<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. __)*
ALARMGUARD HOLDINGS, INC.
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(Name of Issuer)
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COMMON STOCK, par value $.0001 per share
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(Title of Class of Securities)
011649100
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(CUSIP Number)
Lisel M. Mittelholzer
Testa, Hurwitz & Thibeault, LLP
High Street Tower
125 High Street
Boston, MA
(617) 248-7785
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
February 2, 1998
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(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 the
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> 2
- --------------------------- -----------------------------
CUSIP NO. 011649100 SCHEDULE 13D PAGE 2 OF 16 PAGES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Canaan Equity L. P.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
00
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
645,161
-----------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY 0
OWNED BY -----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 645,161
WITH -----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
645,161
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
10.3%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON *
PN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE> 3
- --------------------------- -----------------------------
CUSIP NO. 011649100 SCHEDULE 13D PAGE 3 OF 16 PAGES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Canaan Equity Partners LLC
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
-----------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY 645,161
OWNED BY -----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 0
WITH -----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
645,161
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
645,161
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
10.3%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON *
00
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE> 4
- --------------------------- -----------------------------
CUSIP NO. 011649100 SCHEDULE 13D PAGE 4 OF 16 PAGES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Harry T. Rein
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
-----------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY 1,428,264
OWNED BY -----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 0
WITH -----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
1,428,264
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,428,264
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
22.9%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON *
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE> 5
- --------------------------- -----------------------------
CUSIP NO. 011649100 SCHEDULE 13D PAGE 5 OF 16 PAGES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Stephen L. Green
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
-----------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY 645,161
OWNED BY -----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 0
WITH -----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
645,161
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
645,161
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
10.3%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON *
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE> 6
- --------------------------- -----------------------------
CUSIP NO. 011649100 SCHEDULE 13D PAGE 6 OF 16 PAGES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Deepak Kamra
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
-----------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY 645,161
OWNED BY -----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 0
WITH -----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
645,161
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
645,161
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
10.3%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON *
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE> 7
- --------------------------- -----------------------------
CUSIP NO. 011649100 SCHEDULE 13D PAGE 7 OF 16 PAGES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Gregory Kopchinsky
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
-----------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY 1,428,264
OWNED BY -----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 0
WITH -----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
1,428,264
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,428,264
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
22.9%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON *
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE> 8
- --------------------------- -----------------------------
CUSIP NO. 011649100 SCHEDULE 13D PAGE 8 OF 16 PAGES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Robert J. Migliorino
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
-----------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY 1,428,264
OWNED BY -----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 0
WITH -----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
1,428,264
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,428,264
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
22.9%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON *
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE> 9
- --------------------------- -----------------------------
CUSIP NO. 011649100 SCHEDULE 13D PAGE 9 OF 16 PAGES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Guy M. Russo
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
-----------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY 645,161
OWNED BY -----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 0
WITH -----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
645,161
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
645,161
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
10.3%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON *
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE> 10
- --------------------------- -----------------------------
CUSIP NO. 011649100 SCHEDULE 13D PAGE 10 OF 16 PAGES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Eric A Young
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
-----------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY 1,428,264
OWNED BY -----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 0
WITH -----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
1,428,264
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,428,264
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
22.9%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON *
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE> 11
Item 1. SECURITY AND ISSUER.
This Schedule 13D report relates to the common stock, par value $.0001 per
share (the "Common Stock"), of Alarmguard Holdings, Inc. (the "Issuer"). The
principal executive offices of the Issuer are located at 125 Frontage Road,
Orange, CT 06477.
Item 2. IDENTITY AND BACKGROUND.
This statement is filed by Canaan Equity L.P., a Delaware limited
partnership, ("Canaan Equity"), Canaan Equity Partners LLC, a Delaware limited
liability company, ("Canaan Partners"), Harry T. Rein, Stephen L. Green, Deepak
Kamra, Gregory Kopchinsky, Robert J. Migliorino, Guy M. Russo and Eric A. Young
(collectively, the "Partners"). Messrs. Rein, Kopchinsky, Migliorino and Young
are general partners of other venture capital investment funds which may be
deemed to be affiliated with Canaan Equity and Canaan Partners (collectively,
the "Canaan Entities"). Canaan Equity, Canaan Partners (which serves as the
general partner of Canaan Equity) and the Partners (who serve as general
partners of Canaan Partners), are collectively referred to as the "Reporting
Persons" in this Schedule 13G.
Except in the case of Deepak Kamra and Eric A. Young, the principal
business address of the Reporting Persons is 105 Rowayton Avenue, Rowayton, CT
06853. The principal business address of Deepak Kamra and Eric A. Young is 2884
Sand Hill Road, Suite 115, Menlo Park, CA 94025.
The principal business of Canaan Equity is to assist growth-oriented
businesses located primarily in the United States. The principal business of
Canaan Partners is to act as general partner of Canaan Equity. The principal
business of each of the Partners is to act as general partner of Canaan Partners
and a number of affiliated partnerships with similar businesses. In addition,
Messrs. Rein, Kopchinsky, Migliorino and Young also act as a general partners of
a number of partnerships affiliated with the Canaan Entities.
During the five years prior to the date hereof, none of the Reporting
Persons has been convicted in a criminal proceeding or has been a party to a
civil proceeding ending in 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.
Canaan Equity is a limited partnership organized under the laws of
Delaware. Canaan Partners is a limited liability company organized under the
laws of Delaware. Each of the Partners are citizens of the United States.
Item 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
On February 2, 1998 Canaan Equity acquired 5,000 shares of Series B
Convertible Preferred Stock (the "Preferred Stock") of the Issuer for a total
purchase price of $5,000,000.00. The Preferred Stock acquired by Canaan Equity
is currently convertible into 645,161 shares of the Issuer's Common Stock. The
working capital of Canaan Equity was the source of funds for
<PAGE> 12
this purchase. No part of the purchase price was or will be represented by funds
or other consideration borrowed or otherwise obtained for the purpose of
acquiring, holding, trading or voting the Preferred Stock.
Item 4. PURPOSE OF TRANSACTION.
Canaan Equity acquired the Issuer's securities for investment purposes.
Depending on market conditions, its continuing evaluation of the business and
prospects of the Issuer and other factors, Canaan Equity may dispose of or
acquire additional securities of the Issuer. Except as set forth above, none of
the Reporting Persons has any present plans which relate to or would result in:
(a) The acquisition by any person of additional securities of the Issuer,
or the disposition of securities of the Issuer;
(b) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Issuer or any of its
subsidiaries;
(c) A sale or transfer of a material amount of assets of the Issuer or any
of its subsidiaries;
(d) Any change in the present board of directors or management of the
Issuer, including any plans or proposals to change the number or term
of directors or to fill any existing vacancies on the board;
(e) Any material change in the present capitalization or dividend policy
of the Issuer;
(f) Any other material change in the Issuer's business or corporate
structure, including but not limited to, if the issuer is a registered
closed-end investment company, any plans or proposals to make any
changes in its investment policy for which a vote is required by
Section 13 of the Investment Company act of 1940;
(g) Changes in the Issuer's charter, bylaws or instruments corresponding
thereto or other actions which may impede the acquisition of control
of the Issuer by any person;
(h) Causing a class of securities of the Issuer to be delisted from a
national securities exchange or to cease to be authorized to be quoted
in an inter-dealer quotation system of a registered national
securities association;
(i) A class of equity securities of the Issuer becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the
Securities Exchange Act of 1934; or
(j) Any action similar to any of those enumerated above.
<PAGE> 13
Item 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) Canaan Equity is the record owner of 5,000 shares of Preferred Stock. The
Preferred Stock is currently convertible into 645,161 shares of the
Issuer's Common Stock (the "Conversion Shares"). By virtue of its status as
general partner of Canaan Equity, Canaan Partners may be deemed to be the
beneficial owner of the Preferred Stock and the Conversion Shares. By
virtue of their status as general partners of Canaan Partners, the Partners
may each be deemed to be the beneficial owner of the Preferred Stock and
the Conversions Shares. By virtue of their affiliation with the Canaan
Entities, Messrs. Rein, Kopchinsky, Migliorino and Young may be deemed to
be the beneficial owners of the Preferred Stock, the Conversion Shares and
783,103 shares of Common Stock, respectively.
Percent of Class: Canaan Equity: 10.3%; Canaan Partners: 10.3%; the
Partners (except for Messrs. Rein, Kopchinsky, Migliorino and Young):
10.3%; and Messrs. Rein, Kopchinsky, Migliorino and Young: 22.9%
respectively.
The foregoing percentages are calculated based on (i) 5,592,000 shares of
Common Stock of the Issuer reported to be outstanding on the Bloomberg
website in January, 1998 and (ii) the number of shares of Common Stock
(645,161) issuable upon the conversion of the Preferred Stock.
(b) Regarding the number of shares as to which such person has:
(i) sole power to vote or to direct the vote:
Canaan Equity: 645,161 shares of Common Stock; and 0 shares of Common
Stock for all remaining Reporting Persons.
(ii) shared power to vote or to direct the vote:
Canaan Equity: 0 shares of Common Stock; all other Reporting Persons
(except for Messrs. Rein, Kopchinsky, Migliorino and Young): 645,161
shares of Common Stock; and Messrs. Rein, Kopchinsky, Migliorino and
Young: 1,428,264 shares of Common Stock, respectively.
(iii) sole power to dispose or to direct the disposition:
Canaan Equity: 645,161 shares of Common Stock; and 0 shares of Common
Stock for all remaining Reporting Persons.
(iv) shared power to dispose or to direct the disposition:
<PAGE> 14
Canaan Equity: 0 shares of Common Stock; all other Reporting Persons
(except for Messrs. Rein, Kopchinsky, Migliorino and Young): 645,161
shares of Common Stock; and Messrs. Rein, Kopchinsky, Migliorino and
Young shares of Common Stock: 1,428,264, respectively.
(c) Except as set forth above, none of the Reporting Persons has effected any
transaction in the shares of Common Stock during the last 60 days.
(d) No other person is known to have the right to receive or the power to
direct the receipt of dividends from, or any proceeds from the sale of,
shares of Common Stock beneficially owned by any of the Reporting Persons.
(e) Not Applicable.
Item 6. CONTRACTS, ARRANGEMENTS, UNDERTAKINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER.
Canaan Equity acquired its shares of Series B Convertible Preferred Stock
of the Issuer pursuant to a Preferred Stock Purchase Agreement dated as of
February 2, 1998 (attached hereto as Exhibit 3) by and between the Issuer
and Canaan Equity, Advance Capital Partners, L.P., Advance Capital Offshore
Partners, L.P., Elliott Associates, L.P., Westgate International, L.P.,
Exeter Capital Partners IV, L.P., Aetna Life Insurance Company, Ziff Asset
Management, L.P., Oz Master Fund, Ltd., LB I Group Inc., IBJS Capital
Corporation, Granite Properties Management Corp., Credit Suisse (Guernsey)
Limited as trustee for the Dynamic Growth Fund II, and Paul Finkelstein
(collectively, the "Purchasers").
By virtue of the Preferred Stock Purchase Agreement, Canaan Equity acquired
5,000 shares of Series B Convertible Preferred Stock, $.0001 par value, for
$1,000.00 per share; and the other Purchasers acquired, in the aggregate,
35,000 shares of Series A Convertible Preferred Stock, $.0001 par value,
for $1,000.00 per share. The series A and B Preferred Stock are currently
convertible, in the aggregate, into 4,887,586 shares of the Issuer's Common
Stock. The holders of Series A and B Convertible Preferred Stock are also
entitled to elect two directors to serve on the Issuer's Board of
Directors. The terms of conversion and voting rights are more fully set
forth in Sections 5 and 6 of the Certificate of Designations of the Issuer
dated as of February 2, 1998 (attached hereto as Exhibit 4).
Pursuant to a certain Registration Rights Agreement dated February 2, 1998
(attached hereto as Exhibit 5) by and among the Issuer and the Purchasers,
the Purchasers are granted, subject to certain restrictions and
limitations, certain demand and "piggyback" registration rights with
respect to the shares of Common Stock issuable upon the conversion of the
Series A and Series B Convertible Preferred Stock.
The Series A and B Preferred Stockholders have the option of participating,
on a pro rata basis, in any future issuance by the Issuer of warrants,
options or rights to purchase
<PAGE> 15
preferred and/or common stock offered to the record holders of any class of
Common Stock. These purchase rights are more fully set forth in Section 8
of the Certificate of Designations (attached hereto as Exhibit 4).
Item 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1 - Agreement regarding filing of joint Schedule 13D.
Exhibit 2 - Power of Attorney.
Exhibit 3 - Preferred Stock Purchase Agreement.
Exhibit 4 - Certificate of Designations of Alarmguard Holdings, Inc.
Exhibit 5 - Registration Rights Agreement.
This filing was made pursuant to a joint filing agreement, a copy of which
is attached as Exhibit 1 and pursuant to a Power of Attorney filed a copy of
which is attached as Exhibit 2.
[Signature Page to Follow]
<PAGE> 16
After reasonable inquiry and to the best of my knowledge and belief, the
undersigned certify that the information set forth in this statement is true,
complete and correct.
March 11, 1998 CANAAN EQUITY L.P.
By:Canaan Equity Partners LLC
Its General Partner
By: *
----------------------------
Member/Manager
CANAAN EQUITY PARTNERS LLC
By: *
----------------------------
Member/Manager
*
----------------------------
Harry T. Rein
*
----------------------------
Stephen L. Green
*
----------------------------
Deepak Kamra
*
----------------------------
Gregory Kopchinsky
*
----------------------------
Robert J. Migliorino
*
----------------------------
Guy M. Russo
*
----------------------------
Eric A. Young
* /s/ Guy M. Russo
----------------------------
Guy M. Russo
As Attorney-in-Fact
This Schedule 13D was executed by Guy M. Russo pursuant to the Power of
Attorney, which is attached hereto as Exhibit 2.
<PAGE> 1
EXHIBIT 1
JOINT FILING AGREEMENT
Pursuant to Rule 13d-1(f)(1) under the Securities Exchange Act of 1934, as
amended, the undersigned hereby agree that only one statement containing the
information required by Schedule 13D needs to be filed with respect to the
ownership by each of the undersigned of shares of stock of Alarmguard Holdings,
Inc.
EXECUTED this 11th day of March, 1998.
CANAAN EQUITY L.P.
By: Canaan Equity Partners LLC
Its General Partner
By: *
----------------------------
Member/Manager
CANAAN EQUITY PARTNERS LLC
By: *
----------------------------
Member/Manager
*
----------------------------
Harry T. Rein
*
----------------------------
Stephen L. Green
*
----------------------------
Deepak Kamra
*
----------------------------
Gregory Kopchinsky
*
----------------------------
Robert J. Migliorino
*
----------------------------
Guy M. Russo
*
----------------------------
Eric A. Young
*/s/ Guy M. Russo
----------------
Guy M. Russo
As Attorney-in-Fact
This Schedule 13D was executed by Guy M. Russo pursuant to the Power of
Attorney, which is attached hereto as Exhibit 2.
<PAGE> 1
EXHIBIT 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Guy M. Russo his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities (until
revoked in writing) to sign any and all instruments, certificates and documents
required to be executed on behalf of himself as an individual or in his capacity
as a general partner or authorized signatory, as the case may be, on behalf of
any of Canaan Equity L.P.; Canaan Equity Offshore C.V.; Canaan Offshore
Management, N.V. or Canaan Equity Partners LLC pursuant to the Securities Act of
1933, as amended, (the "Securities Act"), or the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any and all regulations promulgated
thereunder and to file the same, with all exhibits thereto, and any other
documents in connection therewith, with the Securities and Exchange Commission,
and with any other entity when and if such is mandated by the Securities Act,
the Exchange Act or by the By-laws of the National Association of Securities
Dealers, Inc., granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
fully to all intents and purposes as he might or could do in person thereby, and
ratifying and confirming all that said attorney-in-fact and agent, or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof,
or may have done in connection with the matters described above.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 2
IN WITNESS WHEREOF, this Power of Attorney has been signed as of the 11th day of
March, 1998.
CANAAN EQUITY L.P.
By: Canaan Equity Partners LLC
Its General Partner
By: /s/ Harry T. Rein
----------------------------
Member/Manager
CANAAN EQUITY OFFSHORE C.V.
By: Canaan Offshore Management N.V.
Its General Partner
By: /s/ Harry T. Rein
----------------------------
Director
CANAAN OFFSHORE MANAGEMENT, N.V.
By: /s/ Harry T. Rein
----------------------------
Director
CANAAN EQUITY PARTNERS LLC
By: /s/ Harry T. Rein
----------------------------
Member/Manager
<PAGE> 3
/s/ Harry T. Rein
----------------------------
Harry T. Rein
/s/ Stephen L. Green
----------------------------
Stephen L. Green
/s/ Deepak Kamra
----------------------------
Deepak Kamra
/s/ Gregory Kopchinsky
----------------------------
Gregory Kopchinsky
/s/ Robert J. Migliorino
----------------------------
Robert J. Migliorino
/s/ Guy M. Russo
----------------------------
Guy M. Russo
/s/ Eric A. Young
----------------------------
Eric A. Young
393LMM1355/1.485651-1
<PAGE> 1
Exhibit 3
---------
ALARMGUARD HOLDINGS, INC.
PREFERRED STOCK PURCHASE AGREEMENT
DATED AS OF FEBRUARY 2, 1998
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS.......................................................1
1.1 Definitions; Interpretation........................................1
ARTICLE II ISSUANCE AND SALE OF PREFERRED STOCK.............................6
2.1 Number of Shares and Price.........................................6
ARTICLE III CLOSING; CLOSING DELIVERIES.....................................6
3.1 Closing............................................................6
3.2 Payment for and Delivery of Preferred Shares.......................6
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................7
4.1 Existence; Qualification; Subsidiaries.............................7
4.2 Authorization and Enforceability; Issuance of Shares...............7
4.3 Capitalization.....................................................8
4.4 Private Sale; Voting Agreements....................................8
4.5 Financial Statements; Disclosure...................................8
4.6 Absence of Certain Changes.........................................9
4.7 Litigation........................................................10
4.8 Licenses, Compliance with Law, Other Agreements, Etc..............11
4.9 Third-Party Approvals.............................................11
4.10 No Undisclosed Liabilities........................................11
4.11 Tangible Assets...................................................11
4.12 Inventory.........................................................11
4.13 Owned Real Property...............................................11
4.14 Real Property Leases..............................................12
4.15 Agreements........................................................12
4.16 Intellectual Property.............................................12
4.17 Employees.........................................................12
4.18 ERISA; Employee Benefits..........................................13
4.19 Environment, Health and Safety....................................13
4.20 Transactions With Affiliates......................................14
4.21 Taxes.............................................................14
4.22 Other Investors...................................................14
4.23 Year 2000 Representations.........................................14
4.24 Seniority.........................................................15
4.25 Investment Company................................................15
4.26 Certain Fees......................................................15
4.27 Solicitation Materials............................................15
4.28 Form S-3 Eligibility..............................................16
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<PAGE> 3
<TABLE>
<S> <C> <C>
4.29 Listing and Maintenance Requirements Compliance...............................16
4.30 Registration Rights; Rights of Participation..................................16
4.31 Recent Results of Operations..................................................16
4.32 Small Business Matters........................................................16
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS............................17
5.1 Authorization and Enforceability..............................................17
5.2 Government Approvals..........................................................17
ARTICLE VI COMPLIANCE WITH SECURITIES LAWS............................................17
6.1 Investment Intent of Purchaser................................................17
6.2 Status of Preferred Shares....................................................17
6.3 Sophistication and Financial Condition of Purchaser...........................17
6.4 Transfer of Preferred Shares and Conversion Shares............................17
6.5 Exculpation Among Purchasers..................................................19
ARTICLE VII CONDITIONS PRECEDENT......................................................19
7.1 Closing Deliveries to the Purchasers..........................................19
7.2 Closing Deliveries to the Company.............................................20
ARTICLE VIII COVENANTS OF THE COMPANY.................................................20
8.1 Restricted Actions............................................................20
8.2 Required Actions..............................................................21
8.3 Reservation of Common Stock...................................................23
8.4 Purchasers' Rights if Trading in Common Stock is Suspended or Delisted........23
8.5 Use of Proceeds...............................................................23
ARTICLE IX SURVIVAL...................................................................24
9.1 Survival......................................................................24
ARTICLE X INDEMNIFICATION.............................................................24
10.1 Indemnification...............................................................24
ARTICLE XI GENERAL PROVISIONS.........................................................25
11.1 Successors and Assigns........................................................25
11.2 Entire Agreement..............................................................25
11.3 Notices.......................................................................25
11.4 Purchasers Fees and Expenses..................................................26
11.5 Amendment and Waiver..........................................................26
11.7 Counterparts..................................................................27
11.8 Headings......................................................................27
11.9 Specific Performance..........................................................27
11.10 Remedies Cumulative...........................................................27
</TABLE>
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<PAGE> 4
11.11 GOVERNING LAW......................................................27
11.12 No Third Party Beneficiaries.......................................27
11.13 Severability.......................................................27
Schedule I Purchasers
Exhibit A Amendment to the Certificate of Designations.
Exhibit B Financial Statements
Exhibit C Registration Rights Agreement
Exhibit D Opinion of Counsel
X:\LEGAL\393LMM\DOC\AFHM_1.DOC
<PAGE> 5
PREFERRED STOCK PURCHASE AGREEMENT
PREFERRED STOCK PURCHASE AGREEMENT (this "AGREEMENT") dated as of
February 2, 1998 between Alarmguard Holdings, Inc., a Delaware corporation (the
"COMPANY"), Advance Capital Partners, L.P., a Delaware limited partnership,
Advance Capital Offshore Partners, L.P., a Cayman Islands limited partnership
(collectively, "ADVANCE"), and each of the other purchasers set forth on
Schedule I hereto (with Advance, each a "PURCHASER" and collectively the
"PURCHASERS").
The Purchasers desire to purchase from the Company, and the Company
desires to issue to the Purchasers, shares of Series A Convertible Preferred
Stock $.0001 par value per share of the Company (the "SERIES A PREFERRED") and
Series B Convertible Preferred Stock $.0001 par value per share of the Company
(the "Series B PREFERRED").
In consideration of the mutual promises, representations, warranties,
covenants and conditions set forth in this Agreement, the parties hereto agree
as follows:
ARTICLE I
DEFINITIONS
I.1 DEFINITIONS; INTERPRETATION.
(a) For purposes of this Agreement, the following terms have
the indicated meanings:
"ADVANCE" has the meaning set forth in the recitals hereof.
"ADVANCE CLOSING" has the meaning set forth in Section 3.1.
"ADVANCE CLOSING DATE" has the meaning set forth in Section
3.1.
"AFFILIATE" of a person means any other person that directly,
or indirectly through one or more intermediaries, controls, is controlled by, or
is under common control with such person.
"CERTIFICATE OF DESIGNATIONS" means the Certificate of
Designations designating the rights and preferences of the Series A Preferred
and Series B Preferred adopted by the Board of Directors of the Company and set
forth as EXHIBIT A hereto.
"CLOSING" has the meaning set forth in Section 3.1.
X:\LEGAL\393LMM\DOC\AFHM_1.DOC
<PAGE> 6
"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.
2
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<PAGE> 7
"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.
3
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<PAGE> 8
"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.
4
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<PAGE> 9
"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
ss.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
5
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<PAGE> 10
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
II.1 NUMBER OF SHARES AND PRICE. On the terms and subject to the
conditions of this Agreement, at the Closing, the Company shall issue to the
Purchasers, 27,750 shares of Series A Preferred and 5,000 shares of Series B
Preferred (collectively, with the Shares of Series A Preferred to be issued to
Advance at the Advance Closing, the "PREFERRED SHARES") for a purchase price of
$1,000 per share. On the terms and subject to the conditions of this Agreement,
at the Advance Closing, the Company shall issue to Advance, 7,250 shares of
Series A Preferred for a purchase price of $1,000 per share. Each Purchaser's
obligation to purchase the number of Preferred Shares opposite such Purchaser's
name on Schedule I hereto shall be subject to the prior or simultaneous purchase
by each other Purchaser (other than Advance) of the number of Preferred Shares
opposite such Purchaser's name on Schedule I hereto.
ARTICLE III
CLOSING; CLOSING DELIVERIES
III.1 CLOSING. The closing of the transactions contemplated hereby (the
"CLOSING") shall take place at 10:00 a.m. on February 2, 1998, at the offices of
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".
III.2 PAYMENT FOR AND DELIVERY OF PREFERRED SHARES. At the Closing, the
Company shall issue and deliver to the Purchasers, stock certificates for the
Preferred Shares duly registered in the name of each Purchaser, against payment
by such Purchaser, by wire transfer of immediately-available funds to the
account designated by the Company, of the purchase price therefor set forth in
Section 2.1. At the Advance Closing, the Company shall issue and deliver to
Advance stock certificates for the Preferred Shares duly registered in the name
of Advance, against payment by Advance, by wire transfer of
immediately-available funds to the account
6
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<PAGE> 11
designated by the Company, of the purchase price therefor set forth in Section
2.1.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each Purchaser as
follows:
IV.1 EXISTENCE; QUALIFICATION; SUBSIDIARIES. The Company and each
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation and has full corporate
power and authority to conduct its business and own and operate its properties
as now conducted, owned and operated. The copies of the Restated Certificate of
Incorporation and By-Laws of the Company and all amendments thereto previously
delivered to the Purchasers are true, correct and complete copies of such
documents. The Company and each Subsidiary is licensed or qualified as a foreign
corporation and is in good standing in all jurisdictions where such person is
required to be so licensed or qualified, except where the failure to be so
licensed, qualified or in good standing would not have a Material Adverse
Effect. Except as set forth on SCHEDULE 4.1, the Company has no Subsidiaries and
owns no capital stock or other securities of, and has not made any other
investment in, any other entity. All of the issued shares of capital stock of
each Subsidiary have been duly and validly authorized and issued, are fully paid
and non-assessable and are owned directly or indirectly by the Company, free and
clear of all liens, encumbrances, equities or adverse claims other than liens
securing the obligations under the Credit Agreement.
IV.2 AUTHORIZATION AND ENFORCEABILITY; ISSUANCE OF SHARES.
(a) The Company has full power and authority and has taken all required
corporate and other action necessary to permit it to execute and deliver this
Agreement and the Related Documents and to carry out the terms hereof and
thereof and to issue and deliver the Preferred Shares and the Conversion Shares
(including adoption of the Certificate of Designations), and none of such
actions will violate any provision of the Restated Certificate of Incorporation
of the Company, the By-Laws of the Company or of any applicable law, regulation,
order, judgment or decree or rule of the stock exchange where the Company's
Common Stock is listed, or result in the breach of or constitute a default (or
an event which, with notice or lapse of time or both would constitute a default)
under any material agreement, instrument or understanding to which the Company
is a party or by which it is bound or by which it will become bound as a result
of the transaction contemplated by this Agreement. This Agreement and each of
the Related Documents constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except to
the extent limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws of general application related to the enforcement of
creditor's rights generally and (ii) general principles of equity.
7
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<PAGE> 12
(b) The Preferred Shares have been duly authorized and, when issued and
delivered in accordance with this Agreement, will be validly issued and
outstanding. The Preferred Shares and, when issued, the Conversion Shares, will
be fully paid and nonassessable. The Conversion Shares have been duly reserved
for issuance upon conversion of the Preferred Shares and, when so issued, will
be duly authorized, validly issued and outstanding, fully paid and nonassessable
shares of Series A Preferred, Series B Preferred or Common Stock, as the case
may be. Neither the issuance and delivery of the Preferred Shares nor the
issuance and delivery of any Conversion Shares upon conversion of any Preferred
Shares is subject to any preemptive right of any stockholder of the Company or
to any right of first refusal or other similar right in favor of any Person
which has not been waived.
IV.3 CAPITALIZATION. As of the Closing, the authorized capital stock of
the Company shall consist of (i) 25,000,000 shares of Common Stock, par value
$.0001 per share, of which 5,592,476 shares are outstanding, 4,972,434 shares
are reserved for issuance upon conversion of Preferred Shares and 770,000 shares
are reserved for issuance upon the exercise of certain stock options, and (ii)
5,000,000 shares of Preferred Stock, par value $.0001 per share, of which 35,700
shares have been designated Series A Preferred and 5,000 shares have been
designated Series B Preferred, of which 40,000 shares will be sold to the
Purchasers pursuant to this Agreement. At the time of the Closing, all of the
outstanding capital stock will be validly issued, fully paid and nonassessable
and will have been issued in compliance with all applicable securities laws
(including the provisions of the Securities Act and the rules and regulations
promulgated thereunder). Except as set forth on SCHEDULE 4.3, as of the Closing,
the Company has not granted or issued any options, convertible securities,
warrants, calls, pledges, transfer restrictions (except restrictions imposed by
federal and state securities laws), liens, rights of first offer, rights of
first refusal, antidilution provisions or commitments of any character relating
to any issued or unissued shares of capital stock of the Company other than as
contemplated in the Related Documents. Except as contemplated by this Agreement
and the Related Documents or as set forth in SCHEDULE 4.3, there are no
preemptive or other preferential rights applicable to the issuance and sale of
securities of the Company, including the Preferred Shares.
IV.4 PRIVATE SALE; VOTING AGREEMENTS. Assuming the accuracy of the
representations and warranties made by recipients of the Company's capital stock
made in connection with the acquisition of such capital stock, the Company has
not violated any applicable federal or state securities laws in connection with
the offer, sale and issuance of any of its capital stock. Subject to the
accuracy of the Purchaser's representations contained herein, neither the offer,
sale and issuance of the Preferred Shares hereunder nor the issuance and
delivery of any Preferred Shares or Conversion Shares upon conversion of any
Preferred Shares requires registration under the Securities Act or any state
securities laws.
IV.5 FINANCIAL STATEMENTS; DISCLOSURE.
(a) The Financial Statements (together with the notes thereto,
as applicable), (i) are true, correct and complete in all material
respects, (ii) are in accordance with the books and records of the
Company and (iii) fairly present the financial condition and
8
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<PAGE> 13
results of operations of the Company as of the dates and for the
periods indicated, in accordance with GAAP except that the unaudited
balance sheets and related financial statements do not contain an
auditors' opinion and do not contain footnotes and are subject to
normal year-end audit adjustments.
(b) This Agreement together with the schedules, attachments,
exhibits, written statements and certificates supplied to the
Purchasers by or on behalf of the Company with respect to the
transactions contemplated hereby does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make
the statements contained herein or therein, in light of the
circumstances in which they were made, not misleading. There is no fact
which has not been disclosed to the Purchasers in writing of which the
Company has knowledge, and which has had or would reasonably be
anticipated to have a Material Adverse Effect.
(c) As of its filing date, each document filed with the SEC by
the Company, as amended or supplemented prior to the Closing Date, if
applicable, pursuant to the Securities Act and/or the Exchange Act (i)
complied in all material respects with the applicable requirements of
the Securities Act and/or Exchange Act and (ii) did not contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of
the circumstances under which they were made, not misleading. Each
final registration statement filed with the SEC by the Company pursuant
to the Securities Act, as of the date such statement became effective
(i) complied in all material respects with the applicable requirements
of the Securities Act and (ii) did not contain any untrue statement of
a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading (in the case of any prospectus, in light of the
circumstances under which they were made).
IV.6 ABSENCE OF CERTAIN CHANGES.
(a) Except as set forth on SCHEDULE 4.6 since the date of the
Current Balance Sheet, neither the Company nor any Subsidiary
has:
(i) incurred any Liabilities other than current
Liabilities incurred, or obligations under contracts entered
into, in the Ordinary Course of Business and for individual
amounts not greater than $250,000;
(ii) paid, discharged or satisfied any claim, Lien or
Liability, other than any claim, Lien or Liability (A)
reflected or reserved against on the Current Balance Sheet and
paid, discharged or satisfied in the Ordinary Course of
Business since the date of the Current Balance Sheet or (B)
incurred and paid, discharged or satisfied since the date of
the Current Balance Sheet, in each case in the Ordinary Course
of Business;
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(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;
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or
(xv) agreed, in writing or otherwise, to any of the
foregoing.
(b) Since the date of the Current Balance Sheet there has been
no Material Adverse Change.
IV.7 LITIGATION. As of the date hereof no claim, suit, proceeding or
investigation is pending or, to the knowledge of the Company, threatened against
or affecting the Company or any Subsidiary or any officer or director thereof or
the Company's and the Subsidiaries' business which if decided adversely to any
such person could have a Material Adverse Effect.
IV.8 LICENSES, COMPLIANCE WITH LAW, OTHER AGREEMENTS, ETC. The Company
and each Subsidiary have all material franchises, permits, licenses and other
rights to allow it to conduct its business and is not in violation, in any
material respects of any order or decree of any court, or of any law, order or
regulation of any Governmental Agency, or of the provisions of any material
contract or agreement to which it is a party or by which it is bound, and
neither this Agreement nor the Related Documents nor the transactions
contemplated hereby or thereby will result in any such violation except where
the failure to have any such franchise permit or license or any such violation
could not be expected to have a Material Adverse Effect. The Company's and the
Subsidiaries' business has been conducted in all material respects in compliance
with all federal, state and local laws, ordinances, rules and regulations,
except where such violations, defaults or noncompliance would not have a
Material Adverse Effect.
IV.9 THIRD-PARTY APPROVALS. Assuming the accuracy of the
representations and warranties of the Purchasers contained in this Agreement,
the Company is not required to obtain any order, consent, approval or
authorization of, or to make any declaration or filing with, any Governmental
Agency or other third party (including under any state securities or "blue sky"
laws) in connection with the execution and delivery of this Agreement or the
Related Documents, or the consummation of the transactions contemplated hereby
or thereby to occur on the Closing Date or the Advance Closing Date, except for
any consents, approvals or authorizations the failure to obtain which could not
have a Material Adverse Effect.
IV.10 NO UNDISCLOSED LIABILITIES. Neither the Company nor any of its
Subsidiaries has any Liabilities except (i) as and to the extent of the amounts
reflected or reserved against on the Current Balance Sheet (excluding the
footnotes thereto), (ii) liabilities and obligations incurred in the Ordinary
Course of Business since the date thereof, (iii) such other liabilities that in
the aggregate will not result in a Material Adverse Effect, and (iv) Liabilities
under the Credit Agreement (as defined therein).
IV.11 TANGIBLE ASSETS. The Company and its Subsidiaries own or lease
all tangible assets used or reasonably necessary in connection with the conduct
of its business. All material tangible assets are free from any Liens (other
than Permitted Liens), are free from any material defects, have been maintained
in accordance with normal industry practice and any regulatory
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standard or procedure to which such assets are subject, are in good operating
condition and repair (subject to normal wear and tear) and are suitable for the
purposes for which such assets are used or proposed to be used, other than
liens, defects and wear and tear which in the aggregate could not be expected to
have a Material Adverse Effect.
IV.12 INVENTORY. All inventory of the Company and its Subsidiaries,
whether reflected on the Current Balance Sheet or otherwise, consists of a
quality and quantity usable or salable in the Ordinary Course of Business,
subject to normal rates of defect or obsolescence not inconsistent with the
Company's historical experience.
IV.13 OWNED REAL PROPERTY. The Company and its Subsidiaries own no real
property.
IV.14 REAL PROPERTY LEASES. There exists no event of default (nor any
event which with notice or lapse of time would constitute an event of default)
with respect to the Company, any Subsidiary and, to the Company's knowledge,
with respect to any other party thereto under any agreement pursuant to which
the Company is the lessee or lessor of any real property, except for such
defaults and defects in enforceability as could not in the aggregate be expected
to have a Material Adverse Effect, and all such agreements are in full force and
effect and enforceable against the lessor or lessee in accordance with their
terms except for such defaults and defects in enforceability as could not in the
aggregate be expected to have a Material Adverse Effect.
IV.15 AGREEMENTS. Neither the Company nor any Subsidiary is in default,
nor to the knowledge of the Company is there any basis for a valid claim of
default, and to the Company's knowledge no event has occurred which, with notice
or lapse of time, would constitute a default, under any agreement, arrangement
or understanding to which the Company or any Subsidiary is a party, and to the
knowledge of the Company no other Person is in default under any such agreement,
in each case other than defaults which in the aggregate could not be expected to
have a Material Adverse Effect. Additionally, neither the Company nor any
Subsidiary is party to any agreement the performance of which in accordance with
its terms (including any termination provision thereof) could be expected to
have a Material Adverse Effect.
IV.16 INTELLECTUAL PROPERTY. SCHEDULE 4.16 sets forth a complete list
of (i) all patented, registered or applied for Intellectual Property owned or
filed by the Company; and (ii) all trade names and material unregistered
trademarks used by the Company in connection with its business. The Company owns
and possesses all right, title and interest in and to, or has a valid and
enforceable license to use, the Intellectual Property necessary for the
operation of its business as currently conducted and as currently proposed to be
conducted, and no claim by any third party contesting the validity,
enforceability, use or ownership of such Intellectual Property has been made or,
to the knowledge of the Company, is threatened. The Company has not infringed or
misappropriated the Intellectual Property of any third party.
IV.17 EMPLOYEES. Except as set forth on SCHEDULE 4.17, since the date
of the Current Balance Sheet, no key employees and no group of employees has
terminated, or to the
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knowledge of the Company plans to terminate, employment with the Company or any
Subsidiary, as applicable. Except as set forth on SCHEDULE 4.17, the Company is
not a party to or bound by any collective bargaining agreement, nor has it
experienced any strike, material grievance, material claim of unfair labor
practice or other collective bargaining dispute. Except as set forth on Schedule
4.17, to the knowledge of the Company there is no organizational effort being
made or threatened by or on behalf of any labor union with respect to its
employees. The Company has not committed any unfair labor practice or materially
violated any federal, state or local law or regulation regulating employers or
the terms and conditions of its employees' employment, including laws regulating
employee wages and hours, employment discrimination, employee civil rights,
equal employment opportunity and employment of foreign nationals, except for
such violations as could not be expected to have a Material Adverse Effect.
IV.18 ERISA; EMPLOYEE BENEFITS. Each Plan (other than a Plan which is a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA) that is
intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service or has timely
filed for a favorable determination letter from the Internal Revenue Service and
no event has occurred since the date of the last determination letter that could
reasonably be expected to materially adversely affect the qualified status of
such Plan. Each Plan (other than a Plan which is a "multiemployer plan" within
the meaning of Section 4001(a)(3) of ERISA) is in full force and effect and has
been administered in all material respects in accordance with its terms and is
and has been, and each plan administrator and fiduciary of a Plan is acting and
has been acting, in compliance in all material respects with all applicable
requirements of the Code and ERISA (including the funding, reporting and
disclosure and prohibited transaction provisions thereof) and other applicable
laws, regulations and rulings in connection with each such Plan. No Plan has
been terminated or partially terminated. With respect to each Plan which is a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA, no
complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of
ERISA) has occurred, no such Plan is in reorganization or insolvency (within the
meaning of Title IV of ERISA) and no material withdrawal liability has been
assessed against the Company. The Company or one of its Subsidiaries has made,
accrued or provided for all contributions required under each Plan. To the
knowledge of the Company, no event has occurred or is reasonably expected to
occur with respect to any employee pension benefit plan of the Company or any
member of the Company's controlled group (within the meaning of Section 414 of
the Code), which could reasonably be expected to directly or indirectly result
in any material liability (other than liability arising in the ordinary course)
to the Company or any member of its controlled group pursuant to Title IV of
ERISA or Section 412 of the Code. No Plan (other than a Plan which is a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA) has
incurred an "accumulated funding deficiency" within the meaning of Section 412
of the Code or Section 302 of ERISA.
IV.19 ENVIRONMENT, HEALTH AND SAFETY.
(a) The Company (as used in this Section 4.19, Company shall
include the Company's Subsidiaries and its predecessor) has complied
and is in compliance in all
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material respects with all Environmental and Safety Requirements that
are applicable to the Company's business.
(b) The Company has not received any written notice, report or
other information regarding any liabilities or potential liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise),
including any investigatory, remedial or corrective obligations,
relating to the Company or its facilities and arising under
Environmental and Safety Requirements.
(c) The Company has not, either expressly or by operation of
law, assumed or undertaken any liability, including without limitation
any obligation for corrective or remedial action, of any other person
relating to Environmental and Safety Requirements.
IV.20 TRANSACTIONS WITH AFFILIATES. Except as disclosed in filings made
by the Company with the SEC pursuant to the Securities Act and the Exchange Act,
neither the Company nor any Subsidiary is party to any agreement, arrangement or
transaction with any Affiliate which is material to the Company's and its
Subsidiaries business, taken as a whole.
IV.21 TAXES.
(a) Each of the Company, its predecessor and its Subsidiaries
has filed all Tax Returns that it was required to file, and has paid
all Taxes shown thereon as owing, except where the failure to file Tax
Returns or to pay Taxes would not have a Material Adverse Effect on the
financial condition of the Company and its Subsidiaries taken as a
whole.
(b) None of the Company and its Subsidiaries (A) has been a
member of an affiliated group filing a consolidated federal Tax Return
(other than a group the common parent of which was the Company) or (B)
has any Liability for the Taxes of any Person (other than any of the
Company and its Subsidiaries) under Treas. Reg. ss.1.1502-6 (or any
similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(c) Each of the Company, its predecessor and its Subsidiaries
has withheld and paid all taxes required to have been withheld and paid
in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party.
(d) There is no dispute or claim concerning any Tax Liability
of any of the Company and its Subsidiaries either (A) claimed or raised
by any authority in writing or (B) as to which any of the directors and
officers (and employees responsible for Tax matters) of the Company and
its Subsidiaries has knowledge based upon personal contact with any
agent of such authority and which is material to the Company and its
Subsidiaries taken as a whole.
IV.22 OTHER INVESTORS. Set forth on SCHEDULE 4.22 is a list of all
shareholders of the
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<PAGE> 19
Company who as of the date hereof, based upon Schedule I hereto and SEC filings
of shareholders, after giving effect to the terms hereof, own more than 5% of
the fully diluted common equity of the Company and sets forth such percentage
ownership.
IV.23 YEAR 2000 REPRESENTATIONS.
(a) None of the computer software, computer firmware, computer
hardware (whether general or special purpose) or other similar or
related items of automated, computerized or software systems that are
used or relied on by Company or by any of its Subsidiaries in the
conduct of their respective businesses will malfunction, will cease to
function, will generate incorrect data or will produce incorrect
results when processing, providing or receiving (i) date-related data
from, into and between the twentieth and twenty-first centuries or (ii)
date-related data in connection with any valid date in the twentieth
and twenty-first centuries.
(b) None of the products and services sold, licensed,
rendered, or otherwise provided by the Company or by any of its
Subsidiaries in the conduct of their respective businesses will
malfunction, will cease to function, will generate incorrect data or
will produce incorrect results when processing, providing or receiving
(i) date-related data from, into and between the twentieth and
twenty-first centuries or (ii) date-related data in connection with any
valid date in the twentieth and twenty-first centuries; and,
accordingly, neither the Company nor any of its Subsidiaries is or will
be subject to any claim, demand, action, suit, liability, damage,
material loss, or material expense arising from, or related to,
circumstances where such products and services malfunction, cease to
function, generate incorrect data, or produce incorrect results when
processing, providing or receiving (i) date-related data from, into and
between the twentieth and twenty-first centuries or (ii) date-related
data in connection with any valid date in the twentieth and
twenty-first centuries.
(c) Neither the Company nor any of its Subsidiaries has made
any other representations or warranties regarding the ability of any
product or service sold, licensed, rendered, or otherwise provided by
the Company or by any of its Subsidiaries in the conduct of their
respective businesses to operate without malfunction, to operate
without ceasing to function, to generate correct data or to produce
correct results when processing, providing or receiving (i)
date-related data from, into and between the twentieth and twenty-first
centuries and (ii) date-related data in connection with any valid date
in the twentieth and twenty-first centuries.
IV.24 SENIORITY. No class of equity securities of the Company is senior
to the Preferred Shares in right of payment, whether upon liquidation,
dissolution or otherwise.
IV.25 INVESTMENT COMPANY. The Company is not, and is not controlled by
or under common control with an affiliate of, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
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IV.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.
IV.27 SOLICITATION MATERIALS. The Company has not (i) distributed any
offering materials in connection with the offering and sale of the Preferred
Shares other than the disclosure materials delivered to Purchasers (the
"Disclosure Materials") or (ii) solicited any offer to buy or sell the Preferred
Shares by means of any form of general solicitation or advertising. None of the
Disclosure Materials or any other information provided to the Purchasers by or
on behalf of the Company contain any untrue statement of material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
IV.28 FORM S-3 ELIGIBILITY. No later than May 1, 1998, the Company will
be eligible to register securities for resale with the SEC under Form S-3
promulgated under the Securities Act.
IV.29 LISTING AND MAINTENANCE REQUIREMENTS COMPLIANCE. (i) The Company
has not received notice (written or oral) from the American Stock Exchange that
the Company is not in compliance with the listings or maintenance requirements
of such Exchange.
(ii) Upon conversion of the Preferred Shares into shares of Common
Stock and upon the affirmative vote of the Company's shareholders approving the
issuance of the Preferred Shares and the Conversion Shares, which vote shall
occur not later than July 31, 1998, all Conversion Shares shall be listed on the
American Stock Exchange.
IV.30 REGISTRATION RIGHTS; RIGHTS OF PARTICIPATION. Except as described
on Schedule 4.30 hereto, (A) the Company has not granted or agreed to grant to
any Person any rights (including "piggy-back" registration rights) to have any
securities of the Company registered with the SEC or any other governmental
authority which has not been satisfied and (B) no Person, including, but not
limited to, current or former shareholders of the Company, underwriters, brokers
or agents, has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by this Agreement or any other related document which has not been
waived.
IV.31 RECENT RESULTS OF OPERATIONS. Set forth on SCHEDULE 4.31 is (i)
the
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Company's monthly recurring revenues for the month of December 1997 and (ii) the
Company's number of subscribers as of December 31, 1997, each as prepared and
calculated in the Ordinary Course of Business.
IV.32 SMALL BUSINESS MATTERS. The Company acknowledges that each SBIC
Holder is a federally licensed SBIC under the SBIC Act. The Company, together
with its "affiliates" (as that term is defined in 13 CFR ss.121.103), is a
"small business concern" within the meaning of the SBIC Regulations, including
13 CFR ss.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 ss.107.720).
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby represents and warrants to the Company as
follows:
V.1 AUTHORIZATION AND ENFORCEABILITY. Such Purchaser has taken all
action necessary to permit it to execute and deliver this Agreement and the
other documents and instruments to be executed by it pursuant hereto and to
carry out the terms hereof and thereof. This Agreement and each such other
document and instrument, when duly executed and delivered by such Purchaser,
will constitute a valid and binding obligation of such Purchaser, enforceable
against such Purchaser in accordance with its terms.
V.2 GOVERNMENT APPROVALS. Such Purchaser is not required to obtain any
order, consent, approval or authorization of, or to make any declaration or
filing with, any Governmental Agency in connection with the execution and
delivery of this Agreement and the other documents and instruments to be
executed by it pursuant hereto or the consummation of the transactions
contemplated hereby and thereby, except for such order, consent, approval,
authorization, declaration or filing as which has been or will be obtained or
made.
ARTICLE VI
COMPLIANCE WITH SECURITIES LAWS
VI.1 INVESTMENT INTENT OF PURCHASER. Each Purchaser represents and
warrants to the Company that it is acquiring the Preferred Shares for its own
account, with no present intention of selling or otherwise distributing the same
to the public.
VI.2 STATUS OF PREFERRED SHARES. Each Purchaser has been informed by
the Company that the Preferred Shares have not been and will not be registered
under the Securities
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<PAGE> 22
Act or under any state securities laws and are being offered and sold in
reliance upon federal and state exemptions for transactions not involving any
public offering.
VI.3 SOPHISTICATION AND FINANCIAL CONDITION OF PURCHASER. Each
Purchaser represents and warrants to the Company that it is an "Accredited
Investor" as defined in Regulation D under the Securities Act and that it
considers itself to be an experienced and sophisticated investor and to have
such knowledge and experience in financial and business matters as are necessary
to evaluate the merits and risks of an investment in the Preferred Shares.
VI.4 TRANSFER OF PREFERRED SHARES AND CONVERSION SHARES.
(a) Preferred Shares and Conversion Shares may be transferred
pursuant to (i) public offerings registered under the Securities Act,
(ii) Rule 144 of the SEC (or any similar rule then in force), (iii) to
an Affiliate of the transferor, or (iv) subject to the conditions set
forth in Section 6.4(b), any other legally-available means of transfer.
(b) In connection with any transfer of any Preferred Shares or
Conversion Shares (other than a transfer described in Section
6.4(a)(i), (ii) or (iii)), the holder of such shares shall deliver
written notice to the Company describing in reasonable detail the
proposed transfer, together with an opinion of counsel (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
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REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY
APPLICABLE STATE SECURITIES LAW. THE TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE
CONDITIONS SET FORTH IN THE PREFERRED STOCK PURCHASE AGREEMENT
DATED AS OF FEBRUARY 2, 1998 BETWEEN THE ISSUER (THE
"COMPANY") AND THE PURCHASERS LISTED ON SCHEDULE I THERETO.
THE COMPANY RESERVES THE RIGHT TO REFUSE ANY TRANSFER OF SUCH
SECURITIES UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH
RESPECT TO SUCH TRANSFER. A COPY OF SUCH CONDITIONS SHALL BE
FURNISHED WITHOUT CHARGE TO THE HOLDER HEREOF UPON WRITTEN
REQUEST TO THE COMPANY.
VI.5 EXCULPATION AMONG PURCHASERS. Each Purchaser acknowledges that it
is not relying upon any person, firm or corporation (including without
limitation any other Purchaser), other than the Company and its officers and
directors, in making its investment or decision to invest in the Company. Each
Purchaser agrees that no other Purchaser (acting in such capacity) nor the
respective controlling persons, officers, directors, partners, agents or
employees of any such other Purchaser shall be liable to any other Purchaser in
connection with this investment for any action taken or omitted to be taken by
any of them prior to the date hereof in connection with the Preferred Shares.
ARTICLE VII
CONDITIONS PRECEDENT
VII.1 CLOSING DELIVERIES TO THE PURCHASERS. The following documents and
items shall be delivered to the Purchasers at or prior to the Closing:
(a) Evidence acceptable to the Purchasers of adoption by the
Company of the Certificate of Designations;
(b) A fully executed and delivered counterpart of the
Registration Rights Agreement;
(c) The written opinion of 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,
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(i) the representations and warranties of the Company
contained herein and in any writing delivered pursuant hereto
shall be true and correct when made and at and as of the time
of the Closing;
(ii) No action, suit, investigation or proceeding
shall be pending or threatened before any court or
Governmental Agency to restrain, prohibit, collect damages as
a result of or otherwise challenge this Agreement or any
Related Document or any transaction contemplated hereby or
thereby;
(iii) All acts or covenants required hereunder to be
performed by the Company prior to the Closing shall have been
fully performed by it;
(iv) No Material Adverse Change shall have occurred
between the date of the Current Balance Sheet and the Closing
Date; and
(B) setting forth the resolutions of the board of directors of
the Company authorizing the execution and delivery of this Agreement
and the Related Documents (including the Certificate of Designations)
and the consummation of the transactions contemplated hereby and
thereby and certifying that such resolutions were duly adopted and have
not been rescinded or amended;
(e) such other documents relating to the transactions
contemplated hereby as Advance or other Purchasers may reasonably
request; and
(f) to each SBIC Holder,
(i) duly completed and executed SBA Forms 480, 652
and Parts A and B of 1031, and
(ii) a written certification from the Company
regarding its intended use of the proceeds of the Financing.
VII.2 CLOSING DELIVERIES TO THE COMPANY. At Closing, each Purchaser
other than Advance will deliver to the Company the aggregate purchase price for
the Preferred Shares purchased by it. At the Advance Closing, Advance will
deliver to the Company the aggregate purchase price for the Preferred Shares
purchased by it.
ARTICLE VIII
COVENANTS OF THE COMPANY
VIII.1 RESTRICTED ACTIONS. Without the prior written consent of the
holders of two-thirds of the then outstanding Preferred Shares the Company shall
not, and shall not permit
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<PAGE> 25
any Subsidiary to:
(a) become subject to any agreement or instrument which by its
terms would (under any circumstances) restrict the Company's right to
comply with the terms of this Agreement or any of the Related
Documents;
(b) use the proceeds from the sale of the Preferred Shares
other than (i) primarily for acquisitions of assets or businesses
reasonably related to the Company's existing business, and repayment of
indebtedness, and (ii) the remainder for other working capital purposes
of the Company;
(c) enter into any transaction or series of transactions with
any stockholder, director, officer, employee or Affiliate which would
require disclosure pursuant to Rule 404 of Regulation S-K under the
Securities Act unless such transaction is approved by the Company's
disinterested directors; or
(e) expand the Company's Board of Directors to greater than
nine members.
VIII.2 REQUIRED ACTIONS. For so long as at least 20% of the Preferred
Shares remain outstanding, the Company shall, and shall cause each Subsidiary
to:
(a) cause all properties owned by the Company or any of its
Subsidiaries or used or held for use in the conduct of its business or
the business of any of its Subsidiaries to be maintained and kept in
good condition, repair and working order (reasonable wear and tear
excepted) and supplied with all necessary equipment and will cause to
be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Board of Directors
may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times;
PROVIDED, HOWEVER, that the foregoing shall not prevent the Company
from discontinuing the maintenance of any of such properties if such
discontinuance is, in the judgment of the management of the Company,
desirable in the conduct of its business or the business of any of its
Subsidiaries and is not disadvantageous in any material respect to the
holders of Preferred Shares;
(b) preserve and keep in full force and effect the corporate
existence, rights (charter and statutory), licenses and franchises of
the Company and each of its Subsidiaries; PROVIDED, HOWEVER, that the
Company shall not be required to preserve any such right, license or
franchise if the Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of the
business of the Company and its Subsidiaries as a whole and that the
loss thereof is not disadvantageous in any material respect to the
holders of Preferred Shares;
(c) maintain the books, accounts and records of the Company
and its Subsidiaries in accordance with past custom and practice as
used in the preparation of the
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<PAGE> 26
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
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<PAGE> 27
Certificate of Designations (x) one individual designated by Advance as
long as Advance owns any Preferred Shares and (y) one individual
elected by the holders of a plurality of the Series A Preferred and
Series B Preferred, voting together as a single class; and
(k) on the Closing Date, have executed and delivered the
Credit Agreement on substantially the same principal terms and
conditions as set forth in the commitment letter issued by the lenders
a party thereto dated January 7, 1998; and
(l) deliver Conversion Shares in accordance with the terms and
conditions, and time periods, set forth in the Certificate of
Designations.
VIII.3 RESERVATION OF COMMON STOCK. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purposes of issuance upon conversion of the Preferred
Shares, such number of shares of Common Stock as are issuable upon the
conversion of all outstanding shares of the Preferred Shares. All shares of
Common Stock which are so issuable shall, when issued, be duly and validly
issued, fully paid and nonassessable and free from all Taxes, liens and charges.
The Company shall take all such actions as may be necessary to assure that all
such shares of Common Stock may be so issued without violation of any applicable
law or governmental regulation or any requirements of any domestic securities
exchange upon which shares of Common Stock may be listed (except for official
notice of issuance which shall be immediately transmitted by the Company upon
issuance).
VIII.4 PURCHASERS' RIGHTS IF TRADING IN COMMON STOCK IS SUSPENDED OR
DELISTED. If at any time while any Purchaser (or any assignee thereof) owns any
Preferred Shares or Conversion Shares, trading in the shares of the Common Stock
is suspended on or delisted from the American Stock Exchange or any other
principal market or exchange for such shares (other than as a result of the
suspension of trading in securities on such market or exchange generally or
temporary suspensions pending the release of material information) for more than
five business days in the aggregate, at the option of any Purchaser exercisable
by written notice to the Company delivered after such suspension or delisting,
the Company shall redeem, in cash, one-twentieth of the Preferred Shares and
Conversion Shares then held by such Purchaser, at an aggregate purchase price
equal to the sum of (i) the number of Preferred Shares to be redeemed multiplied
by the product of (1) the average per share market value for the five (5)
business days immediately preceding (a) the day of such notice or (b) the date
of payment in full of the redemption price calculated under this Section,
whichever is greater and (2) a fraction, the numerator of which is 1,000 and the
denominator of which is the Conversion Price on (a) the date of the repurchase
notice, or (b) the date of payment in full of the redemption price pursuant to
this Section, whichever is lower, (ii) the aggregate of all accrued but unpaid
dividends payable in respect of all Preferred Shares to be redeemed, (iii) the
number of Conversion Shares then held by such Purchaser multiplied by the
average per share market value for the five (5) business days immediately
preceding (A) the date of the notice or (B) the date of payment in full by the
Company of the redemption price calculated under this Section, whichever is
greater, and (iv) interest on the amounts set forth in (i) - (iii) above
accruing from the 5th business day after such notice until the repurchase price
under this Section is paid in full at the rate of 14% per annum.
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<PAGE> 28
The Company shall provide written notice of any redemption demand made pursuant
to this Section to each other holder of Preferred Shares or Conversion Shares
within 24 hours of its receipt thereof.
VIII.5 USE OF PROCEEDS. At the same time the Company files its annual
report on Form 10-K and at such other times as any SBIC Holder reasonably
requests, the Company shall deliver to each SBIC Holder a written statement
certified by the Company's president or chief financial officer describing in
reasonable detail the use of the proceeds of the Financing hereunder by the
Company and its Subsidiaries. In addition to any other rights granted hereunder,
the Company shall grant such SBIC Holder and the SBA access to the Company's
books and records for the purpose of verifying the use of such proceeds and
verifying the certifications made by the Company in SBA Forms 480 and 652
delivered pursuant to Section 7.1(f) above and for the purpose of determining
whether the principal business activity of the Company and its Subsidiaries
continues to constitute an eligible business activity (within the meaning of the
SBIC Regulations).
ARTICLE IX
SURVIVAL
IX.1 SURVIVAL. The representations and warranties of the parties hereto
contained herein, or in any writing delivered pursuant hereto, shall survive the
Closing and expire 30 days following the filing of the Company's annual report
on Form 10-K with the SEC for the Company's fiscal year that ends in 1999,
except that, notwithstanding anything to the contrary contained herein, the
representations of the Company contained in Section 4.23 hereof shall survive
the Closing and expire on December 31, 2001.
ARTICLE X
INDEMNIFICATION
X.1 INDEMNIFICATION. In consideration of each Purchaser's execution and
delivery of this Agreement and acquiring the Preferred Stock hereunder and in
addition to all of the Company's other obligations under this Agreement, the
Company shall defend, protect, indemnify and hold harmless each Purchaser and
each other holder of Preferred Stock and all of their officers, directors,
employees and agents (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement) (collectively,
the "Indemnitees") from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and damages, and
expenses (including, without limitation, costs of suit and attorneys' fees and
expenses) in connection therewith (irrespective of whether any such Indemnitee
is a party to the action for which indemnification hereunder is sought) (the
"Indemnified Liabilities"), incurred by the Indemnitees or any of them as a
result of, or arising out of, or relating to (a) the breach of any
representation of warranty contained in any agreement
24
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<PAGE> 29
relating to any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Preferred
Stock, (b) the execution, delivery, performance or enforcement of this Agreement
and any other instrument, document or agreement executed pursuant hereto by any
of the Indemnitees or (c) resulting from any breach of any representation,
warranty, covenant or agreement made by the Company herein or in any Related
Document. The Company shall reimburse the Indemnitees for the Indemnified
Liabilities as such Indemnified Liabilities are incurred. To the extent that the
foregoing undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under applicable law.
ARTICLE XI
GENERAL PROVISIONS
XI.1 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns,
including each subsequent holder of Preferred Shares or Conversion Shares.
Except as otherwise specifically provided herein, this Agreement shall not be
assignable by any party without the prior written consent of the other parties
hereto.
XI.2 ENTIRE AGREEMENT. This Agreement and the other writings referred
to herein or delivered pursuant hereto constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
arrangements or understandings.
XI.3 NOTICES. All notices, requests, consents and other communications
provided for herein shall be in writing and shall be (i) delivered in person,
(ii) transmitted by telecopy, (iii) sent by first-class, registered or certified
mail, postage prepaid, or (iv) sent by reputable overnight courier service, fees
prepaid, to the recipient at the address or telecopy number set forth below, or
such other address or telecopy number as may hereafter be designated in writing
by such recipient. Notices shall be deemed given upon personal delivery, seven
days following deposit in the mail as set forth above, upon acknowledgment by
the receiving telecopier or one day following deposit with an overnight courier
service.
(a) If to the Company:
Alarmguard Holdings, Inc.
125 Frontage Road
Orange, Connecticut 06477
Telecopy: (203) 799-9636
Attention: Russell R. MacDonnell
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<PAGE> 30
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.
XI.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.
XI.5 AMENDMENT AND WAIVER. No amendment of any provision of this
Agreement shall be effective, unless the same shall be in writing and signed by
the Company and the holders of two-thirds of the Preferred Shares and Conversion
Shares held by holders of Series A Preferred and Series B Preferred, taken
together. Any failure of the Company to comply with any provision hereof may
only be waived in writing by the holders of two-thirds of the Preferred Shares
and Conversion Shares held by holders of Series A Preferred and Series B
Preferred, taken together, and any failure of any holder of Preferred Shares or
Conversion Shares to comply with any provision hereof may only be waived in
writing by the Company. No such waiver shall operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. No failure by any party to
take any action against any breach of this Agreement or default by any other
party shall
26
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<PAGE> 31
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
27
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<PAGE> 32
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
28
<PAGE> 33
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
<PAGE> 34
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:
-----------------------------------
<PAGE> 35
Name: Daren J. Wells
Title: Director, Private Equity
By:
-----------------------------------
Name: Paul Finkelstein
393LMM1355/1.486634-1
<PAGE> 1
EXHIBIT 4
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF
SERIES A PREFERRED STOCK, $.0001 PAR VALUE
AND
SERIES B PREFERRED STOCK, $.0001 PAR VALUE
OF
ALARMGUARD HOLDINGS, INC.
Alarmguard Holdings, Inc., a corporation organized and existing under
the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
That pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of said corporation, and pursuant to the provisions
of Section 151 of Title 8 of the Delaware Code of 1953, said Board of Directors
adopted resolutions providing for as follows:
RESOLVED, that the Board of Directors does hereby create, establish and
authorize the issuance of a new series of the Company's Preferred Stock
and does hereby fix the designation, rights, preferences, amounts
payable in the event of voluntary or involuntary liquidation,
qualifications and restrictions of said series as follows:
(1) the designation of said new series of the Company's
Common Stock shall be "Series A Preferred Stock, $.0001 par value
per share", and each share of Series A Preferred Stock shall be
equal to every other share of Series A Preferred Stock in every
respect;
(2) the Series A Preferred Stock is hereby authorized to
be issued in the amount of up to thirty-five thousand seven
hundred (35,700) shares;
(3) the Series A Preferred Stock shall have such
additional rights, preferences, amounts payable in the event of
voluntary or involuntary liquidation, qualifications and
restrictions as set forth in Exhibit A attached hereto;
and further,
RESOLVED, that the Board of Directors does hereby create, establish and
authorize the issuance of a new series of the Company's Preferred Stock
and does hereby fix the designation, rights, preferences, amounts
payable in the event of voluntary or involuntary liquidation,
qualifications and restrictions of said series as follows:
<PAGE> 2
(1) the designation of said new series of the company's
Common Stock shall be "Series B Preferred Stock, $.0001 par value
per share", and each share of Series B Preferred Stock shall be
equal to every other share of Series B Preferred Stock in every
respect;
(2) the Series B Preferred Stock is hereby authorized to
be issued in the amount of up to five thousand (5,000) shares;
(3) the Series B Preferred Stock shall have such
additional rights, preferences, amounts payable in the event of
voluntary or involuntary liquidation, qualifications and
restrictions as set forth in Exhibit A attached hereto.
IN WITNESS WHEREOF, Alarmguard Holdings, Inc. has caused this certificate to be
signed by Russell R. MacDonnell, its Chief Executive Officer, this 2nd day of
February, 1998.
ALARMGUARD HOLDINGS, INC.
By: /s/ Russell R. MacDonnell
-------------------------
Russell R. MacDonnell
Chief Executive Officer
<PAGE> 3
EXHIBIT A
ALARMGUARD HOLDINGS, INC. (THE "CORPORATION")
PREFERRED STOCK TERMS
Section 1. DIVIDENDS.
1A. GENERAL OBLIGATION. When and as declared by the Corporation's
Board of Directors and to the extent permitted under the General Corporation Law
of Delaware, the Corporation shall pay preferential dividends in cash to the
holders of the Series A Preferred Stock (the "Series A Preferred") as provided
in this Section 1. No preferential dividends shall be paid to the holders of the
Series B Preferred Stock (the "Series B Preferred"). Except as otherwise
provided herein, dividends on each share of the Series A Preferred (a "Series A
Share", and, collectively with each share of the Series B Preferred, a "Share")
shall accrue, whether or not declared or paid, on a daily basis at the rate of
5% per annum of the sum of the Liquidation Value thereof plus all accumulated
and unpaid dividends thereon from and including the date of issuance of such
Share to and including the first to occur of (i) the date on which the
Liquidation Value of such Share (plus all accrued and unpaid dividends thereon)
is paid to the holder thereof in connection with the liquidation of the
Corporation or the redemption of such Share by the Corporation, (ii) the date on
which such Share is converted into shares of Conversion Stock hereunder or (iii)
the date on which such Share is otherwise acquired by the Corporation. Such
dividends shall accrue whether or not they have been declared and whether or not
there are profits, surplus or other funds of the Corporation legally available
for the payment of dividends, and such dividends shall be cumulative such that
all accrued and unpaid dividends shall be fully paid before any dividends,
distributions, redemptions or other payments may be made with respect to any
Junior Securities. The date on which the Corporation initially issues any Share
shall be deemed to be its "date of issuance" regardless of the number of times
transfer of such Share is made on the stock records maintained by or for the
Corporation and regardless of the number of certificates which may be issued to
evidence such Share.
1B. DIVIDEND PAYMENT DATES. All dividends which have accrued on the
Series A Preferred shall be payable on January 1, April 1, July 1 and October 1
of each year, beginning April 1, 1998 (the "Dividend Payment Dates"); provided,
however, that incremental dividends over and above the rate of 5% per annum
payable pursuant to clause (i) of Paragraph 9B hereof need not be paid on the
Dividend Payment Dates and shall accrue until otherwise payable pursuant to the
terms hereof.
1C. DISTRIBUTION OF PARTIAL DIVIDEND PAYMENTS. Except as otherwise
provided herein, if at any time the Corporation pays less than the total amount
of dividends then accrued with respect to the Series A Preferred, such payment
shall be distributed pro rata among the holders thereof based upon the aggregate
accrued but unpaid dividends on the Shares held by each such holder.
<PAGE> 4
1D. PARTICIPATING DIVIDENDS. In the event that the Corporation
declares or pays any dividends upon the Common Stock (whether payable in cash,
securities or other property) other than dividends payable solely in shares of
Common Stock, the Corporation shall also declare and pay to the holders of the
Series A Preferred and the Series B Preferred at the same time that it declares
and pays such dividends to the holders of the Common Stock, the dividends which
would have been declared and paid with respect to the Common Stock issuable upon
conversion of the Series A Preferred and Series B Preferred had all of the
outstanding Series A Preferred and Series B Preferred been converted immediately
prior to the record date for such dividend, or if no record date is fixed, the
date as of which the record holders of Common Stock entitled to such dividends
are to be determined.
Section 2. LIQUIDATION.
Upon any liquidation, dissolution or winding up of the Corporation
(whether voluntary or involuntary), each holder of Series A Preferred or Series
B Preferred (collectively referred to herein as the "Preferred Stock") shall be
entitled to be paid, before any distribution or payment is made upon any Junior
Securities, an amount in cash equal to the aggregate Liquidation Value of all
Shares held by such holder (plus all accrued and unpaid dividends thereon), and
the holders of Preferred Stock shall not be entitled to any further payment. If
upon any such liquidation, dissolution or winding up of the Corporation the
Corporation's assets to be distributed among the holders of the Preferred Stock
are insufficient to permit payment to such holders of the aggregate amount which
they are entitled to be paid under this Section 2, then the entire assets
available to be distributed to the Corporation's stockholders shall be
distributed pro rata among such holders based upon the aggregate Liquidation
Value (plus all accrued and unpaid dividends) of the Preferred Stock held by
each such holder. Prior to the liquidation, dissolution or winding up of the
Corporation, the Corporation shall declare for payment all accrued and unpaid
dividends with respect to the Preferred Stock, but only to the extent of funds
of the Corporation legally available for the payment of dividends. Not less than
60 days prior to the payment date stated therein, the Corporation shall mail
written notice of any such liquidation, dissolution or winding up to each record
holder of Preferred Stock, setting forth in reasonable detail the amount of
proceeds to be paid with respect to each Share and each share of Common Stock in
connection with such liquidation, dissolution or winding up.
Section 3. PRIORITY OF PREFERRED STOCK ON DIVIDENDS AND REDEMPTIONS.
3A. NO PAYMENTS WITH RESPECT TO JUNIOR SECURITIES.
So long as any Preferred Stock remains outstanding, without the
prior written consent of the holders of two-thirds of the outstanding shares of
Preferred Stock, taken together as a single series, the Corporation shall not,
nor shall it permit any Subsidiary to, redeem, purchase or otherwise acquire
directly or indirectly any Junior Securities, nor shall the Corporation directly
or indirectly pay or declare any dividend or make any distribution upon any
Junior Securities.
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3B. NO ISSUANCE OF SENIOR OR PARI PASSU SECURITIES.
For so long as any Preferred Stock remains outstanding, without the
prior written consent of the holders of two-thirds of the outstanding shares of
the Preferred Stock, taken together as a single series, the Company shall not
amend its Restated Certificate of Incorporation or take any other action to
approve or issue any capital stock (including increasing the number of
authorized shares of Series A Preferred or Series B Preferred) of the Company
that is senior or pari passu in right to the payment of dividends, payment upon
liquidation, redemption or otherwise to the Preferred Stock. Additionally, so
long as any Preferred Stock remains outstanding, without the prior written
consent of the holders of two-thirds of the outstanding shares of Preferred
Stock, taken together as a single series, the Company shall not amend its
Restated Certificate of Incorporation or take any other action that would alter
the rights, preferences or privileges of the Preferred Stock as in effect on the
date of the original issuance of the Preferred Stock.
Section 4. REDEMPTIONS.
4A. SCHEDULED REDEMPTION. On February 2, 2003 (the "Scheduled
Redemption Date"), the Corporation shall redeem all outstanding Preferred Stock
at a price per Share equal to the Liquidation Value thereof (plus accrued and
unpaid dividends thereon).
4B. REDEMPTION PAYMENTS. For each Share which is to be redeemed
hereunder, the Corporation shall be obligated on the Redemption Date to pay to
the holder thereof (upon surrender by such holder at the Corporation's principal
office of the certificate representing such Share) an amount in cash in
immediately available funds equal to the Liquidation Value of such Share (plus
all accrued and unpaid dividends thereon and any premium payable with respect
thereto). If the funds of the Corporation legally available for redemption of
Shares on any Redemption Date are insufficient to redeem the total number of
Shares to be redeemed on such date, those funds which are legally available
shall be used to redeem the maximum possible number of Shares pro rata among the
holders of the Shares to be redeemed based upon the aggregate Liquidation Value
of such Shares held by each such holder (plus all accrued and unpaid dividends
thereon and any premium payable with respect thereto). At any time thereafter
when additional funds of the Corporation are legally available for the
redemption of Shares, such funds shall immediately be used to redeem the balance
of the Shares which the Corporation has become obligated to redeem on any
Redemption Date but which it has not redeemed. Prior to any redemption of
Preferred Stock, the Corporation shall declare for payment all accrued and
unpaid dividends with respect to the Shares which are to be redeemed, but only
to the extent of funds of the Corporation legally available for the payment of
dividends.
4C. NOTICE OF REDEMPTION. The Corporation shall mail written notice
of each redemption of any Preferred Stock (other than a redemption at the
request of a holder or holders of Preferred Stock) to each record holder thereof
not more than 60 nor less than 30 days prior to the date on which such
redemption is to be made. In case fewer than the total number of
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Shares represented by any certificate are redeemed, a new certificate
representing the number of unredeemed Shares shall be issued to the holder
thereof without cost to such holder within five business days after surrender of
the certificate representing the redeemed Shares.
4D. DIVIDENDS AFTER REDEMPTION DATE. No Share shall be entitled to
any dividends accruing after the date on which the Liquidation Value of such
Share (plus all accrued and unpaid dividends thereon) is paid to the holder of
such Share. On such date, all rights of the holder of such Share shall cease,
and such Share shall no longer be deemed to be issued and outstanding.
4E. REDEEMED OR OTHERWISE ACQUIRED SHARES. Any Shares which are
redeemed or otherwise acquired by the Corporation shall be canceled and retired
to authorized but unissued shares and shall not be reissued, sold or
transferred.
4F. OTHER REDEMPTIONS OR ACQUISITIONS. The Corporation shall not,
nor shall it permit any Subsidiary to, redeem or otherwise acquire any Shares of
Preferred Stock, except as expressly authorized herein or pursuant to a purchase
offer made pro rata to all holders of Preferred Stock on the basis of the number
of Shares owned by each such holder.
4G. PAYMENT OF ACCRUED DIVIDENDS. The Corporation may not redeem any
Series A Preferred, unless all dividends accrued on the outstanding Series A
Preferred through the immediately preceding Dividend Payment Date have been
declared and paid in full.
4H. CHANGE OF CONTROL.
(i) If a Change of Control has occurred or the Corporation obtains
knowledge that a Change of Control is proposed to occur, the Corporation shall
give prompt written notice of such Change of Control describing in reasonable
detail the material terms and date of consummation thereof to each holder of
Preferred Stock, but in any event such notice shall not be given later than five
days after the occurrence of such Change of Control, and the Corporation shall
give each holder of Preferred Stock prompt written notice of any material change
in the terms or timing of such transaction. Any holder of Preferred Stock may
require the Corporation to redeem all or any portion of the Preferred Stock
owned by such holder at a price per Share equal to the greater of (a) $1,300 if
the Change of Control occurs prior to February 2, 1999 or $1,500 if the Change
of Control occurs thereafter or (b) the Liquidation Value thereof (plus all
accrued and unpaid dividends thereon) by giving written notice to the
Corporation of such election prior to the later of (a) 21 days after receipt of
the Corporation's notice and (b) five days prior to the consummation of the
Change of Control (the "Expiration Date"). The Corporation shall give prompt
written notice of any such election to all other holders of Preferred Stock
within five days after the receipt thereof, and each such holder shall have
until the later of (a) the Expiration Date or (b) ten days after receipt of such
second notice to request redemption hereunder (by giving written notice to the
Corporation) of all or any portion of the Preferred Stock owned by such holder.
Upon receipt of such election(s), the Corporation shall be obligated
to redeem the aggregate number of Shares specified therein on the occurrence of
the Change of Control. If any
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proposed Change of Control does not occur, all requests for redemption in
connection therewith shall be automatically rescinded, or if there has been a
material change in the terms or the timing of the transaction, any holder of
Preferred Stock may rescind such holder's request for redemption by giving
written notice of such rescission to the Corporation.
The term "Change of Control" means (a) any sale, transfer or
issuance or series of sales, transfers and/or issuances of Common Stock by the
Corporation or any holders thereof which results in any Person or group of
Persons (as the term "group" is used under the Securities Exchange Act of 1934),
other than the holders of Preferred Stock as of the date of issuance of such
Shares, beneficially owning (as such term is used in the Securities Exchange Act
of 1934) more than 50% of the Common Stock outstanding at the time of such sale,
transfer or issuance or series of sales, transfers and/or issuances, (b) any
sale or transfer of more than 50% of the assets of the Corporation and its
Subsidiaries on a consolidated basis (measured either by book value in
accordance with generally accepted accounting principles consistently applied or
by fair market value determined in the reasonable good faith judgment of the
Corporation's Board of Directors) in any transaction or series of transactions
(other than sales in the ordinary course of business) and (c) any merger or
consolidation to which the Corporation is a party, except for a merger in which
the Corporation is the surviving corporation, the terms of the Preferred Stock
are not changed and the Preferred Stock is not exchanged for cash, securities or
other property, and after giving effect to such merger, the holders of the
Corporation's outstanding capital stock possessing a majority of the voting
power (under ordinary circumstances) to elect a majority of the Corporation's
Board of Directors immediately prior to the merger shall continue to own the
Corporation's outstanding capital stock possessing the voting power (under
ordinary circumstances) to elect a majority of the Corporation's Board of
Directors.
(ii) Redemptions made pursuant to this paragraph 4H shall not
relieve the Corporation of its obligation to redeem the Preferred Stock on the
Scheduled Redemption Date pursuant to paragraph 4A above.
Section 5. VOTING RIGHTS.
5A. ELECTION OF DIRECTORS. In the election of directors of the
Corporation, the holders of the Preferred Stock, voting separately as a single
class to the exclusion of all other classes of the Corporation's capital stock
and with each Share of Preferred Stock entitled to one vote, shall be entitled
to elect two directors to serve on the Corporation's Board of Directors until
their successors are duly elected by the holders of the Preferred Stock or they
are removed from office by the holders of the Preferred Stock. If the holders of
the Preferred Stock for any reason fail to elect anyone to fill any such
directorship, such position shall remain vacant until such time as the holders
of the Preferred Stock elect a director to fill such position and shall not be
filled by resolution or vote of the Corporation's Board of Directors or the
Corporation's other stockholders.
5B. OTHER VOTING RIGHTS. The holders of the Preferred Stock shall be
entitled
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to notice of all stockholders meetings in accordance with the Corporation's
bylaws, and except as otherwise required by applicable law, the holders of the
Preferred Stock shall be entitled to vote on all matters submitted to the
stockholders for a vote together with the holders of the Common Stock voting
together as a single class with each share of Common Stock entitled to one vote
per share and each Share of Preferred Stock entitled to one vote for each share
of Common Stock issuable upon conversion of such Share of Preferred Stock as of
the record date for such vote or, if no record date is specified, as of the date
of such vote.
Section 6. CONVERSION.
6A. CONVERSION PROCEDURE.
(i) At any time and from time to time, any holder of Series A
Preferred may convert all or any portion of the Series A Preferred (including
any fraction of a Series A Share) held by such holder into a number of shares of
Conversion Stock computed by multiplying the number of Series A Shares to be
converted by $1,000 and dividing the result by the Series A Conversion Price
then in effect and any holder of Series B Preferred may convert all or any
portion of the Series B Preferred (including any fraction of a Series B Share)
held by such holder into a number of shares of Conversion Stock computed by
multiplying the number of Series B Shares to be converted by $1,000 and dividing
the result by the Series B Conversion Price then in effect.
(ii) Except as otherwise provided herein, each conversion of
Preferred Stock shall be deemed to have been effected as of the close of
business on the date on which the certificate or certificates representing the
Preferred Stock to be converted have been surrendered for conversion at the
principal office of the Corporation. At the time any such conversion has been
effected, the rights of the holder of the Shares converted as a holder of
Preferred Stock shall cease and the Person or Persons in whose name or names any
certificate or certificates for shares of Conversion Stock are to be issued upon
such conversion shall be deemed to have become the holder or holders of record
of the shares of Conversion Stock represented thereby.
(iii) The conversion rights of any Share subject to redemption
hereunder shall terminate on the Redemption Date for such Share unless the
Corporation has failed to pay to the holder thereof the Liquidation Value of
such Share (plus all accrued and unpaid dividends thereon and any premium
payable with respect thereto).
(iv) Notwithstanding any other provision hereof, if a conversion of
Preferred Stock is to be made in connection with a Change of Control or other
transaction affecting the Corporation, the conversion of any Shares of Preferred
Stock may, at the election of the holder thereof, be conditioned upon the
consummation of such transaction, in which case such conversion shall not be
deemed to be effective until such transaction has been consummated.
(v) As soon as possible after a conversion has been effected (but in
any event within three (3) business days after notice of such conversion has
been delivered to the
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Corporation, provided that such conversion has been effected by such date, in
the case of subparagraph (a) below), the Corporation shall deliver to the
converting holder:
(a) a certificate or certificates representing the number
of shares of Conversion Stock issuable by reason of such conversion in
such name or names and such denomination or denominations as the
converting holder has specified;
(b) payment in an amount equal to all accrued dividends
with respect to each Share converted which have not been paid prior
thereto, plus the amount payable under subparagraph (x) below with
respect to such conversion; and
(c) a certificate representing any Shares which were
represented by the certificate or certificates delivered to the
Corporation in connection with such conversion but which were not
converted.
(vi) The Corporation shall declare the payment of all dividends
payable under subparagraph (v)(b) above. If the Corporation is not permitted
under applicable law to pay any portion of the accrued and unpaid dividends on
the Preferred Stock being converted, the Corporation shall pay such dividends to
the converting holder as soon thereafter as funds of the Corporation are legally
available for such payment. At the request of any such converting holder, the
Corporation shall provide such holder with written evidence of its obligation to
such holder. If for any reason the Corporation is unable to pay any portion of
the accrued and unpaid dividends on Preferred Stock being converted, such
dividends may, at the converting holder's option, be converted into an
additional number of shares of Conversion Stock determined by dividing the
amount of the unpaid dividends to be applied for such purpose, by the lesser of
(a) the Conversion Price then in effect and (b) the Market Price of a share of
Common Stock.
(vii) The issuance of certificates for shares of Conversion Stock
upon conversion of the Preferred Stock shall be made without charge to the
holders of such Preferred Stock for any issuance tax in respect thereof or other
cost incurred by the Corporation in connection with such conversion and the
related issuance of shares of Conversion Stock. Upon conversion of each Share,
the Corporation shall take all such actions as are necessary in order to insure
that the Conversion Stock issuable with respect to such conversion shall be
validly issued, fully paid and nonassessable, free and clear of all taxes,
liens, charges and encumbrances with respect to the issuance thereof.
(viii) The Corporation shall not close its books against the
transfer of Preferred Stock or of Conversion Stock issued or issuable upon
conversion of Preferred Stock in any manner which interferes with the timely
conversion of Preferred Stock. The Corporation shall assist and cooperate with
any holder of Shares required to make any governmental filings or obtain any
governmental approval prior to or in connection with any conversion of Shares
hereunder (including, without limitation, making any filings required to be made
by the Corporation).
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(ix) The Corporation shall at all times reserve and keep available
out of its authorized but unissued shares of Conversion Stock, solely for the
purpose of issuance upon the conversion of Preferred Stock, such number of
shares of Conversion Stock issuable upon the conversion of all outstanding
Preferred Stock. All shares of Conversion 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 Corporation shall take all such actions
as may be necessary to assure that all such shares of Conversion 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 Conversion
Stock may be listed (except for official notice of issuance which shall be
immediately delivered by the Corporation upon each such issuance). The
Corporation shall not take any action which would cause the number of authorized
but unissued shares of Conversion Stock to be less than the number of such
shares required to be reserved hereunder for issuance upon conversion of
Preferred Stock.
(x) If any fractional interest in a share of Conversion Stock would,
except for the provisions of this subparagraph, be delivered upon any conversion
of Preferred Stock, the Corporation, in lieu of delivering the fractional share
therefor, shall pay an amount to the holder thereof equal to the Market Price of
such fractional interest as of the date of conversion.
(xi) If the shares of Conversion Stock issuable by reason of
conversion of Preferred Stock are convertible into or exchangeable for any other
stock or securities of the Corporation, the Corporation shall, at the converting
holder's option, upon surrender of the Shares to be converted by such holder as
provided herein together with any notice, statement or payment required to
effect such conversion or exchange of Conversion Stock, deliver to such holder
or as otherwise specified by such holder a certificate or certificates
representing the stock or securities into which the shares of Conversion Stock
issuable by reason of such conversion are so convertible or exchangeable,
registered in such name or names and in such denomination or denominations as
such holder has specified.
6B. CONVERSION PRICE.
(i) The initial Series A Conversion Price shall be $8.25 and the
initial Series B Conversion Price shall be $7.75. As used herein, the term
"Conversion Price" shall refer to the Series A Conversion Price and/or the
Series B Conversion Price, as applicable. In order to prevent dilution of the
conversion rights granted under this Section 6, the Conversion Price shall be
subject to adjustment from time to time pursuant to this paragraph 6B.
(ii) If and whenever on or after the original date of issuance of
the Preferred Stock the Corporation issues or sells, or in accordance with
paragraph 6C is deemed to have issued or sold, any shares of its Common Stock
for a consideration per share less than the Series A Conversion Price in effect
immediately prior to the time of such issue or sale, then immediately upon such
issue or sale or deemed issue or sale the Series A Conversion Price shall be
reduced to the Series A Conversion Price determined by dividing (a) the sum of
(1) the product derived by multiplying the Series A Conversion Price in effect
immediately prior to such
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issue or sale by the number of shares of Common Stock Deemed Outstanding
immediately prior to such issue or sale, plus (2) the consideration, if any,
received by the Corporation upon such issue or sale, by (b) the number of shares
of Common Stock Deemed Outstanding immediately after such issue or sale.
(iii) Notwithstanding the foregoing, there shall be no adjustment in
the Series A Conversion Price as a result of any issue or sale (or deemed issue
or sale) of up to an aggregate of 770,000 shares of Common Stock to employees of
the Corporation and its Subsidiaries pursuant to stock option plans and stock
ownership plans approved by the Corporation's Board of Directors (as such number
of shares is proportionately adjusted for subsequent stock splits, combinations
and dividends affecting the Common Stock and as such number includes all such
stock options and purchase rights outstanding at the time of the issuance of the
Preferred Stock).
(iv) Whenever the Series A Conversion Price is adjusted pursuant to
this paragraph 6B, the Series B Conversion Price shall be reduced to the Series
B Conversion Price determined by multiplying (a) the Series B Conversion Price
in effect immediately prior to such adjustment by (b) a fraction the numerator
of which is the Series A Conversion Price in effect immediately following such
adjustment and the denominator of which is the Series A Conversion Price in
effect immediately prior to such adjustment.
6C. EFFECT ON CONVERSION PRICE OF CERTAIN EVENTS. For purposes of
determining the adjusted Series A Conversion Price under paragraph 6B, the
following shall be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Corporation in any manner
grants or sells any Options and the price per share for which Common Stock is
issuable upon the exercise of such Options, or upon conversion or exchange of
any Convertible Securities issuable upon exercise of such Options, is less than
the Series A Conversion Price in effect immediately prior to the time of the
granting or sale of such Options, then the total maximum number of shares of
Common Stock issuable upon the exercise of such Options or upon conversion or
exchange of the total maximum amount of such Convertible Securities issuable
upon the exercise of such Options shall be deemed to be outstanding and to have
been issued and sold by the Corporation at the time of the granting or sale of
such Options for such price per share. For purposes of this paragraph, the
"price per share for which Common Stock is issuable" shall be determined by
dividing (A) the total amount, if any, received or receivable by the Corporation
as consideration for the granting or sale of such Options, plus the minimum
aggregate amount of additional consideration payable to the Corporation upon
exercise of all such Options, plus in the case of such Options which relate to
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the issuance or sale of
such Convertible Securities and the conversion or exchange thereof, by (B) the
total maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options. No further adjustment of
the Series A Conversion Price shall be made when Convertible Securities are
actually issued upon the exercise of such Options or when
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Common Stock is actually issued upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Corporation in any
manner issues or sells any Convertible Securities and the price per share for
which Common Stock is issuable upon conversion or exchange thereof is less than
the Series A Conversion Price in effect immediately prior to the time of such
issue or sale, then the maximum number of shares of Common Stock issuable upon
conversion or exchange of such Convertible Securities shall be deemed to be
outstanding and to have been issued and sold by the Corporation at the time of
the issuance or sale of such Convertible Securities for such price per share.
For the purposes of this paragraph, the "price per share for which Common Stock
is issuable" shall be determined by dividing (A) the total amount received or
receivable by the Corporation as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities. No
further adjustment of the Series A Conversion Price shall be made when Common
Stock is actually issued upon the conversion or exchange of such Convertible
Securities, and if any such issue or sale of such Convertible Securities is made
upon exercise of any Options for which adjustments of the Conversion Price had
been or are to be made pursuant to other provisions of this Section 6, no
further adjustment of the Series A Conversion Price shall be made by reason of
such issue or sale.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If the purchase
price provided for in any Options, the additional consideration, if any, payable
upon the conversion or exchange of any Convertible Securities or the rate at
which any Convertible Securities are convertible into or exchangeable for Common
Stock changes at any time, the Series A Conversion Price in effect at the time
of such change shall be immediately adjusted to the Series A Conversion Price
which would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold; provided that if such adjustment would result
in an increase of the Series A Conversion Price then in effect, such adjustment
shall not be effective until 30 days after written notice thereof has been given
by the Corporation to all holders of the Preferred Stock. For purposes of
paragraph 6C, if the terms of any Option or Convertible Security which was
outstanding as of the date of issuance of the Preferred Stock are changed in the
manner described in the immediately preceding sentence, then such Option or
Convertible Security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued as of the
date of such change; provided that no such change shall at any time cause the
Series A Conversion Price hereunder to be increased.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. Upon the expiration of any Option or the termination of any right to
convert or exchange any Convertible Security without the exercise of any such
Option or right, the Series A Conversion Price then in effect hereunder shall be
adjusted immediately to the Series A Conversion Price
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which would have been in effect at the time of such expiration or termination
had such Option or Convertible Security, to the extent outstanding immediately
prior to such expiration or termination, never been issued; provided that if
such expiration or termination would result in an increase in the Series A
Conversion Price then in effect, such increase shall not be effective until 30
days after written notice thereof has been given to all holders of the Preferred
Stock. For purposes of paragraph 6C, the expiration or termination of any Option
or Convertible Security which was outstanding as of the date of issuance of the
Preferred Stock shall not cause the Series A Conversion Price hereunder to be
adjusted unless, and only to the extent that, a change in the terms of such
Option or Convertible Security caused it to be deemed to have been issued after
the date of issuance of the Preferred Stock.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common Stock,
Option or Convertible Security is issued or sold or deemed to have been issued
or sold for cash, the consideration received therefor shall be deemed to be the
amount received by the Corporation therefor (net of discounts, commissions and
related expenses). If any Common Stock, Option or Convertible Security is issued
or sold for a consideration other than cash, the amount of the consideration
other than cash received by the Corporation shall be the fair value of such
consideration, except where such consideration consists of securities, in which
case the amount of consideration received by the Corporation shall be the Market
Price thereof as of the date of receipt. If any Common Stock, Option or
Convertible Security is issued to the owners of the non-surviving entity in
connection with any merger in which the Corporation is the surviving
corporation, the amount of consideration therefor shall be deemed to be the fair
value of such portion of the net assets and business of the non-surviving entity
as is attributable to such Common Stock, Option or Convertible Security, as the
case may be. The fair value of any consideration other than cash and securities
shall be determined jointly by the Corporation and the holders of a majority of
the outstanding Preferred Stock. If such parties are unable to reach agreement
within a reasonable period of time, the fair value of such consideration shall
be determined by an independent appraiser experienced in valuing such type of
consideration jointly selected by the Corporation and the holders of a majority
of the outstanding Preferred Stock. The determination of such appraiser shall be
final and binding upon the parties, and the fees and expenses of such appraiser
shall be borne by the Corporation.
(vi) INTEGRATED TRANSACTIONS. In case any Option is issued in
connection with the issue or sale of other securities of the Corporation,
together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the Option
shall be deemed to have been issued for a consideration of $.01.
(vii) TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Corporation or any Subsidiary, and the disposition of any
shares so owned or held shall be considered an issue or sale of Common Stock.
(viii) RECORD DATE. If the Corporation takes a record of the holders
of Common Stock for the purpose of entitling them (a) to receive a dividend or
other distribution payable in
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Common Stock, Options or in Convertible Securities or (b) to subscribe for or
purchase Common Stock, Options or Convertible Securities, then such record date
shall be deemed to be the date of the issue or sale of the shares of Common
Stock deemed to have been issued or sold upon the declaration of such dividend
or upon the making of such other distribution or the date of the granting of
such right of subscription or purchase, as the case may be.
6D. SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Corporation
at any time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision shall be proportionately reduced, and if the Corporation at any
time combines (by reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall be
proportionately increased.
6E. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.
Any recapitalization, reorganization, reclassification, consolidation, merger,
sale of all or substantially all of the Corporation's assets or other
transaction, in each case which is effected in such a manner that the holders of
Common Stock are entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect to or in exchange for
Common Stock, is referred to herein as an "Organic Change". Prior to the
consummation of any Organic Change, the Corporation shall make appropriate
provisions (in form and substance satisfactory to the holders of a majority of
the Preferred Stock then outstanding) to insure that each of the holders of
Preferred Stock shall thereafter have the right to acquire and receive, in lieu
of or in addition to (as the case may be) the shares of Conversion Stock
immediately theretofore acquirable and receivable upon the conversion of such
holder's Preferred Stock, such shares of stock, securities or assets as such
holder would have received in connection with such Organic Change if such holder
had converted its Preferred Stock immediately prior to such Organic Change. In
each such case, the Corporation shall also make appropriate provisions (in form
and substance satisfactory to the holders of a majority of the Preferred Stock
then outstanding) to insure that the provisions of this Section 6 and Sections 7
and 8 hereof shall thereafter be applicable to the Preferred Stock (including,
in the case of any such consolidation, merger or sale in which the successor
entity or purchasing entity is other than the Corporation, an immediate
adjustment of the Conversion Price to the value for the Common Stock reflected
by the terms of such consolidation, merger or sale, and a corresponding
immediate adjustment in the number of shares of Conversion Stock acquirable and
receivable upon conversion of Preferred Stock, if the value so reflected is less
than the Conversion Price in effect immediately prior to such consolidation,
merger or sale). The Corporation shall not effect any such consolidation, merger
or sale, unless prior to the consummation thereof, the successor entity (if
other than the Corporation) resulting from consolidation or merger or the entity
purchasing such assets assumes by written instrument (in form and substance
satisfactory to the holders of a majority of the Preferred Stock then
outstanding), the obligation to deliver to each such holder such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to acquire.
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6F. CERTAIN EVENTS. If any event occurs of the type contemplated by
the provisions of this Section 6 but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then the
Corporation's Board of Directors shall make an appropriate adjustment in the
Conversion Price so as to protect the rights of the holders of Preferred Stock;
provided that no such adjustment shall increase the Conversion Price as
otherwise determined pursuant to this Section 6 or decrease the number of shares
of Conversion Stock issuable upon conversion of each Share.
6G. NOTICES.
(i) Immediately upon any adjustment of the Conversion Price, the
Corporation shall give written notice thereof to all holders of Preferred Stock,
setting forth in reasonable detail and certifying the calculation of such
adjustment.
(ii) The Corporation shall give written notice to all holders of
Preferred Stock at least 20 days prior to the date on which the Corporation
closes its books or takes a record (a) with respect to any dividend or
distribution upon Common Stock, (b) with respect to any pro rata subscription
offer to holders of Common Stock or (c) for determining rights to vote with
respect to any Organic Change, dissolution or liquidation.
(iii) The Corporation shall also give written notice to the holders
of Preferred Stock at least 20 days prior to the date on which any Organic
Change shall take place.
Section 7. LIQUIDATING DIVIDENDS.
If the Corporation declares or pays a dividend upon the Common Stock
payable otherwise than in cash out of earnings or earned surplus (determined in
accordance with generally accepted accounting principles, consistently applied)
except for a stock dividend payable in shares of Common Stock (a "Liquidating
Dividend"), then the Corporation shall pay to the holders of Preferred Stock at
the time of payment thereof the Liquidating Dividends which would have been paid
on the shares of Conversion Stock had such Preferred Stock been converted
immediately prior to the date on which a record is taken for such Liquidating
Dividend, or, if no record is taken, the date as of which the record holders of
Common Stock entitled to such dividends are to be determined.
Section 8. PURCHASE RIGHTS.
If at any time the Corporation grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of Common Stock (the
"Purchase Rights"), then each holder of Preferred Stock shall be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which such holder could have acquired if such holder had held
the
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number of shares of Conversion Stock acquirable upon conversion of such
holder's Preferred Stock immediately before the date on which a record is taken
for the grant, issuance or sale of such Purchase Rights, or if no such record is
taken, the date as of which the record holders of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights.
Section 9. EVENTS OF NONCOMPLIANCE.
9A. DEFINITION. An Event of Noncompliance shall have occurred if:
(i) the Corporation fails to pay on any two consecutive Dividend
Payment Dates the full amount of dividends then accrued on the Series A
Preferred, whether or not such payments are legally permissible or are
prohibited by any agreement to which the Corporation is subject;
(ii) the Corporation fails to make any redemption payment with
respect to the Preferred Stock which it is required to make hereunder, whether
or not such payment is legally permissible or is prohibited by any agreement to
which the Corporation is subject;
(iii) the Corporation breaches or otherwise fails to perform or
observe the covenants set forth in Section 8.2(j) and (k) of the Purchase
Agreement;
(iv) the Corporation or any material Subsidiary makes an assignment
for the benefit of creditors or admits in writing its inability to pay its debts
generally as they become due; or an order, judgment or decree is entered
adjudicating the Corporation or any material Subsidiary bankrupt or insolvent;
or any order for relief with respect to the Corporation or any material
Subsidiary is entered under the Federal Bankruptcy Code; or the Corporation or
any material Subsidiary petitions or applies to any tribunal for the appointment
of a custodian, trustee, receiver or liquidator of the Corporation or any
material Subsidiary or of any substantial part of the assets of the Corporation
or any material Subsidiary, or commences any proceeding (other than a proceeding
for the voluntary liquidation and dissolution of a Subsidiary) relating to the
Corporation or any material Subsidiary under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation law of
any jurisdiction; or any such petition or application is filed, or any such
proceeding is commenced, against the Corporation or any material Subsidiary and
either (a) the Corporation or any such Subsidiary by any act indicates its
approval thereof, consent thereto or acquiescence therein or (b) such petition,
application or proceeding is not dismissed within 60 days;
(v) a judgment in excess of $5,000,000 is rendered against the
Corporation or any material Subsidiary and, such judgment is not (a) discharged,
bonded or otherwise satisfied within 60 days from the entry thereof, (b) covered
by adequate insurance, or (c) the execution of such judgment is not stayed
pending appeal or, within 60 days after the expiration of such stay, discharged
or otherwise satisfied; or
(vi) the Corporation or any material Subsidiary defaults in the
performance of any obligation or agreement if the effect of such default is to
cause an amount exceeding
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$10,000,000 to become due prior to its stated maturity or the holder or holders
of any obligation causes an amount exceeding $10,000,000 to become due prior to
its stated maturity.
9B. CONSEQUENCES OF EVENTS OF NONCOMPLIANCE.
(i) If an Event of Noncompliance has occurred and is continuing, the
dividend rate on the Series A Preferred shall increase immediately by an
increment of two percentage point(s). Thereafter, until such time as no Event of
Noncompliance exists, the dividend rate shall increase automatically at the end
of each succeeding 90-day period by an additional increment of two percentage
point(s) (but in no event shall the dividend rate exceed 13%). Any increase of
the dividend rate resulting from the operation of this subparagraph shall
terminate as of the close of business on the date on which no Event of
Noncompliance exists, subject to subsequent increases pursuant to this
paragraph.
(ii) If an Event of Noncompliance other than an Event of
Noncompliance of the type described in subparagraphs 9A(i) or 9A(iv) has
occurred and is continuing, the holders of a majority of the Preferred Stock
then outstanding may demand (by written notice delivered to the Corporation)
immediate redemption of all or any portion of the Preferred Stock owned by such
holder or holders at a price per Share equal to the Liquidation Value thereof
(plus all accrued and unpaid dividends thereon). The Corporation shall give
prompt written notice of such election to the other holders of Preferred Stock
(but in any event within five days after receipt of the initial demand for
redemption), and each such other holder may demand immediate redemption of all
or any portion of such holder's Preferred Stock by giving written notice thereof
to the Corporation within seven days after receipt of the Corporation's notice.
The Corporation shall redeem all Preferred Stock as to which rights under this
paragraph have been exercised within 15 days after receipt of the initial demand
for redemption.
(iii) If an Event of Noncompliance of the type described in
subparagraph 9A(iv) has occurred, all of the Preferred Stock then outstanding
shall be subject to immediate redemption by the Corporation (without any action
on the part of the holders of the Preferred Stock) at a price per Share equal to
the Liquidation Value thereof (plus all accrued and unpaid dividends thereon).
The Corporation shall immediately redeem all Preferred Stock upon the occurrence
of such Event of Noncompliance.
(iv) If any Event of Noncompliance of the type described in
subparagraph 9A(i) has occurred, for each such occurrence of the failure to pay
on any two consecutive Dividend Payment Dates the full amount of dividends then
accrued on the Series A Preferred, whether or not such payments are legally
permissible or are prohibited by any agreement to which the Corporation is
subject, the Series A Conversion Price shall be reduced immediately by $0.50
from the Series A Conversion Price in effect immediately prior to such
adjustment. In no event shall any Series A Conversion Price adjustment be
rescinded.
(v) If any Event of Noncompliance of the type described in
subparagraph 9A(ii) has occurred, the Series A Conversion Price and Series B
Conversion Price shall be
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reduced immediately to 75% of the lesser of (a) the applicable Conversion Price
in effect immediately prior to such adjustment and (b) the Market Price of a
share of Common Stock. Thereafter, until such time as no Event of Noncompliance
exists, the Series A Conversion Price and Series B Conversion Price shall be
automatically reduced at the end of each succeeding 90-day period to 75% of the
lesser of (a) the applicable Conversion Price in effect immediately prior to
such adjustment and (b) the Market Price of a share of Common Stock. In no event
shall any Conversion Price adjustment be rescinded.
For example, assume that the initial Series A Conversion Price is
$8.25. If an Event of Noncompliance of the type described in
subparagraph 9A(ii) has occurred, and the Market Price of a share of
Common Stock exceeds $8.25, the Series A Conversion Price would be
reduced immediately to 75% of $8.25, or $6.1875. If an Event of
Noncompliance exists for an additional 90 days, and the Market Price of
a share of Common Stock exceeds $6.1875, the existing Series A
Conversion Price would be reduced to 75% of $6.1875, or $4.640625. Then
assume that there is a two-for-one stock split, in which case the
Conversion Price would be decreased hereunder from $4.640625 to
$2.3203125, and assume that an Event of Noncompliance exists for an
additional 90 days and that the Market Price of a share of Common Stock
exceeds $2.3203125. In this case, the Series A Conversion Price would
be reduced to 75% of $2.3203125, or $1.740234375.
(vi) If any Event of Noncompliance of the type described in
subparagraph 9A(v) has occurred, for each such occurrence the Series A
Conversion Price and Series B Conversion Price shall be reduced immediately by
an amount equal to the quotient of (a) the amount of the judgment referred to in
subparagraph 9A(v) divided by (b) the number of shares of Common Stock Deemed
Outstanding.
(vii) If any Event of Noncompliance exists, each holder of Preferred
Stock shall also have any other rights which such holder is entitled to under
the Purchase Agreement or any other contract or agreement with such holder at
any time and any other rights which such holder may have pursuant to applicable
law.
Section 10. REGISTRATION OF TRANSFER.
The Corporation shall keep at its principal office a register for
the registration of Preferred Stock. Upon the surrender of any certificate
representing Preferred Stock at such place, the Corporation shall, at the
request of the record holder of such certificate, execute and deliver (at the
Corporation's expense) a new certificate or certificates in exchange therefor
representing in the aggregate the number of Shares represented by the
surrendered certificate. Each such new certificate shall be registered in such
name and shall represent such number of Shares as is requested by the holder of
the surrendered certificate and shall be substantially identical in form to the
surrendered certificate, and dividends shall accrue on the Preferred Stock
represented by such new certificate from the date to which dividends have been
fully paid on such Preferred Stock represented by the surrendered certificate.
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Section 11. REPLACEMENT.
Upon receipt of evidence reasonably satisfactory to the Corporation
(an affidavit of the registered holder shall be satisfactory) of the ownership
and the loss, theft, destruction or mutilation of any certificate evidencing
Preferred Stock, and in the case of any such loss, theft or destruction, upon
receipt of indemnity reasonably satisfactory to the Corporation (provided that
if the holder is a financial institution or other institutional investor its own
agreement shall be satisfactory), or, in the case of any such mutilation upon
surrender of such certificate, the Corporation shall (at its expense) execute
and deliver in lieu of such certificate a new certificate of like kind
representing the number of Shares of such class represented by such lost,
stolen, destroyed or mutilated certificate and dated the date of such lost,
stolen, destroyed or mutilated certificate, and dividends shall accrue on the
Preferred Stock represented by such new certificate from the date to which
dividends have been fully paid on such lost, stolen, destroyed or mutilated
certificate.
Section 12. DEFINITIONS.
"CHANGE OF CONTROL" has the meaning set forth in paragraph 4H
hereof.
"COMMON STOCK" means, collectively, the Corporation's Common Stock,
$0.0001 par value per share, and any capital stock of any class of the
Corporation hereafter authorized which is not limited to a fixed sum or
percentage of par or stated value in respect to the rights of the holders
thereof to participate in dividends or in the distribution of assets upon any
liquidation, dissolution or winding up of the Corporation.
"COMMON STOCK DEEMED OUTSTANDING" means, at any given time, the
number of shares of Common Stock actually outstanding at such time, plus the
number of shares of Common Stock deemed to be outstanding pursuant to
subparagraphs 6C(i) and 6C(ii) hereof whether or not the Options or Convertible
Securities are actually exercisable at such time.
"CONVERSION STOCK" means shares of the Corporation's Common Stock,
par value $0.0001 per share; provided that if there is a change such that the
securities issuable upon conversion of Preferred Stock are issued by an entity
other than the Corporation or there is a change in the type or class of
securities so issuable, then the term "Conversion Stock" shall mean one share of
the security issuable upon conversion of Preferred Stock if such security is
issuable in shares, or shall mean the smallest unit in which such security is
issuable if such security is not issuable in shares.
"CONVERTIBLE SECURITIES" means any stock or securities directly or
indirectly convertible into or exchangeable for Common Stock.
"JUNIOR SECURITIES" means any capital stock or other equity
securities of the Corporation, except for the Preferred Stock.
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"LIQUIDATION VALUE" of any Share as of any particular date shall be
equal to $1,000.
"MARKET PRICE" of any security means the average of the closing
prices of such security's sales on all securities exchanges on which such
security may at the time be listed, or, if there has been no sales on any such
exchange on any day, the average of the highest bid and lowest asked prices on
all such exchanges at the end of such day, or, if on any day such security is
not so listed, the average of the representative bid and asked prices quoted in
the NASDAQ System as of 4:00 P.M., New York time, or, if on any day such
security is not quoted in the NASDAQ System, the average of the highest bid and
lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of 21 days
consisting of the day as of which "Market Price" is being determined and the 20
consecutive business days prior to such day. If at any time such security is not
listed on any securities exchange or quoted in the NASDAQ System or the
over-the-counter market, the "Market Price" shall be the fair value thereof
determined jointly by the Corporation and the holders of a majority of the
Series A Preferred. If such parties are unable to reach agreement within a
reasonable period of time, such fair value shall be determined by an independent
appraiser experienced in valuing securities jointly selected by the Corporation
and the holders of a majority of the Preferred Stock. The determination of such
appraiser shall be final and binding upon the parties, and the Corporation shall
pay the fees and expenses of such appraiser.
"OPTIONS" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.
"PERSON" means an individual, a partnership, a corporation, a
limited liability company, a limited liability partnership, an association, a
joint stock company, a trust, a joint venture, an unincorporated organization
and a governmental entity or any department, agency or political subdivision
thereof.
"PREFERRED STOCK" means collectively the Series A Preferred and
Series B Preferred.
"PURCHASE AGREEMENT" means the Purchase Agreement, dated as of
February 2, 1998, by and among the Corporation and certain investors, as such
agreement may from time to time be amended in accordance with its terms.
"REDEMPTION DATE" as to any Share means the date specified in the
notice of any redemption at the Corporation's option or at the holder's option
or the applicable date specified herein in the case of any other redemption;
provided that no such date shall be a Redemption Date unless the Liquidation
Value of such Share (plus all accrued and unpaid dividends thereon and any
required premium with respect thereto) is actually paid in full on such date,
and if not so paid in full, the Redemption Date shall be the date on which such
amount is fully paid.
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"SUBSIDIARY" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control the managing general partner of such limited liability
company, partnership, association or other business entity.
Section 13. AMENDMENT AND WAIVER.
No amendment, modification or waiver shall be binding or effective
with respect to any provision of Sections 1 to 14 hereof without the prior
written consent of the holders of 66.67% of the Preferred Stock outstanding at
the time such action is taken; provided that no such action shall change (a) the
rate at which or the manner in which dividends on the Preferred Stock accrue or
the times at which such dividends become payable or the amount payable on
redemption of the Preferred Stock or the times at which redemption of Preferred
Stock is to occur, without the prior written consent of the holders of at least
75% of the Preferred Stock then outstanding, (b) the Conversion Price of the
Preferred Stock or the number of shares or class of stock into which the
Preferred Stock is convertible, without the prior written consent of the holders
of at least 75% of the Preferred Stock then outstanding, or (c) the percentage
required to approve any change described in clauses (a) and (b) above, without
the prior written consent of the holders of at least 75% of the Preferred Stock
then outstanding; and provided further that no change in the terms hereof may be
accomplished by merger or consolidation of the Corporation with another
corporation or entity unless the Corporation has obtained the prior written
consent of the holders of the applicable percentage of the Preferred Stock then
outstanding.
Section 14. NOTICES.
Except as otherwise expressly provided hereunder, all notices
referred to herein shall be in writing and shall be delivered by registered or
certified mail, return receipt requested and postage prepaid, or by reputable
overnight courier service, charges prepaid, and shall be deemed to have been
given when so mailed or sent (i) to the Corporation, at its principal executive
offices and (ii) to any stockholder, at such holder's address as it appears in
the stock records of the Corporation (unless otherwise indicated by any such
holder).
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EXHIBIT 5
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 Securities on Form S-1 or any similar
long-form registration ("Long-Form Registrations"), and
<PAGE> 2
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 Registrations".
(b) LONG-FORM REGISTRATIONS. Subject to paragraph 1(a), the holders of
Registrable 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.
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<PAGE> 3
(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
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<PAGE> 4
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
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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 convertible into or
exchangeable or exercisable for Common Stock, purchased from the Company at any
time after the date of this Agreement (other than in a registered public
offering) 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.
5
<PAGE> 6
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);
6
<PAGE> 7
(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
7
<PAGE> 8
(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.
8
<PAGE> 9
(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).
9
<PAGE> 10
(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.
10
<PAGE> 11
(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.
11
<PAGE> 12
(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
hereafter enter into any agreement with respect to its securities which is
inconsistent with or violates the rights granted to the holders of Registrable
Securities in this Agreement.
(b) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company will not take
12
<PAGE> 13
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
13
<PAGE> 14
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.
14
<PAGE> 15
(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]
15
<PAGE> 16
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> 17
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> 18
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
<PAGE> 19
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.
<PAGE> 20
By: ---------------------------------
Name: Daren J. Wells
Title: Director, Private Equity
By: ---------------------------------
Name: Paul Finkelstein
<PAGE> 21
SCHEDULE I
<TABLE>
<CAPTION>
---------------- -------------------- -------------------- ---------------------------
Name, Address and Shares of Shares of Shares of Common Stock
Telecopier Number Series A Convertible Series B Convertible initially issuable upon
Preferred Stock Preferred Stock Conversion of Convertible
Preferred Stock
<S> <C> <C> <C>
Advance Capital Partners, L.P. 5,524 -- 669,575.76
660 Madison Avenue, 15th Floor
New York, NY 10021
(212) 835-2020
Attn: Robert Bernstein
Advance Capital Offshore 1,726 -- 209,212.12
Partners, L.P.
c/o CITCO Fund Services (Cayman
Islands) Limited
Safehaven Corporate Centre
Leward Building
P.O. Box 31106 SMB
West Bay Road
Grand Cayman
Cayman Islands B.W.I.
345-949-3877
Attn: Robert Bernstein
Elliott Associates, L.P. 2,000 -- 242,424.24
712 Fifth Avenue, 35th Floor
New York, NY 10019
(212) 974-2092
Attn: Jeffrey Kaplan
Westgate International, L.P. 2,000 -- 242,424.24
c/o Stonington Management Corp.
712 Fifth Avenue, 36th Floor
New York, NY 10019
(212) 974-2092
Attn: Jeffrey Kaplan
Exeter Capital Partners IV, L.P. 2,500 -- 303,030.30
10 E. 53rd Street, 32nd Floor
New York, NY 10022
(212) 872-1198
Attn: Keith Fox
Aetna Life Insurance Company 5,000 -- 606,060.60
151 Farmington Avenue
RC21
Hartford, CT 06516
(860) 273-8650
Attention: Private Equity Group
Ziff Asset Management, L.P. 7,250 --- 878,787.88
</TABLE>
<PAGE> 22
<TABLE>
<CAPTION>
---------------- -------------------- -------------------- ---------------------------
Name, Address and Shares of Shares of Shares of Common Stock
Telecopier Number Series A Convertible Series B Convertible initially issuable upon
Preferred Stock Preferred Stock Conversion of Convertible
Preferred Stock
<S> <C> <C> <C>
c/o Och-Ziff Management, L.L.C.
153 E. 53rd Street, 43rd Floor
New York, NY 10022
(212) 292-5950
Attn: Danny Och/Joel Frank
Oz Master Fund, Ltd. 2,000 --- 242,424.24
c/o Och-Ziff Management, L.L.C.
153 E. 53rd Street, 43rd Floor
New York, NY 10022
(212) 292-5950
Attn: Danny Och/Joel Frank
Canaan Equity L.P. -- 5,000 645,161.29
105 Rowayton Avenue
Rowayton, CT 06853
(203) 854-9117
Attn: Stephen Green
LB I Group Inc. 5,000 --- 606,060.60
c/o Lehman Brothers
3 World Financial Center
6th Floor
New York, NY 10285
(212) 528-8821
Attn: Stephen Berkenfeld
IBJS Capital Corporation 200 --- 24,242.42
One State Street
New York, NY 10004
(212) 858-2768
Attn: Kevin Falvey
Granite Properties 1,500 --- 181,818.18
Management Corp.
1 Cablevision Center
P.O. Box 311
Liberty, NY 12754
(914) 295-2741
Attn: Daren Wells
Credit Suisse (Guernsey) Limited 200 --- 24,242.42
as trustee for the Dynamic
Growth Fund II
P.O. Box 122, Helvetia Court
South Esplanade, St. Peter Port
Guernsey Channel Islands
GY1 4EE
###-##-#### 710934
Attn: David Preston
</TABLE>
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<TABLE>
<CAPTION>
---------------- -------------------- -------------------- ---------------------------
Name, Address and Shares of Shares of Shares of Common Stock
Telecopier Number Series A Convertible Series B Convertible initially issuable upon
Preferred Stock Preferred Stock Conversion of Convertible
Preferred Stock
<S> <C> <C> <C>
Paul Finkelstein 100 --- 12,121.21
</TABLE>
