) Prior to the Closing Date the Shares shall have been duly authorized
for listing on the Nasdaq SmallCap Market, subject only to official notice of
issuance.
(K) The Company shall have furnished to the Representatives such
certificates, in addition to those specifically mentioned herein, as the
Representatives may have reasonably requested as to the accuracy and
completeness at each Closing Date of any statement in the Registration
Statement, the Prospectus as to the accuracy at each Closing Date of the
representations and warranties of the Company herein, as to the performance by
the Company of its obligations hereunder, or as to the fulfillment of the
conditions concurrent and precedent to the obligations hereunder of the
Representatives.
(L) No order preventing or suspending the use of any preliminary
prospectus or the Prospectus shall have been or shall be in effect and no order
suspending the effectiveness of the Registration Statement shall be in effect
and no proceedings for such purpose shall be pending before or threatened by the
Commission, and any requests for additional information on the part of the
Commission (to be included in the Registration Statement or the Prospectus or
otherwise) shall have been complied with to the satisfaction of the
Underwriters.
(M) The Company will have obtained from each of its officers, directors
and one percent or greater shareholders of record their written agreement that,
for a period of 180 days from the date of the Prospectus, that they will not,
without the prior written consent of the Representatives, sell, contract to
sell, grant any option for the sale of or otherwise dispose of, directly or
indirectly, any shares of Common Stock of the Company owned by them (or any
securities convertible into or exercisable for such shares of Common Stock) or
file a registration statement contemplating such sale or disposition.
The several obligations of the Underwriters to purchase Option Shares
hereunder are further subject to the delivery to you on the Option Closing Date
of such documents comparable to the foregoing as you may reasonably request.
9. INDEMNIFICATION.
(A) The Company will indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning set forth
in the Act (i) against any losses, claims, damages or liabilities to which such
Underwriter or such controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (A) any untrue
statement or alleged untrue statement made by the Company in Section 1 hereof,
(B) any untrue statement or alleged untrue statement of any material fact
contained (x) in the Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto, or (y) in any Blue Sky
application or other document executed by the Company specifically for that
purpose or based upon written information furnished by the Company filed in any
state or other jurisdiction in order to qualify any or all of the Shares under
the securities or Blue Sky laws thereof (any such application, document or
information being hereinafter called a "Blue Sky Application"), or (C) the
omission or alleged omission to state in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto or
in any Blue Sky Application, a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) against any and
all loss, liability, claim, damage and expense whatsoever, as incurred, to the
extent of the aggregate amount paid in settlement of any litigation, or any
investigation or proceeding by any, governmental agency or body, commenced or
threatened, or of any claim, in each case arising out of or based upon any such
untrue statement or omission, or any such alleged untrue statement or omission,
if such settlement is effected with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred (including, subject to
Section 9(d) hereof, the fees and disbursements of counsel chosen by the
Representatives), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim, in each case arising out
of or based upon any such untrue statement or omission, or any such alleged
untrue statement or omission, to the extent that any such expense is not paid
under (i) or (ii) above, and will reimburse promptly each Underwriter and each
such controlling person for any legal or other expenses reasonably incurred by
such Underwriter or such controlling person in connection with investigating or
defending any such loss, claim, damage, liability, action or proceeding;
provided, however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or expense arises out of or
is based upon an untrue statement or alleged untrue statement, or omission or
alleged omission, made in the Registration Statement, the Prospectus, or any
amendment or supplement thereto, in reliance upon and in conformity with written
information furnished to the Company through you by or on behalf of any
Underwriter specifically for use in the preparation of the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto or in any Blue Sky Application; provided further, however,
that the indemnity agreement provided in this Section with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter from
whom the person asserting any such losses, claims, charges, liabilities,
expenses or litigation purchased Shares (or to the benefit of any person
controlling such Underwriter), if a copy of the Prospectus correcting such
untrue statement or omission has not been sent or given to such person within
the time required by the Act and the rules and regulations promulgated
thereunder, unless such failure is the result of noncompliance by the Company
with the terms of this Agreement. This indemnity agreement will be in addition
to any liability which the Company may otherwise have, including but not limited
to the obligations to indemnify the Underwriters pursuant to the Engagement
Letter dated April 1, 1997.
(B) Each Underwriter severally, but not jointly, will indemnify and
hold harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement, each person, if any, who controls the Company
within the meaning set forth in the Act and the Selling Stockholder, (i) against
any losses, claims, damages or liabilities to which the Company or any such
director, officer or controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained (A) in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or (B) in any Blue Sky Application, or arise
out of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made, (ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any,
governmental agency or body, commenced or threatened, or of any claim, in each
case arising out of or based upon any such untrue statement or omission, if such
settlement is effected with the written consent of the Underwriters; and (iii)
against any and all expense whatsoever, as incurred (including, subject to
Section 9(d) hereof, the fees and disbursements of counsel chosen by the
indemnified parties), reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim, in each case
arising out of or based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such expense is not
paid under (i) or (ii) above, and will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer or controlling
person in connection with investigating or defending any such loss, claim,
damages, liability, action or proceeding; provided, however, that each
Underwriter will be liable in each case as provided in subsection (i), (ii) and
(iii) of this Section to the extent, but only to the extent, that such loss,
liability, claim, damage or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission that has
been made in the Registration Statement, Preliminary Prospectus, the Prospectus
or any amendment or supplement thereto or in any Blue Sky Application in
reliance upon and in conformity with written information furnished to the
Company through the Representative by or on behalf of such Underwriter
specifically for use in the preparation thereof or from the failure of any
Underwriter within the time required by the Act and the Rules and Regulations to
send or deliver a copy of the Prospectus (or the Prospectus as amended or
supplemented) to the person asserting any such losses, claims, charges,
liabilities or litigation, unless such failure is the result of noncompliance by
the Company with the terms of this Agreement. This indemnity agreement will be
in addition to any liability which such Underwriter may otherwise have.
(C) Each Selling Stockholder, severally and not jointly, will indemnify
and hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning set forth in the Act (i) against any losses,
claims, damages or liabilities to which such Underwriter or such controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon (A) any untrue statement or alleged untrue
statement made by such Selling Stockholder in Section 2 hereof, (B) any untrue
statement or alleged untrue statement of any material fact contained (x) in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or (y) in any Blue Sky application or other
document executed by such Selling Stockholder specifically for that purpose or
based upon written information furnished by such Selling Stockholder filed in
any state or other jurisdiction in order to qualify any or all of the Shares
under the securities or Blue Sky laws thereof or (C) the omission or alleged
omission to state in the Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto or in any Blue Sky
Application, a material fact required to be stated therein or necessary to make
the statements therein not misleading, (ii) against any and all loss, liability,
claim, damage and expense whatsoever, as incurred, to the extent of the
aggregate amount paid in settlement of any litigation, or any investigation or
proceeding by any, governmental agency or body, commenced or threatened, or of
any claim, in each case arising out of or based upon any such untrue statement
or omission, or any such alleged untrue statement or omission, if such
settlement is effected with the written consent of such Selling Stockholder; and
(iii) against any and all expense whatsoever, as incurred (including, subject to
Section 9(d) hereof, the fees and disbursements of counsel chosen by the
Representatives), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim, in each case arising out
of or based upon any such untrue statement or omission, or any such alleged
untrue statement or omission, to the extent that any such expense is not paid
under (i) or (ii) above, and will reimburse promptly each Underwriter and each
such controlling person for any legal or other expenses reasonably incurred by
such Underwriter or such controlling person in connection with investigating or
defending any such loss, claim, damage, liability, action or proceeding;
provided, however, that any Selling Stockholder will be liable in any such case
to the extent, but only to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon an untrue statement or
alleged untrue statement, or omission or alleged omission, made in the
Registration Statement, the Prospectus, or any amendment or supplement thereto,
in reliance upon and in conformity with written information furnished to the
Company by such Selling Stockholder specifically for use in the preparation of
the Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto or in any Blue Sky Application; provided
further, however, that the indemnity agreement provided in this Section with
respect to any Prospectus shall not inure to the benefit of any Underwriter from
whom the person asserting any such losses, claims, charges, liabilities,
expenses or litigation purchased Shares (or to the benefit of any person
controlling such Underwriter), if a copy of an amendment or supplement to the
Prospectus correcting such untrue statement or omission has not been sent or
given to such person within the time required by the Act and the rules and
regulations promulgated thereunder, unless such failure is the result of
noncompliance by such Selling Stockholder or the Company with the terms of this
Agreement. This indemnity agreement will be in addition to any liability which
the Selling Stockholder may otherwise have.
(D) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity or
contribution may be sought pursuant to this Section 9, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing. No
indemnification provided for in Section 9(a), (b) or (c) or contribution
provided for in Section 9(e) shall be available to any party who shall fail to
give notice as provided in this Section 9(d) if the party to whom notice was not
given was unaware of the proceeding to which such notice would have related and
was materially prejudiced by the failure to give such notice, but the failure to
give such notice shall not relieve the indemnifying party or parties from any
liability which it or they may have to the indemnified party otherwise than on
account of the provisions of Section 9(a), (b), (c) or (d). In case any such
proceeding shall be brought against any indemnified party and it shall notify
the indemnifying party of the commencement thereof, the indemnifying party shall
be entitled to participate therein and, to the extent that it shall wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified party
and shall pay as incurred the fees and disbursements of such counsel related to
such proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel at its own expense. Notwithstanding the
foregoing, the indemnifying party shall pay as incurred the reasonable fees and
expenses of the counsel retained by the indemnified party in the event (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel, or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to material actual or potential differing interests between
them. It is understood that the indemnifying party shall not, in connection with
any proceeding or related proceedings in the same jurisdiction, be liable for
the fees and expenses of more than one separate firm for all such indemnified
parties. Such firm shall be designated in writing by you and shall be reasonably
satisfactory to the Company in the case of parties indemnified pursuant to
Section 9(a) and 9(c) and shall be designated by the Company and shall be
reasonably satisfactory to you in the case of parties indemnified pursuant to
Section 9(b). The indemnifying party shall not be liable for any settlement of
any proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment.
(E) If the indemnification provided for in this Section 9 is legally
unavailable to hold harmless an indemnified party under Section 9(a), (b) or (c)
above in respect of any losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) referred to therein, then each indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Company, the Selling Stockholder and the
Underwriters from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law, then each indemnifying party shall contribute to such amount paid or
payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Company and the Underwriters in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Stockholder on the one hand and the Underwriters on the other shall be deemed to
be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company and the Selling Stockholder bear to
the total underwriting discounts and commissions received by the Underwriters,
in each case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company, the Selling Stockholder, or the Underwriters and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 9(e) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 9(e). The amount paid
or payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions or proceedings in respect thereto) referred to above in
this Section 9(e) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (e), no Underwriter shall be required to contribute any amount in
excess of the underwriting discounts and commissions applicable to the Shares
purchased by such Underwriter, and no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriter's obligations in this Section 9(e) to
contribute are several in proportion to the respective numbers of Firm Shares
set forth opposite their names in Schedule A hereto (or such number of Firm
Shares increased as set forth in Section 10 hereof).
(F) In any proceeding relating to the Registration Statement, the
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto or
any Blue Sky Application, the Company and the Underwriters, and each other party
against whom contribution may be sought under this Section 9, hereby consent to
the exclusive jurisdiction and venue of any court situated in the State of
Colorado, City of Denver, and all such parties agree that process issuing from
such court may be served upon him or it by any other contributing party and
consents to the service of such process and agrees that any other contributing
party may join him or it as an additional defendant in any such proceeding in
which such other contributing party is a party.
10. SUBSTITUTION OF UNDERWRITERS.
If any Underwriter shall fail to purchase the Shares set forth opposite
its name in Schedule A hereto, and such failure to purchase shall constitute a
default by such Underwriter in its obligation to purchase the number of Shares
which it has agreed to purchase under this Agreement, the non-defaulting
Underwriters shall have the right and shall be obligated to purchase (in the
respective proportions which the number of Shares set forth opposite the name of
each non-defaulting Underwriter in Schedule A hereto bears to the total number
of Shares set forth opposite the names of all the non-defaulting Underwriters in
Schedule A hereto) the Shares which the defaulting Underwriter agreed but failed
to purchase; except that the non-defaulting Underwriters shall not be obligated
to purchase any of the Shares if the total number of Shares which the defaulting
Underwriter or Underwriters agreed but failed to purchase exceed 10% of the
total number of Shares, and any non-defaulting Underwriter shall not be
obligated to purchase more than 110% of the number of Shares set forth its name
in Schedule A hereto plus the applicable Option Shares, if any, purchasable by
it pursuant to the terms of Section 2; provided further, that if the foregoing
maximums are exceeded, the non-defaulting Underwriters, and any other
underwriters satisfactory to you who so agree, shall have the right, but shall
not be obligated, to purchase (in such proportions as may be agreed upon among
them) all the Shares. If the non-defaulting Underwriters or the other
underwriters satisfactory to you do not elect to purchase the Shares which the
defaulting Underwriter or Underwriters agreed but failed to purchase, this
Agreement shall terminate without liability on the part of any non-defaulting
Underwriter or the Company except for the payment of expenses to be borne by the
Company and the Underwriters as provided in Section 7 and the indemnity and
contribution agreement of the Company and the Underwriters contained in Section
9 hereof.
If any of the Underwriters shall fail to purchase the entire number of
shares set forth opposite its name and such failure to purchase shall not
constitute a default by such Underwriter in the performance of its obligations
under this Agreement, the remaining Underwriters shall have the right, but shall
not be obligated, to take up and pay for (in such proportions as may be agreed
upon among them) the entire amount (but not less than all) of the Shares which
all withdrawing Underwriters agreed but failed to purchase.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have for damages caused by its default. If the other
underwriters satisfactory to you are obligated or agree to purchase the Shares
of a defaulting Underwriter, either you or the Company may postpone the Closing
Date for up to seven (7) full Business Days in order to effect any changes that
may be necessary in the Registration Statement or Prospectus or in any other
document or agreement, and to file promptly any amendment or any supplements to
the Registration Statement or the Prospectus which in you opinion may thereby be
made necessary.
11. NOTICES.
All communications hereunder shall be in writing and, except as otherwise
provided herein, will be mailed, delivered or sent by facsimile or telex as
follows: (a) if to the Company, at the office of the Company, 2600 Virginia
Ave., N.W., Suite 900, Washington, D.C. 20037, Attention: Wirt Walker III
(Facsimile:(202) 965-0886), with a copy to Dyer Ellis & Joseph, P.C., 600 New
Hampshire Avenue, N.W., Suite 1000, Washington, D.C. 20037, Attention: Michael
Joseph, Esq. (Facsimile: (202) 944-3068), (b) if to the Underwriters, to the
Underwriters at the offices of Hanifen, Imhoff Inc., 1125 17th Street, Suite
1600, Denver, Colorado 80202, Attention: Corporate Finance Department
(Facsimile: (303) 291-5470) with a copy to Gibson, Dunn & Crutcher LLP, 1801
California Street, Suite 4100, Denver, Colorado 80202, Attention: Thomas R.
Denison, Esq. (Facsimile: (303) 296-5310), and (c) if to the Selling
Stockholder, to the address set forth on Exhibit B, with a copy to
_______________________________.
12. EFFECTIVE DATE AND TERMINATION.
This Agreement shall become effective at 6:30 p.m. Eastern Time, on the
date hereof. Until this Agreement is effective, it may be terminated by the
Company by giving written notice to the Representatives or by the
Representatives by giving written notice to the Company, except that the
provisions of Section 7 and 9 shall at all time be effective. This Agreement may
be terminated at any time on or prior to each Closing Date by the
Representatives by notice to the Company as follows:
(A) At any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any material adverse change in, or
any adverse development or discovery which materially affects the business,
condition (financial and otherwise), results of operations, properties or
prospects of the Company whether or not arising in the ordinary course of
business, (ii) trading in any of the equity securities of the Company shall have
been suspended by the Commission, by the exchange that lists the Shares, or by
the NASDAQ, (iii) any outbreak or escalation of hostilities or declaration of
war or national emergency after the date hereof or other national or
international calamity or crises if the effect of such outbreak, escalation,
declaration, emergency, calamity or crises would, in your judgment, make the
offering or delivery of the Shares impracticable or inadvisable, (iv) suspension
or material limitation of trading in securities on the New York Stock Exchange,
the American Stock Exchange, Nasdaq National Market, the Chicago Board of
Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade
or limitation on prices for securities on any such exchange or quotation system,
(v) additional material governmental restrictions, not in force on the date of
this Agreement, shall have been imposed upon trading in securities generally by
any such exchange or quotation system or by order of the Commission or any court
or other governmental authority, (vi) declaration of a banking moratorium by
either federal or New York authorities or (vii) if there shall have been such a
material change in general economic, political or financial conditions or if the
effect of international conditions on the financial markets in the United States
shall be such as, in you judgment, makes it impracticable or inadvisable to
proceed with the delivery of the Shares; or
(B) As provided in Sections 8 and 10 of this Agreement.
If this Agreement is terminated pursuant to this Section, such termination
shall be without liability of any party to any other party, except to the extent
provided in Sections 8 and 10 hereof. If this Agreement is terminated pursuant
to this Section, you shall notify the Company thereof promptly by telephone or
facsimile, confirmed by express mail.
13. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
ELIVERY.
The indemnity and contribution agreements contained in Section 9 and
the representations, warranties and agreements of the Company and the Selling
Stockholder in Sections 1, 2, 5, 6 and 7 hereof shall survive the delivery of
the Shares to the Underwriters hereunder and shall remain in full force and
effect, regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of any Underwriter or other indemnified
party.
14. INFORMATION FURNISHED BY UNDERWRITERS.
The statements set forth in the last paragraph of the cover page and
under the caption "Underwriting" in any Preliminary Prospectus and in the
Prospectus constitute the only written information furnished by or on behalf of
any Underwriter.
15. SUCCESSORS.
This Agreement has been and is made solely for the benefit of the
Underwriters, the Selling Stockholder and the Company and their respective
successors, executors, administrators, heirs and assigns, and the officers,
directors and controlling persons referred to in Section 9, and no other person
will acquire or have any right or obligation hereunder. The term "successors and
assigns" shall not include any purchaser of any of the Shares merely by reason
of such purchase.
16. MARKET STAND-OFF.
Each Seller hereby agrees that, without your prior written consent, it
will not offer, sell, contract to sell or otherwise dispose of any shares of
Common Stock of the Company or any securities convertible into or exercisable or
exchangeable for such Common Stock for a period of 180 days after the date of
the public offering of the Shares, other than the Shares to be sold hereunder.
However, the Company may issue options under existing option plans and shares of
Common Stock upon the exercise of existing options. The Company will not file
any registration statement with respect to any capital stock of the Company with
the Commission for a period of 180 days after the date of the public offering of
the Shares.
17. MISCELLANEOUS.
For purposes of this Agreement, "Business Day" means any day on which
the New York Stock Exchange, Inc. is open for trading and Subsidiary has the
meaning set forth in Rule 405 of the Rules and Regulations.
Except as otherwise provided herein, this Agreement constitutes the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all other agreements and understandings except that the
provisions of Paragraphs I(m) and (n) and II of the Engagement Letter dated
April 1, 1997 between the Company and the Representatives shall survive the
execution of this Agreement.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
In case any provision in this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York without giving effect to the choice of law or
conflicts of law principles thereof.
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company, the Selling
Stockholder and the several Underwriters in accordance with its terms.
Very truly yours,
Securacom, Incorporated
By:
Its:
The Selling Stockholder named in Schedule B hereto:
By:
Attorney-in-Fact
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written:
HANIFEN, IMHOFF INC.
SCOTT & STRINGFELLOW, INC.
as Representatives of the Several
Underwriters names in Schedule A
hereto
HANIFEN, IMHOFF INC.
By:
Its:
FORM OF
WARRANT TO PURCHASE
[__________] COMMON SHARES
WARRANT TO PURCHASE
COMMON SHARES OF SECURACOM, INCORPORATED
TRANSFER RESTRICTED -- SEE SECTION 5.02
This certifies that, for [$_______] and other good and valuable
consideration, HANIFEN, IMHOFF INC. and its registered, permitted assigns
(collectively, the "Warrantholder"), is entitled to purchase from SECURACOM,
INCORPORATED, a corporation incorporated under the laws of the state of Delaware
(the "Company"), subject to the terms and conditions hereof, at any time after
9:00 A.M., New York time, on [Issue Date], 1998 and before 5:00 P.M., New York
time, on [Issue Date], 2000 (or, if such day is not a Business Day, at or before
5:00 P.M., New York time, on the next following Business Day), the number of
fully paid and non-assessable Common Shares stated above at the Exercise Price.
The Exercise Price and the number of shares purchasable hereunder are subject to
adjustment from time to time as provided in Article III hereof.
ARTICLE I
Section 1.01: Definition of Terms. As used in this Warrant, the following
capitalized terms shall have the following respective meanings:
(a) 50% Holders: At any time as to which a Demand Registration is
requested, the holders of any Warrants and the holders of Warrant Shares who
have the right to acquire or hold, as the case may be, not less than 50% of the
combined total of Warrant Shares issuable and Warrant Shares outstanding at the
time such Demand Registration is requested.
(b) Business Day: A day other than a Saturday, Sunday or other day on which
banks in the State of New York are authorized by law to remain closed.
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(c) Common Stock: Common Stock, par value of $0.01 per share, of the
Company.
(d) Common Stock Equivalents: Securities that are convertible into or
exercisable for shares of Common Stock.
(e) See Section 6.02.
(f) Exchange Act: The Securities Exchange Act of 1934, as amended.
(g) Exercise Price: 120% of the public offering price per Warrant Share, as
such price may be adjusted from time to time pursuant to Article III hereof
(h) Expiration Date: 5:00 P.M., New York time, on [Issue Date], 2000 or if
such day is not a Business Day, the next succeeding day which is a Business Day.
(i) Holder: A Holder of Registrable Securities.
(j) NASD and NASDAQ: National Association of Securities Dealers, Inc., and
NASD Automatic Quotation System.
(k) Participatory Registration: See Section 6.01.
(l) Person: An individual, partnership, joint venture, corporation, trust,
unincorporated organization or government or any department or agency thereof.
(m) Prospectus: Any prospectus included in any Registration Statement,
as amended or supplemented by any prospectus supplement, with respect to the
terms of the offering of any portion of the Registrable Securities covered by
such Registration Statement and all other amendments and supplements to the
prospectus, including post-effective amendments and all material incorporated by
reference in such prospectus.
(n) Public Offering: A public offering of any of the Company's equity
securities pursuant to a Registration Statement under the Securities Act.
(o) Registrable Securities: Any Warrant Shares issued to HANIFEN,
IMHOFF INC. and/or its designees or transferees as permitted under Section 5.02
and/or other securities that may be or are issued by the Company upon exercise
of this Warrant, including those which may thereafter be issued by the Company
in respect of any such securities by means of any stock splits, stock dividends,
recapitalizations, reclassifications or the like, and as adjusted pursuant to
Article III hereof.
(p) Registration Expenses: Any and all expenses incurred in connection
with any registration or action incident to performance of or compliance by the
Company with Article VI, including, without limitation, (i) all SEC, national
securities exchange and NASD registration and filing fees; all listing fees and
all transfer agent fees; (ii) all fees and expenses of complying with state
securities or blue sky laws (including the fees and disbursements of counsel for
the underwriters in connection with blue sky qualifications of the Registrable
Securities); (iii) all printing, mailing, messenger and delivery expenses and
(iv) all fees and disbursements of counsel for the Company and of its
accountants, including the expenses of any special audits and/or "cold comfort"
letters required by or incident to such performance and compliance, but
excluding underwriting discounts and commissions, brokerage fees and transfer
taxes, if any, and fees of counsel or accountants retained by the holders of
Registrable Securities to advise them in their capacity as Holders of
Registrable Securities.
(q) Registration Statement: Any registration statement of the Company
filed or to be filed with the SEC which covers any of the Registrable Securities
pursuant to the provisions of this Agreement, including all amendments
(including post-effective amendments) and supplements thereto, all exhibits
thereto and all material incorporated therein by reference.
(r) SEC: The Securities and Exchange Commission or any other federal agency
at the time administering the Securities Act or the Exchange Act.
(s) Securities Act: The Securities Act of 1933 as amended.
(t) Transfer: See Section 5.02.
(u) Warrant: This Warrant, and all other similar warrants issued on the
date hereof, and all other warrants that may be issued in its place (together
evidencing the right to purchase an aggregate of [_____] shares of Common
Stock), originally issued as set forth in the definition of -------- Registrable
Securities.
(v) Warrantholders: The person(s) or entity(ies) to whom this Warrant is
originally issued, or any successor in interest thereto, or any assignee or
transferee thereof, in whose name this Warrant is registered upon the books to
be maintained by the Company for that purpose. --------------
(w) Warrant Shares: Common Stock, Common Stock Equivalents and other
securities purchased or purchasable upon exercise of the Warrants.
(x) $U.S.: United States dollars.
ARTICLE II
DURATION AND EXERCISE OF WARRANT
Section 2.01: Duration of Warrant. The Warrantholder may exercise this
Warrant at any time and from time to time after 9:00 A.M., New York time on
[Issue Date], 1998 and before 5:00 P.M., New York time, on the Expiration Date.
If this Warrant is not exercised on the Expiration Date, it shall become void,
and all rights hereunder shall thereupon cease.
Section 2.02: Exercise of Warrant.
(a) The Warrantholder may exercise this Warrant, in whole or in part, as
follows:
(i) by presentation and surrender of this warrant to the
Company at its corporate office at 50 Tice Boulevard, Woodcliff Lake, New Jersey
07675 or at the office of its stock transfer agent, if any, with the
Subscription Form annexed hereto duly executed and accompanied by payment of the
Exercise Price for each Warrant Share to be purchased by means of a cashiers or
certified check; or
(ii) By presentation and surrender of this Warrant to the
Company at its principal executive offices with a Cashless Exercise Form annexed
hereto duly executed (a "Cashless Exercise"). In the event of a Cashless
Exercise, the Warrantholder shall exchange its Warrant for that number of shares
of Common Stock determined by multiplying the number of Warrant Shares by a
fraction, the numerator of which shall be the amount by which the then current
market price per share of Common Stock exceeds the Exercise Price, and the
denominator of which shall be the then current market price per share of Common
Stock. For purposes of any computation under this Section 2.02(a)(ii), the then
current market price per share of Common Stock at any date shall be deemed to be
the last sale price of the Common Stock on the business day prior to the date of
the Cashless Exercise or, in case no such reported sales take place on such day,
the average of the last reported bid and asked prices of the Common Stock on
such day, in either case on the principal national securities exchange on which
the Common Stock is admitted to trading or listed, or if not listed or admitted
to trading on any such exchange, the representative closing bid price of the
Common Stock as reported by NASDAQ, or other similar organization if NASDAQ is
no longer reporting such information, or if not so available, the fair market
price of the Common Stock as determined by the Board of Directors in good faith.
(b) Upon receipt of this Warrant with the Subscription Form fully
executed and accompanied by payment of the aggregate Exercise Price for the
Warrant Shares for which this Warrant is then being exercised, or, in the case
of Section 2.02(a)(ii), with the Cashless Exercise Form duly executed, the
Company shall cause to be issued certificates for the total number of whole
shares of Common Stock for which this Warrant is being exercised (adjusted to
reflect the effect of the anti-dilution provisions contained in Article III
hereof, if any, and as provided in Section 2.04 hereof) in such denominations as
are requested for delivery to the Warrantholder, and the Company shall thereupon
deliver such certificates to the Warrantholder. The Warrantholder shall be
deemed to be the holder of record of the shares of Common Stock issuable upon
such exercise, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such shares of Common
Stock may not then be actually delivered to the Warrantholder. If at the time
this Warrant is exercised, a Registration Statement is not in effect to register
under the Securities Act the Warrant Shares issuable upon exercise of this
Warrant, the Company may require the Warrantholder to make such representations,
and may place such legends on certificates representing the Warrant Shares, as
may be reasonably required in the opinion of counsel to the Company to permit
the Warrant Shares to be issued without such registration.
(c) In case the Warrantholder shall exercise this Warrant with respect
to less than all of the Warrant Shares that may be purchased under this Warrant,
the Company shall execute a new warrant in the form of this Warrant for the
balance of such Warrant Shares and deliver such new warrant to the
Warrantholder.
(d) The Company shall pay any and all stock transfer and similar taxes
which may be payable in respect of the issue of this Warrant or in respect of
the issue of any Warrant Shares.
Section 2.03: Reservation of Shares; Representation as to Shares. The
Company hereby agrees that at all times there shall be reserved for issuance and
delivery upon exercise of this Warrant such number of shares of Common Stock or
other shares of capital stock of the Company from time to time issuable upon
exercise of this Warrant. All such shares shall be duly authorized, and when
issued upon such exercise, shall be validly issued, filly paid and
non-assessable, free and clear of all liens, security interests, charges and
other encumbrances or restrictions on sale and free and clear of all preemptive
rights, and not issued in violation of any rights of other Holders of the
Company securities, including without limitation, rights of first offer or
refusal held by shareholders of the Company.
Section 2.04: Fractional Shares. The Company shall not be required to
issue any fraction of a share of its capital stock in connection with the
exercise of this Warrant, and in any case where the Warrantholder would, except
for the provisions of this Section 2.04, be entitled under the terms of this
Warrant to receive a fraction of a share upon the exercise of this Warrant, the
Company shall, upon the exercise of this Warrant and receipt of the Exercise
Price, issue the greatest number of whole shares purchasable upon exercise of
this Warrant for which payment in full of the Exercise Price has been received.
The Company shall not be required to make any cash or other adjustment in
respect of such fraction of a share to which the Warrantholder would otherwise
be entitled.
Section 2.05: Listing. Prior to the issuance of any shares of Common
Stock upon exercise of this Warrant, the Company shall secure the listing of
such shares of Common Stock upon each national securities exchange or automated
quotation systems, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance upon exercise of this Warrant) and shall
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of all shares of Common Stock from time to time issuable upon the
exercise of this Warrant; and the Company shall so list on each national
securities exchange or automated quotation system, and shall maintain such
listing of, any other shares of capital stock of the Company issuable upon the
exercise of this Warrant if and so long as any shares of the same class shall be
listed on such national securities exchange or automated quotation system.
ARTICLE III
ADJUSTMENT OF SHARES OF COMMON STOCK
PURCHASABLE AND OF EXERCISE PRICE
The Exercise Price and the number and kind of Warrant Shares shall be
subject to adjustment from time to time upon the happening of certain events as
provided in this Article III.
Section 3.01: Mechanical Adjustments
(a) If at any time prior to the exercise of this Warrant in full, the
Company shall (i) declare a dividend or make a distribution on the Common Stock
payable in shares of its Common Stock; (ii) subdivide, reclassify or
recapitalize the outstanding Common Stock into a greater number of shares of
Common Stock;(iii) combine, reclassify or recapitalize its outstanding-shares of
Common Stock into a smaller number of shares of Common Stock, or (iv) issue any
shares of its capital stock by reclassification of its Common Stock (including
any such reclassification in connection with a consolidation or a merger in
which the Company is the continuing corporation), the Exercise Price in effect
at the time of the record date of such dividend, distribution, subdivision,
combination, reclassification or recapitalization shall be adjusted so that the
Warrantholder shall be entitled to receive the aggregate number and kind of
shares which, if this Warrant had been exercised in full immediately prior to
such event, he would have owned upon such exercise and been entitled to receive
by virtue of such dividend, distribution, subdivision, combination,
reclassification or recapitalization. Any adjustment required by this paragraph
3.01(a) shall be made successively and become effective immediately after the
record date, in the case of a dividend or distribution, or the effective date,
in the case of a subdivision, combination, reclassification or recapitalization,
to allow the purchase of such aggregate number and kind of shares.
(b) If at any time prior to the exercise of this Warrant in full, the
Company shall (i) issue or sell any Common Stock or Common Stock Equivalents
without consideration or for consideration per share of Common Stock less than
the current market price per share of Common Stock on the date of such issuance
or sale as defined in Section 3.01(f) (other than pursuant to employee benefit
or compensation arrangements and other than pursuant to subscription rights,
options or warrants which had a subscription, exercise, purchase or conversion
price equal to or greater than the current market price per share on the
effective date of issuance or grant of such rights, options or warrants) or (ii)
fix a record date for the issuance of subscription rights, options or warrants
to all holders of Common Stock entitling them to subscribe for or purchase
shares of Common Stock (or Common Stock Equivalents) at a price (or having an
exercise or conversion price per share) less than the current market price of
the Common Stock (as determined pursuant to Section 3.01(e)) on the record date
described below, the Exercise Price shall be adjusted so that the Exercise Price
shall equal the price determined by multiplying the Exercise Price in effect
immediately prior to the date of such sale or issuance (which date in the event
of distribution to shareholders shall be deemed to be the record date set by the
Company to determine shareholders entitled to participate in such distribution)
by a fraction, the numerator of which shall be (i) the number of shares of
Common Stock outstanding on the date of such sale or issuance, plus (ii) the
number of additional shares of Common Stock which the aggregate consideration
received by the Company upon such issuance or sale (plus the aggregate of any
additional amount to be received by the Company upon the exercise of such
subscription rights, options or Warrants) would purchase at such current market
price per share of the Common Stock immediately prior to the date of such
issuance or sale; and the denominator of which shall be (i) the number of shares
of Common Stock outstanding on the date of such issuance or sale, plus (ii) the
number of additional shares of Common Stock offered for subscription or purchase
(or into which the Common Stock equivalents so offered are exercisable or
convertible). Any adjustments required by this paragraph 3.01(b) shall be made
immediately after such issuance or sale or record date, as the case may be
unless the offering period of such Common Stock or Common Stock Equivalents, or
the period in which such rights, options or warrants may be exercised or
converted, shall expire in 90 days or less, in which case such event shall be
given effect immediately after the expiration of such period based upon the
number of shares of Common Stock (or Common Stock Equivalents) actually
delivered; provided that should any Warrant be exercised during such period, the
number of shares of Common Stock issuable upon such exercise shall be
recalculated giving effect to any adjustment made at the end of such period in
respect of such event and an appropriate number of additional shares of Common
Stock shall be issued in respect of such exercise. Such adjustments shall be
made successively whenever such event shall occur. In the event that such period
shall be greater than 90 days, then to the extent that shares of Common Stock
(or Common Stock Equivalents) are not delivered after the expiration of such
subscription rights, options or warrants, the Exercise Price shall be readjusted
to the Exercise Price which would then be in effect had the adjustments made
upon the issuance of such rights, options or warrants been made upon the basis
of delivery of only the number of shares of Common Stock (or Common Stock
Equivalents) actually delivered.
(c) If at any time prior to the exercise of this Warrant in full, the
Company shall fix a record date for the issuance or making a distribution to all
holders of the Common Shock (including any such distribution to be made in
connection with a consolidation or merger in which the Company is to be the
continuing corporation) of evidences of its indebtedness, any other securities
of the Company or any cash, property or other assets or securities, including
without limitation shares of a subsidiary's capital stock (excluding a common
stock dividend, combination, reclassification, recapitalization or issuance
referred to in Section 3.01(a)), regular cash dividends or cash distributions in
the ordinary course of business or subscription rights, options or warrants for
Common Stock or Common Stock Equivalents (excluding those referred to in Section
3.01(b)) (any such nonexcluded event being herein called a "Special Dividend"),
the Exercise Price shall be decreased immediately after the record date for such
Special Dividend to a price determined by multiplying the Exercise Price then in
effect by a fraction, the numerator of which shall be the then current market
price of the Common Stock (as defined in Section 3.01(e)) on such record date
less the fair market value (as determined by the Company's Board of Directors)
of the evidences of indebtedness, securities or property, or other assets issued
or distributed in such Special Dividend applicable to one share of Common Stock
or of such subscription rights or warrants applicable to one share of Common
Stock, and the denominator of which shall be such then current market price per
share of Common Stock (as so determined). Any adjustment required by this
paragraph 3.01(c) shall be made successively effective on the record date for
the Special Dividend and in the event that such distribution is not so made, the
Exercise Price shall again be adjusted to be the Exercise Price that was in
effect immediately prior to such record date.
(d) If at any time prior to the exercise of this Warrant in full, the
Company shall make a distribution to all holders of the Common Stock of stock of
a subsidiary or securities convertible into or exercisable for such stock, then
in lieu of an adjustment in the Exercise Price or the number of Warrant Shares
purchasable upon the exercise of this warrant, each Warrantholder, upon the
exercise hereof at any time after such distribution, shall be entitled to
receive from the Company, such subsidiary or both, as the Company shall
determine, the stock or other securities to which such Warrantholder would have
been entitled if such Warrantholder had exercised this Warrant immediately prior
thereto, all subject to further adjustment as provided in this Article III, and
the Company shall reserve, for the life of the Warrant such securities of such
subsidiary or other corporation; provided, however, that no adjustment in
respect of dividends or interest of such stock or other securities shall be made
during the term of this Warrant or upon its exercise.
(e) Whenever the Exercise Price payable upon exercise of each Warrant
is adjusted pursuant to one or more of paragraphs (a), (b) and (c) of this
Section 3.01, the Warrant Shares shall simultaneously be adjusted by multiplying
the number of Warrant Shares initially issuable upon exercise of each Warrant by
the Exercise Price in effect on the date thereof and dividing the product so
obtained by the Exercise Price, as adjusted.
(f) For the purpose of any computation under this Section 3.01, the
current market price per share of Common Stock at any date shall be deemed to be
the average of the daily closing prices for 20 consecutive trading days
commencing 30 trading days before such date. The closing price for each day
shall be the last sale price regular way or, in case no such reported sales take
place on such day, the average of the last reported bid and asked prices regular
way, in either case on the principal national securities exchange on which the
Common Stock is admitted to trading or listed, or if not listed or admitted to
trading on such exchange, the representative closing bid price as reported by
NASDAQ, or other similar organization if NASDAQ is no longer reporting such
information, or if not so available, the fair market price as determined in good
faith by the Board of Directors of the Company.
(g) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least five cents ($.05)
in such price; provided, however, that any adjustments which by reason of this
paragraph (f) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
3.01 shall be made to the nearest cent or to the nearest one-hundredth of a
share, as the case may be. Notwithstanding anything in this Section 3.01 to the
contrary, the Exercise Price shall not be reduced to less than the then existing
par value, if any, of the Common Stock as a result of any adjustment made
hereunder.
(h) In the event that at any time, as a result of any adjustment made
pursuant to Section 3.01(a), the Warrantholder thereafter shall become entitled
to receive any shares of the Company other than Common Stock, thereafter the
number of such other shares so receivable upon exercise of any Warrant shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common Stock
contained in Section 3.01(a).
(i) In the case of an issue of additional Common Stock or Common Stock
Equivalents for cash, the consideration received by the Company therefor,
without deducting therefrom any discount or commission or other expenses paid by
the Company for any underwriting of, or otherwise in connection with, the
issuance thereof, shall be deemed to be the amount received by the Company
therefor. To the extent that such issuance shall be for a consideration other
than cash, then, except as herein otherwise expressly provided, the amounts of
such consideration shall be deemed to be the fair value of such consideration at
the time of such issuance as reasonably determined in good faith by the Board of
Directors of the Company (but without deduction of any compensation, discounts
or expenses paid or incurred by the Company for, and in the underwriting of, or
otherwise in connection with, the issuance thereof). The term issue shall
include the sale or other disposition of shares held by or on account of the
Company or m the treasury of the Company but until so sold or otherwise disposed
of such shares shall not be deemed outstanding.
Section 3.02: Notices of Adjustment. Whenever the number of Warrant
Shares or the Exercise Price is adjusted as herein provided, the Company shall
prepare and deliver forthwith to the Warrantholder a certificate signed by its
President, and by any Vice President, Treasurer or Secretary, setting forth the
adjusted number of shares purchasable upon the exercise of this Warrant and the
Exercise Price of such shares after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting forth the
computation by which adjustment was made. The certificate of any independent
firm of public accountants of recognized standing selected by the Board of
Directors of the Company shall be conclusive evidence of the arithmetic
correctness of any computation made under this Section 3.
Section 3.03: No Adjustment for Dividends. Except as provided in Section
3.01 of this Agreement, no adjustment in respect of any cash dividends shall be
made during the term of this Warrant or upon the exercise of this Warrant.
Section 3.04: Preservation of Purchase Rights in Certain Transactions.
In case of any consolidation or merger of the Company with or into another
corporation (other than a merger with a subsidiary in which the Company is the
continuing corporation and that does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock) or in case
of any sale, lease, transfer or conveyance to another corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, the Company shall, as a condition to such transaction cause such
successor or purchasing corporation, as the case may be, to execute with the
Warrantholder an agreement granting the Warrantholder the right thereafter, upon
payment of the Exercise Price in effect immediately prior to such transaction,
to receive upon exercise of this Warrant the kind and amount of shares and other
securities and property which he would have owned or have been entitled to
receive as a result of such transaction had this Warrant been exercised
immediately prior to such action. Such agreement shall provide for adjustments
in respect of such shares of stock and other securities and property, which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Article III and shall provide that such rights may be exercised at
any time prior to the Expiration Date. In the event that in connection with any
such transaction, additional shares of Common Stock shall be issued in exchange,
conversion, substitution or payment, in whole or in part, for, or of, a security
of the Company other than Common Stock, any such issue shall be treated as an
issue of Common Stock covered by the provisions of Article III. The provisions
of this Section 3.04 shall similarly apply to successive reclassifications,
capital reorganizations, consolidations, mergers, sales or conveyance.
Section 3.05: Form of Warrant After Adjustments. The form of this
Warrant need not be changed because of any adjustments in the Exercise Price or
the number or kind of the Warrant Shares, and Warrants theretofore or thereafter
issued may continue to express the same price and number and kind of shares as
are stated in the Warrant, as initially issued.
Section 3.06: Treatment of Warrantholder. Subject to Article V, prior
to due presentment for registration of transfer of this Warrant, the Company may
deem and treat the Warrantholder as the absolute owner of this Warrant
(notwithstanding any notation of ownership or other writing hereon) for all
purposes and shall not be affected by any notice to the contrary.
ARTICLE IV
OTHER PROVISIONS RELATING TO
RIGHTS OF WARRANTHOLDER
Section 4.01: No Rights as Shareholders; Notice to Warrantholders.
Nothing contained in this Warrant shall be construed as conferring upon the
Warrantholder or his or its transferees the right to vote or to receive
dividends or to consent or to receive notice as a shareholder in respect of any
meeting of shareholders for the election of directors of the Company or of any
other matter, or any rights whatsoever as shareholders of the Company. The
Company shall give notice to the Warrantholder by registered mall if at any time
prior to the expiration or exercise in full of the Warrants, any of the
following events shall occur:
(a) the Company shall authorize the payment of any dividend to
all holders of Common Stock;
(b) the Company shall authorize the issuance to all holders of Common
Stock of any additional shares of Common Stock or Common Stock equivalents or of
rights, options or warrants to subscribe for or purchase Common Stock or Common
Stock Equivalents or of any other subscription rights, options or warrant;
(c) a dissolution, liquidation or winding up of the Company; or
(d) a capital reorganization or reclassification of the Common Stock
(other than a subdivision or combination of the outstanding Common Stock) or any
consolidation or merger of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and that does not result in any reclassification or change of Common
Stock outstanding) or in the case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety.
Such giving of notice shall be completed at least l5 Business Days
prior to the date fixed as a record date or effective date or the date of
closing of the Company's stock transfer books for the determination of the
shareholders entitled to such dividend, distribution, or subscription rights, or
for the determination of the shareholders entitled to vote on such proposed
merger, consolidation, sale, conveyance dissolution, liquidation or winding up.
Such notice shall specify such record date or the date of closing the stock
transfer books, as the case may be. Failure to provide such notice shall not
affect the validity of any action taken in connection with such dividend,
distribution or subscription rights, or proposed merger, consolidation, sale,
conveyance, dissolution, liquidation or winding up.
Section 4.02: Lost, Stolen, Mutilated, or Destroyed Warrants. If this
Warrant is lost, stolen, mutilated or destroyed, the Company may, upon receipt
by the Company of evidence of ownership reasonably satisfactory to it and on
such terms as to indemnity or otherwise as it may in its discretion impose
(which shall, in the case of a mutilated Warrant, include the surrender
thereof), issue a new Warrant of like denomination and tenor as, and in
substitution for, this Warrant.
ARTICLE V
SPLIT-UP, COMBINATION, EXCHANGE
AND TRANSFER OF WARRANTS
Section 5.01: Split-Up, Combination, Exchange and Transfer of Warrants.
Subject to the provisions of Section 5.02 hereof, this Warrant may be split up,
combined or exchanged for another Warrant or Warrants containing the same terms
to purchase a like aggregate number of Warrant Shares. If the Warrantholder
desires to split up, combine or exchange this Warrant, he or it shall make such
request in writing delivered to the Company and shall surrender to the Company
this Warrant and any other Warrants to be so split-up, combined or exchanged.
Upon any such surrender for a split-up, combination or exchange, the Company
shall execute and deliver to the person entitled thereto a Warrant or Warrants,
as the case may be, as so requested. The Company shall not be required to effect
any split-up, combination or exchange which will result in the issuance of a
Warrant entitling the Warrantholder to purchase upon exercise a fraction of a
share of Common Stock or a fractional Warrant
Section 5.02: Restrictions on Transfer. Neither this Warrant nor the
Warrant Shares may be disposed of or encumbered (any such action, a "Transfer"),
except (i) to HANIFEN, IMHOFF INC. any successor to the business of such
company, or any officer or partner of such company, or (ii) to any underwriter
in connection with a registered Public Offering of the Warrant Shares, provided
(as to (ii)) that this Warrant is exercised upon such Transfer and the Warrant
Shares issued upon such exercise are sold by such underwriter as part of such
registered Public Offering and, as to both (i) and (ii), only in accordance with
and subject to the provisions of the Securities Act and the rules and
regulations promulgated hereunder. If at the time of a Transfer, a Registration
Statement is not in effect to register this Warrant or the Warrant Shares, the
Company may require the Warrantholder to make such representations, and may
place such legends on certificates representing this Warrant, as may be
reasonably required in the opinion of counsel to the Company to permit a
Transfer without such registration.
ARTICLE VI
REGISTRATION UNDER THE SECURITIES ACT OF 1933
Section 6.01: Piggyback Registration.
(a) Right to Include Registrable Securities. If at any time or from
time to time after [Issue Date], l998, and prior to the Expiration Date, the
Company proposes to register any Common Stock (or any other securities for which
this Warrant may then be exercised) under the Securities Act on any form for the
registration of securities under such Act, whether or not for its own account
(other than by a registration statement on forms S-8 (or any successor forms) or
other form which does not include substantially the same information as would be
required in a form for the general registration of securities or would not be
available for the Registrable Securities) (a "Participatory Registration"), it
shall give written notice to all Holders of its intention to do so and of such
Holders' rights under this Section 6.01. Such rights are referred to hereinafter
as "Participatory Registration Rights." Upon the written request of any such
Holder made within 20 days after receipt of any such notice (which request shall
specify the Registrable Securities intended to be disposed of by such Holder and
the intended manner of distribution of such securities), the Company shall use
its best efforts to include in the Registration Statement the Registrable
Securities which the Company has been so requested to register by the Holders
thereof (subject to paragraph (e) below) and the Company shall keep such
registration statement in effect and maintain compliance with each Federal and
state law or regulation for the period necessary for such Holder to effect the
proposed sale or other disposition (but in no event for a period greater than 90
days).
(b) Withdrawal of Participatory Registration by Company. If, at any
time after giving written notice of its intention to register any securities in
a Participatory Registration but prior to the effective date of the related
Registration Statement, the Company shall determine for any reason not to
register such securities, the Company shall give written notice of such
determination to each Holder and, thereupon, shall be relieved of its obligation
to register any Registrable Securities in connection with such Participatory
Registration. All best efforts obligations of the Company pursuant to Section
6.04 shall cease if the Company determines to terminate prior to such effective
date any registration where Registrable Securities are being registered pursuant
to this Section 6.01.
(c) Participatory Registration of Underwritten Public Offerings. If a
Participatory Registration involves an offering by or through underwriters,
then, (i) all Holders requesting to have their Registrable Securities included
in the Company's Registration Statement must sell their Registrable Securities
to the underwriters selected by the Company on the same terms and conditions as
apply to other selling shareholders and (ii) any Holder requesting to have his
or its Registrable Securities included in such registration Statement may elect
in writing, not later than three Business Days prior to the Company's request
for effectiveness of the Registration Statement filed in connection with such
registration, not to have his or its Registrable Securities so included in
connection with such registration.
(d) Payment of Registration Expenses for Participatory Registration. The
Company shall pay all Registration Expenses in connection with each registration
of Registrable Securities requested pursuant to a Participatory Registration
Right contained in this Section 6.01.
(e) Priority in Participatory Registration. If a Participatory
Registration involves an offering by or through underwriters, the Company,
except as otherwise provided herein, shall not be required to include
Registrable Securities therein if and to the extent the underwriter managing the
offering reasonably believes in good faith and advises each Holder requesting to
have Registrable Securities included in the Company's Registration Statement
that such inclusion would materially adversely affect such offering; provided
that any such reduction or elimination shall be pro rata to all shares of Common
Stock proposed to be included in the Company's Registration Statement in
proportion to the respective number of shares that have been requested to be
registered by the Company, any Holder or any other selling shareholder, as the
case may be.
Section 6.02: Demand Registration.
(a) Request for Registration. If, at any time subsequent to [Issue
Date], 1998 and prior to the Expiration Date, any 50% Holders make a written
request that the Company file a registration statement under the Securities Act,
the Company as soon as practicable shall use its best efforts to file a
registration statement with respect to all Warrant Shares that it has been so
requested to include and obtain the effectiveness thereof, and to take all other
action necessary under any Federal or state law or regulation to permit the
Warrant Shares that are then held and/or that may be acquired upon the exercise
of the Warrants specified in the notices of the Holder or Holders thereof to be
sold or otherwise disposed of, and the Company shall maintain such compliance
with each such Federal and state law and regulation for the period necessary for
such Holder or Holders to effect the proposed sale or other disposition (but in
no event for more than 90 days) (the "Demand Registration"); provided, however,
the Company shall be entitled to defer such Demand Registration for a period of
up to 90 days if and to the extent that its Board of Directors shall determine
in good faith that such registration would interfere with a pending corporate
transaction. The Company shall also promptly give written notice to the Holder
and the Holders of any other Warrants and/or the Holders of any Warrant Shares
who or that have not made a request to the Company pursuant to the provisions of
this subsection (a) of its intention to effect any required registration or
qualification, and shall use its best efforts to effect as expeditiously as
possible such registration or qualification of all other such Warrant Shares
that are then held or that may be acquired upon the exercise of the Warrants,
the Holder or Holders of which have made a written request for such registration
or qualification, within l5 days after such notice has been given by the
Company, as provided in the preceding sentence. The Company shall be required to
effect a registration or qualification pursuant to this subsection (a) on one
(1) occasion only. Each written request of the Holders shall specify the names
of the Holders making such request and the number of Warrant Shares to be sold
by each Holder.
(b) Payment of Registration Expenses for Demand Registration. The Company
shall pay all Registration Expenses in connection with the Demand Registration.
(c) Selection of Underwriters. If any Demand Registration is requested
to be in the form of an underwritten offering, the managing underwriter shall be
HANIFEN, IMHOFF INC., co-manager shall be [_____] and the independent pricer
required under the rules of the NASD (if any) shall be selected and obtained by
the Holders of a majority of the Warrant Shares to be registered. Such selection
shall be subject to the Company's consent, which consent shall not be
unreasonably withheld. All fees and expenses (other than Registration Expenses
otherwise required to be paid) of any managing underwriter, any co-manager or
any independent underwriter or other independent pricer required under the rules
of the NASD shall be paid for by such underwriters or by the Holder or Holders
whose shares are being registered. If Hanifen, Imhoff Inc., or [__________]
should decline to serve as managing underwriter, the Holders of a majority of
the Warrant Shares to be registered may select and obtain one or more managing
underwriters. Such selection shall be subject to the Company's consent, which
shall not be unreasonably withheld.
Section 6.03: Buy-outs of Registration Demand. Upon receipt of any
request pursuant to Section 6.01 or a demand pursuant to Section 6.02 that
Registrable Securities be included in a registration statement, and in lieu of
any obligation under such Sections to effect either a Participatory or a Demand
Registration with respect to such Registrable Securities, the Company may,
within five business days of receipt of such request, purchase all, but not less
than all, such Registrable Securities at an amount in cash equal to with respect
to Warrants not yet exercised the difference between (a) the then current market
value (as determined in Section 3.01(e)) of the Common Stock on the day of such
repurchase, and (b) the Exercise Price in effect on such day and with respect to
issued Warrant Shares, the then current market value (as determined in Section
3.01(e)) of the Common Stock on the day of such repurchase.
Section 6.04: Registration Procedures. If and whenever the Company is
required to use its best efforts to take action pursuant to any Federal or state
law or regulation to permit the sale or other disposition of any Warrant Shares
that are then held or that may be acquired upon exercise of the Warrants in
order to effect or cause the registration of any Registrable Securities under
the Securities Act as provided in this Article VI, the Company shall, as
expeditiously as practicable;
(a) furnish to each selling Holder of Registrable Securities and the
underwriters, if any, without charge, as many copies of the Registration
Statement, the Prospectus or the Prospectuses (including each preliminary
prospectus) and any amendment or supplement thereto as they may reasonably
request;
(b) enter into such agreements (including an underwriting agreement)
and take all such other actions reasonably required in connection therewith in
order to expedite or facilitate the disposition of such Registrable Securities
and in such connection, if the registration is in connection with an
underwritten offering (i) make such representations and warranties to the
underwriters in such form, substance and scope as are customarily made by
issuers to underwriters in underwritten offerings and confirm the same if and
when requested; (ii) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions in form, scope and substance shall be
reasonably satisfactory to the underwriters and their counsel) addressed to the
underwriters covering the matters customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably requested by
such underwriters; (iii) obtain "cold comfort" letters and updates thereof from
the Company's accountants addressed to the underwriters, such letters to be in
customary form and covering matters of the type customarily covered in "cold
comfort" letters to underwriters in connection with underwritten offerings; (iv)
set forth in any underwriting agreement entered into the indemnification
provisions and procedures of Section 6.05 hereof with respect to all parties to
be indemnified pursuant to said Section or such other alternative
indemnification language reasonably satisfactory to such persons; and (v)
deliver such documents and certificates as may be reasonably requested by the
underwriters and their counsel to evidence compliance with clause (i) above and
with any customary conditions contained in the underwriting agreement or other
agreement entered into by the Company; the above shall be done at each closing
under such underwriting or similar agreement or as and to the extent required
thereunder;
(c) make available for inspection by one or more representatives of the
Holders of Registrable Securities being sold, any underwriter participating in
any disposition pursuant to such registration, and any attorney or accountant
retained by such Holders or underwriter, all financial and other records,
pertinent corporate documents and properties of the Company, and cause the
Company's officers, directors and employees to supply all information reasonably
requested by any such representatives; and
(d) otherwise use its best efforts to comply with all applicable
Federal and state regulations and take such other action as may be reasonably
necessary to or advisable to enable each such Holder and each such underwriter
to consummate the sale or disposition in such jurisdiction or jurisdictions in
which any such Holder or underwriter shall have requested that the Registrable
Securities be sold.
Except as otherwise provided in this Agreement, the Company shall have
sole control in connection with the preparation, filing, withdrawal, amendment
or supplementing of each Registration Statement, the selection of underwriters,
and the distribution of any preliminary prospectus included in the Registration
Statement, and may include within the coverage thereof additional shares of
Common Stock or other securities for its own account or for the account of one
or more of its other security holders; provided, however, with respect to the
Demand Registration that additional shares of Common Stock may be included only
if the managing underwriter determines in its judgment that the inclusion of
such additional shares will not adversely affect such offering.
Each seller of Registrable Securities as to which any registration is
being effected shall furnish to the Company such information regarding the
distribution of such securities and such other information as may otherwise be
required by the Securities Act to be included in such Registration Statement.
Section 6.05: Indemnification.
(a) Indemnification by Company. In connection with each Registration
Statement relating to disposition of Registrable Securities, the Company shall
indemnify and hold harmless each Holder and each Person, if any, who controls
such Holder (within the meaning of Section l 5 of the Securities Act or Section
20 of the Exchange Act) against any and all losses, claims, damages and
liabilities, joint or several (including any reasonable investigation, legal and
other expenses incurred in connection with, and any amount paid in settlement of
any action, suit or proceeding or any claim asserted), to which they, or any of
them, may become subject under the Securities Act, the Exchange Act or other
Federal or state law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities arises out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement, Prospectus or preliminary prospectus or any amendment
thereof or supplement thereto, or arise out of or are based upon any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein in light of the circumstances in
which they are made not misleading; provided, however, that such indemnity shall
not inure to the benefit of any Holder (or any Person controlling such Holder
within the meaning of Section l5 of the Securities Act or Section 20 of the
Exchange Act) on account of any losses, claims, damages or liabilities arising
from the sale of the Registrable Securities if such untrue statement or omission
or alleged untrue statement or omission was made in such Registration Statement,
Prospectus or preliminary prospectus, or such amendment or supplement, in
reliance upon and in conformity with information furnished in writing to the
Company by such Holder specifically for use therein. The Company shall also
indemnify underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in the distribution, their officers and
directors and each Person who controls such Persons (within the meaning of
Section l 5 of the Securities Act or Section 20 of the Exchange Act) to the same
extent as provided above with respect to the indemnification of the Holders of
Registrable Securities, if requested. This indemnity agreement shall be in
addition to any liability which the Company may otherwise have.
(b) Indemnification by Holder. In connection with each Registration
Statement, each selling Holder shall indemnify, to the same extent as the
indemnification provided by the Company in Section 6.05(a), the Company, its
directors, officers, employees, agents and counsel and each Person who controls
the Company (within the meaning of Section l 5 of the Securities Act and Section
20 of the Exchange Act) but only insofar as such losses, claims, damages and
liabilities arise out of or are based upon any untrue statement or omission or
alleged untrue statement or omission which was made in the Registration
Statement, the Prospectus or preliminary prospectus or any amendment thereof or
supplement thereto, in reliance upon and in conformity with information
furnished in writing by such Holder to the Company specifically for use therein.
In no event shall the liability of any selling Holder of Registrable Securities
hereunder be greater in amount than the dollar amount of the net proceeds
received by such Holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.
(c) Conduct of Indemnification Procedure. Any party that proposes to
assert the right to he indemnified hereunder will, promptly after receipt of
notice of commencement of any action, suit or proceeding against such party in
respect of which a claim is to be made against an indemnifying party or parties
under this section, notify each such indemnifying party of the commencement of
such action, suit or proceeding, enclosing a copy of all papers served. No
indemnification provided for in Section 6.05(a) or 6.05(b) shall be available to
any party who shall fail to give notice as provided in this Section 6.05(c) if
the party to whom notice was not given was unaware of the proceeding to which
such notice would have related and was prejudiced by the failure to give such
notice, but the omission so to notify such indemnifying party of any such
action, suit or proceeding shall not relieve it from any liability that it may
have to any indemnified party for contribution or otherwise than under this
Section. In case any such action, suit or proceeding shall be brought against
any indemnified party, and the indemnified party notifies the indemnifying party
of the commencement thereof, the indemnifying party shall be entitled to
participate in, and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, assume the defense thereof, with counsel
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense thereof
and the approval by the indemnified party of such counsel, the indemnifying
party shall not be liable to such indemnified party for any legal or other
expenses, except as provided below and except for the reasonable costs of
investigation subsequently incurred by such indemnified party in connection with
the defense thereof. The indemnified party shall have the right to employ
separate counsel in any such action, but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the employment of
counsel by such indemnified party has been authorized in writing by the
indemnifying parties; (ii) the indemnified party shall have been reasonably
advised by counsel that there may be a conflict of interest between the
indemnifying parties and the indemnified party in the conduct of the defense of
such action (in which case the indemnifying parties shall not have the right to
direct the defense of such action on behalf of the indemnified party); or (iii)
the indemnifying parties shall not have employed counsel to assume the defense
of such action within a reasonable time after notice of the commencement
thereof, in each of which cases the fees and expenses of separate counsel for
the indemnified party shall be at the expense of the indemnifying parties. An
indemnifying party shall not be liable for any settlement of any action, suit,
proceeding or claim effected without its written consent, which consent shall
not be withheld unreasonably.
(d) Contribution. In connection with each Registration Statement
relating to the disposition of Registrable Securities, if the indemnification
provided for in subsection (a) or (b) hereof is unavailable to an indemnified
party thereunder in respect of any losses, claims, damages or liabilities
referred to therein, then the indemnifying party shall, in lieu of indemnifying
such indemnified party, contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities.
The amount to be contributed by the indemnifying party hereunder shall be an
amount which is in the same proportionate relationship to the total amount of
such losses, claims, damages or liabilities as the total net proceeds from the
offering (before deducting expenses) of the Registrable Securities sold by such
party bears to the total price to the public (including underwriters' discounts)
for the offering of the securities covered by such registration.
(e) Specific Performance. The Company and the Holder acknowledge that
remedies at law for the enforcement of this Section 6.05 may be inadequate and
intend that this Section 6.05 shall be specifically enforceable.
ARTICLE VII
OTHER MATTERS
Section 7.01: Amendments and Waivers. The provisions of this Warrant,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waiver or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least a majority of the outstanding Registrable Securities. Holders shall
be bound by any consent authorized by this Section whether or not certificates
representing such Registrable Securities have been marked to indicate such
consent.
Section 7.02: Counterparts. This Warrant may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
so executed shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement.
Section 7.03: Governing Law. This Warrant shall be governed by and
construed in accordance, with the laws of the State of New York.
Section 7.04: Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provisions in every other respect and of the
remaining provisions contained herein shall not be affected or impaired thereby.
Section 7.05: Attorneys' Fees. In any action or proceeding brought to
enforce any provisions of this Warrant, or where any provisions hereof or
thereof are validly asserted as a defense, the successful party shall be
entitled to recover reasonable attorneys' fees and disbursements in addition to
its costs and expenses and any other available remedy.
Section 7.06: Computations of Consent. Whenever the consent or approval
of Holders of a specified percentage of Registrable Securities is required
hereunder, Registrable Securities held by the Company or its affiliates (other
than the Warrantholder or subsequent Holders if they are deemed to be such
affiliates solely by reason of their holdings of such Registrable Securities)
shall not be counted in determining whether such consent or approval was given
by the Holders of such required percentage.
Section 7.07: Notices. Any notices or certificates by the Company to
the Holder and by the Holder to the Company shall be deemed delivered if in
writing and delivered in person or by registered mail (return receipt requested)
to the Holder addressed to him in care of Hanifen, Imhoff Inc., 1125 17th
Street, Suite 1600, Denver, CO 80202, Attention: Kathy Evers with a copy to
Gibson, Dunn & Crutcher, LLP, 1801 California Street, Suite 4100, Denver, CO
80202 Attention: Thomas R. Denison or, if the Holder has designated, by notice
in writing to the Company, any other address, to such other address, and if to
the Company, addressed to it at
Securacom Incorporated
50 Tice Boulevard,
Woodcliff Lake, New Jersey 07675
The Company may change its address by written notice to the Holder and
the Holder may change its address by written notice to the Company.
Section 7.08: Investment Representation of the Holder. By accepting
delivery of this Warrant the Holder represents to the Company that it has
acquired this Warrant solely for its own account for investment (except as
contemplated in Section 5.02) and not with a view to distribution or sale in
violation of the Securities Act, but subject, nevertheless, to any requirement
of law that the disposition of the Holder's property be at all times within its
control. The Holder represents that it understands that this Warrant has been
issued in a transaction that is exempt from the registration requirements of the
Securities Act and that this Warrant must be held by the Holder and may not be
resold unless subsequently registered under the Securities Act or an exemption
from such registration is available.
Section 7.09: Currency. All amounts used in this Agreement are expressed in
U.S. Dollars unless otherwise specified.
IN WITNESS WHEREOF, this Warrant has been duly executed by the Company
under its corporate seal as of the [Issue Date], 1997.
SECURACOM, INCORPORATED
By: ................................................
Title: .............................................
Attest: ............................................
Secretary: .........................................
<PAGE>
ASSIGNMENT
(To be executed only upon assignment of Warrant Certificate)
For value received, _______________ hereby sells, assigns and transfers
unto _________________ the within Warrant Certificate, together with all right,
title and interest therein, and does hereby irrevocably constitute and appoint
_____________ attorney to transfer said Warrant Certificate on the books of the
within- named Company with respect to the number of Warrants set forth below,
with full power of substitution in the premises:
Name(s) of Assignee(s) No. of Warrants
And if said number of Warrants shall not be all the Warrants
represented by the Warrant Certificate, a new Warrant Certificate is to be
issued in the name of said undersigned for the balance remaining of the Warrants
registered by said Warrant Certificate.
Dated: _________________, 199_.
Note: The above signature should correspond exactly with the name on
the face of this Warrant Certificate SUBSCRIPTION FORM (To be executed upon
exercise of Warrant)The undersigned hereby irrevocably elects to exercise the
right of purchaser represented by the within Warrant Certificate for, and to
purchase thereunder, _____________ shares of Common Stock, as provided for
therein, and tenders herewith payment of the purchase price in full in the form
of cash or a certified or official bank check for the amount of $_____________
Please issue a certificate or certificates for such Common Stock in the
name of, and pay any cash for any fractional share to:
Name: ...................................................
(Please print Name, Address and Social Security No.)
Signature: ..............................................
Note: The above signature should correspond exactly with the name on the
first page of this Warrant Certificate or with the name of the assignee
appearing in the assignment form below.
And if said number of shares shall not be all the shares purchasable under
the within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said undersigned for the balance remaining of the shares purchasable
thereunder rounded up to the next higher number of shares.
CASHLESS EXERCISE FORM
(To be executed upon exercise of Warrant pursuant to Section 2.02(a)(ii))
The undersigned hereby irrevocably elects to Exchange its Warrant for
such shares of Common Stock pursuant to the Cashless Exercise provisions of the
within Warrant Certificate, as provided for in Section 2.02(a)(ii) of such
Warrant Certificate.
Please issue a certificate or certificates for such Common Stock in the
name of:
Name: ...................................................
..........(Please print Name, Address and Social Security No.)
Signature: ..............................................
Note: The above signature should correspond exactly with the name on the
first page of this Warrant Certificate or with the name of the assignee
appearing in the assignment form below.
And if said number of shares shall not be all the shares exchangeable or
purchasable under the within Warrant Certificate, a new Warrant Certificate is
to be issued in the name of the undersigned for the balance remaining of the
shares purchasable rounded up to the next higher number of shares.
RESTATED CERTIFICATE OF INCORPORATION
OF
SECURACOM, INCORPORATED
Pursuant to Section 245 of the
General Corporation Law of the State of Delaware
Securacom, Incorporated, a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), hereby certifies as follows:
1. This Restated Certificate of Incorporation of the Corporation
restates and integrates and further amends the provisions of the Certificate of
Incorporation of the Corporation and was duly authorized by the stockholders of
the Corporation pursuant to Section 228 of the General Corporation Law of the
State of Delaware, after first having been declared advisable by the Board of
Directors of the Corporation, all in accordance with the provisions of Sections
228, 242, and 245 of the General Corporation Law of the state of Delaware.
2. The capital of the Corporation will not be reduced under, or by
reason of, the amendments set forth herein to the Certificate of Incorporation
of the Corporation.
3. The text of the Certificate of Incorporation of the Corporation is
hereby restated and further amended to read in its entirety as follows:
ARTICLE I
The name of the Corporation is Securacom, Incorporated.
ARTICLE II
The period of its duration is perpetual.
ARTICLE III
The purpose for which the Corporation is organized is to engage in the
transaction of any or all lawful business for which corporations may be
incorporated under the Delaware General Corporation Law.
ARTICLE IV
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 25,000,000, of which (a) 5,000,000
shares, par value $0.01 per share, are to be designated "Preferred Stock" (the
"Preferred Stock") (b) 20,000,000 shares, par value $0.01 per share, are to be
of a class designated "Common Stock" (the "Common Stock").
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<PAGE>
The designations, powers, preferences and rights and qualifications,
limitations, or restrictions of the Preferred Stock and the Common Stock are as
follows:
A. PREFERRED STOCK
The Board of Directors is authorized and empowered to designate the
rights, preferences, and restrictions of shares of Preferred Stock from time to
time in accordance with the following:
1. The Board of Directors is hereby authorized to issue the Preferred
Stock from time to time in one or more series, which Preferred Stock shall be
preferred to the Common Stock as to dividends and distribution of assets of the
Corporation on dissolution, as hereinafter provided, and shall have such
distinctive designations as may be stated in the Certificate of Designation
providing for the issue of such stock adopted by the Board of Directors pursuant
to Section 151(g) of the Delaware General Corporation Law. In such Certificate
of Designation providing for the issue of shares of each particular series, the
Board of Directors is hereby expressly authorized and empowered to fix the
number of shares constituting such series and to fix the relative rights and
preferences of the shares of the series so established to the full extent
allowable by law except as otherwise provided herein and except insofar as such
rights and preferences are fixed herein. Such authorization in the Board of
Directors shall expressly include the authority to fix and determine the
relative rights and preferences of such shares in the following respects:
(a) The rate of dividend;
(b) Whether shares can be redeemed or called and, if so, the
redemption or call price and terms and conditions of redemption or
call;
(c) The amount payable upon shares in the event of voluntary and
involuntary liquidation;
(d) The purchase, retirement, or sinking fund provisions, if any,
for the call, redemption, or purchase of shares;
(e) The terms and conditions, if any, on which shares may be
converted into Common Stock or any other securities;
(f) Whether or not shares have voting rights, and the extent of
such voting rights, if any, including the number of votes per share;
and
(g) Whether or not shares shall be cumulative, non-cumulative, or
partially cumulative as to dividends and the dates from which any
cumulative dividends are to accumulate.
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<PAGE>
All shares of the Preferred Stock shall be of equal rank and shall be
identical, except in respect to the particulars that may be fixed by the Board
of Directors as hereinabove provided in this Article IV and which may vary among
the series.
2. The holders of Preferred Stock are entitled to receive, when, as,
and if declared by the Board of Directors, but only from funds legally available
for the payment of dividends, cash dividends at the annual rate for each
particular series as theretofore fixed and determined by the Board of Directors
as hereinabove authorized, and to more; such dividends to be payable before any
dividend on Common Stock shall be paid or set apart for payment.
3. In the event of any dissolution, liquidation, or winding up of the
affairs of the Corporation, after payment or provision for payment of the debts
and other liabilities of the Corporation, the holders of each series of
Preferred Stock shall be entitled to receive, out of the net assets of the
Corporation, an amount in cash for each share equal to the amount fixed and
determined by the Board of Directors in any Certificate of Designation providing
for the issue of any particular series of Preferred Stock, plus an amount equal
to any dividends payable to such holder which are then unpaid, either under the
provisions of the Certificate of Designation adopted by the Board of Directors
providing for the issue of such series of Preferred Stock or by declaration of
the Board of Directors, on each such share up to the date fixed for
distribution, and no more, before any distribution shall be made to the holders
of Common Stock. Neither the merger or consolidation of the Corporation, nor the
sale, lease, or conveyance of all or a part of its assets shall be deemed to be
a dissolution, liquidation, or winding up of the affairs of the Corporation
unless otherwise stated by the Board of Directors with respect to such series.
B. COMMON STOCK
1. Whenever dividends upon the Preferred Stock at the time outstanding
shall have been paid in full for all past dividend periods or declared and set
apart for payment, the holders of the Common Stock shall be entitled to receive
dividends when, as, and if declared by the Board of Directors out of funds
legally available therefor.
2. In the event of any liquidation, dissolution, or winding up of the
affairs of the Corporation, either voluntary or involuntary, distributions to
the stockholders of the Corporation shall be made in the following manner: if
any Preferred Stock is then outstanding and if payment has been made to the
holders of the such Preferred Stock of the full amount to which they shall be
entitled then the holders of the Common Stock shall be entitled to share in all
remaining assets of the Corporation available for distribution to its
stockholders on a share for share basis.
3. Each holder of Common Stock shall be entitled to vote on all matters
and shall be entitled to one vote for each share of Common Stock standing in
such holder's name on the books of the Corporation.
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ARTICLE V
Except as provided elsewhere in this Certificate of Incorporation, the
preemptive rights of any shareholder of the Corporation to acquire additional,
unissued, or treasury shares of the Corporation, or securities of the
Corporation convertible into or carrying a right to subscribe to or acquire
shares of the Corporation, is hereby denied; provided, however, that nothing
herein shall preclude the Corporation from granting preemptive rights by
contract or agreement to any person, corporation, or other entity.
ARTICLE VI
Cumulative voting by the shareholders of the Corporation at any
election of directors of the Corporation is hereby prohibited.
ARTICLE VII
The street address of the Corporation's registered office is .
ARTICLE VIII
1. Number. The number of directors of the Corporation may be
fixed by the Bylaws.
2. Powers. In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized:
(a) To make, alter, or repeal the Bylaws of the Corporation;
(b) To authorize and cause to be executed mortgages and liens
upon the real and personal property of the Corporation;
(c) To set apart out of any of the funds of the Corporation
available for dividends a reserve or reserves for any proper
purpose and to abolish any such reserve in the
manner in which it was created; and
(d) By a majority of the whole Board of Directors, to designate
one or more committees, each committee to office for a term
expiring at the annual meeting of stockholders held in the
year following the year of their election.
3. Created Directorships and Vacancies. Newly created directorships
resulting from any increase in the number of directors and any vacancies of the
Board of Directors resulting from death, resignation, disqualification, removal,
or other cause shall be filled by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum of the Board
of Directors. Any director elected in accordance with the preceding
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<PAGE>
sentence shall hold office for the remainder of the full term and until such
director's successor shall have been elected and qualified. No decrease in the
number of directors constituting the Board of Directors shall shorten the term
of any incumbent director.
4. Removal. Any director may be removed from office for cause by the
affirmative vote of the holders of two-thirds of the combined voting power of
the then outstanding shares of stock entitled to vote generally in the election
of directors, voting together as a single class.
5. Amendment or Repeal. Notwithstanding anything contained in this
Certificate of Incorporation to the contrary, the affirmative vote of the
holders of at least two-thirds of the voting power of all shares of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required to alter, amend, adopt any
provision inconsistent with, or repeal Sections 3, 4, or 5 of this Article VIII.
ARTICLE IX
1. Location of Meetings; Books and Records; Use of Ballots in the
Elections of Directors. Meetings of stockholders may be held within or without
the State of Delaware, as the Bylaws may provide. The books of the Corporation
may be kept (subject to applicable law) outside the State of Delaware at such
place or places as may be designated from time to time by the Board of Directors
or in the Bylaws of the Corporation. Elections of Directors need not be by
written ballot unless the Bylaws of the Corporation shall so provide.
2. Actions by Shareholders; Special Meetings: Amendment. Any action
required or permitted to be taken by the stockholders of the Corporation must be
affected at a duly called annual or special meeting of such holders and may not
be effected by any consent in writing by such holders. Special meetings of
stockholders of the Corporation may be called only by the Chairman of the Board
of Directors, the President, or the Board of Directors pursuant to a resolution
approved by a majority of the entire Board of Directors. Notwithstanding
anything contained in this Certificate of Incorporation to the contrary, the
affirmative vote of the holders of at least two-thirds of the voting power of
all shares of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required to alter, amend,
adopt any provision inconsistent with, or repeal this Section 2 of this Article
IX.
ARTICLE X
To the fullest extent permitted by the Delaware General Corporation
Law, as the same exists or may hereafter be amended, a director of the
Corporation shall not be liable to the Corporation or its shareholders for
monetary damages for an act or omission in the director's capacity as a
director.
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ARTICLE XI
1. Right to Indemnification. Each person who was or is made a party to
or is threatened to be made a party to or is otherwise involved in any action,
suit, or proceeding, whether civil, criminal, administrative, or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she 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, or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(hereinafter an "indemnitee"), whether the basis of such proceeding is alleged
action in an official capacity as a director, officer, employee, or agent or in
any other capacity while serving as a director, officer, employee, or agent,
shall be indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than permitted prior thereto), against all expense, liability, and loss
(including attorney's fees, judgments, fines, ERISA excise taxes, or penalties
and amounts paid in settlement) reasonably incurred or suffered by such
indemnitee in connection therewith and such indemnification shall continue as to
an indemnitee who has ceased to be a director, officer, employee, or agent and
shall inure to the benefit of the indemnitee's heirs, executors, and
administrators; provided, however, that, except as provided in section 3 hereof
with respect to proceedings to enforce rights to indemnification, the
Corporation shall indemnify any such indemnitee in connection with a proceeding
(or part thereof) initiated by such indemnitee only if such proceeding (or part
thereof) was authorized by the board of directors of the Corporation.
2. Right to Advancement of Expenses. The right to indemnification
conferred in section 1 of this Article XI shall include the right to be paid by
the Corporation the expenses incurred in defending any proceeding for which such
right to indemnification is applicable in advance of its final disposition
(hereinafter an "advancement of expenses"); provided, however, that, if the
Delaware General Corporation Law requires, an advancement of expenses incurred
by an indemnitee in his or her capacity as a director or officer (and not in any
other capacity in which service was or is rendered by such indemnitee,
including, without limitation, service to an employee benefit plan) shall be
made only upon delivery to the Corporation of an undertaking (hereinafter an
"undertaking"), by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal (hereinafter a "final adjudication")
that such indemnitee is not entitled to be indemnified for such expenses under
this Article XI or otherwise.
3. Right of Indemnitee to Bring Suit. The rights to indemnification and
to the advancement of expenses conferred in sections 1 and 2 of this Section
shall be contract rights. If a claim under sections 1 or 2 of this Article XI is
not paid in full by the Corporation within sixty days after a written claim has
been received by the Corporation, except in the case of a claim for an
advancement of expenses, in which case the applicable period shall be twenty
days, the indemnitee may at any time thereafter bring suit against the
Corporation to recover the
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unpaid amount of the claim. If successful in whole or in part in any such suit,
or in a suit brought by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking, the indemnitee shall be entitled also
to be paid the expense of prosecuting or defending such suit. In (i) any suit
brought by the indemnitee to enforce a right to indemnification hereunder (but
not in a suit brought by the indemnitee to enforce a right to an advancement of
expenses) it shall be a defense that, and (ii) in any suit by the Corporation to
recover an advancement of expenses pursuant to the terms of an undertaking the
Corporation shall be entitled to recover such expenses upon a final adjudication
that, the indemnitee has not met any applicable standard for indemnification set
forth in the Delaware General Corporation Law. Neither the failure of the
Corporation (including its board of directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Corporation (including its board of directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expense hereunder, or
by the Corporation to recover an advancement of expenses pursuant to the terms
of an undertaking, the burden of proving that the indemnitee is not entitled to
be indemnified, or to such advancement of expenses, under this Article XI or
otherwise shall be on the Corporation.
4. Non-Exclusivity of Rights. The rights to indemnification and to the
advancement of expenses conferred in this Article XI shall not be exclusive of
any other right which any person may have or hereafter acquire under any
statute, this Corporation's certificate of incorporation, bylaw, agreement, vote
of stockholders or disinterested, directors, or otherwise.
5. Insurance. The Corporation may maintain insurance, at its expense,
to protect itself and any director, officer, employee, or agent of the
corporation or another corporation, partnership, joint venture, trust, or other
enterprise against any expense, liability, or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability, or loss under the Delaware General Law.
ARTICLE XII
The election of directors need not be by written ballot.
ARTICLE XIII
The Board of Directors shall have power to adopt, amend, and repeal the
Bylaws of the Corporation. Any Bylaws adopted by the directors under the powers
conferred hereby may be amended or repealed by the directors or by the
stockholders. Notwithstanding the foregoing and anything contained in this
Certificate of Incorporation to the contrary, provisions of the Bylaws
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of the Corporation regulating the number, qualification, and election of
directors, newly created directorships and vacancies, removal of directors and
election of directors shall not be amended or repealed and no provision
inconsistent with provisions regulating such matters in the then existing Bylaws
shall be adopted without the affirmative vote of the holders of at least
two-thirds of the voting power of all the shares of the Corporation entitled to
vote generally in the election of directors, voting together as a single class.
Notwithstanding anything contained in this Certificate of Incorporation to the
contrary, the affirmative vote of the holders of at least two-thirds of the
voting power of all the shares of the Corporation entitled to vote generally in
the election of directors, voting together as a single class, shall be required
to alter, amend, adopt any provision inconsistent with, or repeal this Article
XIII.
ARTICLE XIV
This Certificate of Incorporation may be amended from time to time as
provided in the Delaware General Corporation Law, as amended from time to time.
IN WITNESS WHEREOF, Securacom, Incorporated has caused this certificate
to be signed by its President, who hereby acknowledges under penalty of perjury
that the facts herein stated are true and that this certificate is the act and
deed of the Corporation, this day of , 1997.
SECURACOM, INCORPORATED
By:
Name:
Title:
8
BYLAWS
OF
SECURACOM INCORPORATED
ARTICLE 1
OFFICES
SECTION 1.1 Registered Office. The registered office of the Corporation
in the State of Delaware shall be in the City of Wilmington, County of New
Castle, and the name of its registered agent shall be .
SECTION 1.2 Places of Business. The Corporation may have offices at
such 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 2
MEETINGS OF STOCKHOLDERS
SECTION 2.1 Place of Meeting. All meetings of stockholders for the
election of directors shall be held at the principal business office of the
Corporation or at such other place, either within or without the State of
Delaware, as shall be designated from time to time by the caller of the meeting
and stated in the notice of the meeting.
SECTION 2.2 Annual Meeting. The annual meeting of stockholders shall be
held at such date and time as shall be designated by the Board of Directors and
stated in the notice of the meeting.
SECTION 2.3 Voting List. 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 such
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. Failure to comply with this Section shall not affect the validity of
any action taken at such meeting.
SECTION 2.4 Special Meetings. Special meetings of stockholders of the
Corporation may be called only by (i) the Chairman, (ii) the President or (iii)
the Board of Directors pursuant to a
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resolution approved by a majority of the entire Board of Directors.
SECTION 2.5 Notice of Meeting. Written or printed notice of the annual,
and each special meeting of stockholders, stating the time, place and purpose or
purposes thereof, shall be given to each stockholder entitled to vote thereat,
not less than ten (10) nor more than sixty (60) days before the meeting. Such
further or earlier notice shall be given as may be required by law. A
stockholder's attendance at a meeting shall constitute a waiver of notice by
such stockholder, unless such attendance is for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened, or called or convened as
herein required. In addition, a stockholder may waive notice of a meeting in
writing signed by him as provided in Section 5.2 hereof.
SECTION 2.6 Notice of Stockholder Business. At an annual meeting of the
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual meeting
business must be (a) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of Directors, (b) otherwise
properly brought before the meeting by or at the direction of the Board of
Directors, or (c) otherwise properly brought before the meeting by a
stockholder. For business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a stockholder's notice (other
than a request for inclusion of a proposal in the Corporation's proxy statement
pursuant to Rule 14a-8 of the Securities Exchange Act of 1934) must be delivered
to or mailed and received at the principal executive offices of the Corporation,
not less than 60 days nor more than 90 days prior to the meeting; provided,
however, that in the event that less than 70 days' notice or prior public
disclosure of the date of the meeting is given or made to stockholders, notice
by the stockholder to be timely must be so received not later than the close of
business on the 10th day following the day on which such notice of the date of
the annual meeting was mailed or such public disclosure was made. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting (a) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (b) the name and record
address of the stockholder proposing such business, (c) the class and number of
shares of the Corporation which are beneficially owned by the stockholder, and
(d) any material interest of the stockholder in such business. Notwithstanding
anything in the By-Laws to the contrary, no business shall be conducted at an
annual meeting except in accordance with the procedures set forth in this
Section. The Chairman of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting and in accordance with the provisions of this Section, and if
he should so determine, he shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted. At any special
meeting of the stockholders, only such business shall be conducted as shall have
been brought before the meeting by or at the direction of the Board of
Directors.
SECTION 2.7 Quorum. The holders of a majority of the voting power of
the stock issued and outstanding and entitled to vote thereat, present in person
or represented by proxy, shall constitute a quorum at any meeting of
stockholders for the transaction of business except as
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otherwise provided by statute or by the Certificate of Incorporation.
Notwithstanding the other provisions of the Certificate of Incorporation or
these bylaws, the holders of a majority of the voting power of the shares of
capital stock entitled to vote thereat, present in person or represented by
proxy, whether or not a quorum is present, 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. 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. 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.
SECTION 2.8 Voting. When a quorum is present at any meeting of the
stockholders, the vote of the holders of a majority of the voting power of the
stock having voting rights 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, of the Certificate of Incorporation
or of these bylaws, a different vote is required, in which case such express
provision shall govern and control the decision of such question. Every
stockholder having the right to vote shall be entitled to vote in person, or by
proxy appointed by an instrument in writing subscribed by such stockholder,
bearing a date not more than three years prior to voting, unless such instrument
provides for a longer period, and filed with the Secretary of the Corporation
before, or at the time of, the meeting. If such instrument shall designate two
(2) or more persons to act as proxies, unless such instrument shall provide the
contrary, a majority of such persons present at any meeting at which their
powers thereunder are to be exercised shall have and may exercise all the powers
of voting or giving consents thereby conferred, or if only one (1) be present,
then such powers may be exercised by that one (1); or, if any even number attend
and a majority do not agree on any particular issue, each proxy so attending
shall be entitled to exercise such powers in respect of the same portion of the
shares as he is of the proxies representing such shares.
SECTION 2.9 Voting of Stock of Certain Holders. Shares standing in the
name of another corporation, domestic or foreign, may be voted by such officer,
agent or proxy as the bylaws of such Corporation may prescribe, or in the
absence of such provision, as the Board of Directors of such Corporation may
determine. Shares standing in the name of a deceased person may be voted by the
executor or administrator of such deceased person, either in person or by proxy.
Shares standing in the name of a guardian, conservator or trustee may be voted
by such fiduciary, either in person or by proxy, but no such fiduciary shall be
entitled to vote shares held in such fiduciary capacity without a transfer of
such shares into the name of such fiduciary. Shares standing in the name of a
receiver may be voted by such receiver. A stockholder whose shares are pledged
shall be entitled to vote such shares, unless in the transfer by the pledgor on
the books of the Corporation, he has expressly empowered the pledgee to vote
thereon, in which case only the pledgee, on his proxy, may represent the stock
and vote thereon.
SECTION 2.10 Treasury Stock. The Corporation shall not vote, directly
or indirectly, shares of its own stock owned by it; and such shares shall not be
counted in determining the total number of outstanding shares.
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SECTION 2.11 Fixing Record Date. The Board of Directors may fix in
advance a date, not exceeding sixty (60) days preceding the date of any meeting
of stockholders, or the date for payment of any dividend or distribution, or the
date for the allotment of rights, or the date when any change, or conversion or
exchange of capital stock shall go into effect, as a record date for the
determination of the stockholders entitled to notice of, and to vote at, any
such meeting and any adjournment thereof, or entitled to receive payment of any
such dividend or distribution, or to receive any such allotment of rights, or to
exercise the rights in respect of any such change, conversion or exchange of
capital stock, and in such case such stockholders and only such stockholders as
shall be stockholders of record on the date so fixed shall be entitled to such
notice of, and to vote at, any such meeting and any adjournment thereof, or to
receive payment of such dividend or distribution, or to receive such allotment
of rights, or to exercise such rights, as the case may be, notwithstanding any
transfer of any stock on the books of the Corporation after any such record date
fixed as aforesaid.
SECTION 2.12 Balloting. Upon the demand of any stockholder, the vote
upon any question before the meeting shall be by ballot. At each meeting
inspectors of election may be appointed by the presiding officer of the meeting,
and at any meeting for the election of directors, inspectors shall be so
appointed on the demand of any stockholder present or represented by proxy and
entitled to vote at the election of Directors. No director or candidate for the
office of director shall be appointed as such inspector. The number of votes
cast by shares in the election of directors shall be recorded in the minutes.
SECTION 2.13 Record of Stockholders. The Corporation shall keep at its
principal business office, or the office of its transfer agents or registrars, a
record of its stockholders, giving the names and addresses of all stockholders
and the number and class of the shares held by each.
ARTICLE 3
BOARD OF DIRECTORS
SECTION 3.1 Powers. The business and affairs of the Corporation shall
be managed by the Corporation's 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.
SECTION 3.2 Number, Qualification and Term. The number of directors
which shall constitute the whole Board Shall be fixed and determined from time
to time by the Board of Directors and shall be set forth in the notice of any
meeting of stockholders held for the purpose of electing directors. At each
annual meeting of stockholders, Directors shall be elected to hold office until
the next succeeding annual meeting. Each Director shall hold office until the
expiration of his or her term and until his or her successor is elected and
qualified or until his or her earlier death, resignation or removal. The number
of directors may be decreased from time to time; however, no such decrease shall
have the effect of shortening the term of any incumbent director.
SECTION 3.3 Notice of Stockholder Nominees. Only persons who are
nominated in accordance with the procedures set forth in this Section shall be
eligible for election as Directors.
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Nominations of persons for election to the Board of Directors of the Corporation
may be made at a meeting of stockholders by or at the direction of the Board of
Directors by any nominating committee or person appointed by the Board of
Directors or by any stockholder of the Corporation entitled to vote for the
election of Directors at the meeting who complies with the notice procedures set
forth in this Section. Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made pursuant to timely notice in
writing to the Secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered to or mailed and received at the principal executive
offices of the Corporation not less than 60 days nor more than 90 days prior to
the meeting; provided, however, that in the event that less than 70 days' notice
or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the 10th day following the day on which such
notice of the date of the meeting was mailed or such public disclosure was made.
Such stockholder's notice shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or re-election as a Director, (i)
the name, age, business address and residence address of such person, (ii) the
principal occupation or employment of such person, (iii) the class and number of
shares of the Corporation which are beneficially owned by such person and (iv)
any other information relating to such person that is required to be disclosed
in solicitations of proxies for election of Directors, or is otherwise required,
in each case pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (including without limitation such person's written consent to
being named in the proxy statement as a nominee and to serving as a Director if
elected); and (b) as to the Stockholder giving the notice (i) the name and
record address of such stockholder and (ii) the class and number of shares of
the Corporation which are beneficially owned by such stockholder. No person
shall be eligible for election as a Director of the Corporation unless nominated
in accordance with the procedures set forth in this Section. The Chairman of the
meeting shall, if the facts warrant, determine and declare to the meeting that a
nomination was not made in accordance with the procedures prescribed by the
Bylaws, and if he should so determine, he shall so declare to the meeting and
the defective nomination shall be disregarded.
SECTION 3.4 Vacancies, Additional Directors and Removal From Office. If
any vacancy occurs in any position on the Board of Directors caused by the
death, resignation, retirement, disqualification or removal from office of such
director, or otherwise, or if any new directorship is created, a majority of the
directors then in office, though less than a quorum, or a sole remaining
director, may chose a successor to fill the newly created directorship; and a
director so chosen shall hold office for the remainder of the full term of the
class of directors in which the new directorship was created or the vacancy
occurred and until his successor shall be duly elected and shall qualify, unless
sooner displaced. Any director may be removed for cause at any duly constituted
special meeting of stockholders duly called and held for such purpose by the
affirmative vote of two-thirds of the voting power of the issued and outstanding
capital stock of the Corporation. This section may not be amended except upon
the affirmative vote of stockholders holding at least two-thirds of the voting
power of the issued and outstanding capital stock of the Corporation.
SECTION 3.5 Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such times and places as may be
designated from time to time as may be determined by the Board of Directors.
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SECTION 3.6 Special Meeting. A special meeting of the Board of
Directors may be called by the Chairman of the Board or by the President and
shall be called by the Secretary on the written request of any two directors.
The Chairman or President so calling, or the directors so requesting, any such
meeting shall fix the time and any place, either within or without the State of
Delaware, as the place for holding such meeting.
SECTION 3.7 Notice of Special Meetings. Written notice of special
meetings of the Board of Directors shall be given to each director at least
twenty-four (24) hours prior to the time of such meeting. Any director may waive
notice of any meeting. The attendance of a director at any meeting shall
constitute a waiver of notice of such meeting, except where a director attends a
meeting for the purpose of objecting to the transaction or any business because
the meeting is not lawfully called or convened. Except as may be otherwise
provided by law, the Certificate of Incorporation or these bylaws neither the
business to be transacted at, nor the purpose of, any special meeting of the
Board of Directors need be specified in the notice or waiver of notice of such
meeting, except that notice shall be given of any proposed amendment to the
bylaws if it is to be adopted at any special meeting.
SECTION 3.8 Quorum. A majority of the Board of Directors shall
constitute a quorum for the transaction of business at any meeting of the Board
of Directors, 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 law, the Certificate of Incorporation
or these bylaws. 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 announcement at the meeting, until a quorum
shall be present.
SECTION 3.9 Action Without Meeting. 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 of any committee
thereof as provided in Article IV of these bylaws, may be taken without a
meeting, if a written consent thereto is signed by all members of the Board or
of such committee, as the case may be, and such written consent is filed with
the minutes of proceedings of the Board or committee.
SECTION 3.10 Telephonic Meetings. Unless otherwise restricted by law,
the Certificate of Incorporation, or these Bylaws, members of the Board of
Directors or any committee thereof may participate in a meeting of the Board of
Directors or such committee by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in a meeting pursuant to this Section
shall constitute presence in person at such meeting.
SECTION 3.11 Compensation of Directors. The Board of Directors shall
have authority to determine, from time to time, the amount of compensation, if
any, which shall be paid to its members for their services as Directors and as
members of committees of the Board of Directors. The Board of Directors shall
also have power in its discretion to provide for and to pay to Directors
rendering services to the Corporation not ordinarily rendered by Directors as
such, special
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compensation appropriate to the value of such services as determined by the
Board of Directors from time to time. Nothing herein contained shall be
construed to preclude any Director from serving the Corporation in any other
capacity and receiving compensation therefor.
ARTICLE 4
COMMITTEE OF DIRECTORS
SECTION 4.1 Designation, Powers and Name. The Board of Directors may,
by resolution passed by a majority of the whole Board, designate one (1) or more
committees, including, if they shall so determine, an Executive Committee, each
such committee to consist of two (2) or more of the directors of the
Corporation. The committee shall have and may exercise such of the powers of the
Board of Directors in the management of the business and affairs of the
Corporation as may be provided in such resolution. The committee may authorize
the seal of the Corporation to be affixed to all papers which may require it;
provided, however, that in no event shall any such committee have any power or
authority in reference to (i) amending the Certificate of Incorporation, (ii)
adopting an agreement of merger or consolidation, (iii) recommending to the
stockholders the sale, lease, or exchange of all or substantially all of the
Corporation's property and assets, (iv) recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, (v) amending
the bylaws of the Corporation, or (vi) unless specifically so authorized by
resolution passed by a majority of the whole Board of Directors, declaring a
dividend or authorizing the issuance of stock. The Board of Directors may
designate one (1) or more directors as alternate members of any committee, who
may replace any absent or disqualified member at any meeting of such committee.
In the absence or disqualification of any member of such committee or
committees, any other member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Such committee
or committees shall have such name or names and such limitations of authority as
may be determined from time to time by resolution adopted by the Board of
Directors.
SECTION 4.2 Minutes. Each committee of the Board of Directors shall
keep regular minutes of its proceedings and report the same to the Board of
Directors when required except that the minutes of the Executive Committee shall
be reported to the Board of Directors on a regular basis.
SECTION 4.3 Compensation. Members of special or standing committees may
be allowed compensation for attending committee meetings, if the Board of
Directors shall so determine.
ARTICLE 5
NOTICE
SECTION 5.1. Methods of Giving Notice. Whenever under the provisions of
the statutes, the Certificate of Incorporation or these bylaws, notice is
required to be given to any director, member of any committee or stockholder,
such notice shall be in writing and delivered personally or mailed to such
director, member or stockholder; provided that in the case of a director or a
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member of any committee such notice may be given orally or by telephone or
telegram. If mailed, notice to a director, member of a committee or stockholder
shall be deemed to be given when deposited in the United States mail first class
in a sealed envelope, with postage thereon prepaid, addressed, in the case of a
stockholder, to the stockholder at the stockholder's address as it appears on
the records of the Corporation or, in the case of a director or a member of a
committee, to such person at his business address. If sent by telegram, notice
to a director or member of a committee shall be deemed to be given when the
telegram, so addressed, is delivered to the telegraph company.
SECTION 5.2 Written Waiver. Whenever any notice is required to be given
under the provisions of the statutes, the Certificate of Incorporation or 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 6
OFFICERS
SECTION 6.1 Officers. The Corporation shall have a President and a
Secretary and such other officers and assistant officers as the board may deem
desirable to conduct the affairs of the Corporation. In the event there is a
Chairman of the Board, that person shall ipso facto be President of the
Corporation until and unless a person is elected President. Any two or more
offices may be held by the same person. No officer need be a Stockholder or a
Director.
SECTION 6.2 Powers and Duties of Officers. The officers of the
Corporation shall have the powers and duties generally ascribed to the
respective offices, and such additional authority or duty as may from time to
time be established by the Board of Directors.
SECTION 6.3 Removal and Resignation. Any officer appointed by the Board
of Directors may be removed by the Board of Directors whenever, in the judgment
of the Board of Directors, the best interests of the Corporation will be served
thereby. Any officer may resign at any time by giving written notice to the
Corporation. Any such resignation shall take effect at the date of receipt of
such notice or at a later time specified therein, and unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
SECTION 6.4 Term and Vacancies. The officers of the Corporation shall
hold office until their successors are elected or appointed, or until their
death, resignation, or removal from office. Any vacancy occurring in any office
of the Corporation by death, resignation, removal, or otherwise, may be filled
by the Board of Directors.
SECTION 6.5 Compensation. The salaries of all officers of the
Corporation shall be fixed by the Board of Directors. The Board of Directors
shall have the power to enter into contracts for the employment and compensation
of officers on such terms as the Board of Directors deems advisable. No officer
shall be disqualified from receiving a salary or other compensation by reason
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of the fact that he or she is also a Director of the Corporation.
ARTICLE 7
CONTRACTS, CHECKS AND DEPOSITS
SECTION 7.1 Contracts. The Board of Directors may authorize any
officer, officers, agent or agents, to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
SECTION 7.2 Checks, Etc. All checks, demands, drafts or other orders
for the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation, shall be signed by such officer or officers or such
agent or agents of the Corporation, and in such manner, as shall be determined
by the Board of Directors.
SECTION 7.3 Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board of Directors
may select.
ARTICLE 8
CERTIFICATES OF STOCK
SECTION 8.1 Issuance. Each stockholder of this Corporation shall be
entitled to a certificate or certificates showing the number of shares of stock
registered in his name on the books of the Corporation. The certificates shall
be in such form or forms as comply with the requirements of law and the
Certificate of Incorporation and as the Board of Directors shall approve. The
certificates shall be issued in numerical order and shall be entered in the
books of the Corporation as they are issued. Such certificates shall exhibit the
holder's name and number of shares and shall be signed by the President or a
Vice President and by the Secretary or an Assistant Secretary. If any
certificate is countersigned (1) by a transfer agent other than the Corporation
or any employee of the Corporation, or (2) by a registrar other than the
Corporation or any employee of the Corporation, any other signature on the
certificate may be a facsimile. In the event any officer or officers who have
signed or whose facsimile signature or signatures have been placed upon such
certificate shall have ceased to be such officer or officers before such
certificate is issued, it may be adopted and issued by the Corporation with the
same effect as if he or they had not ceased to be such officer or officers as of
the date of its issuance, and issuance and delivery thereof by the Corporation
shall constitute adoption thereof by the Corporation. If the Corporation shall
be authorized to issue more than one class of stock or more than one series of
any class, the 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 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 of stock; provided that,
except as otherwise provided by statute, 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 to each stockholder who so requests the
designations, preferences and relative, participating, optional or
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other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and rights. All
certificates surrendered to the Corporation for transfer shall be canceled and
no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and canceled, except that in the
case of a lost, stolen, destroyed or mutilated certificate a new one may be
issued therefor upon such terms and with such indemnity, if any, to the
Corporation as the Board of Directors may prescribe. Certificates shall not be
issued representing fractional shares of stock.
SECTION 8.2 Lost Certificates. The Board of Directors may direct a new
certificate or certificates 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, 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 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 or certificates alleged to have been lost,
stolen or destroyed, or both.
SECTION 8.3 Transfers. 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, assignment 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. Transfers of shares shall be made only on the books
of the Corporation by the registered holder thereof, or by his attorney
thereunto authorized by power of attorney and filed with the Secretary of the
Corporation or the Transfer Agent.
SECTION 8.4 Registered Stockholders. The Corporation shall be entitled
to treat the holder of record of any share or shares of stock as the holder in
fact thereof and, accordingly, 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 the State of Delaware.
SECTION 8.5 Transfer Agent and Registrar. The Board of Directors may
appoint one or more transfer agents or registrars of the shares, or both, and
may require all stock certificates to bear the signature of a transfer agent or
registrar or both.
ARTICLE 9
DIVIDENDS
SECTION 9.1 Declaration. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, 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 capital stock, subject to the provisions of the Certificate of
Incorporation.
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SECTION 9.2 Reserve. 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 Board of 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 Board of Directors shall think conducive to the
interest of the Corporation, and the Board of Directors may modify or abolish
any such reserve in the manner in which it was created.
ARTICLE 10
MISCELLANEOUS
SECTION 10.1 Seal. The corporate seal, if any, shall have inscribed
thereon the name of the Corporation, and the words "Corporate Seal, Delaware."
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or otherwise reproduced.
SECTION 10.2 Books. The books of the Corporation may be kept (subject
to any provision contained in the statutes) outside the State of Delaware at the
Chief Executive Office of the Corporation, or at such other place or places as
may be designated from time to time by the Board of Directors.
SECTION 10.3 Endorsement of Stock Certificates. Subject to the specific
directions of the Board, any share or shares of stock issued by any other
corporation and owned by the Corporation (including reacquired shares of the
Corporation) may, for sale or transfer, be endorsed in the name of the
Corporation by the President or any Vice-President, and attested or witnessed by
the Secretary or any Assistant Secretary either with or without affixing the
Corporation seal.
SECTION 10.4 Voting of Shares Owned By the Corporation. Unless
otherwise ordered by the Board of Directors, the President, the Secretary or the
Treasurer, or any of them, shall have full power and authority on behalf of the
Corporation to attend, to vote and to grant proxies to be used at any meeting of
stockholders of such other corporation in which the Corporation may hold stock.
The Board of Directors may confer like powers upon. any other person or persons.
SECTION 10.5 Fiscal Year; Accounting Election. The fiscal year of and
the method of accounting for the Corporation shall be as the Board of Directors
shall at any time determine.
SECTION 10.6 Indemnification of Officers, Directors and Agents.
(a) Right to Indemnification. Each person who was or is made a party to
or is threatened to be made a party to or is otherwise involved in any action,
suit, or proceeding, whether civil, criminal, administrative, or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she 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, or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(hereinafter an "indemnitee"), whether the basis of such
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proceeding is alleged action in an official capacity as a director, officer,
employee, or agent or in any other capacity while serving as a director,
officer, employee, or agent, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the Delaware General Corporation
Law, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than permitted prior thereto), against
all expense, liability, and loss (including attorney's fees, judgments, fines,
ERISA excise taxes, or penalties and amounts paid in settlement) reasonably
incurred or suffered by such indemnitee in connection therewith and such
indemnification shall continue as to an indemnitee who has ceased to be a
director, officer, employee, or agent and shall inure to the benefit of the
indemnitee's heirs, executors, and administrators; provided, however, that,
except as provided in paragraph (c) hereof with respect to proceedings to
enforce rights to indemnification, the Corporation shall indemnify any such
indemnitee in connection with a proceeding (or part thereof) initiated by such
indemnitee only if such proceeding (or part thereof) was authorized by the board
of directors of the Corporation.
(b) Right to Advancement of Expenses. The right to indemnification
conferred in paragraph (a) of this Section shall include the right to be paid by
the Corporation the expenses incurred in defending any proceeding for which such
right to indemnification is applicable in advance of its final disposition
(hereinafter an "advancement of expenses"); provided, however, that, if the
Delaware General Corporation Law requires, an advancement of expenses incurred
by an indemnitee in his or her capacity as a director or officer (and not in any
other capacity in which service was or is rendered by such indemnitee,
including, without limitation, service to an employee benefit plan) shall be
made only upon delivery to the Corporation of an undertaking (hereinafter an
"undertaking"), by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal (hereinafter a "final adjudication")
that such indemnitee is not entitled to be indemnified for such expenses under
this Section or otherwise.
(c) Right of Indemnitee to Bring Suit. The rights to indemnification
and to the advancement of expenses conferred in paragraphs (a) and (b) of this
Section shall be contract rights. If a claim under paragraph (a) or (b) of this
Section is not paid in full by the Corporation within sixty days after a written
claim has been received by the Corporation, except in the case of a claim for an
advancement of expenses, in which case the applicable period shall be twenty
days, the indemnitee may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If successful in whole or
in part in any such suit, or in a suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the indemnitee
shall be entitled also to be paid the expense of prosecuting or defending such
suit. In (i) any suit brought by the indemnitee to enforce a right to
indemnification hereunder (but not in a suit brought by the indemnitee to
enforce a right to an advancement of expenses) it shall be a defense that, and
(ii) in any suit by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking the Corporation shall be entitled to
recover such expenses upon a final adjudication that, the indemnitee has not met
any applicable standard for indemnification set forth in the Delaware General
Corporation
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Law. Neither the failure of the Corporation (including its board of directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such suit that indemnification of the indemnitee is
proper in the circumstances because the indemnitee has met the applicable
standard of conduct set forth in the Delaware General Corporation Law, nor an
actual determination by the Corporation (including its board of directors,
independent legal counsel, or its stockholders) that the indemnitee has not met
such applicable standard of conduct, shall create a presumption that the
indemnitee has not met the applicable standard of conduct or, in the case of
such a suit brought by the indemnitee, be a defense to such suit. In any suit
brought by the indemnitee to enforce a right to indemnification or to an
advancement of expense hereunder, or by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that the indemnitee is not entitled to be indemnified, or to such
advancement of expenses, under this Section or otherwise shall be on the
Corporation.
(d) Non-Exclusivity of Rights. The rights to indemnification and to the
advancement of expenses conferred in this Section shall not be exclusive of any
other right which any person may have or hereafter acquire under any statute,
this Corporation's certificate of incorporation, bylaw, agreement, vote of
stockholders or disinterested, directors, or otherwise.
(e) Insurance. The Corporation may maintain insurance, at its expense,
to protect itself and any director, officer, employee, or agent of the
Corporation or another corporation, partnership, joint venture, trust, or other
enterprise against any expense, liability, or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability, or loss under the Delaware General Law.
Section 10.7 Invalid Provisions. If any provision of these bylaws is
held to be illegal, invalid, or unenforceable under present or future laws, such
provision shall be fully severable; these bylaws shall be construed and enforced
as if such illegal, invalid, or unenforceable provision had never comprised a
part hereof; and the remaining provisions hereof shall remain in full force and
effect and shall not be affected by the illegal, invalid, or unenforceable
provision or by its severance herefrom. Furthermore, in lieu of such illegal,
invalid, or unenforceable provision there shall be added automatically as a part
of these bylaws a provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid, and enforceable.
Section 10.8 Headings. The headings used in these bylaws are for
reference purposes only and do not affect in any way the meaning or
interpretation of these bylaws.
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ARTICLE 11
AMENDMENT
Except as otherwise provided herein, these Bylaws may be altered,
amended or repealed at any regular meeting of the Board of Directors without
prior notice or at any special meeting of the Board of Directors if notice of
such alteration, amendment or repeal be contained in the notice of such special
meeting, or by the affirmative vote of two-thirds of the voting power of the
issued and outstanding capital stock voting as a single class.
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Draft of 5/21/97
RIGHTS AGREEMENT
Agreement, dated as of ______________, 1997, between Securacom,
Incorporated, a Delaware corporation (the "Company"), and American
Securities Transfer & Trust, Inc. (the "Rights Agent").
The Board of Directors of the Company has authorized and declared a
dividend of one preferred share purchase right (a "Right") for each Common Share
(as hereinafter defined) of the Company outstanding on the close of business on
the date the Company completes its initial public offering of Common Stock, and
to persons who were contractually obligated on such date to receive Common
Shares after such date (the "Record Date"), each Right representing the right to
purchase one one-thousandth of a Preferred Share (as hereinafter defined), upon
the terms and subject to the conditions herein set forth, and has further
authorized and directed the issuance of one Right with respect to each Common
Share that shall become outstanding between the Record Date and the earliest of
the Distribution Date, the Redemption Date and the Final Expiration Date (as
such terms are hereinafter defined).
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and
Associates (as such terms are hereinafter defined) of such Person,
shall become, at any time after the date of this Rights Agreement, the
Beneficial Owner (as such term is hereinafter defined) of 15% or more
of the Common Shares of the Company then outstanding, but shall not
include the Company, any Subsidiary (as such term is hereinafter
defined) of the Company, any employee benefit plan of the Company or
any Subsidiary of the Company, or any entity holding Common Shares for
or pursuant to the terms of any such plan. Notwithstanding the
foregoing, no Person shall become an "Acquiring Person" as the result
of an acquisition of Common Shares by the Company which, by reducing
the number of shares outstanding, increases the proportionate number of
shares beneficially owned by such Person to 15% or more of the Common
Shares of the Company then outstanding; provided, however, that if a
Person shall become the Beneficial Owner of 15% or more of the Common
Shares of the Company then outstanding by reason of share purchases by
the Company and shall, after such share purchases by the Company,
become the Beneficial Owner of any additional Common Shares of the
Company, then such Person shall be deemed to be an "Acquiring Person."
Notwithstanding the foregoing, if the Board of Directors of the Company
determines in good faith that a Person who would otherwise be an
"Acquiring Person," as defined pursuant to the foregoing provisions of
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this paragraph (a), has become such inadvertently, and such Person
divests as promptly as practicable a sufficient number of Common Shares
so that such Person would no longer be an Acquiring Person, as defined
pursuant to the foregoing provisions of this paragraph (a), then such
Person shall not be deemed to be an "Acquiring Person" for purposes of
this Agreement.
(b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended and
as in effect on the date of this Agreement (the "Exchange Act").
(c) A Person shall be deemed the "Beneficial Owner" of
and shall be deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has
"beneficial ownership" of (as determined pursuant to Rule
13d-3 of the General Rules and Regulations under the Exchange
Act), including pursuant to any agreement, arrangement or
understanding, whether or not in writing;
(ii) which such Person or any of such Person's
Affiliates or Associates has (A) the right to acquire (whether
such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement or
understanding (other than customary agreements with and
between underwriters and selling group members with respect to
a bona fide public offering of securities), or upon the
exercise of conversion rights, exchange rights, rights (other
than the Rights subject hereto), warrants or options, or
otherwise; provided, however, that a Person shall not be
deemed the Beneficial Owner of, or to beneficially own,
securities tendered pursuant to a tender or exchange offer
made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are
accepted for purchase or exchange; or (B) the right to vote
pursuant to any agreement, arrangement or understanding;
provided, however, that a Person shall not be deemed the
Beneficial owner of, or to beneficially own, any security if
the agreement, arrangement or understanding to vote such
security (1) arises solely from a revocable proxy or consent
given to such Person in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the
applicable rules and regulations promulgated under the
Exchange Act and (2) is not also then reportable on Schedule
13D under the Exchange Act (or any comparable or successor
report or schedule); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person with which such Person or any
of such Person's Affiliates or Associates has any agreement,
arrangement or understanding (other than customary agreements
with and between underwriters and selling group members with
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respect to a bona fide public offering of securities) for the
purpose of acquiring, holding, voting (except to the extent
contemplated by the proviso to Section 1(c)(ii)(B)) or
disposing of any securities of the Company.
Notwithstanding anything in this definition of Beneficial
Ownership to the contrary, the phrase "then outstanding," when used
with reference to a Person's Beneficial Ownership of securities of the
Company, shall mean the number of such securities then issued and
outstanding together with the number of such securities not then
actually issued and outstanding which such Person would be deemed to
own beneficially hereunder.
(d) "Business Day" shall mean any day other than a Saturday, a
Sunday, or a day on which banking institutions in New York are
authorized or obligated by law or executive order to close.
(e) "Close of business" on any given date shall mean 5:00
p.m., New York Time, on such date; provided, however, that if such date
is not a Business Day it shall mean 5:00 p.m., New York Time, on the
next succeeding Business Day.
(f) "Common Shares" when used with reference to the Company
shall mean the shares of Common Stock, par value $0.01 per share, of
the Company. "Common Shares" when used with reference to any Person
other than the Company shall mean the capital stock (or equity
interest) with the greatest voting power of such other Person or, if
such other Person is a Subsidiary of another Person, the Person or
Persons which ultimately control such first-mentioned Person.
(g) "Distribution Date" shall have the meaning set forth
in Section 3 hereof.
(h) "Final Expiration Date" shall have the meaning set
forth in Section 7 hereof.
(i) "Person" shall mean any individual, firm, corporation or
other entity, and shall include any successor (by merger or otherwise)
of such entity.
(j) "Preferred Shares" shall mean shares of Special Preferred
Stock, par value $0.01 per share, of the Company having the rights,
preferences and limitations set forth in Article IV of the Certificate
of Incorporation of the Company, as amended by the Certificate of
Designations attached to this Agreement as Exhibit A.
(k) "Redemption Date" shall have the meaning set forth
in Section 7 hereof.
(l) "Shares Acquisition Date" shall mean the first date of
public announcement (which, for purposes of this definition, shall
include, without limitation,
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a report or schedule filed pursuant to Section 13(d) under the Exchange
Act) by the Company or an Acquiring Person that an Acquiring Person has
become such.
(m) "Subsidiary" of any Person shall mean any corporation or
other entity of which a majority of the voting power of the voting
equity securities or equity interest is owned, directly or indirectly,
by such Person.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable.
Section 3. Issue of Right Certificates. (a) Until the earlier of (i)
the tenth day after the Shares Acquisition Date (or, if the tenth date after the
Share Acquisition Date occurs before the Record Date, the Record Date), or (ii)
the tenth business day (or such later date as may be determined by action of the
Board of Directors prior to such time as any Person becomes an Acquiring Person)
after the date of the commencement by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company or any entity holding Common Shares for or pursuant to
the terms of any such plan) of, or of the first public announcement of the
intention of any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or of any Subsidiary of the Company or
any entity holding Common Shares for or pursuant to the terms of any such plan)
to commence, a tender or exchange offer the consummation of which would result
in any Person becoming the Beneficial Owner of Common Shares aggregating 15% or
more of the then outstanding Common Shares (including any such date which is
after the date of this Agreement and prior to the issuance of the Rights; the
earlier of such dates being herein referred to as the "Distribution Date") (x)
the Rights will be evidenced (subject to the provisions of Section 3(b) hereof)
by the certificates for Common Shares registered in the names of the holders
thereof (which certificates shall also be deemed to be Right Certificates) and
not by separate Right Certificates, and (y) the right to receive Right
Certificates will be transferable only in connection with the transfer of Common
Shares. As soon as practicable after the Distribution Date, the Company will
prepare and execute, the Rights Agent will countersign, and the Company will
send or cause to be sent (and the Rights Agent will, if requested, send) by
first-class, insured, postage-prepaid mail, to each record holder of Common
Shares as of the close of business on the Distribution Date, at the address of
such holder shown on the records of the Company, a Right certificate, in
substantially the form of Exhibit B hereto (a "Right Certificate"), evidencing
one Right for each Common Share so held. As of the Distribution Date, the Rights
will be evidenced solely by such Right Certificates.
(b) Each record holder of Common Shares as of the close of business on
the Record Date, at the address of such holder shown on the records of the
Company, will receive an Information Statement that contains a summary of the
Rights substantially identical to the Summary of Rights to Purchase Preferred
Shares in the form of Exhibit C hereto (the "Summary of Rights"). Until the
Distribution Date (or the earlier of the Redemption Date or the Final
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Expiration Date), the surrender for transfer of any certificate for Common
Shares outstanding on the Record Date shall also constitute the transfer of the
Rights associated with the Common Shares represented thereby.
(c) Certificates for Common Shares which become outstanding prior to
the earliest of the Distribution Date, the Redemption Date or the Final
Expiration Date shall have impressed on, printed on, written on or otherwise
affixed to them the following legend:
This certificate also evidences and entitles the holder hereof
to certain rights as set forth in a Rights Agreement, between
Securacom, Incorporated and American Securities Transfer &
Trust, Inc., dated as of _____, 1997 (the "Rights Agreement"),
the terms of which are hereby incorporated herein by reference
and a copy of which is on file at the principal executive
office of Securacom, Incorporated. Under certain
circumstances, as set forth in the Rights Agreement, such
Rights will be evidenced by separate certificates and will no
longer be evidenced by this certificate. Securacom,
Incorporated will mail to the holder of this certificate a
copy of the Rights Agreement without charge after receipt of a
written request therefor. Under certain circumstances, as set
forth in the Rights Agreement, Rights issued to any Person who
becomes an Acquiring Person (as defined in the Rights
Agreement) may become null and void.
With respect to such certificates containing the foregoing legend,
until the Distribution Date, the Rights associated with the Common Shares
represented by such certificates shall be evidenced by such certificates alone,
and the surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby. In
the event that the Company purchases or acquires any Common Shares prior to the
Distribution Date, any Rights associated with such Common Shares shall be deemed
canceled and retired so that the Company shall not be entitled to exercise any
Rights associated with the Common Shares which are no longer outstanding.
Section 4. Form of Right Certificates. The Right Certificates (and the
forms of election to purchase Preferred Shares and of assignment to be printed
on the reverse thereof) shall be substantially the same as Exhibit B hereto and
may have such marks of identification or designation and such legends, summaries
or endorsements printed thereon as the Company may deem appropriate and as are
not inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the Rights
may from time to time be listed, or to conform to usage. Subject to the
provisions of Section 22 hereof, the Right Certificates shall entitle the
holders thereof to purchase such number of one one-thousandths of a Preferred
Share as shall be set forth therein at the price per one one-thousandth of a
Preferred Share set forth therein (the "Purchase Price"), but the number of such
one one-thousandths of a Preferred Share and the Purchase Price shall be subject
to adjustment as provided herein.
Section 5. Countersignature and Registration. The Right Certificates
shall be executed on behalf of the Company by its Chairman of the Board, its
President, any of its Vice Presidents, or its Treasurer, either manually or by
facsimile signature, shall have affixed thereto the Company's seal or a
facsimile thereof, and shall be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile signature. The Right
Certificates shall be manually countersigned by the Rights Agent and shall not
be valid for any purpose unless countersigned. In case any officer of the
Company who shall have signed any of the Right Certificates shall cease to be
such officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Right Certificates, nevertheless, may
be countersigned by the Rights Agent and issued and delivered by the Company
with the same force and effect as though the person who signed such Right
Certificates had not ceased to be such officer of the Company; and any Right
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of
the execution of this Agreement any such person was not such an officer.
Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at its principal office, books for registration and transfer of the
Right Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Right Certificates, the number of
Rights evidenced on its face by each of the Right Certificates and the date of
each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject
to the provisions of Section 14 hereof, at any time after the close of business
on the Distribution Date, and at or prior to the close of business on the
earlier of the Redemption Date or the Final Expiration Date, any Right
Certificate or Right Certificates (other than Right Certificates representing
Rights that have become void pursuant to Section 11(a)(ii) hereof or that have
been exchanged pursuant to Section 24 hereof) may be transferred, split up,
combined or exchanged for another Right Certificate or Right Certificates,
entitling the registered holder to purchase a like number of one one-thousandths
of a Preferred Share as the Right Certificate or Right Certificates surrendered
then entitled such holder to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Right Certificate or Right
Certificates shall make such request in writing delivered to the Rights Agent,
and shall surrender the Right Certificate or Right Certificates to be
transferred, split up, combined or exchanged at the principal office of the
Rights Agent. Thereupon the Rights Agent shall countersign and deliver to the
person entitled thereto a Right Certificate or Right Certificates, as the case
may be, as so requested. The Company may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Right Certificates.
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Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will make and deliver a new
Right Certificate of like tenor to the Rights Agent for delivery to the
registered holder in lieu of the Right Certificate so lost, stolen, destroyed or
mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights. (a) The registered holder of any Right Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein) in whole or in
part at any time after the Distribution Date upon surrender of the Right
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the principal office of the Rights Agent,
together with payment of the Purchase Price for each one one-thousandth of a
Preferred Share as to which the Rights are exercised, at or prior to the
earliest of (i) the close of business on _____________, 2007 (the "Final
Expiration Date"), (ii) the time at which the Rights are redeemed as provided in
Section 23 hereof (the "Redemption Date"), or (iii) the time at which such
Rights are exchanged as provided in Section 24 hereof.
(b) The Purchase Price for each one one-thousandth of a Preferred Share
purchasable pursuant to the exercise of a Right shall initially be $80.00, and
shall be subject to adjustment from time to time as provided in Section 11 or 13
hereof and shall be payable in lawful money of the United States of America in
accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the shares to be purchased and an amount equal
to any applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof by certified check, cashier's
check or money order payable to the order of the Company, the Rights Agent shall
thereupon promptly (i)(A) requisition from any transfer agent of the Preferred
Shares certificates for the number of Preferred Shares to be purchased and the
Company hereby irrevocably authorizes its transfer agent to comply with all such
requests, or (B) requisition from the depositary agent depositary receipts
representing such number of one one-thousandths of a Preferred Share as are to
be purchased (in which case certificates for the Preferred Shares represented by
such receipts shall be deposited by the transfer agent with the depositary
agent) and the Company hereby directs the depositary agent to comply with such
request, (ii) when appropriate, requisition from the Company the amount of cash
to be paid in lieu of issuance of fractional shares in accordance with Section
14 hereof, (iii) after receipt of such certificates or depositary receipts,
cause the same to be delivered to or upon the order of the registered holder of
such Right Certificate, registered in such name or names as may be designated by
such holder and (iv) when appropriate, after receipt, deliver such cash to or
upon the order of the registered holder of such Right Certificate.
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(d) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent to the registered holder of such Right Certificate or to his
duly authorized assigns, subject to the provisions of Section 14 hereof.
Section 8. Cancellation and Destruction of Right Certificates. All
Right Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Right
Certificates shall he issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Right Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Right Certificates to the Company, or shall, at the written request of
the Company, destroy such canceled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Preferred Shares. (a) The
Company covenants and agrees that it will cause to be reserved and kept
available out of its authorized and unissued Preferred Shares or any Preferred
Shares held in its treasury, the number of Preferred Shares that will be
sufficient to permit the exercise in full of all outstanding Rights.
(b) So long as the Preferred Shares (and, following the Distribution
Date, Common Shares and/or other securities) issuable and deliverable upon the
exercise of the Rights are listed on any national securities exchange, the
Company shall use its best efforts to cause, from and after such time as the
Rights become exercisable, all shares reserved for issuance to be listed on such
exchange upon official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the Distribution Date on which the
consideration to be delivered by the Company upon exercise of the Rights has
been determined in accordance with Section 11(a)(iii) hereof, a registration
statement under the securities Act of 1933 (the "Act"), with respect to the
securities purchasable upon exercise of the Rights on an appropriate form, (ii)
cause such registration statement to become effective as soon as practicable
after such filing, and (iii) cause such registration statement to remain
effective (with a prospectus at all times meeting the requirements of the Act)
until the earlier of (A) the date as of which the Rights are no longer
exercisable for such securities and (B) the Final Expiration Date. The Company
will also take such action as may be appropriate under, or to ensure compliance
with, the securities or "blue sky" laws of the various states in connection with
the exercisability of the Rights. The Company may temporarily suspend, for a
period of time not to exceed 90 days after the date set forth in clause (i) of
the first sentence of this Section 9(c), the exercisability of the Rights in
order to prepare and file such registration statement and permit it to become
effective. Upon any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the
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<PAGE>
suspension is no longer in effect. Notwithstanding any provision of this
Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction if the requisite qualification in such jurisdiction shall not have
been obtained, or the exercise thereof shall not be permitted under applicable
law, or a registration statement shall not have been declared effective.
(d) The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all Preferred Shares delivered upon exercise
of Rights shall, at the time of delivery of the certificates for such Preferred
Shares (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable shares.
(e) The Company further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the Right Certificates or
of any Preferred Shares upon the exercise of Rights. The Company shall not,
however, be required to pay any transfer tax which may be payable in respect of
any transfer or delivery of Right Certificates to a person other than, or the
issuance or delivery of certificates or depositary receipts for the Preferred
Shares in a name other than that of, the registered holder of the Right
Certificate evidencing Rights surrendered for exercise or to issue or to deliver
any certificates or depositary receipts for Preferred Shares upon the exercise
of any Rights until any such tax shall have been paid (any such tax being
payable by the holder of such Right Certificate at the time of surrender) or
until it has been established to the Company's reasonable satisfaction that no
such tax is due.
Section 10. Preferred Shares Record Date. Each person in whose name any
certificate for Preferred Shares is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the Preferred
Shares represented thereby on, and such certificate shall be dated, the date
upon which the Right Certificate evidencing such Rights was duly surrendered and
payment of the Purchase Price (and any applicable transfer taxes) was made;
provided, however, that if the date of such surrender and payment is a date upon
which the Preferred Shares transfer books of the Company are closed, such person
shall be deemed to have become the record holder of such shares on, and such
certificate shall be dated, the next succeeding Business Day on which the
Preferred Shares transfer books of the Company are open. Prior to the exercise
of the Rights evidenced thereby, the holder of a Right Certificate shall not be
entitled to any rights of a holder of Preferred Shares for which the Rights
shall be exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions, or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares or Number of
Rights. The Purchase Price, the number of Preferred Shares covered by each Right
and the number of Rights outstanding are subject to adjustment from time to time
as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine
the outstanding Preferred Shares into a smaller
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<PAGE>
number of Preferred Shares or (D) issue any shares of its capital stock in a
reclassification of the Preferred Shares (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation), except as otherwise provided in this Section 11(a),
the Purchase Price in effect at the time of the record date for such dividend or
of the effective date of such subdivision, combination or reclassification, and
the number and kind of shares of capital stock issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive the aggregate number and kind of shares of
capital stock which, if such Right had been exercised immediately prior to such
date and at a time when the Preferred Shares transfer books of the Company were
open, he would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination or reclassification; provided,
however, that in no event shall the consideration to be paid upon the exercise
of one Right be less than the aggregate par value of the shares of capital stock
of the Company issuable upon exercise of one Right.
(ii) Subject to Section 24 of this Agreement, in the event any
Person becomes an Acquiring Person, each holder of a Right shall thereafter have
a right to receive, upon exercise thereof at a price equal to the then current
Purchase Price multiplied by the number of one one-thousandths of a Preferred
Share for which a Right is then exercisable, in accordance with the terms of
this Agreement and in lieu of Preferred Shares, such number of Common Shares of
the Company as shall equal the result obtained by (x) multiplying the then
current Purchase Price by the number of one one-thousandths of a Preferred Share
for which a Right is then exercisable and dividing the product thereof by (y)
50% of the then current per share market price (the "Current Market Price") of
the Company's Common Shares (determined pursuant to Section 11(d) hereof) on the
date of the occurrence of such event (such number of shares, the "Adjustment
Shares"). In the event that any Person shall become an Acquiring Person and the
Rights shall then be outstanding, the Company shall not take any action which
would eliminate or diminish the benefits intended to be afforded by the Rights.
From and after the occurrence of such event, any Rights that
are or were acquired or beneficially owned by any Acquiring Person (or any
Associate or Affiliate of such Acquiring Person) shall be void and any holder of
such Rights shall thereafter have no right to exercise such Rights under any
provision of this Agreement. No Right Certificate shall be issued pursuant to
Section 3 that represents Rights beneficially owned by an Acquiring Person whose
Rights would be void pursuant to the preceding sentence or any Associate or
Affiliate thereof; no Right Certificate shall be issued at any time upon the
transfer of any Rights to an Acquiring Person whose Rights would be void
pursuant to the preceding sentence or any Associate or Affiliate thereof or to
any nominee of such Acquiring Person, Associate or Affiliate; and any Right
Certificate delivered to the Rights Agent for transfer to an Acquiring Person
whose Rights would be void pursuant to the preceding sentence shall be canceled.
(iii) In the event that the number of the Common Shares that
are authorized by the Company's certificate of incorporation but not outstanding
or reserved for issuance for purposes other than upon exercise of the Rights is
not sufficient to permit the exercise in full of
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the Rights in accordance with the foregoing subparagraph (ii) of this Section
11(a), the Company shall, to the extent permitted by applicable law and
regulation, (A) determine the excess of (1) the value of the Adjustment Shares
issuable upon the exercise of a Right (computed using the Current Market Price
used to determine the number of Adjustment Shares) (the "Current Value") over
(2) the Purchase Price (such excess is herein referred to as the "Spread"), and
(B) with respect to each Right, make adequate provision to substitute for the
Adjustment Shares, upon the exercise of the Rights and payment of the applicable
Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3) the Common
Shares or other equity securities of the Company (including, without limitation,
preferred shares, or units of preferred shares, that the Board of Directors of
the Company has deemed to have the same value as the Common Shares (such
preferred shares are herein referred to as the "Common Share Equivalents")), (4)
debt securities of the Company, (5) other assets or (6) any combination of the
foregoing, having an aggregate value equal to the Current Value, where such
aggregate value has been determined by the Board of Directors based upon the
advice of a nationally recognized investment banking firm selected by the Board
of Directors of the Company; provided, however, if the Company shall not have
made adequate provision to deliver value pursuant to clause (B) above within 30
days following the later of (x) the first occurrence of a Section 11(a)(ii)
event and (y) the date on which the Company's right of redemption pursuant to
Section 23(a) expires (the later of (x) and (y) being referred to herein as the
"Section 11(a)(ii) Trigger Date"), then the Company shall be obligated to
deliver, upon the surrender for exercise of a Right and without requiring
payment of the Purchase Price, the Common Shares (to the extent available) and
then, if necessary, cash, which shares and/or cash have an aggregate value equal
to the Spread. If the Board of Directors of the Company shall determine in good
faith that it is likely that sufficient additional Common Shares could be
authorized for issuance upon exercise in full of the Rights, the 30 day period
set forth above may be extended to the extent necessary, but not more than 90
days after the Section 11(a)(ii) Trigger Date, in order that the Company may
seek shareholder approval for the authorization of such additional shares (such
period, as it may be extended, the "Substitution Period"). To the extent that
the Company determines that some action need be taken pursuant to the first
and/or second sentences of this Section 11(a)(iii), the Company (x) shall
provide that such action shall apply uniformly to all outstanding Rights, and
(y) may suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional shares
and/or to decide the appropriate form of distribution to be made pursuant to
such first sentence and to determine the value thereof. In the event of any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect. For purposes
of this Section 11(a)(iii), the value of the Common Shares shall be the Current
Market Price per Common Share on the Section (11)(a)(ii) Trigger Date and the
value of any Common Share Equivalent shall be deemed to have the same value as
the Common Shares on such date.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Shares entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred Shares (or shares having the same rights,
privileges and preferences as the Preferred Shares ("Equivalent Preferred
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<PAGE>
Shares")) or securities convertible into Preferred Shares or Equivalent
Preferred Shares at a price per Preferred Share or Equivalent Preferred Share
(or having a conversion price per share, if a security convertible into
Preferred Shares or Equivalent Preferred Shares) less than the then current per
share market price of the Preferred Shares (as defined in Section 11(d)) on such
record date, the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of
Preferred Shares outstanding on such record date plus the number of Preferred
Shares which the aggregate offering price of the total number of Preferred
Shares and/or Equivalent Preferred Shares so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at such current market price and the denominator of which shall be the
number of Preferred Shares outstanding on such record date plus the number of
additional Preferred Shares and/or Equivalent Preferred Shares to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible); provided, however, that in no event shall
the consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent. Preferred Shares owned by or held for the account
of the Company shall not be deemed outstanding for the purposes of any such
computation. Such adjustment shall be made successively whenever such a record
date is fixed; and in the event that such rights, options or warrants are not so
issued, the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend or a dividend payable in
Preferred Shares) or subscription rights or warrants (excluding those referred
to in Section 11(b) hereof), the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the then current per share market price of the Preferred Shares on such
record date, less the fair market value (as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent) of the portion of the assets or evidences
of indebtedness so to be distributed or of such subscription rights or warrants
applicable to one Preferred Share and the denominator of which shall be such
current per share market price of the Preferred Shares; provided, however, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the Company
to be issued upon exercise of one Right. Such adjustments shall be made
successively whenever such a record date is fixed; and in the event that such
distribution is not so made, the Purchase Price shall again be adjusted to be
the Purchase Price which would then be in effect if such record date had not
been fixed.
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<PAGE>
(d) (i) For the purpose of any computation hereunder, the "current per
share market price" of any security (a "Security" for the purpose of this
Section 11(d)(I)) on any date shall be deemed to be the average of the daily
closing prices per share of such security for the 30 consecutive Trading Days
(as such term is hereinafter defined) immediately prior to such date; provided,
however, that in the event that the current per share market price of the
Security is determined during a period following the announcement by the issuer
of such Security of (A) a dividend or distribution on such Security payable in
shares of such Security or securities convertible into such shares, or (B) any
subdivision, combination or reclassification of such Security and prior to the
expiration of 30 Trading Days after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the current per share market
price shall be appropriately adjusted to reflect the current market price per
share equivalent of such Security. The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Security is not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Security is listed or admitted to trading or, if the Security is
not listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotations System ("NASDAQ"), or such
other system then in use, or, if on any such date the Security is not quoted by
any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Security
selected by the Board of Directors of the Company. The term "Trading Day" shall
mean a day on which the principal national securities exchange on which the
Security is listed or admitted to trading is open for the transaction of
business or, if the Security is not listed or admitted to trading on any
national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder, the
"current per share market price" of the Preferred Shares shall be determined in
accordance with the method set forth in Section 11(d)(I). If the Preferred
Shares are not publicly traded, the "current per share market price" of the
Preferred Shares shall be conclusively deemed to be the current per share market
price of the Common Shares as determined pursuant to Section 11(d)(I)
(appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof), multiplied by one thousand. If
neither the Common Shares nor the Preferred Shares are publicly held or so
listed or traded, "current per share market price" shall mean the fair value per
Share as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the Purchase
Price; provided, however, that any adjustments which by reason of this Section
11(e) are not required to be made shall be
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carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 11 shall be made to the nearest cent or to the
nearest one one-millionth of a Preferred Share or one ten-thousandth of any
other share or security as the case may be. Notwithstanding the first sentence
of this Section 11(e), any adjustment required by this Section 11 shall be made
no later than the earlier of (i) three years from the date of the transaction
which requires such adjustment or (ii) the date of the expiration of the right
to exercise any Rights.
(f) If as a result of an adjustment made pursuant to Section 11(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock of the Company other than Preferred Shares,
thereafter the number of such other shares so receivable upon exercise of any
Right shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the
Preferred Shares contained in paragraphs (a) through (c), inclusive, of this
Section 11, and the provisions of Sections 7, 9, 10 and 13 hereof with respect
to the Preferred Shares shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-thousandths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(I), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-thousandths of
a Preferred Share (calculated to the nearest one one-millionth of a Preferred
Share) obtained by (i) multiplying (x) the number of one one-thousandths of a
share covered by a Right immediately prior to this adjustment by (y) the
Purchase Price in effect immediately prior to such adjustment of the Purchase
Price and (ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one one-thousandths of a Preferred Share purchasable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of one
one-thousandths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one one-millionth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if known at the
time, the amount of the adjustment to be made. This record date may be the date
on which the Purchase Price is adjusted or any day thereafter, but, if the Right
Certificates have been issued, shall be
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<PAGE>
at least 10 days later than the date of the public announcement. If Right
Certificates have been issued, upon each adjustment of the number of Rights
pursuant to this Section 11(I), the Company shall, as promptly as practicable,
cause to be distributed to holders of record of Right Certificates on such
record date Right Certificates evidencing, subject to Section 14 hereof, the
additional Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall cause to be distributed to
such holders of record in substitution and replacement for the Right
Certificates held by such holders prior to the date of adjustment, and upon
surrender thereof, if required by the Company, new Right Certificates evidencing
all the Rights to which such holders shall be entitled after such adjustment.
Right Certificates so to be distributed shall be issued, executed and
countersigned in the manner provided for herein and shall be registered in the
names of the holders of record of Right Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of one one-thousandths of a Preferred Share issuable upon the
exercise of the Rights, the Right Certificates theretofore and thereafter issued
may continue to express the Purchase Price and the number of one one-thousandths
of a Preferred Share which were expressed in the initial Right Certificates
issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below one one-thousandth of the then par value, if any, of
the Preferred Shares issuable upon exercise of the Rights, the Company shall
take any corporate action which may, in the opinion of its counsel, be necessary
in order that the Company may validly and legally issue fully paid and
nonassessable Preferred Shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date of
the Preferred Shares and other capital stock or securities of the Company, if
any, issuable upon such exercise over and above the Preferred Shares and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it, in its sole discretion, shall determine to be advisable in
order that any consolidation or subdivision of the Preferred Shares, issuance
wholly for cash of any Preferred Shares at less than the current market price,
issuance wholly for cash of Preferred Shares or securities which by their terms
are convertible into or exchangeable for Preferred Shares, dividends on
Preferred Shares payable in Preferred Shares or issuance of rights, options or
warrants referred to hereinabove in Section 11(b), hereafter
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made by the Company to holders of its Preferred Shares shall not be taxable to
such stockholders.
(n) In the event that at any time after the date of this Agreement and
prior to the Distribution Date, the Company shall (i) declare or pay any
dividend on the Common Shares payable in Common Shares or (ii) effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares)
into a greater or lesser number of Common Shares, then in any such case (A) the
number of one one-thousandths of a Preferred Share purchasable after such event
upon proper exercise of each Right shall be determined by multiplying the number
of one one-thousandths of a Preferred Share so purchasable immediately prior to
such event by a fraction, the numerator of which is the number of Common Shares
outstanding immediately before such event and the denominator of which is the
number of Common Shares outstanding immediately after such event, and (B) each
Common Share outstanding immediately after such event shall have issued with
respect to it that number of Rights which each Common Share outstanding
immediately prior to such event had issued with respect to it. The adjustments
provided for in this Section 11(n) shall be made successively whenever such a
dividend is declared or paid or such a subdivision, combination or consolidation
is effected.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 or 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment,
and a brief statement of the facts accounting for such adjustment, (b) file with
the Rights Agent and with each transfer agent for the Common Shares or the
Preferred Shares a copy of such certificate and (c) mail a brief summary thereof
to each holder of a Right Certificate in accordance with Section 25 hereof.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power. In the event, directly or indirectly, at any time on or after the
date that any Person shall become an Acquiring Person, (a) the Company shall
consolidate with, or merge with and into, any other Person, (b) any Person shall
consolidate with the Company, or merge with and into the Company and the Company
shall be the continuing or surviving corporation of such merger and, in
connection with such merger, all or part of the Common Shares shall be changed
into or exchanged for stock or other securities of any other Person (or the
Company) or cash or any other property, or (c) the Company shall sell or
otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise
transfer), in one or more transactions, assets or earning power aggregating 50%
or more of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person other than the Company or one or more of
its wholly-owned Subsidiaries, then, and in each such case, proper provision
shall be made so that (i) each holder of a Right (except as otherwise provided
herein) shall thereafter have the right to receive, upon the exercise thereof at
a price equal to the then current Purchase Price multiplied by the number of one
one-thousandths of a Preferred Share for which a Right is then exercisable, in
accordance with the terms of this Agreement and in lieu of Preferred Shares,
such number of Common Shares of such other Person (including the Company as
successor thereto or as the surviving corporation), not subject to any liens,
encumbrances, rights of first
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refusal or other adverse claims, as shall equal the result obtained by (A)
multiplying the then current Purchase Price by the number of one one-thousandths
of a Preferred Share for which a Right is then exercisable and dividing that
product by (B) 50% of the then current per share market price of the Common
Shares of such other Person (determined pursuant to Section 11(d) hereof) on the
date of consummation of such consolidation, merger, sale or transfer; (ii) the
issuer of such Common Shares shall thereafter be liable for, and shall assume,
by virtue of such consolidation, merger, sale or transfer, all the obligations
and duties of the Company pursuant to this Agreement; (iii) the term "Company,"
as used in this Agreement, shall thereafter be deemed to refer to such issuer;
and (iv) such issuer shall take such steps (including, but not limited to, the
reservation of a sufficient number of its Common Shares in accordance with
Section 9 hereof) in connection with such consummation as may be necessary to
assure that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to the Common Shares thereafter deliverable upon
the exercise of the Rights. The Company shall not consummate any such
consolidation, merger, sale or transfer unless prior thereto the Company and
such issuer shall have executed and delivered to the Rights Agent a supplemental
agreement so providing. The Company shall not enter into any transaction of the
kind referred to in this Section 13 if at the time of such transaction there are
any rights, warrants, instruments or securities outstanding or any agreements or
arrangements which, as a result of the consummation of such transaction, would
eliminate or substantially diminish the benefits intended to be afforded by the
Rights. The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers.
Section 14. Fractional Rights and Fractional Shares. (a) The Company
shall not be required to issue fractions of Rights or to distribute Right
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Right Certificates
with regard to which such fractional Rights would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
Right. For the purposes of this Section 14(a), the current market value of a
whole Right shall be the closing price of the Rights for the Trading Day
immediately prior to the date on which such fractional Rights would have been
otherwise issuable. The closing price for any day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the Rights
are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
Rights are listed or admitted to trading or, if the Rights are not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by NASDAQ or such other system then in use
or, if on any such date the Rights are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights selected by the Board of Directors of
the Company. If on any such date no such market maker is making a market in the
Rights, the fair value of the Rights on such date as determined in good faith by
the Board of Directors of the Company shall be used.
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(b) The Company shall not be required to issue fractions of Preferred
Shares (other than fractions which are integral multiples of one one-thousandth
of a Preferred Share) upon exercise of the Rights or to distribute certificates
which evidence fractional Preferred Shares (other than fractions which are
integral multiples of one one-thousandth of a Preferred Share). Fractions of
Preferred Shares in integral multiples of one one-thousandth of a Preferred
Share may, at the election of the Company, be evidenced by depositary receipts,
pursuant to an appropriate agreement between the Company and a depositary
selected by it; provided, that such agreement shall provide that the holders of
such depositary receipts shall have all the rights, privileges and preferences
to which they are entitled as beneficial owners of the Preferred Shares
represented by such depositary receipts. In lieu of fractional Preferred Shares
that are not integral multiples of one one-thousandth of a Preferred Share, the
Company shall pay to the registered holders of Right Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one Preferred Share. For the purposes of
this Section 14(b), the current market value of a Preferred Share shall be the
closing price of a Preferred Share (as determined pursuant to the second
sentence of Section 11(d)(I) hereof) for the Trading Day immediately prior to
the date of such exercise.
(c) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right (except as provided in this Section 14).
Section 15. Rights of Action. All rights of action in respect of this
Agreement, except the rights of action given to the Rights Agent under Section
18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Right Certificate in the manner provided
in such Right Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the obligations under, and injunctive relief against actual or threatened
violations of the obligations of any Person subject to, this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Shares;
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(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if
surrendered at the principal office of the Rights Agent, duly endorsed
or accompanied by a proper instrument of transfer;
(c) the Company and the Rights Agent may deem and treat the
person in whose name the Right Certificate (or, prior to the
Distribution Date, the associated Common Shares certificate) is
registered as the absolute owner thereof and of the Rights evidenced
thereby (notwithstanding any notations of ownership or writing on the
Right Certificates or the associated Common Shares certificate made by
anyone other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any
liability to any holder of a Right or other Person as a result of its
inability to perform any of its obligations under this Agreement by
reason of any preliminary or permanent injunction or other order,
decree or ruling issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission, or any
statute, rule, regulation or executive order promulgated or enacted by
any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company shall
use its best efforts to have any such order, decree or ruling lifted or
otherwise overturned as soon as possible.
Section 17. Right Certificate Holder Not Deemed a Stockholder. No
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Preferred Shares or any
other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent. The Company agrees to pay to
the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent, and its
officers, agents and directors for, and to hold each of them harmless against,
any loss, liability, or expense, incurred without gross negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights Agent or such indemnified party in connection with the acceptance
or administration of this Agreement or the
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<PAGE>
exercise or performance of its duties hereunder, including the costs and
expenses of defending against any claim of liability in the premises.
The Rights Agent shall be protected by the Company and shall incur no
liability for, or in respect of any action taken, suffered or omitted by it in
connection with, its administration of this Agreement or the exercise or
performance of its duties hereunder in reliance upon any Right Certificate or
certificate for the Preferred Shares or Common Shares or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
person or persons, or otherwise upon the advice of counsel as set forth in
Section 20 hereof.
Notwithstanding anything in this Agreement to the contrary, in no event
shall the Rights Agent be liable for special, indirect or consequential loss or
damage of any kind whatsoever (including but not limited to lost profits), even
if the Rights Agent has been advised of the likelihood of such loss or damage
and regardless of the form of the action.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
Any corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the stock transfer or
corporate trust powers of the Rights Agent or any successor Rights Agent, shall
be the successor to the Rights Agent under this Agreement without the execution
or filing of any paper or any further act on the part of any of the parties
hereto; provided, that such corporation would he eligible for appointment as a
successor Rights Agent under the provisions of Section 21 hereof. In case at the
time such successor Rights Agent shall succeed to the agency created by this
Agreement, any of the Right Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Right Certificates so countersigned;
and in case at that time any of the Right Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Right
Certificates either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Right Certificates
shall have the full force provided in the Right Certificates and in this
Agreement.
In case at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
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<PAGE>
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations expressly imposed by this Agreement (and no implied
duties or obligations shall be read into this Agreement against the Rights
Agent) upon the following terms and conditions, by all of which the Company and
the holders of Right Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may
be legal counsel for the Company) and the opinion of such counsel shall
be full and complete authorization and protection to the Rights Agent
as to any action taken or omitted by it in good faith and in accordance
with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that
any fact or matter (including, without limitation, the identity of any
Acquiring Person, Affiliate or Associate and the determination of
current per share market price) be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by
a certificate signed by any person believed in good faith by the Rights
Agent to be one of the Chairman of the Board, the Chief Executive
Officer, the President, any Vice President, the Treasurer or the
Secretary or any Assistant Secretary of the Company and delivered to
the Rights Agent; and such certificate shall be full authorization to
the Rights Agent for any action taken or suffered in good faith by it
under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder to the Company
and any other Person only for consequential damages arising from its
own gross negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement
or in the Right Certificates (except its countersignature thereof) or
be required to verify the same, but all such statements and recitals
are and shall be deemed to have been made by the Company only.
(e) The Rights Agent is serving as an administrative agent
and, accordingly, shall not be under any responsibility in respect of
the validity of any provision of this Agreement or the execution and
delivery hereof (except the due execution hereof by the Rights Agent)
or in respect of the validity or execution of any Right Certificate
(except its countersignature thereof); nor shall it be responsible for
any breach by the Company of any covenant or condition contained in
this Agreement or in any Right Certificate; nor shall it be responsible
for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 11(a)(ii) hereof) or any
adjustment in the terms of the Rights (including the manner, method or
amount thereof) provided for in Section 3, 11, 13, 23 or 24 hereof, or
the ascertaining of the existence of facts that
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<PAGE>
would require any such change or adjustment (except with respect to the
exercise of Rights evidenced by Right Certificates after actual notice
to the Rights Agent that such change or adjustment is required); nor
shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any Preferred Shares
to be issued pursuant to this Agreement or any Right Certificate or as
to whether any Preferred Shares will, when issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed,
acknowledged and delivered all such further and other acts, instruments
and assurances as may reasonably be required by the Rights Agent for
the carrying out or performing by the Rights Agent of the provisions of
this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties
hereunder from any person believed in good faith by the Rights Agent to
be one of the Chief Executive Officer, the President, any Vice
President, the Secretary, any Assistant Secretary, or the Treasurer of
the Company, and to apply to such officers for advice or instructions
in connection with its duties, and it shall not be liable for any
action taken or suffered by it in good faith in accordance with
instructions of any such officer or for any delay in acting while
waiting for those instructions.
Any application by the Rights Agent for written instructions
from the Company may, at the option of the Rights Agent, set forth in
writing any action proposed to be taken or omitted by the Rights Agent
under this Agreement and the date on or after which such action shall
be taken or such omission shall be effective. The Rights Agent shall
not be liable for any action taken by, or omission of, the Rights Agent
in accordance with a proposal included in any such application on or
after the date specified in such application (which date shall not be
less than ten Business Days after the date any officer of the Company
actually receives such application, unless any such officer shall have
consented in writing to an earlier date) unless, prior to taking any
such action (or the effective date in the case of an omission), the
Rights Agent shall have received written instructions in response to
such application subject to the proposed action or omission and/or
specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights
or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract
with or lend money to the Company or otherwise act as fully and freely
as though it were not Rights Agent under this Agreement. Nothing herein
shall preclude the Rights Agent from acting in any other capacity for
the Company or for any other legal entity.
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<PAGE>
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder
either itself or by or through its attorneys or agents, and the Rights
Agent shall not be answerable or accountable for any act, default,
neglect or misconduct of any such attorneys or agents or for any loss
to the Company resulting from any such act, default, neglect or
misconduct, provided reasonable care was exercised in the selection and
continued employment thereof.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Shares or Preferred Shares by registered or certified mail, and to
the holders of the Right Certificates by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon 30 days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Shares or Preferred Shares by
registered or certified mail, and to the holders of the Right Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of 30 days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right Certificate (who shall,
with such notice, submit his Right Certificate for inspection by the Company),
then the registered holder of any Right Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, (a) shall be
a corporation organized and doing business under the laws of the United States
or of the State of New York (or of any other state of the United States so long
as such corporation is authorized to do business as a banking institution in the
State of New York), in good standing, which is authorized under such laws to
exercise corporate trust or stock transfer powers and is subject to supervision
or examination by federal or state authority and (b) which, together with its
parent company, has at the time of its appointment as Rights Agent a combined
capital and surplus of at least $50 million. After appointment, the successor
Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment, the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Shares or Preferred Shares, and mail a
notice thereof in writing to the registered holders of the Right Certificates.
Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any
of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Right Certificates evidencing Rights in
such form as may be approved by its Board of Directors
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to reflect any adjustment or change in the Purchase Price and the number or kind
or class of shares or other securities or property purchasable under the Right
Certificates made in accordance with the provisions of this Agreement.
Section 23. Redemption. (a) The Board of Directors of the Company may,
at its option, at any time prior to such time as any Person becomes an Acquiring
Person, redeem all but not less than all the then outstanding Rights at a
redemption price of $.01 per Right, as such amount may be appropriately adjusted
to reflect any stock split, stock dividend or similar transaction occurring
after the date hereof (such redemption price being hereinafter referred to as
the "Redemption Price"). The redemption of the Rights by the Board of Directors
may be made effective at such time, on such basis and with such conditions as
the Board of Directors in its sole discretion may establish.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights pursuant to paragraph (a) of this
Section 23, and without any further action and without any notice, the right to
exercise the Rights will terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price. The Company shall promptly
give public notice of any such redemption; provided, however, that the failure
to give, or any defect in, any such notice shall not affect the validity of such
redemption. Within 10 days after such action of the Board of Directors ordering
the redemption of the Rights, the Company shall mail a notice of redemption to
all the holders of the then outstanding Rights at their last addresses as they
appear upon the registry books of the Rights Agent or, prior to the Distribution
Date, on the registry books of the transfer agent for the Common Shares. Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of redemption
will state the method by which the payment of the Redemption Price will be made.
Neither the Company nor any of its Affiliates or Associates may redeem, acquire
or purchase for value any Rights at any time in any manner other than that
specifically set forth in this Section 23 or in Section 24 hereof, and other
than in connection with the purchase of Common Shares prior to the Distribution
Date.
Section 24. Exchange. (a) The Board of Directors of the Company may, at
its option, at any time after any Person becomes an Acquiring Person, exchange
all or part of the then outstanding and exercisable Rights (which shall not
include Rights that have become void pursuant to the provisions of Section
11(a)(ii) hereof) for Common Shares at an exchange ratio of one Common Share per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing,
the Board of Directors shall not be empowered to effect such exchange at any
time after any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or any such Subsidiary, or any entity
holding Common Shares for or pursuant to the terms of any such plan), together
with all Affiliates and Associates of such Person, becomes the Beneficial Owner
of 50% or more of the Common Shares then outstanding.
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<PAGE>
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to paragraph (a) of this
Section 24 and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of Common Shares equal to the
number of such Rights held by such holder multiplied by the Exchange Ratio. The
Company shall promptly give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company promptly shall mail a notice
of any such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent. Any notice
which is mailed in the manner herein provided shall be deemed given, whether or
not the holder receives the notice. Each such notice of exchange will state the
method by which the exchange of the Common Shares for Rights will be effected
and, in the event of any partial exchange, the number of Rights which will be
exchanged. Any partial exchange shall be effected pro rata based on the number
of Rights (other than Rights which have become void pursuant to the provisions
of Section 11(a)(ii) hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient Common Shares
issued but not outstanding or authorized but unissued to permit any exchange of
Rights as contemplated in accordance with this Section 24, the Company shall
take all such action as may be necessary to authorize additional Common Shares
for issuance upon exchange of the Rights. In the event the Company shall, after
good faith effort, be unable to take all such action as may be necessary to
authorize such additional Common Shares, the Company shall substitute, for each
Common share that would otherwise be issuable upon exchange of a Right, a number
of Preferred Shares or fraction thereof such that the current per share market
price of one Preferred Share multiplied by such number or fraction is equal to
the current per share market price of one Common Share as of the date of
issuance of such Preferred Shares or fraction thereof.
(d) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates which evidence fractional Common Shares. In
lieu of such fractional Common Shares, the Company shall pay to the registered
holders of the Right Certificates with regard to which such fractional Common
Shares would otherwise be issuable an amount in cash equal to the same fraction
of the current market value of a whole Common Share. For the purposes of this
paragraph (d), the current market value of a whole Common Share shall be the
closing price of a Common Share (as determined pursuant to the second sentence
of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
exchange pursuant to this Section 24.
Section 25. Notice of Certain Events. (a) In case the Company shall
propose (i) to pay any dividend payable in stock of any class to the holders of
its Preferred Shares or to make any other distribution to the holders of its
Preferred Shares (other than a regular quarterly cash dividend), (ii) to offer
to the holders of its Preferred Shares rights or warrants to subscribe for or to
purchase any additional Preferred Shares or shares of stock of any class or any
other securities, rights or options, (iii) to effect any reclassification of its
Preferred Shares (other than a reclassification involving only the subdivision
of outstanding Preferred Shares), (iv) to effect
- 24 -
<PAGE>
any consolidation or merger into or with, or to effect any sale or other
transfer (or to permit one or more of its Subsidiaries to effect any sale or
other transfer), in one or more transactions, of 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to, any
other Person, (v) to effect the liquidation, dissolution or winding up of the
Company, or (vi) to declare or pay any dividend on the Common Shares payable in
Common Shares or to effect a subdivision, combination or consolidation of the
Common Shares (by reclassification or otherwise than by payment of dividends in
Common Shares), then, in each such case, the Company shall give to each holder
of a Right Certificate, in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, or distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Common Shares and/or Preferred Shares, if any such
date is to be fixed, and such notice shall be so given in the case of any action
covered by clause (i) or (ii) above at least 10 days prior to the record date
for determining holders of the Preferred Shares for purposes of such action, and
in the case of any such other action, at least 10 days prior to the date of the
taking of such proposed action or the date of participation therein by the
holders of the Common Shares and/or Preferred Shares, whichever shall be the
earlier.
(b) In case the event set forth in Section 11(a)(ii) hereof shall
occur, then the Company shall as soon as practicable thereafter give to each
holder of a Right Certificate, in accordance with Section 26 hereof, a notice of
the occurrence of such event, which notice shall describe such event and the
consequences of such event to holders of Rights under Section 11(a)(ii) hereof.
Section 26. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Right Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
American Securities Transfer & Trust, Inc.
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
Securacom, Incorporated
50 Tice Boulevard
Woodcliff Lake, New Jersey 07675
Attention: Corporate Secretary
- 25 -
<PAGE>
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. Supplements and Amendments. The Company may from time to
time supplement or amend this Agreement without the approval of any holders of
Right Certificates in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any other
provisions herein, or to make any other provisions with respect to the Rights
which the Company may deem necessary or desirable, any such supplement or
amendment to be evidenced by a writing signed by the Company and the Rights
Agent; provided, however, that from and after such time as any Person becomes an
Acquiring Person, this Agreement shall not be amended in any manner which would
adversely affect the interests of the holders of Rights (other than an Acquiring
Person or an Affiliate or Associate of such person). Without limiting the
foregoing, the Company may at any time prior to such time as any Person becomes
an Acquiring Person amend this Agreement to lower the thresholds in Sections
1(a) and 3 hereof to not less than the greater of (i) the sum of .001% and the
largest percentage of the outstanding Common Shares then known by the Company to
be beneficially owned by any Person (other than the Company, any Subsidiary of
the Company, any employee benefit plan of the Company or any Subsidiary of the
Company, or any entity holding Common Shares for or pursuant to the terms of any
such plan) and (ii) 10%. Notwithstanding anything in this Agreement to the
contrary, no supplement or amendment that changes the rights and duties of the
Rights Agent under this Agreement shall be effective without the consent of the
Rights Agent.
Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, the Common Shares) any legal or equitable right, remedy
or claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Right Certificates (and, prior to the Distribution Date, the Common Shares).
Section 30. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Section 31. Governing Law. This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Delaware and
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<PAGE>
for all purposes shall be governed by and construed in accordance with the laws
of such State applicable to contracts to be made and performed entirely within
such State.
Section 32. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 33. Descriptive Headings. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
Attest: SECURACOM, INCORPORATED
By: By:
Title: Title:
[Rights Agent]
By:
Title:
- 27 -
SECURACOM, INCORPORATED
STOCK OPTION PLAN
1. PURPOSE
This Stock Option Plan (the "Plan") for Securacom, Incorporated (the
"Company") is intended to advance the interests of the Company by providing
certain directors and employees of the Company and its subsidiaries, if any (the
"Subsidiaries"), with additional incentive to promote the success of the Company
and its Subsidiaries, to increase their proprietary interest in the Company, and
to encourage them to remain in the Company's employ or in the employ of its
Subsidiaries.
2. ADMINISTRATION OF THE PLAN
2.1 The Plan shall be administered by the Option Committee (the
"Committee") of the Board of Directors of the Company (the "Board"). The
Committee shall consist of two or more members of the Board, each of whom shall
be appointed by and shall serve at the pleasure of the Board. The Board shall
have the sole continuing authority to appoint members of the Committee both in
substitution for members previously appointed and to fill vacancies however
caused. All members of the Committee shall be "Non-Employee Directors" as such
term is defined in Rule 16b-3(b)(3) under the Securities Exchange Act of 1934,
as amended, or any successor provision. Each grant of options under the Plan
shall be approved by the Board or the Committee.
2.2 The Committee shall have the authority to grant (i) stock options
that constitute incentive stock options ("Incentive Stock Options") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"IRC") and (ii) stock options that do not constitute Incentive Stock Options
within the meaning of Section 422 of the IRC ("Nonqualified Options"). Incentive
Stock Options and Nonqualified Options are together referred to as "Options"
herein.
2.3 Subject to the provisions of this Plan, the Committee shall have
plenary authority, in its discretion, to: (i) determine the employees and other
persons (from the class of employees and other persons eligible under Section 4
to receive Options under this Plan) to whom Options shall be granted; (ii)
determine the time or times at which Options shall be granted; (iii) determine
the type of Options granted and their terms; and (iv) interpret the Plan and to
prescribe, amend, and rescind rules and regulations relating to it.
2.4 The Committee shall hold its meetings at such times and places as
it shall deem advisable. All actions of the Committee shall be taken by
agreement of a majority of the whole Committee. Any action taken by the
Committee through a written instrument signed by a majority of its members shall
be as effective as though taken at a meeting duly called and held. The Committee
may appoint a secretary to keep minutes
723/OPTION.PLN
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<PAGE>
of its meetings and shall make such rules and regulations for the conduct of its
business as it shall deem advisable.
3. SHARES OF STOCK SUBJECT TO THE PLAN
The Committee shall have authority to grant Options under this Plan for
the purchase of an aggregate of 500,000 shares of the Common Stock of the
Company, par value $0.01 per share (the "Common Stock"). Such shares may be
authorized but unissued shares of Common Stock, or shares of Common Stock that
have been reacquired by the Company. In the event of a lapse, expiration,
termination, or cancellation of any Option granted hereunder without the
issuance of shares or payment of cash, the shares subject to or reserved for
such Option may again be used to grant additional Options; provided, that in no
event may the number of shares subject to Options issued hereunder exceed the
total number of shares reserved for issuance. The Company shall reserve and keep
available for issuance that number of shares of Common Stock equal to the number
of shares of Common Stock subject to outstanding Options hereunder.
4. PERSONS ELIGIBLE TO RECEIVE OPTIONS
4.1 The persons who shall be eligible to receive Options granted
hereunder shall be:
(i) directors and employees of the Company and/or its
Subsidiaries; provided, however, that the persons who shall be eligible
to receive options granted hereunder intended to be Incentive Stock
Options shall be employees of the Company and/or its Subsidiaries, as
that term is defined in Section 424 of the IRC; and provided, further,
that no employee shall receive options to purchase Common Stock
hereunder or under any plan of the Company or its Subsidiaries intended
to be Incentive Stock Options to the extent that the stock subject to
such options exercisable for the first time in any year has a Market
Value (determined at the time the options are granted) in excess of
$100,000; and
(ii) consultants or advisors of the Company and/or its
Subsidiaries.
5. AWARDS OF OPTIONS TO DIRECTORS
Each newly elected or appointed Director shall be granted Options to
purchase 15,000 shares of stock upon initial election or appointment to the
Board. Following such initial election or appointment, Directors who continue to
serve in such capacity shall be granted Options to purchase 15,000 shares of
stock on an annual basis following the annual stockholders meeting. The exercise
price per share of all such Options shall be the Market Value of the Common
Stock on the date of grant, as defined in Section 7.2. All such Options shall
have a term of four years and shall become exercisable in three equal annual
installments beginning on the first anniversary of the date of grant.
723/OPTION.PLN
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<PAGE>
6. OPTIONS
6.1 Each option granted hereunder shall be evidenced by an Option
Certificate that shall state the number of shares of stock to which it relates.
6.2 Each Option Certificate shall contain such provisions as may be
required by the terms hereof and such other provisions (including, without
limitation, restrictions on the option and the Common Stock) as the Committee
shall in its discretion impose. The Committee may vary the terms and provisions
of individual Option Certificate on a case-by-case basis and shall not be
required to make all Option Certificates uniform.
6.3 At the time each option is granted under this Plan, the Committee
shall determine whether such option is to be designated an Incentive Stock
Option. Options designated Incentive Stock Options shall conform to those
provisions of this Plan specifically applicable to Incentive Stock Options,
including, without limitation, the minimum option price specified in Section 7
and the maximum exercise period specified in Section 8.1.
7. OPTION PRICE
7.1 Other than the options issued to Directors described in Section 5
of this Plan, the option price of each option issued hereunder shall be
determined by the Commit tee in its discretion at the time the option is
granted, subject to the conditions of this Section 7. Options intended to be
Incentive Stock Options shall have an option price per share equal to or greater
than the Market Value of the Common Stock (as defined in Section 7.2) on the
date such option is granted. If any option intended to be an Incentive Stock
Option is granted to any employee holding stock possessing more than 10 percent
of the total combined voting power of all classes of the capital stock of the
Company, its parent (if any) or any of its Subsidiaries, the option price per
share shall not be less than 110 percent of the Market Value of the Common Stock
on the date the option is granted. Nonqualified Options shall have an option
price per share not less than 85% of the Market Value of the Common Stock on the
date such option is granted.
7.2 For purposes of this Plan, the term "Market Value" shall mean the
closing price of the Common Stock on the Nasdaq National Market or such other
exchange upon which the Common Stock might later be traded, on the date
specified.
8. TERMS AND EXERCISE OF OPTIONS
8.1 Each option granted hereunder shall be exercisable only during a
term commencing and ending (unless the option shall have terminated earlier
under other provisions of this Plan) on dates to be fixed by the Committee,
subject to the following further limitations:
723/OPTION.PLN
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<PAGE>
(i) with respect to any option intended to be an Incentive
Stock Option, the date fixed by the Committee as the end of the option
term must be a date not more than 10 years from the date the option was
granted;
(ii) subject to the provisions of Sections 9.3 and 9.4 hereof,
any option intended to be an Incentive Stock Option may not be
exercisable more than three months after the optionee ceases to be an
employee of the Company or a Subsidiary; and
(iii) with respect to any option intended to be an Incentive
Stock Option that is granted to a person possessing more than 10
percent of the total combined voting power of all classes of the
capital stock of the Com pany, its parent (if any) or any of its
Subsidiaries, the date fixed by the Committee as the end of the option
term must be a date not more than five years from the date the option
was granted.
The period of the option, once it is granted, may be reduced only as provided
for in Section 9 in connection with the termination of employment, death, or
disability of the optionee.
8.2 The Committee shall have authority to grant options exercisable in
whole or in part at any time during their term, or exercisable in cumulative or
non-cumulative installments, as may be determined by the Committee, provided
that any option that is intended to be an Incentive Stock Option shall meet the
requirements of Sections 8.1 and 4.1 hereof.
8.3 Unless otherwise provided herein or in the option agreement, an
option may be exercised in whole or in part at any time during its term. The
Committee may, in its discretion, provide that an option may not be exercised in
whole or in part for any period or periods of time specified in the option
agreement. The Committee may, in its discretion, include in any option granted
hereunder, a condition that the optionee shall agree to remain in the employ of,
and to render services to, the Company and/or a Subsidiary(ies) for a specified
period of time following the date the option is granted. No such agreement shall
impose upon the Company or any Subsidiary any obligation to employ the optionee
for any period of time.
8.4 Options shall be exercised by delivering or mailing to the
Committee:
(i) a notice, in the form prescribed by the Committee,
specifying the number of shares of Common Stock with respect to which
the option is exercised;
(ii) a certified bank check or money order payable to the
Company, or shares of Common Stock, or any combination thereof, for the
full option price in the case of Incentive Stock Options, and in an
amount
723/OPTION.PLN
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<PAGE>
equal to the full option price plus any withholding tax required by law
as determined by the Committee in the case of Nonqualified Options; and
(iii) if the shares are to be issued pursuant to the exemption
from registration under the Securities Act of 1933, as amended (the
"Securities Act"), provided by Section 4(2) or any successor section of
such Act, an "investment letter" in such form as may be dictated by the
Committee.
Shares of Common Stock delivered in full or partial payment of the option price
shall be applied to the option price at their Market Value on the date received
by the Committee. Any withholding tax required in connection with the exercise
of Nonqualified Options must be paid by certified bank check or money order
payable to the Company.
8.5 Upon receipt of such notice (and investment letter if applicable)
and upon payment of the option price (and taxes if applicable), the Company
shall promptly deliver to the optionee a certificate or certificates for the
number of shares of Common Stock in respect of which the option was exercised,
without charge to the optionee for issue or transfer tax. The stock
certificate(s) may, at the request of the optionee, be issued in the name of
such optionee and the name of another person as joint tenants with the right of
survivorship, provided that any restrictions on such stock shall apply with
equal force to such joint tenant. In the event that such shares are not
registered under the Securities Act, such certificates shall bear the following
legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURI TIES ACT OF
1933 AS AMENDED AND MAY NOT BE TRANSFERRED WITHOUT AN OPINION OF
COUNSEL THAT SUCH TRANSFER MAY BE LAWFULLY EFFECTED IN THE ABSENCE OF
SUCH REGISTRATION."
8.6 No optionee or legal representative, legatee, or distributee of
such optionee, will be, or will be deemed to be, a holder of any shares of
Common Stock subject to an option unless and until certificates for such shares
are issued to such person under the terms of this Plan. No adjustment shall be
made for dividends or other rights the record date of which is prior to the date
such stock certificate is issued.
8.7 The Committee may, in its discretion, provide in the option
agreement that the optionee may elect either of the following settlement methods
as an alternative to payment in full of the option price for the number of
shares of Common Stock in respect of which an option is exercised:
(i) the right to receive from the Company cash in an amount
equal to the excess of the Market Value of one share of Common Stock on
the date of exercise over the option price times the number of shares
with re spect to which the option is exercised; or
(ii) the right to receive from the Company that number of
whole shares of Common Stock having an aggregate Market Value on the
date of
723/OPTION.PLN
5
<PAGE>
exercise not greater than the cash amount calculated under subsection
(i) of this Section 8.7.
8.8 The exercise of an option in any manner, including an exercise
involving an election of an alternative settlement method with respect to an
option, shall result in a decrease in the number of shares of Common Stock that
thereafter may be available under the Plan by the number of shares as to which
the option is exercised.
8.9 To the extent that the exercise of options by one of the
alternative settlement methods provided for in Section 8.7 results in
compensation income to the optionee, the Company will withhold from the amount
due to the optionee any amount required for federal, state, and local taxes. If
the settlement method set forth in subsection (ii) of Section 8.7 is selected
and results in compensation income to the optionee, the optionee shall deliver
to the Company a certified bank check or money order payable to the Company in
an amount equal to any withholding tax required by law.
8.10 All options granted under this Plan shall be non-transferable
except by will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the IRC or the rules
thereunder, and options may be exercised during the lifetime of the optionee
only by the person to whom the option was granted. Except as permitted by the
preceding sentence, no option granted under this Plan or any of the rights and
privileges thereby conferred shall be transferred, assigned, pledged, or
hypothecated in any way (whether by operation of law or otherwise), and no such
option, right, or privilege shall be subject to execution, attachment, or
similar process. Upon any attempt so to transfer, assign, pledge, hypothecate,
or otherwise dispose of the option or of any right or privilege conferred
thereby contrary to the provisions hereof, or upon the levy or any attachment or
similar process upon such option, right, or privilege, the option and such
rights and privileges shall immediately become null and void.
9. EFFECT OF TERMINATION OF EMPLOYMENT, DEATH OR DISABILITY ON OPTIONS
9.1 If an optionee is an employee and ceases to be employed by the
Company or a Subsidiary for any reason other than death, retirement on or after
his Retirement Date (as defined in Section 9.2), or disability (as defined in
Section 9.4), any options granted to such optionee hereunder to the extent not
previously exercised shall be deemed canceled and terminated as of the date 90
days following the date such employment is terminated; provided, however, that
the Committee may, subject to section 8.1(ii) hereof, extend the period of time
during which options the optionee is entitled to exercise as of the date of
termination may be exercised if, in its opinion, circumstances warrant such an
extension. The transfer of an optionee from the employ of the Company to a
Subsidiary or visa versa, or from one Subsidiary to another, shall not be deemed
to constitute a termination of employment for purposes of this Section 9. The
Committee shall determine in each case whether, in accordance with applicable
laws, a leave of absence shall constitute a termination of employment.
723/OPTION.PLN
6
<PAGE>
9.2 If an optionee is an employee and ceases to be employed by the
Company or a Subsidiary by reason of the optionee's retirement on or after his
Retirement Date, such optionee shall have the right, at any time within three
months after the date such employment is terminated, to exercise any options
held by him to the extent that he was entitled to exercise the options on the
date of cessation of employment, but in no event shall any option be exercisable
more than ten years from the date it was granted. For purposes of this Plan, the
term "Retirement Date" shall mean the earlier of the date of such employee's
65th birthday, the date of such employee's 60th birthday after 30 years of
employment by the Company or a Subsidiary, or any date an employee is otherwise
entitled to retire under the Company's retirement plans (if any).
9.3 Unless otherwise provided in the option agreement, if an optionee
who is an employee should die while employed by the Company or a Subsidiary, or
should die within three months after retirement on or after his Retirement Date,
then, until the expiration of one year from the date of the optionee's death or
the earlier termination of the term of the option, any options granted to the
deceased optionee and not exercised by him prior to his death shall, to the
extent exercisable by the optionee on the date of his death, be exercisable by
his estate or by any person who acquired such options by bequest or inheritance
from the optionee. Such exercise shall be subject to all applicable conditions
and restrictions prescribed in this Plan or in the option agreement.
9.4 If an optionee ceases to be employed by the Company or a Subsidiary
by reason of the optionee's disability, such optionee shall have the right to
exercise all options held by him, to the extent not previously expired or
exercised, at any time within one year after such termination of employment due
to a disability. For purposes of this Section 9.4, the term "disability" shall
be defined in the same manner that it is defined in the Company's long term
disability plan at the applicable time, if any. In the event the Company has no
long term disability plan, the Optionee shall be deemed to be disabled if he or
she is eligible for and is receiving total and permanent disability benefits
under Section 223 of the Social Security Act, as amended, or any similar or
subsequent section or act of like intent or purpose.
10. ADJUSTMENTS TO SHARES SUBJECT TO THE PLAN
10.1 In the event that additional shares of the capital stock of the
Company are issued pursuant to a stock split or stock dividend, the number of
shares of Common Stock then covered by each outstanding Option granted hereunder
shall be increased proportion ately (and, in the case of options, the option
price shall be reduced proportionately) and the number of shares of Common Stock
reserved for purposes of this Plan shall be increased proportionately.
10.2 In the event that the shares of Common Stock of the Company from
time to time issued and outstanding are reduced by a combination of shares, the
number of shares of Common Stock then covered by each outstanding Option granted
hereunder shall be reduced proportionately (and, in the case of options, the
option price shall be
723/OPTION.PLN
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<PAGE>
increased proportionately) and the number of shares of Common Stock reserved for
purposes of this Plan shall be reduced proportionately.
10.3 In the event that the Company transfers assets to another
corporation and distributes the stock of such other corporation without the
surrender of Common Stock of the Company, and if such distribution is not
taxable as a dividend and no gain or loss is recognized by reason of Section 355
of the IRC or some similar section, then the price per share of the shares
covered by each outstanding option shall be reduced by an amount that bears the
same ratio to the option price per share then in effect as the market value of
the stock distributed in respect of a share of the Common Stock of the Company
immediately following the distribution bears to the aggregate market value at
such time of a share of the Common Stock of the Company and the stock
distributed in respect thereof.
10.4 In the event of a merger or consolidation in which the Company is
not the surviving corporation, or other reorganization, recapitalization, or
exchange which results in substantially all the shares of the capital stock of
the Company being exchanged for or converted into cash or other property, or
upon the dissolution or liquidation of the Company, the Company shall have the
right to terminate this Plan, in which case the options shall, to the extent
exercisable upon the date of such termination, become the right to receive such
cash or property net of the exercise price of the options. If the Company shall
be the surviving corporation in any merger or consolidation, any option issued
hereunder shall pertain, apply and relate to the securities or other property to
which a holder of the number of shares of Common Stock subject to the option
would have been entitled after the merger or consolidation.
10.5 All adjustments pursuant to this Section 10 shall be made by the
Committee, whose determination upon the same shall be final and binding upon the
Option holders; provided, however, that each option granted hereunder that is
intended to be an Incentive Stock Option shall be adjusted so as to continue to
qualify as an Incentive Stock Option. No fractional shares shall be issued, and
any fractional interests resulting from computation pursuant to this Section 10
shall be paid in cash. No adjustment shall be made for (i) the declaration of
cash dividends, (ii) the issuance of Options hereunder or under any of the
Company's other incentive stock or option plans, or (iii) the issuance of rights
to subscribe for additional shares of Common Stock at the Market Value thereof
(or other securities at the fair market value thereof as determined by the
Committee in good faith).
11. LISTING AND REGISTRATION OF SHARES SUBJECT TO OPTIONS
Each option issued hereunder shall be subject to the requirement that
if at any time the Committee shall determine, in its discretion, that the
listing, registration, or qualification of the shares subject to the options
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the granting of such option or the issuance
or purchase of shares thereunder, such option may not be
723/OPTION.PLN
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<PAGE>
exercised in whole or in part unless and until such listing, registration,
qualification, consent, or approval shall have been effected or obtained free of
any conditions not acceptable to the Committee.
12. APPLICATION OF FUNDS
The proceeds received by the Company from the sale of shares pursuant
to options shall be used for general corporate purposes.
13. DISQUALIFYING DISPOSITIONS
If an Optionee disposes of shares of Common Stock acquired upon
exercise of an Incentive Stock Option within two years from the date the Options
is granted or within one year after the issuance of such shares to the Optionee,
the Optionee shall notify the Company of such disposition and provide
information as to the date of disposition, sale price, number of shares disposed
of and any other information relating thereto which the Company may reasonably
request.
14. TERMINATION OF THE PLAN
This Plan may be abandoned or terminated at any time by the Board
except with respect to any Options then outstanding under the Plan. No Option
shall be granted hereunder after 10 years from the effective date of this Plan.
15. AMENDMENT OF THE PLAN
The Board may at any time and from time to time modify and amend the
terms of this Plan in any respect, with the exception of Section 5 of this Plan
which may not be amended more than once every six months, other than to comport
with changes in the IRC, the Employee Retirement Income Security Act, or the
rules thereunder; provided, however, that the Board shall seek stockholder
approval of the amendment to the extent such approval is required by (i) state
or federal law; (ii) Section 16 of the Exchange Act, to the extent that Options
may be granted hereunder to persons who are required to file reports under
Section 16; (iii) the Nasdaq Stock Market rules or regulations or the rules or
regulations of such other exchange upon which the Common Stock might later be
traded; or (iv) the IRC, to the extent that Incentive Stock Options may be
granted hereunder. No modification or amendment of this Plan shall adversely
affect any right acquired by any Option holder under the terms of an Option
award granted before the date of such modification or amendment, without the
consent of the Option holder.
16. EFFECTIVE DATE OF THE PLAN
This Plan became effective on the later of the date of its adoption by
the Board or its approval by the Shareholders.
723/OPTION.PLN
9
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of the 23rd day
of April 1997 by and between Securacom, Incorporated, a corporation organized
and existing under the laws of Delaware (the "Company") and Ronald C. Thomas
(the "Executive").
W I T N E S S E T H
WHEREAS, the Company desires to engage the Executive to serve as
President and Chief Executive Officer of the Company; and
WHEREAS, the Executive desires to be employed by the Company in such
capacity and to assume the duties and responsibilities set forth in this
Agreement;
THEREFORE, in consideration of the premises, and the mutual covenants,
terms and conditions contained herein, the parties hereto agree as follows:
1. Employment. Subject to the terms and conditions set forth in
this Agreement, the Company hereby employs the Executive and the Executive
hereby accepts such employment.
2. Duties and Responsibilities. (a) The Executive shall perform all the
duties and accept all of the responsibilities of the position of President and
Chief Executive Officer of the Company as may be described in the Bylaws of the
Company or assigned to him from time to time by the Board of Directors of the
Company. The Executive shall fulfill such duties and responsibilities
diligently, in good faith and in accordance with applicable laws, and shall have
such power and authority as is necessary and appropriate in order to enable him
to do so.
(b) The Executive shall devote his full time, attention and energies to
the business of the Company and shall use his best efforts to promote the
business interests of the Company. The Executive shall not work either on a
part-time or independent contractor basis for any other business or enterprise
during the term of this Agreement without the prior written consent of the Board
of Directors of the Company.
(c) The Executive's principal place of work shall be the Company's
office in Woodcliff Lake, New Jersey. He shall spend such time at such office
and undertake such business-related travel as is necessary or appropriate to
enable him to perform his duties and responsibilities hereunder.
3. Compensation. (a) In consideration of the services to be
rendered by the Executive hereunder, the Company shall pay to the Executive an
annual salary of $165,000. Salary shall be payable in installments at such
times as the Company
1
<PAGE>
customarily pays its senior management employees, and shall be subject to
withholding as required by law or agreed to by the Executive.
(b) The Executive shall be eligible to receive periodic salary
increases, awards of stock options, and bonuses for each year or portion thereof
during which the Executive is employed hereunder. The amount of salary
increases, stock options and bonuses, if any, shall be determined by the Board
of Directors of the Company in its sole discretion.
4. Expenses. The Company, in accordance with such rules and practices
as it may establish, shall pay or reimburse the Executive for all reasonable and
necessary business expenses incurred in connection with the performance by the
Executive of his duties and responsibilities hereunder. Such expenses shall
include, in accordance with policies established by the Company, travel and
entertainment expenses and reimbursement for mileage when the Executive's
personal automobile is used for business purposes.
5. Benefits. (a) The Executive shall receive the employee
benefits, including health care, life insurance and pension benefits, generally
provided by the Company to senior management employees.
(b) The Executive shall be entitled to paid vacation and sick leave in
accordance with the policies established by the Company generally applicable to
senior management employees.
6. Term and Termination. (a) This Agreement shall be effective
as of the date hereof and shall have a term of five years.
(b) The Company shall have the right to terminate this Agreement at any
time (including following a change of control pursuant to Section 6(d) hereof)
for "Cause" upon written notice to the Executive, and such termination shall be
effective upon delivery of such notice. For purposes of this Agreement, "Cause"
shall mean a material breach of this Agreement by the Executive (other than by
reason of the death or disability of the Executive), including misappropriation
of funds of the Company, willful and deliberate malfeasance, gross negligence,
or any act seriously impeding the Executive's ability to represent the Company.
(c) If this Agreement is terminated for Cause by the Company or is
terminated by the Executive, the Executive shall be entitled to receive any
unpaid salary accrued to the date of termination plus any unpaid expense
reimbursement, reduced by any claim the Company may have against the Executive
for breach of this Agreement or otherwise.
(d) If this Agreement is terminated by the Company for any reason other
than for Cause or the death or disability of the Executive, the Company shall
pay the Executive his
2
<PAGE>
salary at the annual rate in effect at the date of termination through the date
of expiration of the term of this Agreement, plus any bonus or portion thereof
granted by the Board of Directors and earned by the Executive but remaining
unpaid on the date of termination, plus any expense reimbursements due to the
Executive through such date. In the event any termination described in the
preceding sentence occurs within two years following a change in control of the
Company, the Company shall pay to the Executive an additional amount equal to
two times the Executive's salary in effect at the time of such change in
control.
For purposes of this Section 6(d), the term "change in control" shall
mean the occurrence of any of the following events: (i) a change of stock
ownership of the Company of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A promulgated under the Securities and
Exchange Act of 1934, as amended (the "Exchange Act"), and any successor
regulation; (ii) the acquisition of beneficial ownership, directly or
indirectly, by any person (as such term is used in Sections 13(d)(3) and
14(d)(2) of the Exchange Act) other than the Company or a benefit plan sponsored
by the Company, of securities of the Company representing 30% or more of the
combined voting power of the Company's then-outstanding securities; or (iii) a
change within any two-year period of a majority of the members of the Board of
Directors of the Company for any reason, unless the election, or the nomination
for election by the Company's shareholders, of each director was approved by a
vote of at least two-thirds of the directors still in office who were directors
prior to such change. Notwithstanding the foregoing, no change of control shall
be deemed to have occurred by reason of (i) any merger, consolidation, sale or
similar transaction in the event that the Board of Directors approves such
transaction prior to its consummation; (ii) any distribution of shares of the
Company's stock by Special Situation Investment Holdings, Ltd. or Special
Situation Investment Holdings L. P. II to their partners upon dissolution or
otherwise; or (iii) the acquisition of beneficial ownership, either directly or
indirectly, of securities of the Company by KuwAm Corporation or any of its
affiliates.
For purposes of this Section 6(d), termination following a change in
control of the Company shall include (i) a significant reduction of Executive's
duties and responsibilities, (ii) a reduction in annual salary paid to the
Executive of ten percent or more of the highest annual salary previously paid to
the Executive, (iii) a change in the location of Executive's office to a place
that is more than fifty (50) miles from the location of such office on the date
hereof, or (iv) any failure by the Company to obtain the written assumption of
this Agreement by any successor of the Company (such assumption not relieving
the Company of any liability hereunder).
It is the intention of the Company and the Executive that any amounts
payable by the Company to the Executive pursuant to this Section 6(d) shall not
constitute "excess parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended, and any regulations promulgated
thereunder. In the event that the
3
<PAGE>
Company's independent accountants determine that payments hereunder would
constitute excess parachute payments, such payments shall be reduced to the
maximum amount that such accountants determine would not result in the payment
of excess parachute payments.
(e) Death or Disability of Executive. If the Executive dies during the
term of this Agreement, the Company shall pay to the Executive's estate any
unpaid salary, any bonus or portion thereof granted by the Board of Directors
and earned by the Executive but remaining unpaid, and any unpaid expense
reimbursement due hereunder, in each case as of the date of the Executive's
death.
In the event that the Executive becomes physically or mentally disabled
during the term of this Agreement, the Executive shall receive his salary
through the date on which he is first eligible to receive payment of disability
benefits in lieu of salary under the Company's employee benefit plans as then in
effect.
7. Non-competition. During the term of this Agreement and for a period
of one year thereafter, the Executive shall not, without the prior written
consent of the Board of Directors of the Company, directly or indirectly, own,
manage, operate, finance, join or control, or participate in the ownership,
management, operation, financing or control of, or be or become an officer,
director, employee, partner, principal, agent, representative, or consultant of,
or use or permit his name to be used in connection with, any business or
enterprise offering products or services that compete with the products and
services offered by the Company in the markets served by the Company.
Notwithstanding the foregoing, this Section 7 shall not be deemed to prohibit
the ownership by the Executive of not more than one percent (1%) of the capital
stock of any corporation whose capital stock is publicly traded. If the
provisions of this Section 7 should be found by a court of competent
jurisdiction to exceed the time, geographic, product or other limitations
permitted by applicable law, then such provisions shall be deemed reformed to
the maximum time, geographic, product or other limitations permitted by such
law.
8. Confidentiality. The Executive shall not, during the period of his
employment hereunder or at any time thereafter, unless specifically authorized
by a resolution of the Board of Directors of the Company, use or disclose to any
person or entity, any confidential or secret information with respect to the
business or affairs of the Company, or any of its affiliates, including any
information concerning customers or prospective customers of the Company or its
affiliates, unless such information becomes generally available to the public
(and only after it becomes so available). Executive agrees that all confidential
and other information, data, and products, including software and technical
systems, and other property prepared, compiled or developed by Executive while
employed by the Company hereunder shall be the property of the Company. All
files and records relating to the Company in Executive's possession shall be the
property of the Company and shall be returned to the Company upon termination of
employment hereunder.
4
<PAGE>
9. Equitable Relief. Executive acknowledges and agrees that the
restrictions contained in Sections 7 and 8 of this Agreement are reasonable and
necessary to protect the legitimate business interests of the Company. Executive
further acknowledges and agrees that any breach of any provision of Section 7 or
8 hereof will cause immediate and irreparable injury to the Company, and that
the Company shall be entitled to injunctive relief to prevent any actual or
threatened such breach. This Section 9 shall not be construed in such a manner
as to prevent the Company from pursuing any other remedies in law or equity to
which it may be entitled as the result of any such actual or threatened breach.
10. Notices. All notices, consents, approvals, requests, instructions
and other communications required by or related to this Agreement shall be in
writing and shall be delivered personally or shall be sent by registered or
certified mail, return receipt requested, or by telex or facsimile transmission,
to the receiving party at the following address and communication numbers:
If to the Company: Securacom, Incorporated
50 Tice Boulevard
Woodcliff Lake, New Jersey 07675
Tel: (201) 930-9500
Fax: (201) 930-9007
If to the Executive: Ronald C. Thomas
23 Carey Arthur Drive
Wayne, New Jersey 07470
Tel: (201) 616-2094
Fax:
11. Assignment. Neither party may assign its rights or
obligations hereunder without the prior written consent of the other party
hereto.
12. Miscellaneous. (a) This Agreement sets forth the full and
complete understanding between the parties hereto with respect to the subject
matter hereof, and supersedes any prior agreement, oral or written, between the
parties hereto with respect to the subject matter hereof.
(b) This Agreement may be amended or supplemented at any time only by
written instrument executed by both the Company and the Executive.
(c) Each term and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by applicable law. Should any term
or provision of this Agreement be held invalid, illegal or unenforceable, the
remainder of this Agreement, including the
5
<PAGE>
application of such term to the extent not invalid, illegal or unenforceable,
shall not be affected thereby, and this Agreement shall be interpreted as if
such term or provision, to the extent invalid, illegal or unenforceable, did not
exist.
(d) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of Delaware.
(e) In the event of any litigation between the parties in connection
with this Agreement, the unsuccessful party to such litigation shall pay to the
successful party all costs and expenses, including reasonable attorneys' fees,
which costs and expenses shall be included as part of any judgment rendered in
such litigation in addition to the other relief to which the successful party
may be entitled.
(f) No waiver of any provision of this Agreement by either party hereto
shall be effective unless executed in writing or constitute a waiver of any
other provision hereof.
(g) This Agreement may be executed and delivered, including execution
and delivery by facsimile transmission, in counterparts, each of which shall be
deemed an original and both of which together shall constitute one and the same
instrument.
(h) This Agreement shall inure to the benefit of and be binding upon
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees of the parties hereto.
IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement on the dates set forth opposite their respective signatures below.
Securacom, Incorporated
May 28, 1997 By: /s/ WIRT D. WALKER, III
- ----------------- -----------------------------
Date Wirt D. Walker, III
Chairman
May 28, 1997 /s/ RONALD C. THOMAS
- ------------------ ----------------------------
Date Ronald C. Thomas
6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of the 23rd day
of April 1997 by and between Securacom, Incorporated, a corporation organized
and existing under the laws of Delaware (the "Company") and Larry Weaver (the
"Executive").
W I T N E S S E T H
WHEREAS, the Company desires to engage the Executive to serve as Senior
Vice President, Chief Operating Officer and Chief Financial Officer; and
WHEREAS, the Executive desires to be employed by the Company in such
capacity and to assume the duties and responsibilities set forth in this
Agreement;
THEREFORE, in consideration of the premises, and the mutual covenants,
terms and conditions contained herein, the parties hereto agree as follows:
1. Employment. Subject to the terms and conditions set forth in
this Agreement, the Company hereby employs the Executive and the Executive
hereby accepts such employment.
2. Duties and Responsibilities. (a) The Executive shall perform all the
duties and accept all of the responsibilities of the position of Senior Vice
President, Chief Operating Officer and Chief Financial Officer of the Company as
may be described in the Bylaws of the Company or assigned to him from time to
time by the Board of Directors of the Company. The Executive shall fulfill such
duties and responsibilities diligently, in good faith and in accordance with
applicable laws, and shall have such power and authority as is necessary and
appropriate in order to enable him to do so.
(b) The Executive shall devote his full time, attention and energies to
the business of the Company and shall use his best efforts to promote the
business interests of the Company. The Executive shall not work either on a
part-time or independent contractor basis for any other business or enterprise
during the term of this Agreement without the prior written consent of the Board
of Directors of the Company.
(c) The Executive's principal place of work shall be the Company's
office in Woodcliff Lake, New Jersey. He shall spend such time at such office
and undertake such business-related travel as is necessary or appropriate to
enable him to perform his duties and responsibilities hereunder.
3. Compensation. (a) In consideration of the services to be
rendered by the Executive hereunder, the Company shall pay to the Executive an
annual salary of $125,000. Salary shall be payable in installments at such
times as the Company
1
<PAGE>
customarily pays its senior management employees, and shall be subject to
withholding as required by law or agreed to by the Executive.
(b) The Executive shall be eligible to receive periodic salary
increases, awards of stock options, and bonuses for each year or portion thereof
during which the Executive is employed hereunder. The amount of salary
increases, stock options and bonuses, if any, shall be determined by the Board
of Directors of the Company in its sole discretion.
4. Expenses. The Company, in accordance with such rules and practices
as it may establish, shall pay or reimburse the Executive for all reasonable and
necessary business expenses incurred in connection with the performance by the
Executive of his duties and responsibilities hereunder. Such expenses shall
include, in accordance with policies established by the Company, travel and
entertainment expenses and reimbursement for mileage when the Executive's
personal automobile is used for business purposes.
5. Benefits. (a) The Executive shall receive the employee
benefits, including health care, life insurance and pension benefits, generally
provided by the Company to senior management employees.
(b) The Executive shall be entitled to paid vacation and sick leave in
accordance with the policies established by the Company generally applicable to
senior management employees.
6. Term and Termination. (a) This Agreement shall be effective
as of the date hereof and shall have a term of three years.
(b) The Company shall have the right to terminate this Agreement at any
time (including following a change of control pursuant to Section 6(d) hereof)
for "Cause" upon written notice to the Executive, and such termination shall be
effective upon delivery of such notice. For purposes of this Agreement, "Cause"
shall mean a material breach of this Agreement by the Executive (other than by
reason of the death or disability of the Executive), including misappropriation
of funds of the Company, willful and deliberate malfeasance, gross negligence,
or any act seriously impeding the Executive's ability to represent the Company.
(c) If this Agreement is terminated for Cause by the Company or is
terminated by the Executive, the Executive shall be entitled to receive any
unpaid salary accrued to the date of termination plus any unpaid expense
reimbursement, reduced by any claim the Company may have against the Executive
for breach of this Agreement or otherwise.
(d) If this Agreement is terminated by the Company for any reason other
than for Cause or the death or disability of the Executive, the Company shall
pay the Executive his
2
<PAGE>
salary at the annual rate in effect at the date of termination through the date
of expiration of the term of this Agreement, plus any bonus or portion thereof
granted by the Board of Directors and earned by the Executive but remaining
unpaid on the date of termination, plus any expense reimbursements due to the
Executive through such date. In the event any termination described in the
preceding sentence occurs within two years following a change in control of the
Company, the Company shall pay to the Executive an additional amount equal to
two times the Executive's salary in effect at the time of such change in
control.
For purposes of this Section 6(d), the term "change in control" shall
mean the occurrence of any of the following events: (i) a change of stock
ownership of the Company of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A promulgated under the Securities and
Exchange Act of 1934, as amended (the "Exchange Act"), and any successor
regulation; (ii) the acquisition of beneficial ownership, directly or
indirectly, by any person (as such term is used in Sections 13(d)(3) and
14(d)(2) of the Exchange Act) other than the Company or a benefit plan sponsored
by the Company, of securities of the Company representing 30% or more of the
combined voting power of the Company's then-outstanding securities; or (iii) a
change within any two-year period of a majority of the members of the Board of
Directors of the Company for any reason, unless the election, or the nomination
for election by the Company's shareholders, of each director was approved by a
vote of at least two-thirds of the directors still in office who were directors
prior to such change. Notwithstanding the foregoing, no change of control shall
be deemed to have occurred by reason of (i) any merger, consolidation, sale or
similar transaction in the event that the Board of Directors approves such
transaction prior to its consummation; (ii) any distribution of shares of the
Company's stock by Special Situation Investment Holdings, Ltd. or Special
Situation Investment Holdings L. P. II to their partners upon dissolution or
otherwise; or (iii) the acquisition of beneficial ownership, either directly or
indirectly, of securities of the Company by KuwAm Corporation or any of its
affiliates.
For purposes of this Section 6(d), termination following a change in
control of the Company shall include (i) a significant reduction of Executive's
duties and responsibilities, (ii) a reduction in annual salary paid to the
Executive of ten percent or more of the highest annual salary previously paid to
the Executive, (iii) a change in the location of Executive's office to a place
that is more than fifty (50) miles from the location of such office on the date
hereof, or (iv) any failure by the Company to obtain the written assumption of
this Agreement by any successor of the Company (such assumption not relieving
the Company of any liability hereunder).
It is the intention of the Company and the Executive that any amounts
payable by the Company to the Executive pursuant to this Section 6(d) shall not
constitute "excess parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended, and any regulations promulgated
thereunder. In the event that the
3
<PAGE>
Company's independent accountants determine that payments hereunder would
constitute excess parachute payments, such payments shall be reduced to the
maximum amount that such accountants determine would not result in the payment
of excess parachute payments.
(e) Death or Disability of Executive. If the Executive dies during the
term of this Agreement, the Company shall pay to the Executive's estate any
unpaid salary, any bonus or portion thereof granted by the Board of Directors
and earned by the Executive but remaining unpaid, and any unpaid expense
reimbursement due hereunder, in each case as of the date of the Executive's
death.
In the event that the Executive becomes physically or mentally disabled
during the term of this Agreement, the Executive shall receive his salary
through the date on which he is first eligible to receive payment of disability
benefits in lieu of salary under the Company's employee benefit plans as then in
effect.
7. Non-competition. During the term of this Agreement and for a period
of one year thereafter, the Executive shall not, without the prior written
consent of the Board of Directors of the Company, directly or indirectly, own,
manage, operate, finance, join or control, or participate in the ownership,
management, operation, financing or control of, or be or become an officer,
director, employee, partner, principal, agent, representative, or consultant of,
or use or permit his name to be used in connection with, any business or
enterprise offering products or services that compete with the products and
services offered by the Company in the markets served by the Company.
Notwithstanding the foregoing, this Section 7 shall not be deemed to prohibit
the ownership by the Executive of not more than one percent (1%) of the capital
stock of any corporation whose capital stock is publicly traded. If the
provisions of this Section 7 should be found by a court of competent
jurisdiction to exceed the time, geographic, product or other limitations
permitted by applicable law, then such provisions shall be deemed reformed to
the maximum time, geographic, product or other limitations permitted by such
law.
8. Confidentiality. The Executive shall not, during the period of his
employment hereunder or at any time thereafter, unless specifically authorized
by a resolution of the Board of Directors of the Company, use or disclose to any
person or entity, any confidential or secret information with respect to the
business or affairs of the Company, or any of its affiliates, including any
information concerning customers or prospective customers of the Company or its
affiliates, unless such information becomes generally available to the public
(and only after it becomes so available). Executive agrees that all confidential
and other information, data, and products, including software and technical
systems, and other property prepared, compiled or developed by Executive while
employed by the Company hereunder shall be the property of the Company. All
files and records relating to the Company in Executive's possession shall be the
property of the Company and shall be returned to the Company upon termination of
employment hereunder.
4
<PAGE>
9. Equitable Relief. Executive acknowledges and agrees that the
restrictions contained in Sections 7 and 8 of this Agreement are reasonable and
necessary to protect the legitimate business interests of the Company. Executive
further acknowledges and agrees that any breach of any provision of Section 7 or
8 hereof will cause immediate and irreparable injury to the Company, and that
the Company shall be entitled to injunctive relief to prevent any actual or
threatened such breach. This Section 9 shall not be construed in such a manner
as to prevent the Company from pursuing any other remedies in law or equity to
which it may be entitled as the result of any such actual or threatened breach.
10. Notices. All notices, consents, approvals, requests, instructions
and other communications required by or related to this Agreement shall be in
writing and shall be delivered personally or shall be sent by registered or
certified mail, return receipt requested, or by telex or facsimile transmission,
to the receiving party at the following address and communication numbers:
If to the Company: Securacom, Incorporated
50 Tice Boulevard
Woodcliff Lake, New Jersey 07675
Tel: (201) 930-9500
Fax: (201) 930-9007
If to the Executive: Larry Weaver
25 Pine Road
Medford, New Jersey 08055
Tel: (609) 985-5253
Fax:
11. Assignment. Neither party may assign its rights or
obligations hereunder without the prior written consent of the other party
hereto.
12. Miscellaneous. (a) This Agreement sets forth the full and
complete understanding between the parties hereto with respect to the subject
matter hereof, and supersedes any prior agreement, oral or written, between the
parties hereto with respect to the subject matter hereof.
(b) This Agreement may be amended or supplemented at any time only by
written instrument executed by both the Company and the Executive.
(c) Each term and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by applicable law. Should any term
or provision of this Agreement be held invalid, illegal or unenforceable, the
remainder of this Agreement, including the
5
<PAGE>
application of such term to the extent not invalid, illegal or unenforceable,
shall not be affected thereby, and this Agreement shall be interpreted as if
such term or provision, to the extent invalid, illegal or unenforceable, did not
exist.
(d) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of Delaware.
(e) In the event of any litigation between the parties in connection
with this Agreement, the unsuccessful party to such litigation shall pay to the
successful party all costs and expenses, including reasonable attorneys' fees,
which costs and expenses shall be included as part of any judgment rendered in
such litigation in addition to the other relief to which the successful party
may be entitled.
(f) No waiver of any provision of this Agreement by either party hereto
shall be effective unless executed in writing or constitute a waiver of any
other provision hereof.
(g) This Agreement may be executed and delivered, including execution
and delivery by facsimile transmission, in counterparts, each of which shall be
deemed an original and both of which together shall constitute one and the same
instrument.
(h) This Agreement shall inure to the benefit of and be binding upon
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees of the parties hereto.
IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement on the dates set forth opposite their respective signatures below.
Securacom, Incorporated
May 28, 1997 By: /s/ WIRT D. WALKER, III
- ------------------- -----------------------------
Date Wirt D. Walker, III
Chairman
May 28, 1997 /s/ LARRY WEAVER
Date Larry Weaver
6
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT is made and entered into as of the 23rd day
of April 1997 by and between Securacom, Incorporated, a corporation organized
and existing under the laws of Delaware (the "Company") and Wirt D. Walker, III
(the "Consultant").
W I T N E S S E T H
WHEREAS, the Company desires to engage the Consultant to assume the
responsibilities set forth in this Agreement; and
WHEREAS, the Consultant desires to assume such responsibilities;
THEREFORE, in consideration of the premises, and the mutual covenants,
terms and conditions contained herein, the parties hereto agree as follows:
1. Engagement. Subject to the terms and conditions set forth in
this Agreement, the Company hereby engages the Consultant and the Consultant
hereby accepts such engagement.
2. Responsibilities. (a) The Consultant shall provide the Company with
advice and assistance with respect to corporate development, new business
development, corporate finance, operational issues, merger and acquisition
strategy, marketing and positioning in the marketplace, strategic partnership
arrangements and other matters as requested by the Board of Directors of the
Company. The Consultant shall fulfill his responsibilities diligently and in
good faith.
(b) The Consultant shall devote such time, attention and energies to
the business of the Company as is required in order for him to fulfill his
responsibilities as set forth in Section 2(a), and shall use his best efforts to
promote the business interests of the Company.
3. Compensation. (a) In consideration of the services to be rendered by
the Consultant hereunder, the Company shall pay Consultant $140,000 per year
(such compensation, as it may be adjusted pursuant to Section 3(b), being
hereinafter referred to as "Base Compensation"). Base Compensation shall be paid
in installments at such times as the Company customarily pays its senior
management employees, and shall be subject to withholding as required by law or
agreed to by the Consultant.
(b) The Consultant shall be eligible to receive periodic increases in
Base Compensation, awards of stock options, and bonuses for each year or portion
thereof
1
<PAGE>
during which the Consultant is engaged hereunder. The amount of such increases
in Base Compensation, stock options and bonuses, if any, shall be determined by
the Board of Directors of the Company in its sole discretion.
4. Expenses. The Company, in accordance with such rules and practices
as it may establish, shall pay or reimburse the Consultant for all reasonable
and necessary business expenses incurred in connection with the performance by
the Consultant of his responsibilities hereunder. Such expenses shall include,
in accordance with policies established by the Company, travel and entertainment
expenses and reimbursement for mileage when the Consultant's personal automobile
is used for business purposes.
5. Term and Termination. (a) This Agreement shall be effective
as of the date hereof and shall have a term of five years.
(b) The Company shall have the right to terminate this Agreement at any
time (including following a change of control pursuant to Section 5(d) hereof)
for "Cause" upon written notice to the Consultant, and such termination shall be
effective upon delivery of such notice. For purposes of this Agreement, "Cause"
shall mean a material breach of this Agreement by the Consultant (other than by
reason of the death or disability of the Consultant), including misappropriation
of funds of the Company, willful and deliberate malfeasance, gross negligence,
or any act seriously impeding the Consultant's ability to represent the Company.
(c) If this Agreement is terminated for Cause by the Company or is
terminated by the Consultant, the Consultant shall be entitled to receive any
unpaid Base Compensation accrued to the date of termination plus any unpaid
expense reimbursement, reduced by any claim the Company may have against the
Consultant for breach of this Agreement or otherwise.
(d) If this Agreement is terminated by the Company for any reason other
than for Cause or the death or disability of the Consultant, the Company shall
compensate the Consultant at the annual Base Compensation rate in effect on the
date of termination through the date of expiration of the term of this
Agreement, and pay Consultant any bonus or portion thereof granted by the Board
of Directors and earned by the Consultant but remaining unpaid on the date of
termination, plus any expense reimbursements due to the Consultant through such
date. In the event any termination described in the preceding sentence occurs
within two years following a change in control of the Company, the Company shall
pay to the Consultant an additional amount equal to two times the Consultant's
annual Base Compensation rate in effect at the time of such change in control.
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For purposes of this Section 6(d), the term "change in control" shall
mean the occurrence of any of the following events: (i) a change of stock
ownership of the Company of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A promulgated under the Securities and
Exchange Act of 1934, as amended (the "Exchange Act"), and any successor
regulation; (ii) the acquisition of beneficial ownership, directly or
indirectly, by any person (as such term is used in Sections 13(d)(3) and
14(d)(2) of the Exchange Act) other than the Company or a benefit plan sponsored
by the Company, of securities of the Company representing 30% or more of the
combined voting power of the Company's then-outstanding securities; or (iii) a
change within any two-year period of a majority of the members of the Board of
Directors of the Company for any reason, unless the election, or the nomination
for election by the Company's shareholders, of each director was approved by a
vote of at least two-thirds of the directors still in office who were directors
prior to such change. Notwithstanding the foregoing, no change of control shall
be deemed to have occurred by reason of (i) any merger, consolidation, sale or
similar transaction in the event that the Board of Directors approves such
transaction prior to its consummation; (ii) any distribution of shares of the
Company's stock by Special Situation Investment Holdings, Ltd. or Special
Situation Investment Holdings, L.P. II to their partners upon dissolution or
otherwise; or (iii) the acquisition of beneficial ownership, either directly or
indirectly, of securities of the Company by KuwAm Corporation or any of its
affiliates.
For purposes of this Section 6(d), termination following a change in
control of the Company shall include (i) a significant reduction of Consultant's
responsibilities, (ii) a reduction in the annual rate of Base Compensation paid
to the Consultant of ten percent or more of the highest annual rate of Base
Compensation previously paid to the Consultant, or (iii) any failure by the
Company to obtain the written assumption of this Agreement by any successor of
the Company (such assumption not relieving the Company of any liability
hereunder).
It is the intention of the Company and the Consultant that any amounts
payable by the Company to the Consultant pursuant to this Section 6(d) shall not
constitute "excess parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended, and any regulations promulgated
thereunder. In the event that the Company's independent accountants determine
that payments hereunder would constitute excess parachute payments, such
payments shall be reduced to the maximum amount that such accountants determine
would not result in the payment of excess parachute payments.
(e) Death or Disability of Consultant. If the Consultant dies
during the term of this Agreement, the Company shall pay to the Consultant's
estate any unpaid Base
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Compensation, any bonus or portion thereof granted by the Board of Directors and
earned by the Consultant but remaining unpaid, and any unpaid expense
reimbursement due hereunder, in each case as of the date of the Consultant's
death.
In the event that the Consultant becomes physically or mentally
disabled during the term of this Agreement, the Consultant shall be entitled to
receive any unpaid Base Compensation accrued through the date that this
Agreement is terminated by either party as the result of such disability and any
bonus or portion thereof granted by the Board of Directors and earned by the
Consultant but remaining unpaid on the date of termination plus any unpaid
expense reimbursement.
7. Non-competition. During the term of this Agreement and for a period
of one year thereafter, the Consultant shall not, without the prior written
consent of the Board of Directors of the Company, directly or indirectly, own,
manage, operate, finance, join or control, or participate in the ownership,
management, operation, financing or control of, or be or become an officer,
director, employee, partner, principal, agent, representative, or consultant of,
or use or permit his name to be used in connection with, any business or
enterprise offering products or services that compete with the products and
services offered by the Company in the markets served by the Company.
Notwithstanding the foregoing, this Section 7 shall not be deemed to prohibit
the ownership by the Consultant of not more than one percent (1%) of the capital
stock of any corporation whose capital stock is publicly traded. If the
provisions of this Section 7 should be found by a court of competent
jurisdiction to exceed the time, geographic, product or other limitations
permitted by applicable law, then such provisions shall be deemed reformed to
the maximum time, geographic, product or other limitations permitted by such
law.
8. Confidentiality. The Consultant shall not, during the term of his
engagement hereunder or at any time thereafter, unless specifically authorized
by a resolution of the Board of Directors of the Company, use or disclose to any
person or entity, any confidential or secret information with respect to the
business or affairs of the Company, or any of its affiliates, including any
information concerning customers or prospective customers of the Company or its
affiliates, unless such information becomes generally available to the public
(and only after it becomes so available). Consultant agrees that all
confidential and other information, data, and products, including software and
technical systems, and other property prepared, compiled or developed by
Consultant while retained by the Company hereunder shall be the property of the
Company. All files and records relating to the Company in Consultant's
possession shall be the property of the Company and shall be returned to the
Company upon termination of Consultant's engagement hereunder.
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9. Equitable Relief. Consultant acknowledges and agrees that the
restrictions contained in Sections 7 and 8 of this Agreement are reasonable and
necessary to protect the legitimate business interests of the Company.
Consultant further acknowledges and agrees that any breach of any provision of
Section 7 or 8 hereof will cause immediate and irreparable injury to the
Company, and that the Company shall be entitled to injunctive relief to prevent
any actual or threatened such breach. This Section 9 shall not be construed in
such a manner as to prevent the Company from pursuing any other remedies in law
or equity to which it may be entitled as the result of any such actual or
threatened breach.
10. Notices. All notices, consents, approvals, requests, instructions
and other communications required by or related to this Agreement shall be in
writing and shall be delivered personally or shall be sent by registered or
certified mail, return receipt requested, or by telex or facsimile transmission,
to the receiving party at the following address and communication numbers:
If to the Company: Securacom, Incorporated
50 Tice Boulevard
Woodcliff Lake, New Jersey 07675
Tel: (201) 930-9500
Fax: (201) 930-9007
If to the Consultant: Wirt D. Walker, III
6308 Long Meadow Road
McLean, Virginia 22101
Tel: (703) 356-5052
Fax:
11. Assignment. Neither party may assign its rights or
obligations hereunder without the prior written consent of the other party
hereto.
12. Miscellaneous. (a) This Agreement sets forth the full and
complete understanding between the parties hereto with respect to the subject
matter hereof, and supersedes any prior agreement, oral or written, between the
parties hereto with respect to the subject matter hereof.
(b) This Agreement may be amended or supplemented at any time only by
written instrument executed by both the Company and the Consultant.
(c) Each term and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by applicable law. Should any term
or provision of this Agreement be held invalid, illegal or unenforceable, the
remainder of this Agreement,
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including the application of such term to the extent not invalid, illegal or
unenforceable, shall not be affected thereby, and this Agreement shall be
interpreted as if such term or provision, to the extent invalid, illegal or
unenforceable, did not exist.
(d) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of Delaware.
(e) In the event of any litigation between the parties in connection
with this Agreement, the unsuccessful party to such litigation shall pay to the
successful party all costs and expenses, including reasonable attorneys' fees,
which costs and expenses shall be included as part of any judgment rendered in
such litigation in addition to the other relief to which the successful party
may be entitled.
(f) No waiver of any provision of this Agreement by either party hereto
shall be effective unless executed in writing or constitute a waiver of any
other provision hereof.
(g) This Agreement may be executed and delivered, including execution
and delivery by facsimile transmission, in counterparts, each of which shall be
deemed an original and both of which together shall constitute one and the same
instrument.
(h) This Agreement shall inure to the benefit of and be binding upon
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees of the parties hereto.
IN WITNESS WHEREOF, the Company and the Consultant have executed this
Agreement on the dates set forth opposite their respective signatures below.
Securacom, Incorporated
May 31, 1997 By: /s/ RONALD C. THOMAS
- ----------------- ------------------------
Date Ronald C. Thomas
President
May 30, 1997 /s/ WIRT D. WALKER III
Date Wirt D. Walker, III
6
SECURACOM, INCORPORATED
COMMON STOCK PURCHASE AGREEMENT
Securacom, Incorporated
a Delaware Corporation
c/o KuwAm Corporation
2600 Virginia Avenue, N.W., Suite 900
Washington, D.C. 20037
Gentlemen:
Securacom, Incorporated (the "Company") hereby agrees to issue and sell
to the undersigned (the "Investor") and the undersigned hereby agrees to
purchase shares of the Company's common stock, $.01 par value per share (the
"Shares'), at $ per share for a total purchase price of $
.
The Investor shall pay for the Shares by wiring funds in accordance
with the wire transfer instructions provided below.
The Investor acknowledges that he has received and read the Company's
Business Plan dated January 31, 1994 (the "Business Plan") and Common Stock
Purchase Agreement dated January 31, 1994 (the "Agreement") and that he has been
provided sufficient information regarding the management and operation of the
Company pursuant to the Business Plan.
SECTION 1
Representations and Warranties of the Company
The Company hereby represents and warrants to the Investor as follows:
1.1 Organization and Standing The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with its principal place of business at 50 Tice Boulevard, Woodcliff
Lake, New Jersey 07675. The Company has the requisite corporate power to own and
operate its properties and assets, and to carry on its business as presently
conducted and as proposed to be conducted. The Company is qualified to do
business as a foreign corporation in every jurisdiction where the failure to so
qualify would have a material adverse effect on the Company's business.
1.2 Corporate Power. The Company has or, on or before the Closing Date,
will have all requisite legal and corporate power to execute and deliver this
Agreement, to issue and sell the Shares to the Investor hereunder and to carry
out and perform its obligations under the terms of this Agreement.
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1.3 Authorization. The Company has or, on or before the Closing Date,
will have the right and power, and has taken all necessary corporate action, to
authorize it to enter into, execute, deliver and perform this Agreement. This
Agreement has been duly executed and delivered by the duly authorized officers
of the Company and constitutes a legal, valid and binding obligation of the
Company to the Investor, enforceable in accordance with its terms, subject to
laws of general application relating to bankruptcy, insolvency and the relief of
debtors, and rules of law governing specific performance, injunctive relief or
other equitable remedies.
1.4 Capitalization. The authorized capital stock of the Company
consists of:
4,000,000 shares of Common Stock, $.01 par value, of which 3,278,889
shares are issued and outstanding.
1.5 Compliance with Other Instruments. The Company is not in violation
of any term of its Articles of Incorporation or Bylaws, or in any material
respect of any term or provision of any material mortgage, indenture, contract,
agreement, instrument, judgment or decree, and to the best of any officer of the
Company's knowledge is not in violation of any order, statute, rule or
regulation applicable to the Company the violation of which could have a
material adverse effect on the Company's business.
1.6 Litigation, etc. There are no actions, suits, proceedings or
investigations pending or threatened against the Company or its properties
before any court or governmental agency (nor, to the best of any officer of the
Company's knowledge, is there any threat thereof), which, either individually or
in the aggregate, might result in any material adverse change in the business,
prospects, financial condition or equity ownership of the Company or any of its
properties or assets, or in any material impairment of the right or ability of
the Company to carry on its business as now conducted or as proposed to be
conducted, or in any material liability on the part of the Company, and none of
which questions the validity of this Agreement or any action taken or to be
taken in connection herewith. The Company is not a party or subject to any writ,
order, decree or judgment and has no plans to initiate any legal action.
1.7 Material Contracts. All contracts, agreements, leases, licenses,
and other commitments between or among the Company and any other parties,
whether formal or informal, written or verbal, have been disclosed to the
Investor.
SECTION 2
Representations and Warranties of the Investor
The undersigned hereby represents and warrants to the Company as
follows:
2.1 Experience. The Investor is an accredited investor (i) within the
meaning of Regulation D promulgated under the Securities Act and (ii) is
experienced in evaluating and investing in recently organized companies such as
the Company, is able to fend for itself or himself in the transactions
contemplated by this Agreement, has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of the
Investor's investment and has the ability to bear the economic risks of such
Investor's investment hereunder.
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2.2 Investment. The Investor is acquiring the Shares for investment in
such Investor's own account, not as a nominee or agent, and not with a view to,
or for resale in connection with, any distribution thereof. Such Investor
understands that the Shares have not been registered under the Securities Act of
1933 by reason of a specific exemption from the registration provisions of the
Securities Act that depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of such Investor's representations as
expressed herein. The Investor understands that the basis for such exemption may
not be present if, notwithstanding such representations, the Investor has in
mind merely acquiring the Shares for a fixed or determinable period in the
future, or for a market rise, or for sale if the market does not rise; the
Investor has no such intention. The principal place of business or residence of
the Investor is set forth below.
2.3 Rule 144. The Investor acknowledges that the Shares must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. The Investor is aware of the
provisions of Rule 144 promulgated under the Securities Act that permit limited
resale of shares purchased in a private placement subject to the satisfaction of
certain conditions, including, among other things, the resale occurring not less
than two years after a party has purchased and paid for the security to be sold,
the sale being effected through a "broker's transaction" or in transactions
directly with a "market maker" (as provided by Rule 144(f)) and the number of
shares being sold during any three-month period not exceeding specified
limitations.
2.4 No Public Market. The Investor understands that no public market
now exists for any of the securities issued by the Company and that the Company
has made no assurances that a public market will ever exist for the Shares.
2.5 Access to Data. The Investor has carefully reviewed the Business
Plan and all other material and information relevant to the Company provided to
such Investor, and has made such independent investigations as such Investor has
deemed necessary, including consultation with such Investor's own advisors, to
determine the suitability of an investment in the Company and the relationship
of such an investment to such Investor's overall investment program and
financial and tax position. The Investor has received all of the information
such Investor believes required to make an informed decision regarding this
investment. Any questions raised by the Investor (or such Investor's
representatives) concerning the transaction have been answered to the
satisfaction of the Investor (and such Investor's representatives). The
Investor's decision to purchase the Shares is based on such Investor's own
evaluation of the risks and merits of the purchase and the Company's proposed
business activities.
2.6 Organization and Standing. If the Investor is a corporation,
partnership or other entity, it is a limited partnership or corporation duly
organized and existing under, and by virtue of, the laws of the jurisdiction of
its organization and is in good standing under such laws. It has requisite power
to own and operate its properties and assets, and to carry on its business as
presently conducted and as proposed to be conducted. It is qualified to do
business in every jurisdiction where the failure to so qualify would have a
material adverse effect on its business.
2.7 Power. The Investor will have, on the Closing Date, all requisite
legal power to execute and deliver this Agreement, purchase the Shares and to
carry out and perform such Investor's obligations under this Agreement.
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2.8 Authorization. All action on the part of the Investor, its
directors, shareholders, partners or other principals (if applicable) necessary
for the authorization, execution, delivery and performance under this
Subscription Agreement by such Investor, the purchase of the Shares, and the
performance of such Investor's obligations has been taken or will be taken prior
to the Closing Date.
2.9 Compliance with Other Instruments. etc. Such Investor is not in
violation of any term of its constituent documents (if such Investor is a
corporation, partnership or other entity), or in any material respect of any
term or provision of any material mortgage, indenture, contract, agreement,
instrument, judgment or decree, and to the best of such Investor's knowledge is
not in violation of any order, statute, rule or regulation applicable to such
Investor the violation of which could have a material adverse effect on such
Investor's business or financial condition.
2.10 Litigation, etc. There are no actions, suits, proceedings or
investigations pending or threatened against such Investor or such Investor's
properties before any court or governmental agency (nor, to the best of such
Investor's knowledge, is there any threat thereof), which, either individually
or in the aggregate, might result in any material adverse change in such
Investor's business or financial condition or any of such Investor's properties
or assets, or in any material impairment of such Investor's right or ability to
carry on such Investor's business as now conducted or as proposed to be
conducted, or in any material liability on the part of such Investor, and none
of which questions the validity of this Agreement or any action taken or to be
taken in connection.
SECTION 3
Restrictions on Transferability to Securities;
Compliance with Securities Act
3.1 Restrictions on Transferability. The Shares are restricted and
shall not be sold, transferred, pledged or otherwise disposed of unless all the
terms and conditions of this Agreement and the provisions of the Securities Act
of 1933, as amended (the "Securities Act") have been strictly complied with. The
Shares have not been registered under the Securities Act and the Investor agrees
not to sell, transfer or otherwise dispose of any of the Shares in a transaction
which is not registered under the Securities Act or exempt from such
registration, and prior to any such sale, transfer or disposition, the Investor
must provide the Company with an opinion of counsel, reasonably satisfactory to
the Company that the proposed sale, transfer or disposition will not violate any
applicable Federal or state securities laws.
3.2 Certain Definitions. As used in this Section 3, the following
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Holders" as used in this Section 3 shall mean and include the Investor
and any person holding Registrable Securities to whom the registration rights
granted hereunder are transferred in accordance with the provisions of Section
3.8.
"Registrable Securities" means (i) the Shares and (ii) any Common Stock
of the Company issued or issuable or other securities issued or issuable with
respect to the Shares pursuant to any stock split,
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stock dividend, recapitalization, or similar event; provided, however, that
shares of Common Stock shall only be treated as Registrable Securities if and so
long as they have not been (A) sold to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction, or (B)
sold in a transaction exempt from the registration and delivery requirements of
the Securities Act under Section 3(1) thereof so that all transfer restrictions
and restrictive legends with respect thereto are removed upon the consummation
of such sale.
The terms "register", "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by the Company
in complying with Sections 3.4 and 3.5 hereof, including, without limitation,
all registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses,
and the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the Company
which shall be paid in any event by the Company).
"Restricted Securities" shall mean the securities of the Company
required to bear the legend set forth in Section 3.3 hereof (or any similar
legend).
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holders and all fees and disbursements of counsel for any Holder.
3.3 Restrictive Legend. Each certificate shall be stamped or
otherwise imprinted with a legend in the following form (in addition to any
legend required under applicable state securities laws):
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or under the securities
laws of any state, and such shares may not be sold or transferred
unless such sale or transfer is in accordance with the registration
requirements of the Securities Act of 1933, as at the time amended, and
the appropriate state securities laws, or unless some other exemption
from the registration requirements of such Act and State laws is
available with respect thereto. The shares represented by this
Certificate are transferable only to the Corporation or to the
Shareholders of the Corporation unless and until the Holder hereof
shall have complied with all provisions of the Articles of
Incorporation, Bylaws and any applicable agreement with the Corporation
affecting the sale thereof, copies of which are on file at the
principal office of the Corporation."
3.4 Company Registration.
(a) Notice of Registration. If at any time or from time to
time, the Company shall determine to register any of its securities, either for
its own account or the account of a security holder or holders, other than (i) a
registration relating solely to employee benefit plans or (ii) a registration
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relating solely to a Commission Rule 145 transaction, the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within 10 days after receipt of such written notice from the
Company, by any Holder or Holders.
(b) Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 3.4(a)(i). In such event the right of any Holder to
registration pursuant to Section 3.4 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and the other holders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the managing underwriter selected for such underwriting by the
Company. Notwithstanding any other provision of this Section 3.4, if the
managing underwriter determines that marketing factors require a limitation of
the number of Registrable Securities to be underwritten, the managing
underwriter may exclude some or all Registrable Securities from such
registration and underwriting. The Company shall so advise all Holders and the
other holders distributing their securities through such underwriting, and the
number of shares of Registrable Securities and other securities that may be
included in the registration and underwriting shall be allocated among all
Holders and other holders thereof in proportion, as nearly as practicable, to
the respective amounts of Registrable Securities held by all such Holders at the
time of filing the registration statement. If any Holder disapproves of the
terms of any such underwriting, he or it may elect to withdraw therefrom by
written notice to the Company and the managing underwriter. Any securities
excluded or withdrawn from such underwriting shall be withdrawn from such
registration and shall not be transferred in a public distribution prior to 90
days after the effective date of the registration statement relating thereto.
The Company may include shares of Common Stock (or other securities issued or
issuable pursuant to any stock split, stock dividend, recapitalization, or
similar event) held by shareholders other than the Holders in a registration
statement pursuant to this Section 3.4 only if, and to the extent, the amount of
Registrable Securities included in such registration would not thereby be
diminished.
3.5 Registration Procedures and Expenses. In the case of each
registration, qualification or compliance effected by the Company pursuant to
this Section 3, the Company will keep each Holder advised in writing as to the
initiation of each registration, qualification and compliance and as to the
completion thereof. At its expense the Company will:
(a) prepare and file with the Commission a registration
statement with respect to all offered securities and use its best efforts to
cause such registration statement to become and remain, and prepare and file
with the Commission such amendments to such registration statement and
supplements to the prospectus contained therein as may be necessary to cause
such registration statement to remain, effective for a period of at least 90
days or until the Holder or Holders have completed the distribution described in
the registration statement relating thereto, whichever first occurs; provided,
however, that no such registration shall constitute a shelf registration under
Rule 415 promulgated by the Commission under the Act; and
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(b) furnish such reasonable number of prospectuses and other
documents incident thereto as a Holder from time to time may reasonably request.
3.6 Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders as the Company may
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Section 3.
3.7 Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Securities to the public without registration, the
Company shall use its best efforts to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
subsequent to 90 days after the effective date of the first registration
statement covering an underwritten public offering filed by the Company;
(b) file with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Securities Exchange Act of 1934, as amended; and
(c) so long as a Holder owns any Restricted Securities, to
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of Rule 144 (at any time
subsequent to 90 days after the effective date of the first registration
statement covering an underwritten public offering filed by the Company) and of
the Securities Act and the Securities Exchange Act of 1934 (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
so filed by the Company as a Holder may reasonably request in availing itself of
any rule or regulation of the Commission allowing a Holder to sell any such
securities without registration.
3.8 Transfer of Registration Rights. The rights to cause the Company to
register securities granted Holders under Section 3.4 may be assigned, upon
written notice to the Company, to a transferee or assignee who acquires at least
10% of the Registrable Securities of the Company, provided that such transfer
must otherwise be effected in accordance with applicable securities laws.
3.9 Amendment of Registration Rights. Any provision of this Section 3
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the holders of seventy-five percent (75%) of
the Registrable Securities. Any amendment or waiver effected in accordance with
this Section 3.9 shall be binding upon each Holder and the Company. By
acceptance of any benefits under this Agreement, holders of Registrable
Securities hereby agree to be bound by the provisions hereunder.
3.10 Indemnification. Subject to Section 3.4(b), in the event any
Registrable Securities are included in a registration statement under Section 3:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder joining in a registration, any underwriter (as
defined in the Securities Act) for it, and each
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person, if any, who controls such Holder or underwriter within the meaning of
the Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which they may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based on any untrue or alleged untrue statement of
any material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein, or any amendments
or supplements thereto, 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 or arise out of any
violation by the Company of any rule or regulation promulgated under the
Securities Act applicable to the Company and relating to action or inaction
required of the Company in connection with any such registration; and will
reimburse each such Holder, such underwriter, or controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this Section
3.10(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Company (which consent shall not be unreasonably withheld) nor shall the
Company be liable in any such case for any such loss, claim, damage, liability
or action to the extent that it arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
connection with such registration statement, preliminary prospectus, final
prospectus or amendments or supplements thereto, in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each Holder joining in a
registration will indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed the registration statement, each
agent and any underwriter for the Company (within the meaning of the Securities
Act) and each person, if any, who controls the Company or such underwriter
within the meaning of the Securities Act against any losses, claims, damages or
liabilities, joint or several, to which the Company or any director, officer,
controlling person, agent or underwriter may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein, or any amendments or supplements thereto, 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, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in such registration statement, preliminary or final
prospectus, or any amendments or supplements thereto, in reliance upon and in
conformity with written information furnished by such Holder expressly for use
in connection with such registration; and each such Holder will reimburse any
legal or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, agent or underwriter in connection with
investigating or defending such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this Section
3.10(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of such Holder (which consent shall not be unreasonably withheld).
(c) Promptly after receipt by an indemnified party under this
Section 3.11 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying party
under this Section 3.10, notify the indemnifying party in writing of the
commencement thereof and (unless the interest of the indemnifying party
conflicts with that of the indemnified party) the indemnifying party shall have
the right to participate in and, to the extent the
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indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with its own counsel (provided
such counsel is reasonably satisfactory to the indemnified party). The failure
to notify an indemnifying party promptly of the commencement of any such action,
if prejudicial to his ability to defend such action, shall relieve such
indemnifying party, to the extent that he is prejudiced thereby, of any
liability to the indemnified party under this Section 3.10, but the omission so
to notify the indemnifying party will not relieve him of any liability that he
may have to any indemnified party otherwise than under this Section 3.10.
3.11 Termination of the Company's Obligations. The Company's
obligations pursuant to Section 3.4 shall expire one year after the Company
first becomes subject to the reporting requirements of Section 13 or 15(d) of
the 1934 Act.
3.12 Lockup Agreement. In consideration for the Company agreeing to its
obligations under this Section 3, each Investor agrees in connection with any
registration of the Company's Common Stock for sale to the general public, upon
the request of the Company or the underwriters managing any underwritten
offering of the Company's securities, not to sell, make short sale of, loan,
grant any option for the purchase of, or otherwise dispose of any Registrable
Securities (other than those included in the registration) without the prior
written consent of the Company or such underwriters, as the case may be, for
such period of time (not to exceed 120 days) from the effective date of such
registration as the Company or the underwriters may specify. The Company may
impose stop-transfer instructions with respect to all securities subject to the
foregoing restrictions until the end of the applicable period.
3.13 Delay of Registration. No Holder shall have any right to take any
action to restrain, enjoin or otherwise delay any registration as the result of
any controversy that may arise with respect to the interpretation or
implementation of this Agreement.
3.14 Right of First Refusal. In the event that the Company proposes to
issue and sell new shares or securities that are convertible into Common or
Preferred Stock (the "New Securities"), the Company shall give the Investor at
least 30 days prior written notice of its intention, and description, terms and
conditions of the proposed transaction and the Investor shall have the right of
first refusal to purchase, pro rata, all or any part of the New Securities. The
Investor shall have 30 days from the date of such notice to exercise its option.
if the Investor should waive or not exercise its right of first refusal provided
herein, all or part of its pro rata share of New Securities may be purchased by
the other investors. In the event that the Investor fails to exercise the right
of first refusal within such 30 day period and other investors do not exercise
their right of first refusal with respect to such New Securities, the Company
shall have 120 days thereafter to sell or enter into an agreement to sell the
New Securities at the price and upon general terms no more favorable to the
investors thereof than specified in the Company's notice. In the event that the
Company has not sold all the New Securities or entered into an agreement to sell
all the New Securities within such 120 day period, the Company shall not
thereafter issue or sell any New Securities, without first offering such
securities to the Investor in the manner provided above.
3.15 Option to Purchase Stock. If the Investor at any time intends to
sell, transfer or otherwise dispose of any Shares, said Investor shall give the
Company at least 30 days prior written notice of such intention (the "Investor
Notice of Sale"), which Investor Notice of Sale shall specify the number of
Shares to be sold, transferred or disposed of, the manner of the proposed sale,
transfer or disposition, the name of the proposed investor, the proposed sale
price (which must be payable in cash), a copy of a bona fide written offer from
the proposed investor and all other material terms and conditions of such
proposed
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sale, transfer or disposition and the Company shall have the option to purchase
for cash all, but not part, of the Shares to which such Investor Notice of Sale
relates on the terms and conditions specified in such notice. Such option shall
be exercisable by the Company no later than 30 days after the date of the
receipt by the Company of the Investor Notice of Sale. The parties to such
transaction shall execute such certificates and cross receipts as are reasonably
necessary to consummate such transaction.
If the Company does not exercise its option to purchase the Shares
covered by the Investor Notice of Sale, the Investor shall have the right to
sell, transfer or otherwise dispose of such Shares for a period of 30 days
following the waiver or expiration of the Company's option to purchase in
accordance with the terms and conditions of the Investor Notice of Sale, after
which the right of first refusal will again apply. Any provisions of this
Section 3.15 to the contrary notwithstanding shall apply to any transfer of the
Shares.
3.16 Sale of Majority of Shares of Stock. Upon the contemporaneous sale
or exchange or other transfer of a majority of the shares of capital stock of
the Company by one or more shareholders, such offeror shareholders shall arrange
for the purchase of all the remaining shares of the Company's capital stock held
by the remaining shareholder(s), at a price and subject to terms and conditions
substantially or no less favorable than the same as those applicable to the sale
or exchange of the offeror shareholder's shares.
SECTION 4
Miscellaneous
4.1 Binding effect. All provisions of this Agreement shall be binding
upon, inure to the benefit of, and be enforceable by and against the successors
or assigns of the Company and any subsequent transferee.
4.2 Amendment and Modification. The parties hereto may amend, modify
and supplement this Agreement in such manner as may be agreed upon by them in
writing.
4.3 Notices. Any notices hereunder may be given to the Company
addressed to 50 Tice Boulevard, Woodcliff Lake, New Jersey 07675, for the
attention of President. All such notices shall be by letter delivered in person,
sent by certified mail, telegram or telex.
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This Agreement shall be governed by the laws of the State of Delaware
and shall have the effect of a sealed instrument.
Name of Investor (please print)
---------------------------------------------
(Signature)
Date:
Address:
Accepted:
SECURACOM, INCORPORATED
By:_______________________________
Date:_____________________________
Subscription payment instructions:
- - Please wire funds to:
Chemical Bank
New York, New York
ABA No.
Account:
Account No.:
For Further Credit to:
Account:
11
Exhibit 23.1
We have issued our report dated March 12, 1997 accompanying the financial
statements and schedule of Securacom, Incorporated contained in the Registration
Statement on Form S-1 (File No. 333-26439) and Prospectus. We consent to the use
of the aforementioned report in the Registration Statement and Prospectus, and
to the use of our name as it appears under the caption "Experts".
GRANT THORNTON LLP
Parsippany, New Jersey
June 6, 1997
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation of our report dated June 3, 1996 on the
financial statements of Securacom, Incorporated as of December 31, 1995 and for
each of the two years then ended which is included in this Form S-1 of
Securacom, Incorporated, and to the reference of our Firm under the caption
"Experts" in the Form S-1 which is expected to be filed on or about April 30,
1997.
AMPER, POLITZINER & MATTIA
June 6, 1997
Edison, New Jersey
