SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )*
Alarmguard Holdings, Inc.
(Name of Issuer)
Common Stock, $0.0001 par value
(Title of Class of Securities)
011649100
(CUSIP Number)
Joel Frank
OZ Management, L.L.C.
153 E. 53rd Street, 44th Floor
New York, N.Y. 10022
212-292-5956
(Name, Address, and Telephone Number of Person
Authorized to Receive Notices and Communications)
February 2, 1998
(Date of Event Which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box [ ].
* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
<PAGE>
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
OZ Management, L.L.C.
2. CHECK THE APPROPRIATE ROW IF A MEMBER OF A GROUP
(SEE INSTRUCTIONS) (a) [ ]
(b) [ ]
3. SEC USE ONLY
4. SOURCE OF FUNDS (SEE INSTRUCTIONS)
AF
5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(D) OR 2(E) [ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7. SOLE VOTING POWER
0
8. SHARED VOTING POWER
1,121,212 Shares
9. SOLE DISPOSITIVE POWER
0
10. SHARED DISPOSITIVE POWER
1,121,212 Shares
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,121,212 Shares
12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE
INSTRUCTIONS)
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
10.6%
14. TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
OO
<PAGE>
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
OZ Master Fund, Ltd.
2. CHECK THE APPROPRIATE ROW IF A MEMBER OF A GROUP
(SEE INSTRUCTIONS) (a) [ ]
(b) [ ]
3. SEC USE ONLY
4. SOURCE OF FUNDS (SEE INSTRUCTIONS)
WC
5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(D) OR 2(E) [ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands
7. SOLE VOTING POWER
0
8. SHARED VOTING POWER
242,424 Shares
9. SOLE DISPOSITIVE POWER
0
10. SHARED DISPOSITIVE POWER
242,424 Shares
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
242,424 Shares
12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE
INSTRUCTIONS)
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
2.3%
14. TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
CO
<PAGE>
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
Ziff Asset Management, L.P.
2. CHECK THE APPROPRIATE ROW IF A MEMBER OF A GROUP
(SEE INSTRUCTIONS) (a) [ ]
(b) [ ]
3. SEC USE ONLY
4. SOURCE OF FUNDS (SEE INSTRUCTIONS)
WC
5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(D) OR 2(E) [ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7. SOLE VOTING POWER
0
8. SHARED VOTING POWER
878,788 Shares
9. SOLE DISPOSITIVE POWER
0
10. SHARED DISPOSITIVE POWER
878,788 Shares
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
878,788 Shares
12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE
INSTRUCTIONS)
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.3%
14. TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
PN
<PAGE>
Item 1. Security and Issuer
The class of securities to which this statement on Schedule 13D relates
is the Common Stock, par value $0.0001 per share (the "Shares"), of Alarmguard
Holdings, Inc., a Delaware corporation (the "Company"). The Company has its
principal executive offices at 125 Frontage Road, Orange, Connecticut 06477.
Item 2. Identity and Background
This statement is being filed by OZ Management, L.L.C., OZ Master Fund,
Ltd. and Ziff Asset Management, L.P. (together, the "Reporting Persons").
Neither the present filing nor anything contained herein shall be construed as
an admission that any Reporting Person constitutes a "person" for any purposes
other than Section 13(d) of the Securities Exchange Act of 1934 or that the
Reporting Persons constitute a "group" for any purpose.
As of February 2, 1998, OZ Master Fund, Ltd. may be deemed beneficially
and directly to own 242,424 Shares, and Ziff Asset Management, L.P. may be
deemed beneficially and directly to own 878,788 Shares. As of February 2,
1998, OZ Management, L.L.C. may be deemed beneficially and indirectly to own
(i) the 242,424 Shares owned directly by OZ Master Fund, Ltd., by reason of
its investment advisory relationship with OZ Master Fund, Ltd., and (ii) the
878,788 Shares owned directly by Ziff Asset Management, L.P. since such Shares
are held in an investment account over which OZ Management, L.L.C. exercises
voting and investment authority.
a. OZ Management, L.L.C. OZ Management, L.L.C. ("OZ Management") is
a Delaware limited liability company. OZ Management serves as the investment
manager for OZ Master Fund, Ltd. and exercises shared voting and investment
authority over an investment account of Ziff Asset Management, L.P. The
principal business and principal office address of OZ Management is 153 E.
53rd Street, 44th Floor, New York, New York 10022.
b. OZ Master Fund, Ltd. OZ Master Fund, Ltd. ("OZ Master Fund") is
an exempted company incorporated under the laws of the Cayman Islands. OZ
Master Fund serves as a master fund to which may be contributed a significant
portion or possibly all of the assets of (i) OZ Overseas Fund, Ltd., an
exempted company incorporated under the laws of the Cayman Islands, operating
as a private investment fund, and (ii) OZ Domestic Partners, L.P., a Delaware
limited partnership, operating as a private investment fund for U.S.
investors. The principal business of OZ Master Fund is to invest, on margin
or otherwise, in securities and other financial instruments of U.S. and
foreign entities, including, without limitation, equity and equity-related
securities, partnership interests, debt securities, currencies, commodities,
derivative products, and other securities, and to sell any such securities
short and cover such sales. The principal office of OZ Master Fund is c/o
Goldman Sachs (Cayman) Trust, Limited, P.O. Box 896 G.T., Harbour Centre,
Second Floor, North Church Street, George Town, Grand Cayman, Cayman Islands,
B.W.I.
c. Ziff Asset Management, L.P. Ziff Asset Management, L.P. ("Ziff
Asset Management") is a Delaware limited partnership. The principal business
of Ziff Asset Management is to invest in securities and other financial
instruments of U.S. and foreign entities, including, without limitation,
equity and equity-related securities, partnership interests, debt securities,
currencies, commodities, derivative products, and other securities, and to
sell any such securities short and cover such sales. The address of each of
the principal business and the principal office of Ziff Asset Management is
156 Greenwich Avenue, Unit 2A, Greenwich, Connecticut 06830.
d. In addition to the information given above with respect to the
Reporting Persons, the following information is provided pursuant to
Instruction C to Schedule 13D.
OZ Overseas Fund, Ltd., an exempted company incorporated under the laws
of the Cayman Islands, operates as a private investment fund, and may
contribute some or all of its assets to OZ Master Fund. Its principal office
is c/o Goldman Sachs (Cayman) Trust, Limited, P.O. Box 896 G.T., Harbour
Centre, Second Floor, North Church Street, George Town, Grand Cayman, Cayman
Islands, B.W.I. OZ Domestic Partners, L.P., a Delaware limited partnership,
operates as a private investment fund for U.S. investors, and may contribute
some or all of its assets to OZ Master Fund. Its principal business and
principal office address is c/o OZ Management, 153 E. 53rd Street, 44th Floor,
New York, New York 10022.
OZ Advisors, L.L.C., a Delaware limited liability company, serves as
sole general partner to OZ Domestic Partners, L.P., and may be deemed to
control OZ Domestic Partners, L.P. The principal business of OZ Advisors,
L.L.C. is to serve as general partner of OZ Domestic Partners, L.P. and funds
with similar investment objectives. Och-Ziff Associates, L.L.C., a Delaware
limited liability company, serves as sole managing member of OZ Advisors,
L.L.C., and may be deemed to control OZ Advisors, L.L.C. Its principal
business is to serve as managing member of OZ Advisors, L.L.C. and companies
with similar investment objectives. The principal business and principal
office address of each of OZ Advisors, L.L.C. and Och-Ziff Associates, L.L.C.
is 153 E. 53rd Street, 44th Floor, New York, New York 10022.
Daniel S. Och, an individual resident of New York and U.S. citizen, with
his principal address c/o OZ Management, is (i) the managing member of OZ
Management and (ii) the managing member of Och-Ziff Associates, L.L.C. His
principal business is to serve as investment adviser. The principal business
and principal office address for each of OZ Advisors, L.L.C., Och-Ziff
Associates, L.L.C. and Daniel S. Och is c/o OZ Management, 153 E. 53rd Street,
44th Floor, New York, New York 10022.
PBK Holdings, Inc., a Delaware corporation, is the sole general partner
of Ziff Asset Management. Its principal business is to serve as general
partner of Ziff Asset Management and affiliated funds with similar investment
objectives. Philip B. Korsant, an individual resident of Connecticut and a
U.S. citizen, is the sole shareholder and President of PBK Holdings. His
principal business is investing. The principal business address and principal
office for each of PBK Holdings, Inc. and Mr. Korsant is 156 Greenwich Avenue,
Unit 2A, Greenwich, Connecticut 06830.
The name, business address, present principal occupation or employment
and citizenship of (i) each director and executive officer of OZ Master Fund,
(ii) each executive officer of OZ Management and (iii) each director and
executive officer of PBK Holdings, Inc. are set forth on Schedule I hereto,
and are incorporated herein by reference.
The name, business address, present principal occupation or employment
and citizenship of each director of OZ Overseas Fund, Ltd. is set forth in
Schedule II-A hereto and are incorporated herein by reference. The name,
business address, present principal occupation or employment and citizenship
of each executive officer of (i) OZ Advisors, L.L.C., the sole general partner
of OZ Domestic Partners, L.P., and (ii) Och-Ziff Associates, L.L.C., the
managing member of OZ Advisors, L.L.C., is set forth in Schedule II-B hereto,
and are incorporated herein by reference.
OZ Master Fund disclaims beneficial ownership of any Shares held by Ziff
Asset Management, and Ziff Asset Management disclaims beneficial ownership of
any Shares held by OZ Master Fund. OZ Management disclaims beneficial
ownership of (i) Shares beneficially owned by OZ Master Fund, to the extent of
interests therein held directly or indirectly by persons other than OZ
Management or its affiliated entities, and (ii) Shares held by Ziff Asset
Management.
During the last five years, none of the Reporting Persons, OZ Overseas
Fund, Ltd., OZ Domestic Partners, L.P., OZ Advisors, L.L.C., Och-Ziff
Associates, L.L.C., Daniel S. Och, PBK Holdings, Inc., Philip B. Korsant, or,
to the best knowledge of each of the Reporting Persons, any of the persons
listed on Schedules I, II-A or II-B hereto, (i) has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors), or
(ii) has been a party to a civil proceeding of a judicial or administrative
body of competent jurisdiction and as a result of such proceeding was or is
subject to a judgment, decree or final order enjoining future violations of,
or prohibiting or mandating activities subject to, federal or state securities
laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration
The Reporting Persons acquired an aggregate of 9,250 shares of Series A
Convertible Preferred Stock of the Company in a private placement closing on
February 2, 1998, pursuant to a Stock Purchase Agreement, dated as of such
date (the "Stock Purchase Agreement") among the Company, OZ Master Fund, Ziff
Asset Management and certain other purchasers. 2,000 of such shares were
purchased by OZ Master Fund and 7,250 of such shares were purchased by Ziff
Asset Management. Such shares of Series A Convertible Preferred Stock are
convertible into an aggregate of 1,121,212 Shares (subject to anti-dilution
adjustments). The total consideration paid by the Reporting Persons was
$9,250,000, of which $2,000,000 was paid by OZ Master Fund and $7,250,000 was
paid by Ziff Asset Management.
The source of funds for the purchase was working capital for OZ Master
Fund and Ziff Asset Management. In the normal course of their businesses,
working capital is comprised of equity contributions of the shareholders of OZ
Master Fund, or of the partners of Ziff Asset Management; their respective
earnings from operations; and, with respect to OZ Master Fund only, funds
borrowed from banks and brokerage firm margin accounts and used for their
businesses operations in general. None of the funds reported herein as
working capital were borrowed or otherwise obtained for the specific purpose
of acquiring, handling, trading or voting the Shares. With respect to OZ
Master Fund, to the extent that shares of the Series A Convertible Preferred
Stock, or Shares into which they are converted, may be held in such a margin
account, they may be pledged along with other positions in such accounts as
collateral security for the repayment of debit balances in the account.
Because other securities are held in such accounts, however, it is not
possible to determine the amount, if any, of margin used by OZ Master Fund
with respect to the Series A Convertible Preferred Stock or Shares into which
they may be converted.
None of the persons listed on Schedule I or II has contributed any funds
or other consideration towards the purchase of any securities of the Company,
except insofar as they may have partnership or other equity interests in any
of the Reporting Persons and may have made capital contributions to a
Reporting Person.
Item 4. Purpose of Transaction
The Shares have been acquired by the Reporting Persons for investment
purposes. Each Reporting Person expects to evaluate on an ongoing basis the
Company's financial condition, business operations and prospects, the status
of any business combination involving the Company, the market price of the
Shares, conditions in the securities markets generally, general economic and
industry conditions and other factors. Accordingly, each Reporting Person
reserves the right to change its plans and intentions at any time, as it deems
appropriate. In particular, each Reporting Person may at any time and from
time to time acquire additional Shares or other securities convertible or
exchangeable for Shares in public or private transactions; dispose of Shares
or other securities in public or private transactions, including dispositions
economically effected by short sales or options transactions; and/or enter
into privately negotiated derivative transactions with institutional
counterparties to hedge the market risk of some or all of its positions in the
Shares or other securities. Any such transactions may be effected at any time
and from time to time. To the knowledge of each Reporting Person, each of the
persons listed on Schedules hereto may make the same evaluation and may
reserve the same rights. In connection with their investment in the Company,
the Reporting Persons expect from time to time to consult with management and
other shareholders of the Company.
Other than as discussed above, or as otherwise described in Item 6 of
this Statement on Schedule 13D, the Reporting Persons currently have no plans
to effect any of the transactions required to be described in Item 4 of
Schedule 13D.
Item 5. Interest in Securities of the Issuer
(a) OZ Management may be considered the beneficial owner of 1,121,212
Shares, comprised of (x) the 242,424 Shares reported herein by OZ Master Fund
and (y) the 878,788 reported herein by Ziff Asset Management, representing
approximately 10.6% of the Company's Shares outstanding as of February 2,
1998. OZ Master Fund may be considered the beneficial owner of the 242,424
Shares reported by it on this Statement, representing approximately 2.3% of
the Company's Shares outstanding as of February 2, 1998. Ziff Asset
Management may be considered the beneficial owner of the 878,788 Shares
reported by it on this Statement, representing approximately 8.3% of the
Company's Shares outstanding as of February 2, 1998.
To reflect more accurately the beneficial ownership of the Reporting
Persons as a percentage of issued and outstanding voting securities of the
Company, the ownership percentage of the Reporting Persons is calculated by
treating all shares of Convertible Preferred Stock issued under the Stock
Purchase Agreement as though converted into Common Stock at the conversion
ratio of $8.25 per share, in the case of Series A Convertible Preferred Stock,
and at $7.75 per shares, in the case of Series B Convertible Preferred Stock.
All such shares of Convertible Preferred Stock are immediately entitled to
voting rights alongside the Common Stock, on an as-converted basis. Pursuant
to information furnished by the Company as of February 2, 1998, there were an
aggregate of 10,564,909 shares of Common Stock and Common Stock equivalents
outstanding on the date thereof, comprised of (x) 5,592,476 shares of issued
and outstanding Common Stock and (y) 4,972,433 shares of Common Stock
represented by the Convertible Preferred Stock issued under the Stock Purchase
Agreement on an as-converted basis. Pursuant to information provided by the
Company, calculating the Reporting Persons' ownership without treating all
Convertible Preferred Stock as so converted would mathematically result in the
Reporting Persons owning 16.7% of the Company's outstanding Shares of Common
Stock as of February 2, 1998. Other than the Shares for which the shares of
Convertible Preferred Stock of the Reporting Persons are convertible, to the
knowledge of the Reporting Persons there are no Shares subject to options,
warrants, rights or convertible securities owned by the Reporting Persons.
None of the Reporting Persons, or to the knowledge of the Reporting
Persons any of the persons listed on Schedule I, beneficially owns any Shares
other than as set forth herein.
(b) OZ Management shares the power to vote or direct the vote, and to
dispose or to direct the disposition of, the 242,424 Shares and 878,788 Shares
beneficially and directly owned, respectively, by OZ Master Fund and Ziff
Asset Management.
(c) Other than the purchase of the shares of Series A Convertible
Preferred Stock pursuant to the Stock Purchase Agreement, there were no other
purchases of Shares by the Reporting Persons, and there were no sales of
Shares by the Reporting Persons, within the last 60 days.
(d) No other person is known by any Reporting Person to have the right
to receive or the power to direct the receipt of dividends from, or the
proceeds from the sale of, any Shares beneficially owned by any Reporting
Person.
(e) Not Applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer
As purchasers under the Stock Purchase Agreement, OZ Master Fund and
Ziff Asset Management have agreed to use their best efforts to elect to the
Board of Directors of the Company (i) one individual designated by one of the
other purchasers under the Stock Purchase Agreement, and (ii) one individual
elected by the holders of a majority of the holders of the Series A
Convertible Preferred Stock and the Series B Convertible Preferred Stock,
voting as a single class.
As parties to a Registration Rights Agreement, dated February 2, 1998,
OZ Master Fund and Ziff Asset Management each has the right to demand that the
Company register the Shares held by such Reporting Person in certain cases.
The foregoing discussion is qualified by reference to the Stock Purchase
Agreement and the Registration Rights Agreement, which are filed as exhibits
hereto and are incorporated by reference into this Item 6.
(b) Except as described or referred to above, there are no contracts,
arrangements, understandings or relationships among the Reporting Persons, or
between such persons and any other person with respect to any securities of
the Company, including but not limited to transfer or voting of any securities
of the Company, finder's fees, joint ventures, loan or option arrangements,
puts or calls, guarantees of profits, division of profits or loss, or the
giving or withholding of proxies.
Item 7. Material to be Filed as Exhibits
The following agreements are filed hereto as Exhibits:
1. Stock Purchase Agreement, dated as of February 2, 1998.
2. Registration Rights Agreement, dated as of February 2, 1998.
3. Joint Filing Agreement among the Reporting Persons.
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and
correct.
Dated: February 11, 1998.
OZ MANAGEMENT, L.L.C.
By: /s/ Daniel S. Och
- ----------------------------------------
Name: Daniel S. Och
Title: Managing Member
OZ MASTER FUND, LTD.
By: OZ MANAGEMENT, L.L.C.
as Investment Manager
By: /s/ Daniel S. Och
----------------------------------------
Name: Daniel S. Och
Title: Managing Member
ZIFF ASSET MANAGEMENT, L.P.
By: PBK Holdings, Inc.
as General Partner
By: /s/ Philip B. Korsant
- ----------------------------------------
Name: Philip B. Korsant
Title: President
<PAGE>
Exhibit Index
1. Preferred Stock Purchase Agreement, dated as of February
2, 1998.
2. Registration Rights Agreement, dated as of February 2, 1998.
3. Joint Filing Agreement among the Reporting Persons.
<PAGE>
Schedule I
The following lists the name, business address, present principal
occupation or employment, and citizenship, of (A) each executive officer of OZ
Management, (B) each director and executive officer of OZ Master Fund, and
(C) each director and executive officer of the PBK Holdings, Inc., the general
partner of Ziff Asset Management.
A. OZ Management, L.L.C.
Name Occupation/employment Citizenship
& Business Address
Daniel S. Och Managing Member U.S.A.
153 East 53rd Street
44th Floor
New York, NY 10022
B. OZ Master Fund, Ltd.
Name Occupation/employment Citizenship
& Business Address
Directors:
N.S. Nominees, Ltd. Director Cayman
N.D. Nominees, Ltd. Director Cayman
Martin Lang Director U.K.
Clive Harris Director U.K.
c/o International Management
Services, Ltd.
Harbour Centre
P.O. Box 61
George Town
Grand Cayman, Cayman Islands
Executive Officers:
Goldman Sachs (Cayman) Secretary U.K.
Trust, Ltd.
Harbour Centre
P.O. Box 896
George Town
Grand Cayman, Cayman Islands
C. PBK Holdings, Inc.
Name Occupation/employment Citizenship
& Business Address
Philip Korsant President U.S.A.
Mark A. Beaudoin Treasurer U.S.A.
Robert Ziff Secretary U.S.A.
156 Greenwich Avenue
Unit 2A
Greenwich, CT 06830
<PAGE>
Schedule II-A
The following lists the name, business address, present principal
occupation or employment and citizenship of each director and executive
officer of OZ Overseas Fund, Ltd.
Name Occupation/employment Citizenship
& Business Address
Directors:
N.S. Nominees, Ltd. Director Cayman
N.D. Nominees, Ltd. Director Cayman
Martin Lang Director U.K.
Clive Harris Director U.K.
c/o International Management
Services, Ltd.
Harbour Centre
P.O. Box 61
George Town
Grand Cayman, Cayman Islands
Executive Officers:
Goldman Sachs (Cayman) Secretary U.K.
Trust, Ltd.
Harbour Centre
P.O. Box 896
George Town
Grand Cayman, Cayman Islands
<PAGE>
Schedule II-B
The following lists the name, business address, present principal
occupation or employment and citizenship of each executive officer of (A) OZ
Advisors, L.L.C., the sole general partner of OZ Domestic Partners, L.P., and
(B) Och-Ziff Associates, L.L.C., the managing member of OZ Advisors, L.L.C.
A. OZ Advisors, L.L.C.
Name Occupation/employment Citizenship
& Business Address
Och-Ziff Associates, L.L.C. Managing Member U.S.A.
153 East 53rd Street
44th Floor
New York, NY 10022
C. Och-Ziff Associates, L.L.C.
Name Occupation/employment Citizenship
& Business Address
Daniel S. Och Managing Member U.S.A.
153 East 53rd Street
44th Floor
New York, NY 10022
<PAGE>
Exhibit 1
PREFERRED STOCK PURCHASE AGREEMENT
PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") dated as of
February 2, 1998 between Alarmguard Holdings, Inc., a Delaware corporation
(the "Company"), Advance Capital Partners, L.P., a Delaware limited
partnership, Advance Capital Offshore Partners, L.P., a Cayman Islands limited
partnership (collectively, "Advance"), and each of the other purchasers set
forth on Schedule I hereto (with Advance, each a "Purchaser" and collectively
the "Purchasers").
The Purchasers desire to purchase from the Company, and the
Company desires to issue to the Purchasers, shares of Series A Convertible
Preferred Stock $.0001 par value per share of the Company (the "Series A
Preferred") and Series B Convertible Preferred Stock $.0001 par value per
share of the Company (the "Series B Preferred").
In consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement, the parties
hereto agree as follows:
Article I
DEFINITIONS
1.1 Definitions; Interpretation.
(a) For purposes of this Agreement, the following terms have the
indicated meanings:
"Advance" has the meaning set forth in the recitals hereof.
"Advance Closing" has the meaning set forth in Section 3.1.
"Advance Closing Date" has the meaning set forth in Section 3.1.
"Affiliate" of a person means any other person that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or
is under common control with such person.
"Certificate of Designations" means the Certificate of
Designations designating the rights and preferences of the Series A Preferred
and Series B Preferred adopted by the Board of Directors of the Company and
set forth as Exhibit A hereto.
"Closing" has the meaning set forth in Section 3.1.
"Closing Date" has the meaning set forth in Section 3.1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the common stock of the Company, par value
$.0001 per share.
"Company" has the meaning set forth in the recitals hereof.
"Confidential Information" means any information concerning the
Company's business other than information that (i) was already known to the
Person having a duty to keep confidential such information on a
nonconfidential basis prior to the time of disclosure, (ii) is or becomes
generally available to the public through no act or omission of such Person or
(iii) becomes available to such Person on a nonconfidential basis from a
source other than any party hereto (or any agent or representative thereof) if
such source was not under a prohibition against disclosing the information to
such Person.
"Conversion Shares" means shares of Common Stock issued or
issuable upon conversion of Preferred Shares.
"Credit Agreement" means that certain Third Amended and Restated
Acquisition Credit and Term Loan Agreement by and among the Company, certain
Subsidiaries of the Company, BankBoston, N.A. as Administrative Agent, General
Electric Capital Corporation as Documentation Agent and the lenders party
thereto, as the same may be amended, restated, modified or supplemented from
time to time.
"Current Balance Sheet" means the unaudited balance sheet of the
Company dated September 30, 1997.
"Environmental and Safety Requirements" means all federal, state,
local and foreign statutes, regulations, ordinances and other provisions
having the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law concerning
public health and safety, worker health and safety, and pollution or
protection of the environment, including without limitation all those relating
to the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or by-products,
asbestos, polychlorinated biphenyls, noise or radiation.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Financial Statements" means (i) the unaudited balance sheets of
the Company for the quarterly periods ended June 30, 1997 and September 30,
1997, each as included in a quarterly report of the Company on Form 10-Q as
filed with the SEC pursuant to the Exchange Act and the audited balance sheet
of Triton Group Ltd. dated March 31, 1997 as included in the annual report of
Triton Group Ltd. (a predecessor to the Company) on Form 10-K as filed with
the SEC pursuant to the Exchange Act and the related unaudited and audited, as
applicable, statements of income and consolidated cash flow for the quarterly
and fiscal year-to-date periods then ended, each as included in the Company's
applicable quarterly report or annual report on Form 10-Q and Form 10-K, as
applicable, as filed with the SEC pursuant to the Exchange Act, and (ii) the
unaudited balance sheet of Security Systems Holdings, Inc. for the quarterly
period ended March 31, 1997 and the audited balance sheet of Security Systems
Holdings, Inc. dated December 31, 1996 and the related unaudited and audited,
as applicable, statements of income and consolidated cash flow for the
quarterly and fiscal year-to-date periods then ended, all of which are
attached as Exhibit B hereto.
"Financing" means the purchase of Preferred Shares by the SBIC
Holders hereunder.
"GAAP" means United States generally accepted accounting
principles as in effect from time to time, consistently applied.
"Governmental Agency" means any federal, state, local, foreign or
other governmental agency, instrumentality, commission, authority, board or
body and the American Stock Exchange.
"includes" and "including" mean includes and including, without
limitation.
"Intellectual Property" means all patents, patent applications and
inventions; all trademarks, service marks, trade dress, trade names and
corporate names and all goodwill associated therewith; all copyrights; all
registrations, applications and renewals for any of the foregoing; all trade
secrets, Confidential Information, know-how, technical and computer data,
documentation and software, financial, business and marketing plans, customer
and supplier lists and all other intellectual property rights; and all copies
and tangible embodiments of the foregoing.
"IRS" means the Internal Revenue Service.
"knowledge" or "know" when used with respect to the Company means
the knowledge of the senior management of the Company, or any other management
personnel that has had significant involvement in the business and affairs of
the Company.
"Liability" means any liability or obligation (whether absolute or
contingent, liquidated or unliquidated or due or to become due).
"Lien" means any lien, mortgage, pledge, security interest,
restriction, charge or other encumbrance.
"Material Adverse Change" means any material adverse change in the
business, condition (financial or otherwise), prospects or results of
operations of the Company and its Subsidiaries taken as a whole.
"Material Adverse Effect" means any material adverse effect on (i)
the business, condition (financial or otherwise), prospects or results of
operations of the Company and its Subsidiaries taken as a whole, or (ii) the
transactions contemplated hereby or by the Related Documents.
"Ordinary Course of Business" means the ordinary course of
business consistent with past practice (including with respect to quantity,
quality and frequency).
"Permitted Liens" means (i) liens for taxes not yet due and taxes
for which adequate provision is made in the Current Balance Sheet, (ii)
purchase money security interests in supplies and equipment, (iii)
precautionary liens filed by lessors with respect to leased equipment, (iv)
encumbrances which are not substantial in amount, do not materially detract
from the value of the property subject thereto and do not materially impair
the use of the property subject thereto or the operation of the Company's
business, and (v) liens securing the obligations under the Credit Agreement
and the other documents, agreements and instruments executed in connection
therewith.
"Person" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization or other entity.
"Plan" means any employee benefit plan (as defined in Section 3(3)
of ERISA), subject to Title IV of ERISA or the minimum funding requirements of
Section 412 of the Code, maintained or contributed to by the Company, its
predecessor or any Subsidiary at any time during the 5-calendar years
immediately preceding the date of this Agreement.
"Preferred Shares" has the meaning set forth in Section 2.1.
"Registration Rights Agreement" means the Registration Rights
Agreement between the Company and the Purchasers in the form of Exhibit C
hereto.
"Related Documents" means all documents and instruments to be
executed or adopted by the Company in connection herewith, including the
Certificate of Designations, the Preferred Shares and the Registration Rights
Agreement.
"SBA" means the United States Small Business Administration, and
any successor agency performing the functions thereof.
"SBIC" means a Small Business Investment Company licensed by the
SBA under the SBIC Act.
"SBIC Act" means the Small Business Investment Act of 1958, as
amended.
"SBIC Holders" means IBJS Capital Corporation and Exeter Capital
Partners IV, L.P.
"SBIC Regulations" means the SBIC Act and the regulations issued
by the SBA thereunder, codified at Title 13 of the Code of Federal Regulations
("13 CFR"), Parts 107 and 121.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Preferred" has the meaning set forth in the recitals
hereof.
"Series B Preferred" has the meaning set forth in the recitals
hereof.
"Subsidiary" means any corporation, partnership, association or
other business entity of which (i) if a corporation, a majority of the total
voting power of shares of stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by the
Company or (ii) if a partnership, association or other business entity, a
majority of the partnership or other similar ownership interest thereof is at
the time owned or controlled, directly or indirectly, by the Company. For
purposes hereof, the Company shall be deemed to have a majority ownership
interest in a partnership, association or other business entity if the
Company, directly or indirectly, is allocated a majority of partnership,
association or other business entity gains or losses, or is or controls the
managing director or general partner of such partnership, association or other
business entity.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code sec. 59A),
customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"Tax Returns" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
(b) The words "herein", "hereof" and "hereunder" refer to this
Agreement as a whole and not to any particular article, section or other
subdivision of this Agreement.
Article II
ISSUANCE AND SALE OF PREFERRED STOCK
2.1 Number of Shares and Price. On the terms and subject to the
conditions of this Agreement, at the Closing, the Company shall issue to the
Purchasers, 27,750 shares of Series A Preferred and 5,000 shares of Series B
Preferred (collectively, with the Shares of Series A Preferred to be issued to
Advance at the Advance Closing, the "Preferred Shares") for a purchase price
of $1,000 per share. On the terms and subject to the conditions of this
Agreement, at the Advance Closing, the Company shall issue to Advance, 7,250
shares of Series A Preferred for a purchase price of $1,000 per share. Each
Purchaser's obligation to purchase the number of Preferred Shares opposite
such Purchaser's name on Schedule I hereto shall be subject to the prior or
simultaneous purchase by each other Purchaser (other than Advance) of the
number of Preferred Shares opposite such Purchaser's name on Schedule I
hereto.
Article III
CLOSING; CLOSING DELIVERIES
3.1 Closing. The closing of the transactions contemplated hereby
(the "Closing") shall take place at 10:00 a.m. on February 2, 1998, at the
offices of Kirkland & Ellis, New York, New York or at such other time, place
and/or date as shall be agreed upon by the parties hereto except that the
closing of the issuance and sale of Preferred Shares to Advance (the "Advance
Closing") shall take place at 10:00 a.m. on February 13, 1998 or on such other
date as shall be agreed upon by the Company and Advance. The date upon which
the Closing occurs is referred to herein as the "Closing Date" and the date
upon which the Advance Closing occurs is referred to herein as the "Advance
Closing Date".
3.2 Payment for and Delivery of Preferred Shares. At the
Closing, the Company shall issue and deliver to the Purchasers, stock
certificates for the Preferred Shares duly registered in the name of each
Purchaser, against payment by such Purchaser, by wire transfer of
immediately-available funds to the account designated by the Company, of the
purchase price therefor set forth in Section 2.1. At the Advance Closing, the
Company shall issue and deliver to Advance stock certificates for the
Preferred Shares duly registered in the name of Advance, against payment by
Advance, by wire transfer of immediately-available funds to the account
designated by the Company, of the purchase price therefor set forth in Section
2.1.
Article IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each Purchaser as
follows:
4.1 Existence; Qualification; Subsidiaries. The Company and each
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation and has full
corporate power and authority to conduct its business and own and operate its
properties as now conducted, owned and operated. The copies of the Restated
Certificate of Incorporation and By-Laws of the Company and all amendments
thereto previously delivered to the Purchasers are true, correct and complete
copies of such documents. The Company and each Subsidiary is licensed or
qualified as a foreign corporation and is in good standing in all
jurisdictions where such person is required to be so licensed or qualified,
except where the failure to be so licensed, qualified or in good standing
would not have a Material Adverse Effect. Except as set forth on Schedule
4.1, the Company has no Subsidiaries and owns no capital stock or other
securities of, and has not made any other investment in, any other entity.
All of the issued shares of capital stock of each Subsidiary have been duly
and validly authorized and issued, are fully paid and non-assessable and are
owned directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or adverse claims other than liens securing the
obligations under the Credit Agreement.
4.2 Authorization and Enforceability; Issuance of Shares.
(a) The Company has full power and authority and has taken all
required corporate and other action necessary to permit it to execute and
deliver this Agreement and the Related Documents and to carry out the terms
hereof and thereof and to issue and deliver the Preferred Shares and the
Conversion Shares (including adoption of the Certificate of Designations), and
none of such actions will violate any provision of the Restated Certificate of
Incorporation of the Company, the By-Laws of the Company or of any applicable
law, regulation, order, judgment or decree or rule of the stock exchange where
the Company's Common Stock is listed, or result in the breach of or constitute
a default (or an event which, with notice or lapse of time or both would
constitute a default) under any material agreement, instrument or
understanding to which the Company is a party or by which it is bound or by
which it will become bound as a result of the transaction contemplated by this
Agreement. This Agreement and each of the Related Documents constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except to the extent limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
of general application related to the enforcement of creditor's rights
generally and (ii) general principles of equity.
(b) The Preferred Shares have been duly authorized and, when
issued and delivered in accordance with this Agreement, will be validly issued
and outstanding. The Preferred Shares and, when issued, the Conversion
Shares, will be fully paid and nonassessable. The Conversion Shares have been
duly reserved for issuance upon conversion of the Preferred Shares and, when
so issued, will be duly authorized, validly issued and outstanding, fully paid
and nonassessable shares of Series A Preferred, Series B Preferred or Common
Stock, as the case may be. Neither the issuance and delivery of the Preferred
Shares nor the issuance and delivery of any Conversion Shares upon conversion
of any Preferred Shares is subject to any preemptive right of any stockholder
of the Company or to any right of first refusal or other similar right in
favor of any Person which has not been waived.
4.3 Capitalization. As of the Closing, the authorized capital
stock of the Company shall consist of (i) 25,000,000 shares of Common Stock,
par value $.0001 per share, of which 5,592,476 shares are outstanding,
4,972,434 shares are reserved for issuance upon conversion of Preferred Shares
and 770,000 shares are reserved for issuance upon the exercise of certain
stock options, and (ii) 5,000,000 shares of Preferred Stock, par value $.0001
per share, of which 35,700 shares have been designated Series A Preferred and
5,000 shares have been designated Series B Preferred, of which 40,000 shares
will be sold to the Purchasers pursuant to this Agreement. At the time of the
Closing, all of the outstanding capital stock will be validly issued, fully
paid and nonassessable and will have been issued in compliance with all
applicable securities laws (including the provisions of the Securities Act and
the rules and regulations promulgated thereunder). Except as set forth on
Schedule 4.3, as of the Closing, the Company has not granted or issued any
options, convertible securities, warrants, calls, pledges, transfer
restrictions (except restrictions imposed by federal and state securities
laws), liens, rights of first offer, rights of first refusal, antidilution
provisions or commitments of any character relating to any issued or unissued
shares of capital stock of the Company other than as contemplated in the
Related Documents. Except as contemplated by this Agreement and the Related
Documents or as set forth in Schedule 4.3, there are no preemptive or other
preferential rights applicable to the issuance and sale of securities of the
Company, including the Preferred Shares.
4.4 Private Sale; Voting Agreements. Assuming the accuracy of
the representations and warranties made by recipients of the Company's capital
stock made in connection with the acquisition of such capital stock, the
Company has not violated any applicable federal or state securities laws in
connection with the offer, sale and issuance of any of its capital stock.
Subject to the accuracy of the Purchaser's representations contained herein,
neither the offer, sale and issuance of the Preferred Shares hereunder nor the
issuance and delivery of any Preferred Shares or Conversion Shares upon
conversion of any Preferred Shares requires registration under the Securities
Act or any state securities laws.
4.5 Financial Statements; Disclosure.
(a) The Financial Statements (together with the notes thereto, as
applicable), (i) are true, correct and complete in all material respects,
(ii) are in accordance with the books and records of the Company and (iii)
fairly present the financial condition and results of operations of the
Company as of the dates and for the periods indicated, in accordance with
GAAP except that the unaudited balance sheets and related financial statements
do not contain an auditors' opinion and do not contain footnotes and are
subject to normal year-end audit adjustments.
(b) This Agreement together with the schedules, attachments,
exhibits, written statements and certificates supplied to the Purchasers by
or on behalf of the Company with respect to the transactions contemplated
hereby does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements contained herein or
therein, in light of the circumstances in which they were made, not
misleading. There is no fact which has not been disclosed to the Purchasers
in writing of which the Company has knowledge, and which has had or would
reasonably be anticipated to have a Material Adverse Effect.
(c) As of its filing date, each document filed with the SEC by
the Company, as amended or supplemented prior to the Closing Date, if
applicable, pursuant to the Securities Act and/or the Exchange Act (i)
complied in all material respects with the applicable requirements of the
Securities Act and/or Exchange Act and (ii) did not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. Each final registration
statement filed with the SEC by the Company pursuant to the Securities Act,
as of the date such statement became effective (i) complied in all material
respects with the applicable requirements of the Securities Act and (ii) did
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading (in the case of any prospectus, in light of
the circumstances under which they were made).
4.6 Absence of Certain Changes.
(a) Except as set forth on Schedule 4.6 since the date of the
Current Balance Sheet, neither the Company nor any Subsidiary has:
(i) incurred any Liabilities other than current Liabilities
incurred, or obligations under contracts entered into, in the Ordinary Course
of Business and for individual amounts not greater than $250,000;
(ii) paid, discharged or satisfied any claim, Lien or Liability,
other than any claim, Lien or Liability (A) reflected or reserved against on
the Current Balance Sheet and paid, discharged or satisfied in the Ordinary
Course of Business since the date of the Current Balance Sheet or (B) incurred
and paid, discharged or satisfied since the date of the Current Balance Sheet,
in each case in the Ordinary Course of Business;
(iii) sold, leased, assigned or otherwise transferred any of its
assets, tangible or intangible (other than sales of inventory in the Ordinary
Course of Business and use of supplies in the Ordinary Course of Business);
(iv) permitted any of its assets, tangible or intangible, to
become subject to any Lien (other than any Permitted Lien);
(v) written off as uncollectible any accounts receivable other
than (1) in the Ordinary Course of Business, or (2) for amounts not greater
than $100,000;
(vi) terminated or amended or suffered the termination or
amendment of, other than in the Ordinary Course of Business, failed to perform
in all material respects all of its obligations or suffered or permitted any
material default to exist under, any material agreement, license or permit;
(vii) suffered any damage, destruction or loss of tangible
property (whether or not covered by insurance) which in the aggregate exceeds
$100,000;
(viii) made any loan (other than intercompany advances) to any
other Person (other than advances to employees in the Ordinary Course of
Business which do not exceed $5,000 individually or $25,000 in the aggregate);
(ix) canceled, waived or released any debt, claim or right in an
amount or having a value exceeding $100,000;
(x) paid any amount to or entered into any agreement, arrangement
or transaction with any Affiliate (including its officers, directors and
employees) outside the Ordinary Course of Business and which was not approved
by a majority of the Company's disinterested directors;
(xi) declared, set aside, or paid any dividend or distribution
with respect to its capital stock or redeemed, purchased or otherwise acquired
any of its capital stock;
(xii) other than in the Ordinary Course of Business, granted any
increase in the compensation of any officer or employee or made any other
change in employment terms of any officer or employee;
(xiii) made any change in any method of accounting or accounting
practice;
(xiv) suffered or caused any other occurrence, event or
transaction outside the Ordinary Course of Business which could have a
Material Adverse Effect; or
(xv) agreed, in writing or otherwise, to any of the foregoing.
(b) Since the date of the Current Balance Sheet there has been no
Material Adverse Change.
4.7 Litigation. As of the date hereof no claim, suit, proceeding
or investigation is pending or, to the knowledge of the Company, threatened
against or affecting the Company or any Subsidiary or any officer or director
thereof or the Company's and the Subsidiaries' business which if decided
adversely to any such person could have a Material Adverse Effect.
4.8 Licenses, Compliance with Law, Other Agreements, Etc. The
Company and each Subsidiary have all material franchises, permits, licenses
and other rights to allow it to conduct its business and is not in violation,
in any material respects of any order or decree of any court, or of any law,
order or regulation of any Governmental Agency, or of the provisions of any
material contract or agreement to which it is a party or by which it is bound,
and neither this Agreement nor the Related Documents nor the transactions
contemplated hereby or thereby will result in any such violation except where
the failure to have any such franchise permit or license or any such violation
could not be expected to have a Material Adverse Effect. The Company's and
the Subsidiaries' business has been conducted in all material respects in
compliance with all federal, state and local laws, ordinances, rules and
regulations, except where such violations, defaults or noncompliance would not
have a Material Adverse Effect.
4.9 Third-Party Approvals. Assuming the accuracy of the
representations and warranties of the Purchasers contained in this Agreement,
the Company is not required to obtain any order, consent, approval or
authorization of, or to make any declaration or filing with, any Governmental
Agency or other third party (including under any state securities or "blue
sky" laws) in connection with the execution and delivery of this Agreement or
the Related Documents, or the consummation of the transactions contemplated
hereby or thereby to occur on the Closing Date or the Advance Closing Date,
except for any consents, approvals or authorizations the failure to obtain
which could not have a Material Adverse Effect.
4.10 No Undisclosed Liabilities. Neither the Company nor any
of its Subsidiaries has any Liabilities except (i) as and to the extent of the
amounts reflected or reserved against on the Current Balance Sheet (excluding
the footnotes thereto), (ii) liabilities and obligations incurred in the
Ordinary Course of Business since the date thereof, (iii) such other
liabilities that in the aggregate will not result in a Material Adverse
Effect, and (iv) Liabilities under the Credit Agreement (as defined therein).
4.11 Tangible Assets. The Company and its Subsidiaries own or
lease all tangible assets used or reasonably necessary in connection with the
conduct of its business. All material tangible assets are free from any Liens
(other than Permitted Liens), are free from any material defects, have been
maintained in accordance with normal industry practice and any regulatory
standard or procedure to which such assets are subject, are in good operating
condition and repair (subject to normal wear and tear) and are suitable for
the purposes for which such assets are used or proposed to be used, other than
liens, defects and wear and tear which in the aggregate could not be expected
to have a Material Adverse Effect.
4.12 Inventory. All inventory of the Company and its
Subsidiaries, whether reflected on the Current Balance Sheet or otherwise,
consists of a quality and quantity usable or salable in the Ordinary Course of
Business, subject to normal rates of defect or obsolescence not inconsistent
with the Company's historical experience.
4.13 Owned Real Property. The Company and its Subsidiaries own
no real property.
4.14 Real Property Leases. There exists no event of default
(nor any event which with notice or lapse of time would constitute an event of
default) with respect to the Company, any Subsidiary and, to the Company's
knowledge, with respect to any other party thereto under any agreement
pursuant to which the Company is the lessee or lessor of any real property,
except for such defaults and defects in enforceability as could not in the
aggregate be expected to have a Material Adverse Effect, and all such
agreements are in full force and effect and enforceable against the lessor or
lessee in accordance with their terms except for such defaults and defects in
enforceability as could not in the aggregate be expected to have a Material
Adverse Effect.
4.15 Agreements. Neither the Company nor any Subsidiary is in
default, nor to the knowledge of the Company is there any basis for a valid
claim of default, and to the Company's knowledge no event has occurred which,
with notice or lapse of time, would constitute a default, under any agreement,
arrangement or understanding to which the Company or any Subsidiary is a
party, and to the knowledge of the Company no other Person is in default under
any such agreement, in each case other than defaults which in the aggregate
could not be expected to have a Material Adverse Effect. Additionally,
neither the Company nor any Subsidiary is party to any agreement the
performance of which in accordance with its terms (including any termination
provision thereof) could be expected to have a Material Adverse Effect.
4.16 Intellectual Property. Schedule 4.16 sets forth a
complete list of (i) all patented, registered or applied for Intellectual
Property owned or filed by the Company; and (ii) all trade names and material
unregistered trademarks used by the Company in connection with its business.
The Company owns and possesses all right, title and interest in and to, or has
a valid and enforceable license to use, the Intellectual Property necessary
for the operation of its business as currently conducted and as currently
proposed to be conducted, and no claim by any third party contesting the
validity, enforceability, use or ownership of such Intellectual Property has
been made or, to the knowledge of the Company, is threatened. The Company has
not infringed or misappropriated the Intellectual Property of any third party.
4.17 Employees. Except as set forth on Schedule 4.17, since
the date of the Current Balance Sheet, no key employees and no group of
employees has terminated, or to the knowledge of the Company plans to
terminate, employment with the Company or any Subsidiary, as applicable.
Except as set forth on Schedule 4.17, the Company is not a party to or bound
by any collective bargaining agreement, nor has it experienced any strike,
material grievance, material claim of unfair labor practice or other
collective bargaining dispute. Except as set forth on Schedule 4.17, to the
knowledge of the Company there is no organizational effort being made or
threatened by or on behalf of any labor union with respect to its employees.
The Company has not committed any unfair labor practice or materially violated
any federal, state or local law or regulation regulating employers or the
terms and conditions of its employees' employment, including laws regulating
employee wages and hours, employment discrimination, employee civil rights,
equal employment opportunity and employment of foreign nationals, except for
such violations as could not be expected to have a Material Adverse Effect.
4.18 ERISA; Employee Benefits. Each Plan (other than a Plan
which is a "multiemployer plan" within the meaning of Section 4001(a)(3) of
ERISA) that is intended to be qualified under Section 401(a) of the Code has
received a favorable determination letter from the Internal Revenue Service or
has timely filed for a favorable determination letter from the Internal
Revenue Service and no event has occurred since the date of the last
determination letter that could reasonably be expected to materially adversely
affect the qualified status of such Plan. Each Plan (other than a Plan which
is a "multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA)
is in full force and effect and has been administered in all material respects
in accordance with its terms and is and has been, and each plan administrator
and fiduciary of a Plan is acting and has been acting, in compliance in all
material respects with all applicable requirements of the Code and ERISA
(including the funding, reporting and disclosure and prohibited transaction
provisions thereof) and other applicable laws, regulations and rulings in
connection with each such Plan. No Plan has been terminated or partially
terminated. With respect to each Plan which is a "multiemployer plan" within
the meaning of Section 4001(a)(3) of ERISA, no complete or partial withdrawal
(within the meaning of Sections 4203 and 4205 of ERISA) has occurred, no such
Plan is in reorganization or insolvency (within the meaning of Title IV of
ERISA) and no material withdrawal liability has been assessed against the
Company. The Company or one of its Subsidiaries has made, accrued or provided
for all contributions required under each Plan. To the knowledge of the
Company, no event has occurred or is reasonably expected to occur with respect
to any employee pension benefit plan of the Company or any member of the
Company's controlled group (within the meaning of Section 414 of the Code),
which could reasonably be expected to directly or indirectly result in any
material liability (other than liability arising in the ordinary course) to
the Company or any member of its controlled group pursuant to Title IV of
ERISA or Section 412 of the Code. No Plan (other than a Plan which is a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA) has
incurred an "accumulated funding deficiency" within the meaning of Section 412
of the Code or Section 302 of ERISA.
4.19 Environment, Health and Safety.
(a) The Company (as used in this Section 4.19, Company shall
include the Company's Subsidiaries and its predecessor) has complied and is in
compliance in all material respects with all Environmental and Safety
Requirements that are applicable to the Company's business.
(b) The Company has not received any written notice, report or
other information regarding any liabilities or potential liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise), including any
investigatory, remedial or corrective obligations, relating to the
Company or its facilities and arising under Environmental and Safety
Requirements.
(c) The Company has not, either expressly or by operation of law,
assumed or undertaken any liability, including without limitation any
obligation for corrective or remedial action, of any other person relating to
Environmental and Safety Requirements.
4.20 Transactions With Affiliates. Except as disclosed in
filings made by the Company with the SEC pursuant to the Securities Act and
the Exchange Act, neither the Company nor any Subsidiary is party to any
agreement, arrangement or transaction with any Affiliate which is material to
the Company's and its Subsidiaries business, taken as a whole.
4.21 Taxes.
(a) Each of the Company, its predecessor and its Subsidiaries has
filed all Tax Returns that it was required to file, and has paid all Taxes
shown thereon as owing, except where the failure to file Tax Returns or to pay
Taxes would not have a Material Adverse Effect on the financial condition of
the Company and its Subsidiaries taken as a whole.
(b) None of the Company and its Subsidiaries (A) has been a member
of an affiliated group filing a consolidated federal Tax Return (other than a
group the common parent of which was the Company) or (B) has any Liability for
the Taxes of any Person (other than any of the Company and its Subsidiaries)
under Treas. Reg. 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
(c) Each of the Company, its predecessor and its Subsidiaries has
withheld and paid all taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party.
(d) There is no dispute or claim concerning any Tax Liability of
any of the Company and its Subsidiaries either (A) claimed or raised by any
authority in writing or (B) as to which any of the directors and officers (and
employees responsible for Tax matters) of the Company and its Subsidiaries has
knowledge based upon personal contact with any agent of such authority and
which is material to the Company and its Subsidiaries taken as a whole.
4.22 Other Investors. Set forth on Schedule 4.22 is a list of
all shareholders of the Company who as of the date hereof, based upon Schedule
I hereto and SEC filings of shareholders, after giving effect to the terms
hereof, own more than 5% of the fully diluted common equity of the Company and
sets forth such percentage ownership.
4.23 Year 2000 Representations.
(a) None of the computer software, computer firmware, computer
hardware (whether general or special purpose) or other similar or related
items of automated, computerized or software systems that are used or relied
on by Company or by any of its Subsidiaries in the conduct of their respective
businesses will malfunction, will cease to function, will generate incorrect
data or will produce incorrect results when processing, providing or receiving
(i) date-related data from, into and between the twentieth and twenty-first
centuries or (ii) date-related data in connection with any valid date in the
twentieth and twenty-first centuries.
(b) None of the products and services sold, licensed, rendered, or
otherwise provided by the Company or by any of its Subsidiaries in the conduct
of their respective businesses will malfunction, will cease to function, will
generate incorrect data or will produce incorrect results when processing,
providing or receiving (i) date-related data from, into and between the
twentieth and twenty-first centuries or (ii) date-related data in connection
with any valid date in the twentieth and twenty-first centuries; and,
accordingly, neither the Company nor any of its Subsidiaries is or will be
subject to any claim, demand, action, suit, liability, damage, material loss,
or material expense arising from, or related to, circumstances where such
products and services malfunction, cease to function, generate incorrect data,
or produce incorrect results when processing, providing or receiving (i)
date-related data from, into and between the twentieth and twenty-first
centuries or (ii) date-related data in connection with any valid date in the
twentieth and twenty-first centuries.
(c) Neither the Company nor any of its Subsidiaries has made any
other representations or warranties regarding the ability of any product or
service sold, licensed, rendered, or otherwise provided by the Company or by
any of its Subsidiaries in the conduct of their respective businesses to
operate without malfunction, to operate without ceasing to function, to
generate correct data or to produce correct results when processing, providing
or receiving (i) date-related data from, into and between the twentieth and
twenty-first centuries and (ii) date-related data in connection with any valid
date in the twentieth and twenty-first centuries.
4.24 Seniority. No class of equity securities of the Company is
senior to the Preferred Shares in right of payment, whether upon liquidation,
dissolution or otherwise.
4.25 Investment Company. The Company is not, and is not
controlled by or under common control with an affiliate of, an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended.
4.26 Certain Fees. Other than fees and expenses due and payable
to Lehman Brothers, no fees or commissions will be payable by the Company to
any broker, financial advisor, finder, investment banker, or bank with respect
to the transactions contemplated by this Agreement. The Purchasers shall have
no obligation with respect to any fees or with respect to any claims made by
or on behalf of Lehman Brothers or other Persons for fees of a type
contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement. The Company shall indemnify and
hold harmless each of the Purchasers, its employees, officers, directors,
agents and partners, and their respective affiliates (as such term is defined
under Rule 405 promulgated under the Securities Act), from and against all
claims, losses, damages, costs (including the costs of preparation and
attorney's fees) and expenses suffered in respect to any such claimed or
existing fees.
4.27 Solicitation Materials. The Company has not (i) distributed
any offering materials in connection with the offering and sale of the
Preferred Shares other than the disclosure materials delivered to Purchasers
(the "Disclosure Materials") or (ii) solicited any offer to buy or sell the
Preferred Shares by means of any form of general solicitation or advertising.
None of the Disclosure Materials or any other information provided to the
Purchasers by or on behalf of the Company contain any untrue statement of
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading.
4.28 Form S-3 Eligibility. No later than May 1, 1998, the
Company will be eligible to register securities for resale with the SEC under
Form S-3 promulgated under the Securities Act.
4.29 Listing and Maintenance Requirements Compliance. (i) The
Company has not received notice (written or oral) from the American Stock
Exchange that the Company is not in compliance with the listings or
maintenance requirements of such Exchange.
(ii) Upon conversion of the Preferred Shares into shares of Common Stock
and upon the affirmative vote of the Company's shareholders approving the
issuance of the Preferred Shares and the Conversion Shares, which vote shall
occur not later than July 31, 1998, all Conversion Shares shall be listed on
the American Stock Exchange.
4.30 Registration Rights; Rights of Participation. Except as
described on Schedule 4.30 hereto, (A) the Company has not granted or agreed
to grant to any Person any rights (including "piggy-back" registration rights)
to have any securities of the Company registered with the SEC or any other
governmental authority which has not been satisfied and (B) no Person,
including, but not limited to, current or former shareholders of the Company,
underwriters, brokers or agents, has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the
transactions contemplated by this Agreement or any other related document
which has not been waived.
4.31 Recent Results of Operations. Set forth on Schedule 4.31
is (i) the Company's monthly recurring revenues for the month of December 1997
and (ii) the Company's number of subscribers as of December 31, 1997, each as
prepared and calculated in the Ordinary Course of Business.
4.32 Small Business Matters. The Company acknowledges that each
SBIC Holder is a federally licensed SBIC under the SBIC Act. The Company,
together with its "affiliates" (as that term is defined in 13 CFR 121.103),
is a "small business concern" within the meaning of the SBIC Regulations,
including 13 CFR 121.301. The information regarding the Company and its
affiliates set forth in SBA Form 480, Form 652 and Parts A and B of Form 1031
delivered at the Closing will be accurate and complete. Neither the Company
nor any of its subsidiaries will use the proceeds of the Financing directly or
indirectly for any purpose, for which an SBIC is prohibited from providing
funds by SBIC Regulations (including 13 CFR 107.720).
Article V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby represents and warrants to the Company as
follows:
5.1 Authorization and Enforceability. Such Purchaser has taken
all action necessary to permit it to execute and deliver this Agreement and
the other documents and instruments to be executed by it pursuant hereto and
to carry out the terms hereof and thereof. This Agreement and each such other
document and instrument, when duly executed and delivered by such Purchaser,
will constitute a valid and binding obligation of such Purchaser, enforceable
against such Purchaser in accordance with its terms.
5.2 Government Approvals. Such Purchaser is not required to obtain
any order, consent, approval or authorization of, or to make any declaration
or filing with, any Governmental Agency in connection with the execution and
delivery of this Agreement and the other documents and instruments to be
executed by it pursuant hereto or the consummation of the transactions
contemplated hereby and thereby, except for such order, consent, approval,
authorization, declaration or filing as which has been or will be obtained or
made.
Article VI
COMPLIANCE WITH SECURITIES LAWS
6.1 Investment Intent of Purchasers. Each Purchaser represents
and warrants to the Company that it is acquiring the Preferred Shares for its
own account, with no present intention of selling or otherwise distributing
the same to the public.
6.2 Status of Preferred Shares. Each Purchaser has been informed
by the Company that the Preferred Shares have not been and will not be
registered under the Securities Act or under any state securities laws and are
being offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering.
6.3 Sophistication and Financial Condition of Purchaser. Each
Purchaser represents and warrants to the Company that it is an "Accredited
Investor" as defined in Regulation D under the Securities Act and that it
considers itself to be an experienced and sophisticated investor and to have
such knowledge and experience in financial and business matters as are
necessary to evaluate the merits and risks of an investment in the Preferred
Shares.
6.4 Transfer of Preferred Shares and Conversion Shares.
(a) Preferred Shares and Conversion Shares may be transferred
pursuant to (i) public offerings registered under the Securities Act, (ii)
Rule 144 of the SEC (or any similar rule then in force), (iii) to an
Affiliate of the transferor, or (iv) subject to the conditions set forth in
Section 6.4(b), any other legally-available means of transfer.
(b) In connection with any transfer of any Preferred Shares or
Conversion Shares (other than a transfer described in Section 6.4(a)(i), (ii)
or (iii)), the holder of such shares shall deliver written notice to the
Company describing in reasonable detail the proposed transfer, together with
an opinion of counsel (Kirkland & Ellis or such other counsel which, to the
Company's reasonable satisfaction, is knowledgeable in securities law matters)
to the effect that such transfer may be effected without registration of such
shares under the Securities Act. The holder of the shares being transferred
shall not consummate the transfer until (i) the prospective transferee has
confirmed to the Company in writing its agreement to be bound by the
provisions of this Section 6.4 or (ii) such holder shall have delivered to the
Company an opinion of such counsel that no subsequent transfer of such
Preferred Shares or Conversion Shares shall require registration under the
Securities Act. Promptly upon receipt of any opinion described in clause (ii)
of the preceding sentence, the Company shall prepare and deliver in connection
with the consummation of the proposed transfer, new certificates for the
Preferred Shares or Conversion Shares being transferred that do not bear the
legend set forth in Section 6.4(c). Notwithstanding anything to the contrary
contained herein, Preferred Shares may not be transferred to any of the
Company's competitors listed on Schedule 6.4(b) hereto without the Company's
written consent (other than pursuant to clauses (a)(i) or (a)(ii) above or a
tender offer made to each holder of the Company's Common Stock).
(c) Except as provided in Section 6.4(b), until transferred
pursuant to clauses (a)(i) or (a)(ii) above, each certificate for Preferred
Shares or Conversion Shares shall be imprinted with a legend substantially in
the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY
ISSUED ON FEBRUARY 2, 1998 [OR FEBRUARY 13, 1998 IN THE CASE OF PREFERRED
SHARES ISSUED ON THE ADVANCE CLOSING DATE] AND HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED OR ANY APPLICABLE STATE SECURITIES LAW.
THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
THE CONDITIONS SET FORTH IN THE PREFERRED STOCK PURCHASE AGREEMENT DATED AS OF
FEBRUARY 2, 1998 BETWEEN THE ISSUER (THE "COMPANY") AND THE PURCHASERS LISTED
ON SCHEDULE I THERETO. THE COMPANY RESERVES THE RIGHT TO REFUSE ANY TRANSFER
OF SUCH SECURITIES UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO
SUCH TRANSFER. A COPY OF SUCH CONDITIONS SHALL BE FURNISHED WITHOUT CHARGE TO
THE HOLDER HEREOF UPON WRITTEN REQUEST TO THE COMPANY.
6.5 Exculpation Among Purchasers. Each Purchaser acknowledges
that it is not relying upon any person, firm or corporation (including without
limitation any other Purchaser), other than the Company and its officers and
directors, in making its investment or decision to invest in the Company.
Each Purchaser agrees that no other Purchaser (acting in such capacity) nor
the respective controlling persons, officers, directors, partners, agents or
employees of any such other Purchaser shall be liable to any other Purchaser
in connection with this investment for any action taken or omitted to be taken
by any of them prior to the date hereof in connection with the Preferred
Shares.
Article VII
CONDITIONS PRECEDENT
7.1 Closing Deliveries to the Purchasers. The following documents
and items shall be delivered to the Purchasers at or prior to the Closing:
(a) Evidence acceptable to the Purchasers of adoption by the
Company of the Certificate of Designations;
(b) A fully executed and delivered counterpart of the Registration
Rights Agreement;
(c) The written opinion of Robinson & Cole LLP, counsel for the
Company, in the form of Exhibit D hereto dated as of the Closing Date;
(d) certificates of a duly authorized officer of the Company dated
as of the Closing Date:
(A) stating that the following conditions have been satisfied as
of the Closing Date,
(i) the representations and warranties of the Company contained
herein and in any writing delivered pursuant hereto shall be true and correct
when made and at and as of the time of the Closing;
(ii) No action, suit, investigation or proceeding shall be
pending or threatened before any court or Governmental Agency to restrain,
prohibit, collect damages as a result of or otherwise challenge this Agreement
or any Related Document or any transaction contemplated hereby or thereby;
(iii) All acts or covenants required hereunder to be performed
by the Company prior to the Closing shall have been fully performed by it;
(iv) No Material Adverse Change shall have occurred between the
date of the Current Balance Sheet and the Closing Date; and
(B) setting forth the resolutions of the board of directors of the
Company authorizing the execution and delivery of this Agreement and the
Related Documents (including the Certificate of Designations) and the
consummation of the transactions contemplated hereby and thereby and
certifying that such resolutions were duly adopted and have not been rescinded
or amended;
(e) such other documents relating to the transactions contemplated
hereby as Advance or other Purchasers may reasonably request; and
(f) to each SBIC Holder, (i) duly completed and executed SBA
Forms 480, 652 and Parts A and B of 1031, and
(ii) a written certification from the Company regarding its
intended use of the proceeds of the Financing.
7.2 Closing Deliveries to the Company. At Closing, each Purchaser
other than Advance will deliver to the Company the aggregate purchase price
for the Preferred Shares purchased by it. At the Advance Closing, Advance
will deliver to the Company the aggregate purchase price for the Preferred
Shares purchased by it.
Article VIII
COVENANTS OF THE COMPANY
8.1 Restricted Actions. Without the prior written consent of the
holders of two-thirds of the then outstanding Preferred Shares the Company
shall not, and shall not permit any Subsidiary to:
(a) become subject to any agreement or instrument which by its
terms would (under any circumstances) restrict the Company's right to comply
with the terms of this Agreement or any of the Related Documents;
(b) use the proceeds from the sale of the Preferred Shares other
than (i) primarily for acquisitions of assets or businesses reasonably related
to the Company's existing business, and repayment of indebtedness, and (ii)
the remainder for other working capital purposes of the Company;
(c) enter into any transaction or series of transactions with any
stockholder, director, officer, employee or Affiliate which would require
disclosure pursuant to Rule 404 of Regulation S-K under the Securities Act
unless such transaction is approved by the Company's disinterested directors;
or
(e) expand the Company's Board of Directors to greater than nine
members.
8.2 Required Actions. For so long as at least 20% of the
Preferred Shares remain outstanding, the Company shall, and shall cause each
Subsidiary to:
(a) cause all properties owned by the Company or any of its
Subsidiaries or used or held for use in the conduct of its business or the
business of any of its Subsidiaries to be maintained and kept in good
condition, repair and working order (reasonable wear and tear excepted) and
supplied with all necessary equipment and will cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as
in the judgment of the Board of Directors may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that the foregoing shall not
prevent the Company from discontinuing the maintenance of any of such
properties if such discontinuance is, in the judgment of the management of the
Company, desirable in the conduct of its business or the business of any of
its Subsidiaries and is not disadvantageous in any material respect to the
holders of Preferred Shares;
(b) preserve and keep in full force and effect the corporate
existence, rights (charter and statutory), licenses and franchises of the
Company and each of its Subsidiaries; provided, however, that the Company
shall not be required to preserve any such right, license or franchise if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries
as a whole and that the loss thereof is not disadvantageous in any material
respect to the holders of Preferred Shares;
(c) maintain the books, accounts and records of the Company and
its Subsidiaries in accordance with past custom and practice as used in the
preparation of the Financial Statements except to the extent permitted or
required by GAAP;
(d) keep all of its and its Subsidiaries' properties which are of
an insurable nature insured with insurers, believed by the Company in good
faith to be financially sound and responsible, against loss or damage to the
extent that property of similar character is usually so insured by
corporations similarly situated and owning like properties (which may include
self-insurance, if reasonable and in comparable form to that maintained by
companies similarly situated);
(e) comply with all material legal requirements and material
contractual obligations applicable to the operations and business of the
Company and its Subsidiaries and pay all applicable Taxes as they become due
and payable;
(f) permit representatives of the holders of Preferred Shares
(upon the request of holders of Preferred Shares aggregating 12.5% or more of
the Preferred Shares originally issued hereunder) and their agents (including
their counsel, accountants and consultants) to have reasonable access during
business hours to the Company's books, records, facilities, key personnel,
officers, directors, customers, independent accountants and legal counsel;
(g) at all times file all reports (including annual reports,
quarterly reports and the information, documentation and other reports)
required to be filed by the Company under the Exchange Act and Sections 13 and
15 of the rules and regulations adopted by the SEC thereunder, and the Company
shall use its best efforts to file each of such reports on a timely basis, and
take such further action as any holder or holders of Securities may reasonably
request, all to the extent required to enable such holders to sell Securities
pursuant to Rule 144 adopted by the SEC under the Securities Act (as such rule
may be amended from time to time) or any similar rule or regulation hereafter
adopted by the SEC and to enable the Company to register securities with the
SEC on Form S-3 or any similar short-form registration statement and upon the
filing of each such report deliver a copy thereof to each holder of the
Preferred Shares (or, if the Company is no longer subject to the requirements
of the Exchange Act, provide reports in substantially the same form and at the
same times as would be required if it were subject to the Exchange Act);
(h) maintain at all times a valid listing for the Common Stock on
a national securities exchange or the Nasdaq National Market System;
(i) maintain all material Intellectual Property Rights necessary
to the conduct of its business and own or have a valid license to use all
right, title and interest in and to, such material Intellectual Property
Rights;
(j) within fifteen (15) days after the Advance Closing Date (but
not before) and at each subsequent election of directors, (and each Purchaser
agrees to use its best efforts) elect to the Board of Directors of the Company
pursuant to Section 5A of the Certificate of Designations (x) one individual
designated by Advance as long as Advance owns any Preferred Shares and (y) one
individual elected by the holders of a plurality of the Series A Preferred and
Series B Preferred, voting together as a single class; and
(k) on the Closing Date, have executed and delivered the Credit
Agreement on substantially the same principal terms and conditions as set
forth in the commitment letter issued by the lenders a party thereto dated
January 7, 1998; and
(l) deliver Conversion Shares in accordance with the terms and
conditions, and time periods, set forth in the Certificate of Designations.
8.3 Reservation of Common Stock. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purposes of issuance upon conversion of the Preferred
Shares, such number of shares of Common Stock as are issuable upon the
conversion of all outstanding shares of the Preferred Shares. All shares of
Common Stock which are so issuable shall, when issued, be duly and validly
issued, fully paid and nonassessable and free from all Taxes, liens and
charges. The Company shall take all such actions as may be necessary to
assure that all such shares of Common Stock may be so issued without violation
of any applicable law or governmental regulation or any requirements of any
domestic securities exchange upon which shares of Common Stock may be listed
(except for official notice of issuance which shall be immediately transmitted
by the Company upon issuance).
8.4 Purchasers' Rights if Trading in Common Stock is Suspended or
Delisted. If at any time while any Purchaser (or any assignee thereof) owns
any Preferred Shares or Conversion Shares, trading in the shares of the Common
Stock is suspended on or delisted from the American Stock Exchange or any
other principal market or exchange for such shares (other than as a result of
the suspension of trading in securities on such market or exchange generally
or temporary suspensions pending the release of material information) for more
than five business days in the aggregate, at the option of any Purchaser
exercisable by written notice to the Company delivered after such suspension
or delisting, the Company shall redeem, in cash, one-twentieth of the
Preferred Shares and Conversion Shares then held by such Purchaser, at an
aggregate purchase price equal to the sum of (i) the number of Preferred
Shares to be redeemed multiplied by the product of (1) the average per share
market value for the five (5) business days immediately preceding (a) the day
of such notice or (b) the date of payment in full of the redemption price
calculated under this Section, whichever is greater and (2) a fraction, the
numerator of which is 1,000 and the denominator of which is the Conversion
Price on (a) the date of the repurchase notice, or (b) the date of payment in
full of the redemption price pursuant to this Section, whichever is lower,
(ii) the aggregate of all accrued but unpaid dividends payable in respect of
all Preferred Shares to be redeemed, (iii) the number of Conversion Shares
then held by such Purchaser multiplied by the average per share market value
for the five (5) business days immediately preceding (A) the date of the
notice or (B) the date of payment in full by the Company of the redemption
price calculated under this Section, whichever is greater, and (iv) interest
on the amounts set forth in (i) - (iii) above accruing from the 5th business
day after such notice until the repurchase price under this Section is paid in
full at the rate of 14% per annum. The Company shall provide written notice
of any redemption demand made pursuant to this Section to each other holder of
Preferred Shares or Conversion Shares within 24 hours of its receipt thereof.
8.5 Use of Proceeds. At the same time the Company files its
annual report on Form 10-K and at such other times as any SBIC Holder
reasonably requests, the Company shall deliver to each SBIC Holder a written
statement certified by the Company's president or chief financial officer
describing in reasonable detail the use of the proceeds of the Financing
hereunder by the Company and its Subsidiaries. In addition to any other
rights granted hereunder, the Company shall grant such SBIC Holder and the SBA
access to the Company's books and records for the purpose of verifying the use
of such proceeds and verifying the certifications made by the Company in SBA
Forms 480 and 652 delivered pursuant to Section 7.1(f) above and for the
purpose of determining whether the principal business activity of the Company
and its Subsidiaries continues to constitute an eligible business activity
(within the meaning of the SBIC Regulations).
Article IX
SURVIVAL
9.1 Survival. The representations and warranties of the parties
hereto contained herein, or in any writing delivered pursuant hereto, shall
survive the Closing and expire 30 days following the filing of the Company's
annual report on Form 10-K with the SEC for the Company's fiscal year that
ends in 1999, except that, notwithstanding anything to the contrary contained
herein, the representations of the Company contained in Section 4.23 hereof
shall survive the Closing and expire on December 31, 2001.
Article X
INDEMNIFICATION
10.1 Indemnification. In consideration of each Purchaser's
execution and delivery of this Agreement and acquiring the Preferred Stock
hereunder and in addition to all of the Company's other obligations under this
Agreement, the Company shall defend, protect, indemnify and hold harmless each
Purchaser and each other holder of Preferred Stock and all of their officers,
directors, employees and agents (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses (including, without limitation, costs of suit and
attorneys' fees and expenses) in connection therewith (irrespective of whether
any such Indemnitee is a party to the action for which indemnification
hereunder is sought) (the "Indemnified Liabilities"), incurred by the
Indemnitees or any of them as a result of, or arising out of, or relating to
(a) the breach of any representation of warranty contained in any agreement
relating to any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Preferred
Stock, (b) the execution, delivery, performance or enforcement of this
Agreement and any other instrument, document or agreement executed pursuant
hereto by any of the Indemnitees or (c) resulting from any breach of any
representation, warranty, covenant or agreement made by the Company herein or
in any Related Document. The Company shall reimburse the Indemnitees for the
Indemnified Liabilities as such Indemnified Liabilities are incurred. To the
extent that the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law.
Article XI
GENERAL PROVISIONS
11.1 Successors and Assigns. This Agreement shall bind and
inure to the benefit of the parties hereto and their respective successors and
assigns, including each subsequent holder of Preferred Shares or Conversion
Shares. Except as otherwise specifically provided herein, this Agreement
shall not be assignable by any party without the prior written consent of the
other parties hereto.
11.2 Entire Agreement. This Agreement and the other writings
referred to herein or delivered pursuant hereto constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior arrangements or understandings.
11.3 Notices. All notices, requests, consents and other
communications provided for herein shall be in writing and shall be (i)
delivered in person, (ii) transmitted by telecopy, (iii) sent by first-class,
registered or certified mail, postage prepaid, or (iv) sent by reputable
overnight courier service, fees prepaid, to the recipient at the address or
telecopy number set forth below, or such other address or telecopy number as
may hereafter be designated in writing by such recipient. Notices shall be
deemed given upon personal delivery, seven days following deposit in the mail
as set forth above, upon acknowledgment by the receiving telecopier or one day
following deposit with an overnight courier service.
(a) If to the Company:
Alarmguard Holdings, Inc. 125 Frontage Road Orange, Connecticut
06477 Telecopy: (203) 799-9636 Attention: Russell R. MacDonnell
with a copy to:
Robinson & Cole LLP 695 East Main Street Stamford, Connecticut
06904 Telecopy: (203) 462-7599 Attention: Richard A. Krantz, Esq.
(b) If to Advance:
Advance Capital Partners, L.P. 660 Madison Avenue 15th Floor New
York, New York 10021 Telecopy: (212) 835-2020 Attention: Robert A.
Bernstein
with a copy to:
Kirkland & Ellis 153 East 53rd Street New York, New York 10022
Telecopy: (212) 446-4900 Attention: Joshua N. Korff, Esq.
(c) If to any other Purchaser to the address set forth opposite
such Purchaser's name on Schedule I hereto.
11.4 Purchasers Fees and Expenses. The Company shall reimburse
the Purchasers for the reasonable fees and expenses of Kirkland & Ellis
incurred in connection with the documentation, negotiation and consummation of
the transactions contemplated by this Agreement and the Related Documents
(including any future amendments or waivers thereto) and for reasonable due
diligence expenses incurred by the Purchasers.
11.5 Amendment and Waiver. No amendment of any provision of
this Agreement shall be effective, unless the same shall be in writing and
signed by the Company and the holders of two-thirds of the Preferred Shares
and Conversion Shares held by holders of Series A Preferred and Series B
Preferred, taken together. Any failure of the Company to comply with any
provision hereof may only be waived in writing by the holders of two-thirds of
the Preferred Shares and Conversion Shares held by holders of Series A
Preferred and Series B Preferred, taken together, and any failure of any
holder of Preferred Shares or Conversion Shares to comply with any provision
hereof may only be waived in writing by the Company. No such waiver shall
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. No failure by any party to take any action against any breach of
this Agreement or default by any other party shall constitute a waiver of such
party's right to enforce any provision hereof or to take any such action.
Notwithstanding anything to the contrary contained herein, no amendment to or
waiver of Section 8.2(j) without the prior written consent of Advance shall be
permitted. No amendment of any provision of this Agreement shall be effective
prior to the Advance Closing.
11.6 Like Treatment of Holders. Neither the Company nor any of
its affiliates shall, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee, payment for the redemptions or
exchange of Preferred Shares, or otherwise, to any holder of Preferred Shares,
for or as an inducement to, or in connection with the solicitation of, any
consent, waiver or amendment of any terms or provisions of the Preferred
Shares or this Agreement or the Registration Rights Agreement, unless such
consideration is required to be paid to all holders of Preferred Shares bound
by such consent, waiver or amendment whether or not such holders so consent,
waive or agree to amend and whether or not such holders tender their Preferred
Shares for redemption or exchange. The Company shall not, directly or
indirectly, redeem any Preferred Shares unless such offer of redemption is
made pro rata to all holders of Preferred Shares on identical terms.
11.7 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one agreement.
11.8 Headings. The headings of the various sections of this
Agreement have been inserted for reference only and shall not be deemed to be
a part of this Agreement.
11.9 Specific Performance. The Company, on the one hand, and
the Purchasers, on the other hand, acknowledge that money damages would not be
a sufficient remedy for any breach of this Agreement. It is accordingly
agreed that the parties shall be entitled to specific performance and
injunctive relief as remedies for any such breach, these remedies being in
addition to any of the remedies to which they may be entitled at law or
equity.
11.10 Remedies Cumulative. Except as otherwise provided herein,
the remedies provided herein shall be cumulative and shall not preclude the
assertion by any party hereto of any other rights or the seeking of any other
remedies against any other party hereto.
11.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL SUBSTANTIVE LAWS OF THE STATE OF NEW
YORK WITHOUT GIVING EFFECT TO THE LAWS OF CONFLICT OR CHOICE OF LAWS OF THE
STATE OF NEW YORK OR OF ANY OTHER JURISDICTION THAT WOULD RESULT IN THE
APPLICATION OF ANY LAWS OTHER THAN THOSE OF THE STATE OF NEW YORK.
11.12 No Third Party Beneficiaries. Except as specifically set
forth or referred to herein, nothing herein is intended or shall be construed
to confer upon any person or entity other than the parties hereto and their
successors or assigns, any rights or remedies under or by reason of this
Agreement.
11.13 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
* * * * *
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Agreement as of the date first above written.
ALARMGUARD HOLDINGS, INC.
By:
Name:
Title:
ADVANCE CAPITAL PARTNERS, L.P.
By: Advance Capital Associates, L.P.,
its General Partner
By: Advance Capital Management, LLC,
its General Partner
By:
Name: Robert A. Bernstein
Title: Principal
ADVANCE CAPITAL OFFSHORE
PARTNERS, L.P.
By: Advance Capital Offshore
Associates, LDC,
its General Partner
By: Advance Capital Associates, L.P.,
its Sole Director
By: Advance Capital Management, LLC,
its General Partner
By:
Name: Robert A. Bernstein
Title: Principal
CANAAN EQUITY, L.P.
By: Canaan Equity Partners, L.L.C.
By:
Name: Stephen L. Green
Title: Member/Manager
EXETER CAPITAL PARTNERS IV, L.P.
By: Exeter IV Advisors, L.P.
its General Partner
By: Exeter IV Advisors, Inc.,
its General Partner
By:
Name: Keith R. Fox
Title: President
LB I GROUP INC.
By:
Name: Alan H. Washkowitz
Title: Senior Vice President
ELLIOTT ASSOCIATES, L.P.
By:
Name: Paul E. Singer
Title: General Partner
WESTGATE INTERNATIONAL, L.P.
By: Martley International, Inc.
as Attorney-in-Fact
By:
Name: Paul E. Singer
Title: President
ZIFF ASSET MANAGEMENT, L.P.
By:
Name: Philip B. Korsant
Title: President
OZ MASTER FUND, LTD.
By:
Name: Daniel S. Och
Title: Managing Member
OZ Management, L.L.C.
IBJS CAPITAL CORPORATION
By:
Name: Kevin P. Falvey
Title: Director
CREDIT SUISSE (GUERNSEY) LIMITED
as trustee of the Dynamic Growth
Fund II
By:
Name: M. E. Zunino
Title: Associate
AETNA LIFE INSURANCE COMPANY
By:
Name: Alan Vartelas
Title: Assistant Vice President
GRANITE PROPERTIES MANAGEMENT CORP.
By:
Name: Daren J. Wells
Title: Director, Private Equity
By:
Name: Paul Finkelstein
<PAGE>
Exhibit 2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of
February 2, 1998, between Alarmguard Holdings, Inc., a Delaware
corporation (the "Company"), and the Purchasers listed on Schedule I
hereto (each a "Purchaser" and collectively, the "Purchasers").
RECITALS:
(a) The Purchasers and the Company have entered into a
Preferred Stock Purchase Agreement, dated as of the date hereof (the
"Stock Purchase Agreement") (each capitalized term used herein and not
otherwise defined shall have the meaning ascribed to such term in the
Stock Purchase Agreement), pursuant to which the Purchasers are
simultaneously with the execution hereof purchasing from the Company the
number of shares of Series A Preferred or Series B Preferred (collectively
referred to herein as the "Preferred Shares") of the Company set forth
opposite its name on Schedule I hereto except that Advance will purchase
the Preferred Shares to be purchased by it as of the Advance Closing Date.
(b) As of the date hereof, the Preferred Shares purchased by
the Purchasers pursuant to the Stock Purchase Agreement entitles the
holder thereof to receive, upon the conversion thereof, the number of
shares of Common Stock as are set forth opposite its name on Schedule I,
which number of shares are subject to adjustment as set forth in the
provisions of the Certificate of Amendment to the Second Amended and
Restated Certificate of Incorporation (the "Certificate of
Incorporation").
(c) The Company desires to grant the Purchasers certain
registration rights with respect to the Common Stock.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. Demand Registrations.
(a) Requests for Registration. Subject to paragraph 1(b)
below, the holders at any time of at least 50% of the Registrable
Securities may request at any time registration under the Securities Act
of 1933, as amended (the "Securities Act"), of all or part of their
Registrable Secur- ities on Form S-1 or any similar long-form registration
("Long-Form Registrations"), and each holder of Registrable Securities may
request registration under the Securities Act of all or part of their
Registrable Securities on Form S-2 or S-3 or any similar short-form
registration ("Short-Form Registrations") if available. Each request for a
Demand Registration shall specify the approximate number of Registrable
Securities requested to be registered and the anticipated per share price
range for such offering. Within ten days after receipt of any such
request, the Company will give written notice of such requested
registration to all other holders of Registrable Securities and will
include in such registration all Registrable Securities with respect to
which the Company has received written requests for inclusion therein
within 15 days after the receipt of the Company's notice. All
registrations requested pursuant to this paragraph 1(a) are referred to
herein as "Demand Regis- trations".
(b) Long-Form Registrations. Subject to paragraph 1(a), the
holders of Regis- trable Securities will be entitled at any time to
request Long-Form Registrations in which (subject to Section 5(b)) the
Company will pay all Registration Expenses ("Company-paid Long-Form
Registrations"); provided that the holders of Registrable Securities may
not request more than two (2) Long-Form Registrations (each a "Demand
Long-Form Registration," and each of which shall be a Company-paid
Long-Form Registration), such number to be reduced by the number of
previously consummated Demand Long-Form Registrations. A registration
will not count as one of the permitted Demand Long-Form Registrations
until it has become effective, and no Company-paid Long-Form Registration
will count as one of the permitted Demand Long-Form Registrations unless
the holders of Registrable Securities are able to register and sell at
least 85% of the Registrable Securities requested to be included in such
registration; provided that in any event the Company will pay all
Registration Expenses in connection with any registration initiated as a
Company-paid Long-Form Registration whether or not it has become
effective.
(c) Short-Form Registrations. In addition to the Long-Form
Registrations provided pursuant to paragraph 1(b), each holder of
Registrable Securities will be entitled to request a Short Form
Registration (provided that the holders may only request up to two (2)
Short-Form Registrations in any twelve-month period, which number shall be
reduced by the number of previously consummated Demand Short-Form
Registrations in such twelve-month period) in which the Company will pay
all Registration Expenses. Demand Registrations will be Short-Form
Registrations whenever the Company is permitted to use any applicable
short form. The Company will use its best efforts to make Short-Form
Registrations on Form S-3 available for the sale of Registrable
Securities. The holders of Registrable Securities agree that they will
not request a Long-Form Registration when the Company is eligible to use a
Short-Form Registration; provided that the Company agrees to include in
the prospectus included in any Short-Form Registration Statement, such
material describing the Company and intended to facilitate the sale of
securities being so registered as is reasonably requested for inclusion
therein by any of the shareholders selling securities pursuant to such
registration statement, whether or not the form used for such registration
statement requires the inclusion of such information.
(d) Priority on Demand Registrations. The Company will not
include in any Demand Registration any securities which are not
Registrable Securities without the prior written consent of the holders of
at least 50.1% of the Registrable Securities included in such
registration. If a Demand Registration is an underwritten offering and
the managing underwriters advise the Company in writing that in their
opinion the number of Registrable Securities and, if permitted hereunder,
other securities requested to be included in such offering exceeds the
number of Registrable Securities and other securities, if any, which can
be sold therein without adversely affecting the marketability of the
offering, the Company will include in such registration prior to the
inclusion of any securities which are not Registrable Securities the
number of Registrable Securities requested to be included which in the
opinion of such underwriters can be sold without adversely affecting the
marketability of the offering, pro rata among the respective holders
thereof on the basis of the number of Registrable Securities owned by each
holder participating in such offering.
(e) Restrictions on Long-Form Registrations and Demand
Registrations. The Company will not be obligated to effect any Demand
Long-Form Registration during the period starting with the date thirty
(30) days prior to the Company's good faith estimate of the date of filing
of, and ending on a date one hundred and twenty (120) days after the
effective date of, a Company-initiated registration; provided that the
Company is actively employing in good faith all reasonable efforts to
cause such registration statement to become and remain effective. The
Company will not be obligated to effect any Demand Long-Form Registration
within six (6) months after the effective date of a previous Long-Form
Registration. The Company may postpone for up to six (6) months the
filing or the effectiveness of a registration statement for a Demand
Registration if the Company and the holders of at least 66.67% of the
Registrable Securities to be covered thereby agree that such Demand
Registration would reasonably be expected to have an adverse effect on any
proposal or plan by the Company or any of its subsidiaries to engage in
any acquisition of assets (other than in the ordinary course of business)
or any merger, consolidation, tender offer or similar transaction;
provided that in such event, the holders of Registrable Securities
initially requesting such Demand Registration will be entitled to withdraw
such request and such Demand Registration will not count as one of the
permitted Demand Registrations hereunder and the Company will pay all
Registration Expenses in connection with such registration. The Company
will not be obligated to effect any Demand Long-Form Registration unless
the anticipated aggregate offering price, net of underwriting discounts
and commissions, of the Common Stock to be included in such Demand
Long-Form Registration equals more than ten million dollars ($10,000,000).
(f) Other Registration Rights. Except as provided in this
Agreement, the Company shall not grant to any Persons the right to request
the Company to register any equity securities of the Company, or any
securities convertible or exchangeable into or exercisable for such
securities, without the prior written consent of the holders of at least
66.67% of the Registrable Securities; provided that the Company may grant
rights to employees of the Company and its Subsidiaries to participate in
Piggyback Registrations so long as such rights are subordinate to the
rights of the holders of Registrable Securities with respect to such
Piggyback Registrations as provided in paragraphs 2(c) and 2(d) below.
(g) Selections of Underwriters. If any Demand Registration is
an underwritten offering, the selection by the Company of investment
banker(s) and manager(s) for the Offering must be approved by the holders
of a majority of the Registrable Securities included in such Demand
Registration. Such approval will not be unreasonably withheld.
2. Piggyback Registrations.
(a) Right to Piggyback. Whenever the Company proposes to
register any of its securities under the Securities Act (other than
pursuant to (i) a Demand Registration, (ii) a registration in connection
with shares issued by the Company in connection with the acquisition of
any company or companies or (iii) a registration solely of shares that
have been issued pursuant to the Company's employee benefit plans) and the
registration form to be used may be used for the registration of
Registrable Securities (a "Piggyback Registration"), the Company will give
prompt written notice to all holders of Registrable Securities of its
intention to effect such a registration and will include in such
registration all Registrable Securities with respect to which the Company
has received written requests for inclusion therein within 15 days after
the receipt of the Company's notice.
(b) Piggyback Expenses. Subject to Section 5(b), the
Registration Expenses of the holders of Registrable Securities will be
paid by the Company in all Piggyback Registrations. (c)
Priority on Primary Registrations. If a Piggyback Registration is an
underwritten primary registration on behalf of the Company, and the
managing underwriters advise the Company in writing that in their opinion
the number of securities requested to be included in such registration
exceeds the number which can be sold in such offering without adversely
affecting the marketability of the offering, the Company will include in
such registration (i) first, the securities the Company proposes to sell,
(ii) second, the Registrable Securities requested to be included in such
registration, pro rata among the holders of such Registrable Securities on
the basis of the number of Registrable Securities owned by each holder of
Registrable Securities participating in such offering, and (iii) third,
other securities requested to be included in such registration; provided
that in any event the holders of Registrable Securities shall be entitled
to register at least 20% of the securities to be included in any such
registration.
(d) Priority on Secondary Registrations. If a Piggyback
Registration is an underwritten secondary registration on behalf of
holders of the Company's securities, and the managing underwriters advise
the Company in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number which can
be sold in such offering without adversely affecting the marketability of
the offering, the Company will include in such registration (i) first, the
Registrable Securities requested to be included in such registration, pro
rata among the holders of such Registrable Securities on the basis of the
number of Registrable Securities owned by each holder of Registrable
Securities participating in such offering, and (ii) second other
securities requested to be included in such registration.
(e) Selection of Underwriters. If any Piggyback Registration
is an underwritten offering, the selection by the Company of investment
banker(s) and manager(s) for the offering must be approved by the holders
of a majority of the Registrable Securities included in such Piggyback
Registration. Such approval will not be unreasonably withheld.
(f) Other Registrations. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to
Paragraph 1 or pursuant to this Paragraph 3, and if such previous
registration has not been withdrawn or abandoned, the Company will not
file or cause to be effected any other registration of any of its equity
securities or securities convertible or exchangeable into or exercisable
for its equity securities under the Securities Act (except on Form S-8 or
any successor form), whether on its own behalf or at the request of any
holder or holders of such securities, until a period of at least six
months has elapsed from the effective date of such previous registration.
3. Holdback Agreements.
(a) Each holder of Registrable Securities agrees not to effect
any public sale or distribution (including sales pursuant to Rule 144) of
equity securities of the Company, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days
prior to and the ninety (90)-day period beginning on the effective date of
any underwritten Demand Registration or any underwritten Piggyback
Registration in which Registrable Securities are included (except as part
of such underwritten registration), unless the underwriters managing the
registered public offering otherwise agree.
(b) The Company agrees (i) not to effect any public sale or
distribution of its equity securities, or any securities convertible into
or exchangeable or exercisable for such securities, during the seven days
prior to and during the ninety (90)-day period beginning on the effective
date of any underwritten Demand Registration or any underwritten Piggyback
Registration (except as part of such underwritten registration or pursuant
to registrations on Form S-8 or any successor form), unless the
underwriters managing the registered public offering otherwise agree, and
(ii) to cause each holder of at least 5% (on a fully-diluted basis) of its
Common Stock, or any securities convert- ible into or exchangeable or
exercisable for Common Stock, purchased from the Company at any time after
the date of this Agreement (other than in a registered public offering) to
agree not to effect any public sale or distribution (including sales
pursuant to Rule 144) of any such securities during such period (except as
part of such underwritten registration, if otherwise permitted), unless
the underwriters managing the registered public offering otherwise agree.
4. Registration Procedures. Whenever the holders of
Registrable Securities have requested that any Registrable Securities be
registered pursuant to this Agreement, the Company will use its best
efforts to effect the registration and the sale of such Registrable
Securities in accordance with the intended method of disposition thereof
including the registration of common stock that may be obtained upon
conversion of Preferred Shares held by a holder of Registrable Securities
requesting registration as to which the Company has received reasonable
assurances that only Registrable Securities will be distributed to the
public, and pursuant thereto the Company will as expeditiously as
possible:
(a) prepare and file (in the case of a Demand Registration not
more than sixty (60) days after request therefor) with the Securities and
Exchange Commission a registration statement with respect to such
Registrable Securities and use its best efforts to cause such registration
statement to become effective (provided that as far in advance as
practicable before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company will furnish to the counsel
selected by the holders of a majority of the Registrable Securities
covered by such registration statement copies of all such documents
proposed to be filed, which documents will be subject to the review of
such counsel);
(b) prepare and file with the Securities and Exchange
Commission such amendments and supplements to such registration statement
and the prospectus used in connection therewith as may be necessary to
keep such registration statement effective for a period of not less than
one hundred and eighty (180) days (subject to Paragraph (a) above) and
comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement
during such period in accordance with the intended methods of disposition
by the sellers thereof set forth in such registration statement;
(c) furnish to each seller of Registrable Securities such
number of copies of such registration statement, each amendment and
supplement thereto, the prospectus included in such registration statement
(including each preliminary prospectus) and such other documents as such
seller may reasonably request in order to facilitate the disposition of
the Registrable Securities owned by such seller;
(d) use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of
such jurisdictions as any seller reasonably requests and do any and all
other acts and things which may be reasonably necessary or advisable to
enable such seller to consummate the disposition in such jurisdictions of
the Registrable Securities owned by such seller (provided that the Company
will not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for
this subparagraph, (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction);
(e) notify each seller of such Registrable Securities, at any
time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to make the
statements therein not misleading, and, at the request of any such seller,
the Company will prepare a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus will not contain an untrue statement of a
material fact or omit to state any fact necessary to make the statements
therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are
then listed and, if not so listed, to be listed on the National
Association of Securities Dealers automated quotation system;
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such
registration statement;
(h) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other actions
as the holders of a majority of the Registrable Securities being sold or
the underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities (including,
without limitation, effecting a stock split or a combination of shares);
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to
such registration statement and any attorney, accountant or other agent
retained by any such seller or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors, employees and independent
accountants to supply all information reasonably requested by any such
seller, underwriter, attorney, accountant or agent in connection with such
registration statement;
(j) permit any holder of Registrable Securities which holder,
in its sole and exclusive judgment, might be deemed to be an underwriter
or a controlling person of the Company, to participate in the preparation
of such registration or comparable statement and to require the insertion
therein of material, furnished to the Company in writing, which in the
reasonable judgment of such holder and its counsel should be included;
(k) in the event of the issuance of any stop order suspending
the effectiveness of a registration statement, or of any order suspending
or preventing the use of any related prospectus or suspending the
qualification of any common stock included in such registration statement
for sale in any jurisdiction, the Company will promptly notify the holders
of Registrable Securities and will use its reasonable best efforts
promptly to obtain the withdrawal of such order; and
(l) obtain a cold comfort letter from the Company's independent
public accountants in customary form and covering such matters of the type
customarily covered by cold comfort letters as the holders of a majority
of the Registrable Securities being sold reasonably request; and
(m) in connection with an underwritten public offering, (i)
cooperate with the selling holders of Registrable Securities, the
underwriters participating in the offering and their counsel in any due
diligence investigation reasonably requested by the selling holders or the
underwriters in connection therewith and (ii) participate, to the extent
reasonably requested by the managing underwriter for the offering or the
selling holder, in efforts to sell the Registrable Securities under the
offering (including, without limitation, participating in "roadshow"
meetings with prospective investors) that would be customary for
underwritten primary offerings of a comparable amount of equity securities
by the Company.
5. Registration Expenses.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation all
registration and filing fees, fees and expenses of compliance with
securities or blue sky laws, printing expenses, messenger and delivery
expenses, and fees and disbursements of counsel for the Company and all
independent certified public accountants, underwriters (excluding
discounts and commissions) and other Persons retained by the Company (all
such expenses being herein called "Registration Expenses"), will be borne
as provided in this Agreement, except that the Company will, in any event,
pay its internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting
duties), the expense of any annual audit or quarterly review, the expense
of any liability insurance and the expenses and fees for listing the
securities to be registered on each securities exchange on which similar
securities issued by the Company are then listed or on the National
Association of Securities Dealers automated quotation system. The Company
shall not be required to pay an underwriting discount with respect to any
shares being sold by any party other than the Company in connection with
an underwritten public offering of any of the Company's securities
pursuant to this Agreement.
(b) In connection with each Company-paid Demand Registration,
the Company will reimburse the holders of Registrable Securities covered
by such registration for the reasonable fees and expenses (including the
fees and expenses of counsel chosen by the holders of a majority of the
Registrable Securities initially requesting such registration) incurred by
such holders in connection with such registration. To the extent that
there are any unreimbursed expenses incurred by the holders of Registrable
Securities, each holder shall bear his or her pro rata share of such
expenses based upon the number of shares of Registrable Securities held by
such holder that are included in such registration relative to the number
of all Registrable Securities included in such registration.
(c) The Company will reimburse the holders of Registrable
Securities for the reasonable fees and expenses (including the fees and
expenses of counsel chosen by the holders of a majority of the Registrable
Securities) incurred by such holders in enforcing any of their rights
under this Agreement.
6. Indemnification.
(a) Indemnification of Selling Stockholders by the Company.
The Company agrees to indemnify and hold harmless each holder of
Registrable Securities which are registered pursuant hereto (each a
"Selling Stockholder") and each person, if any, who controls any Selling
Stockholder within the meaning of Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the registration
statement (or any amendment thereto), or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus or the prospectus (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, 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 whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission; provided, that subject to
Section 6(c) below any such settlement is effected with the prior written
consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by such Selling
Stockholder), 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
whatsoever 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; provided, that this indemnity
agreement shall not apply to any loss, liability, claim, damage or expense
to the extent arising out of any untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with
written information furnished to the Company by the Selling Stockholder
expressly for use in the registration statement (or any amendment
thereto), or any preliminary prospectus or the prospectus (or any
amendment or supplement thereto).
(b) Indemnification of Company by the Selling Stockholders.
Each Selling Stockholder, severally and not jointly, agrees to indemnify
and hold harmless the Company, its directors, each of its officers who
signed the registration statement and each person, if any, who controls
the Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, against any and all loss, liability,
claim, damage and expense described in the indemnity contained in Section
6(a) above, as incurred, but only with respect to untrue or alleged untrue
statements or omissions made in the registration statement (or any
amendment thereto), or any preliminary prospectus or any prospectus (or
any amendment or supplement thereto) in reliance upon and in conformity
with written information furnished to the Company by or on behalf of such
Selling Stockholder with respect to such Selling Stockholder expressly for
use in the registration statement (or any amendment or supplement
thereto); provided, that such Selling Stockholder's aggregate liability
under this Section 6 shall be limited to an amount equal to the net
proceeds (after deducting the underwriting discount, but before deducting
expenses) received by such Selling Stockholder from the sale of
Registrable Securities pursuant to a registration statement filed pursuant
to this Agreement.
(c) Actions against Parties; Notification. Each indemnified
party shall give notice as promptly as reasonably practicable to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any
liability hereunder to the extent it is not materially prejudiced as a
result thereof and in any event shall not relieve it from any liability
which it may have otherwise than on account of this indemnity agreement.
In the case of parties indemnified pursuant to Section 6(a), counsel to
the indemnified parties shall be selected by the Selling Stockholders (by
majority vote based on the number of Registrable Securities included in a
registration hereunder) and, in the case of parties indemnified pursuant
to Section 6(b), counsel to the indemnified parties shall be selected by
the Company. An indemnifying party may participate at its own expense in
the defense of any such action; provided, that counsel to the indemnifying
party shall not (except with the consent of the indemnified party) also be
counsel to the indemnified party. In no event shall the indemnifying
parties be liable for fees and expenses of more than one counsel (in
addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the
same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever in respect of
which indemnification or contribution could be sought under this Section 6
(whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising
out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a
failure to act by or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at
any time an indemnified party shall have requested an indemnifying party
to reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of
the nature contemplated by Section 6(a)(ii) effected without its written
consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such
settlement at least 30 days prior to such settlement being entered into
and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of
such settlement.
(e) Contribution. (i) If a claim for indemnification under
Section 6(a) or 6(b) is unavailable to an indemnified party because of a
failure or refusal of a governmental authority to enforce such
indemnification in accordance with its terms (by reason of public policy
or otherwise), then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, in such proportion as is
appropriate to reflect the relative fault of the indemnifying party and
the indemnified party in connection with the actions, statements or
omissions that resulted in such losses as well as any other relevant
equitable considerations. The relative fault of such indemnifying party
and indemnified party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged
untrue statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or relates to information
supplied by, such indemnifying party or indemnified party, and the
parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such action, statement or omission. The amount paid
or payable by a party as a result of any losses shall be deemed to
include, subject to the limitations set forth in this Section, any
reasonable attorneys' or other reasonable fees or expenses incurred by
such party in connection with any proceeding to the extent such party
would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party
in accordance with its terms.
(ii) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 6(f) were determined
by pro rata allocation or by any other method of allocation that does not
take into account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this
Section 6(f), a holder shall not be required to contribute, in the
aggregate, any amount in excess of the amount by which the proceeds
actually received by such holder from the sale of the Registrable
Securities subject to the proceeding exceeds the amount of any damages
that the holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No
Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution
from any Person who was not guilty of such fraudulent misrepresentation.
(iii) The indemnity and contribution agreements contained in
this Section are in addition to any liability that the indemnifying
parties may have to the indemnified parties.
7. Participation in Underwritten Registrations. No Person may
participate in any registration hereunder which is underwritten unless
such Person (a) agrees to sell such Person's securities on the basis
provided in any underwriting arrangements approved by the Person or
Persons entitled hereunder to approve such arrangements and (b) completes
and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of
such underwriting arrangements.
8. Definitions.
"Common Stock" means the Common Stock of the Company, par value
$0.0001 per share.
"Registrable Securities" means (i) any Common Stock issued upon
the conversion of any Preferred Shares issued pursuant to the Stock
Purchase Agreement (whether held by a Purchaser or any successor or
assignee of a Purchaser), and (ii) any Common Stock issued or issuable
with respect to the securities referred to in clause (i) by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to
any particular Registrable Securities, such securities will cease to be
Registrable Securities when they have been distributed to the public
pursuant to an offering registered under the Securities Act or sold to the
public through a broker, dealer or market maker in compliance with Rule
144 under the Securities Act (or any similar rule then in force). For
purposes of this Agreement, a Person will be deemed to be a holder of
Registrable Securities whenever such Person has the right to acquire
directly or indirectly such Registrable Securities (upon conversion or
exercise in connection with a transfer of securities or otherwise, but
disregarding any restrictions or limitations upon the exercise of such
right), whether or not such acquisition has actually been effected. For
purposes of calculating the percentage of Registrable Securities for
voting purposes, the Preferred Shares shall be deemed to have been
converted at the then applicable conversion price.
"Registration Expenses" has the meaning set forth in Section
5(a) hereof.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company has not entered
and will not here- after enter into any agreement with respect to its
securities which is inconsistent with or violates the rights granted to
the holders of Registrable Securities in this Agreement.
(b) Adjustments Affecting Registrable Securities. The Company
will not take any action, or permit any change to occur, with respect to
its securities which would adversely affect the ability of the holders of
Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement or which would
adversely affect the marketability of such Registrable Securities in any
such registration (including, without limitation, effecting a stock split
or a combination of shares).
(c) Remedies. Any Person having rights under any provision of
this Agreement will be entitled to enforce such rights specifically to
recover damages caused by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law. The parties
hereto agree and acknowledge that money damages may not be an adequate
remedy for any breach of the provisions of this Agreement and that any
party may in its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or other security) for
specific performance and for other injunctive relief in order to enforce
or prevent violation of the provisions of this Agreement.
(d) Amendments and Waivers. Except as otherwise provided
herein, the provisions of this Agreement may be amended or waived only
upon the prior written consent of the Company and holders of at least
66.67% of the Registrable Securities.
(e) Successors and Assigns. All covenants and agreements in
this Agreement by or on behalf of any of the parties hereto will bind and
inure to the benefit of the permitted respective successors and assigns of
the parties hereto whether so expressed or not.
(f) Notices. Except as otherwise expressly provided herein,
any and all notices, designations, consents, offers, acceptances or other
communications provided for herein shall be given in writing and shall be
mailed by first class registered or certified mail, postage prepaid, sent
by a nationally recognized overnight courier service or transmitted via
telecopier as follows:
If to the Company:
Alarmguard Holdings, Inc.
125 Frontage Road
Orange, Connecticut 06477
Telecopy: (203) 799-9636
Attention: Russell R. MacDonnell
with a copy to:
Robinson & Cole LLP
695 East Main Street
Stamford, Connecticut 06904
Telecopy: (203) 462-7599
Attention: Richard A. Krantz, Esq.
If to Advance:
Advance Capital Partners, L.P.
660 Madison Avenue
15th Floor
New York, New York 10021
Telecopy: (212) 835-2020
Attention: Robert A. Bernstein
with a copy to:
Kirkland & Ellis
153 East 53rd Street
New York, New York 10022
Telecopy: (212) 446-4900
Attention: Joshua N. Korff, Esq.
If to any other Purchaser to the address set forth opposite such
Purchaser's name on Schedule I hereto.
Notice shall be deemed given, for all purposes, when deposited in the
United States mail as registered or certified mail, in which event the
fifth day following the date of postmark on the receipt of such registered
or certified mail shall conclusively be deemed the date of giving of such
notice, on the first Business Day following collection by the courier
service or when acknowledged by the receiving telecopier.
(g) Interpretation of Agreement; Severability. The provisions
of this Agreement shall be applied and interpreted in a manner consistent
with each other so as to carry out the purposes and intent of the parties
hereto, but if for any reason any provision hereof is determined to be
unenforceable or invalid, such provision or such part thereof as may be
unenforceable or invalid shall be deemed severed from the Agreement and
the remaining provisions carried out with the same force and effect as if
the severed provision or part thereof had not been a part of this
Agreement.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL SUBSTANTIVE LAWS (AND NOT THE
CONFLICTS OF LAW) OF THE STATE OF NEW YORK.
(i) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but
all of which taken together shall constitute one and the same Agreement.
(j) Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof, and
supersedes all previous agreements.
* * * * *
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the date first written above.
ALARMGUARD HOLDINGS, INC.
By:
Name:
Title:
ADVANCE CAPITAL PARTNERS, L.P.
By: Advance Capital Associates, L.P.,
its General Partner
By: Advance Capital Management, LLC,
its General Partner
By:
Name: Robert A. Bernstein
Title: Principal
ADVANCE CAPITAL OFFSHORE PARTNERS,
L.P.
By: Advance Capital Offshore Associates, LDC,
its General Partner
By: Advance Capital Associates, L.P.,
its Sole Director
By: Advance Capital Management, LLC,
its General Partner
By:
Name: Robert A. Bernstein
Title: Principal<PAGE>
CANAAN EQUITY, L.P.
By: Canaan Equity Partners, L.L.C.
By:
Name: Stephen L. Green
Title: Member/Manager
EXETER CAPITAL PARTNERS IV, L.P.
By: Exeter IV Advisors, L.P.
its General Partner
By: Exeter IV Advisors, Inc.,
its General Partner
By:
Name: Keith R. Fox
Title: President
LB I GROUP INC.
By:
Name: Alan H. Washkowitz
Title: Senior Vice President
<PAGE>
ELLIOTT ASSOCIATES, L.P.
By:
Name: Paul E. Singer
Title: General Partner
WESTGATE INTERNATIONAL, L.P.
By: Martley International, Inc.
as Attorney-in-Fact
By:
Name: Paul E. Singer
Title: President
ZIFF ASSET MANAGEMENT, L.P.
By:
Name: Philip B. Korsant
Title: President
OZ MASTER FUND, LTD.
By:
Name: Daniel S. Och
Title: Managing Member
OZ Management, L.L.C.
IBJS CAPITAL CORPORATION
By:
Name: Kevin P. Falvey
Title: Director
CREDIT SUISSE (GUERNSEY) LIMITED
as trustee of the Dynamic Growth Fund II
By:
Name: M.E. Zunino
Title: Associate
AETNA LIFE INSURANCE COMPANY
By:
Name: Alan Vartelas
Title: Assistant Vice President
GRANITE PROPERTIES MANAGEMENT
By:
Name: Daren J. Wells
Title: Director, Private Equity
By:
Name: Paul Finkelstein
<PAGE>
Exhibit 3
JOINT FILING AGREEMENT
Pursuant to Rule 13d-1(f)(1)(iii) promulgated under the Securities
Exchange Act of 1934, the undersigned agree to the joint filing of a
Statement on Schedule 13D (including any and all amendments thereto) with
respect to the shares of Common Stock, par value $0.0001 per share, of
Alarmguard Holdings, Inc., and further agree that this Joint Filing
Agreement be included as an Exhibit thereto. In addition, each party to
this Agreement expressly authorizes each other party to this Agreement to
file on its behalf any and all amendments to such Statement.
February 11, 1998
OZ MANAGEMENT, L.L.C.
By: /s/ Daniel S. Och
- ----------------------------------------
Name: Daniel S. Och
Title: Managing Member
OZ MASTER FUND, LTD.
By: OZ MANAGEMENT, L.L.C.
as Investment Manager
By: /s/ Daniel S. Och
----------------------------------------
Name: Daniel S. Och
Title: Managing Member
ZIFF ASSET MANAGEMENT, L.P.
By: PBK Holdings, Inc.
as General Partner
By: /s/ Philip B. Korsant
- -------------------------------------------
Name: Philip B. Korsant
Title: President
