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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
ALARMGUARD HOLDINGS, INC.
(Name of Subject Company)
ALARMGUARD HOLDINGS, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $.0001 PER SHARE
(Including the Associated Preferred Stock Purchase Rights)
(Title of Class of Securities)
011649100
(CUSIP Number of Class of Securities)
RUSSELL R. MACDONNELL
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND PRESIDENT
ALARMGUARD HOLDINGS, INC.
125 FRONTAGE ROAD
ORANGE, CT 06477
(203) 795-9000
(Name, Address and Telephone Number of Person Authorized to Receive
Notice and Communications on Behalf of the Person(s) Filing Statement)
Copies To:
DAVID A. HAHN, ESQ.
LATHAM & WATKINS
701 B STREET, SUITE 2100
SAN DIEGO, CA 92101
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Alarmguard Holdings, Inc., a Delaware
corporation (the "Company"), and the address of the principal executive offices
of the Company is 125 Frontage Road, Orange, Connecticut 06477. The title of the
class of equity securities of the Company to which this Statement relates is
common stock, par value $.0001 per share, and the preferred stock purchase
rights associated therewith (collectively, a "Common Share").
ITEM 2. TENDER OFFER OF PURCHASER.
This Statement relates to the tender offer disclosed in a Tender Offer
Statement on Schedule 14D-1 dated January 15, 1999 (the "Schedule 14D-1") of T16
Acquisition Corp., a Delaware corporation ("Purchaser"), to purchase all of the
outstanding Common Shares at a price of $9.25 per share, net to the seller in
cash (the "Per Share Amount") upon the terms and subject to the conditions set
forth in the Offer to Purchase dated January 15, 1999 (the "Offer to Purchase")
and the related Letter of Transmittal and any supplement thereto (which together
constitute the "Offer"). The Offer is being made pursuant to an Agreement and
Plan of Merger dated as of January 8, 1999 (the "Merger Agreement") among the
Company, Tyco International Ltd., a Bermuda company ("Tyco"), and Purchaser,
which is an indirect wholly-owned subsidiary of Tyco.
In connection with the execution and delivery of the Merger Agreement,
certain stockholders of the Company entered into a Preferred Stock Purchase
Agreement (the "Stock Purchase Agreement" and, together with the Merger
Agreement, the "Agreements") with Purchaser and the Company, pursuant to which,
among other things, such stockholders agreed to sell their shares of preferred
stock, par value $.0001 per share, of the Company ("Preferred Stock") to
Purchaser (the "Purchase") concurrently with the Offer at a price of $1,400 per
share in cash, plus accrued and unpaid dividends through the date of the
Purchase.
According to the Schedule 14D-1, the address of the principal executive
offices of Tyco is The Gibbons Building, 10 Queen Street, Hamilton HM11,
Bermuda, and the address of the principal executive offices of Purchaser is One
Tyco Park, Exeter, New Hampshire 03833.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person filing
this Statement, are set forth in Item 1 above.
(b)(1) Certain contracts, agreements, arrangements or understandings between
the Company or its affiliates and certain of its directors and executive
officers are, except as noted below, described (i) in the sections entitled
"Compensation of Directors," "Certain Transactions," "Ownership of Company Stock
by Certain Holders, Directors and Officers," "Executive Compensation and Other
Information," "Stock Options," "Options Exercised and Holdings," "Severance
Agreements" and "Compensation Committee Report on Executive Compensation" of the
Company's Proxy Statement for its 1998 Annual Meeting of Stockholders held on
June 30, 1998 (the "Proxy Statement") and (ii) in the sections entitled
"Directors and Executive Officers of the Company" and "Securities Ownership of
Management and Certain Beneficial Owners" of the Company's Information Statement
relating to this transaction. A copy of the relevant sections of the Proxy
Statement and the complete Information Statement have been filed with the
Securities and Exchange Commission (the "Commission") as Exhibit 1 and Annex II
to this Statement, respectively, and are incorporated herein by reference.
Except as described herein (including in Annex II hereto) or incorporated by
reference herein, to the knowledge of the Company, as of the date hereof there
exists no material contract, agreement, arrangement or understanding and no
actual or potential conflict of interest between the Company or its affiliates
and (i) the Company's executive officers, directors or affiliates or (ii) Tyco
or Purchaser or the executive officers, directors or affiliates of Tyco or
Purchaser.
Certain officers, directors and a consultant of the Company have been
awarded bonuses by the Company in connection with the sale of the Company
pursuant to the Offer, the Purchase and the Merger.
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Both Russell R. MacDonnell and David Heidecorn, each a director and an officer
of the Company, have been awarded a bonus of $185,000. The Company's seven
non-employee directors have each been awarded bonuses of $10,000. Futher, a
consultant to the Company, Triton Group Management (an entity in which Mr.
Farley, a director of the Company, is the President and 50% stockholder), has
been awarded a bonus of $50,000. Payment of these amounts are contingent upon
consummation of the Offer and the Purchase.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as the
Company's agent, and an affiliate of Tyco entered into a confidentiality
agreement dated November 5, 1998 (the "Confidentiality Agreement") regarding the
furnishing to Tyco of non-public information concerning the Company. The
Confidentiality Agreement placed restrictions on Tyco's ability to use or
disclose any such information or to disclose any discussions with the Company
concerning a possible transaction. In addition, the Confidentiality Agreement
included agreements by Tyco not, for a period of two years (with certain
exceptions) (i) to acquire any securities or assets of the Company, or to effect
any merger, recapitalization, restructuring, liquidation, dissolution or other
extraordinary transaction with respect to the Company, without the prior written
approval of the Board of Directors of the Company, (ii) to divert or attempt to
divert any business or customer of the Company, or (iii) to solicit for
employment any employee of the Company.
The foregoing is a summary of certain provisions of the Confidentiality
Agreement and is qualified in its entirety by reference to the Confidentiality
Agreement, a copy of which has been filed with the Commission as Exhibit (c)(i)
to the Schedule 14D-1 of Purchaser.
(2) The Merger Agreement.
The following is a summary of certain provisions of the Merger Agreement and
is qualified in its entirety by reference to the Merger Agreement, a copy of
which has been filed with the Commission as Exhibit 2 to this Statement.
Capitalized terms not otherwise defined below shall have the meanings set forth
in the Merger Agreement.
THE OFFER. The Merger Agreement provides that Purchaser will commence the
Offer and that, upon the terms and subject to the prior satisfaction or waiver
of the conditions of the Offer, Purchaser will purchase all Common Shares
validly tendered pursuant to the Offer. The Merger Agreement provides that,
without the written consent of the Company, Purchaser will not (i) decrease the
Per Share Amount or change the form of consideration payable in the Offer, (ii)
decrease the number of Common Shares sought in the Offer, (iii) amend or waive
satisfaction of the condition (the "Minimum Condition") that at least 51% of all
Common Shares outstanding shall have been tendered and not withdrawn in the
Offer and that Purchaser shall hold at least 51% of the total voting power of
the Company upon consummation of the Offer and the Purchase, or (iv) impose
additional conditions to the Offer or amend any other term of the Offer in any
manner adverse to the holders of Common Shares, except that if on the initially
scheduled expiration date of the Offer all conditions to the Offer shall not
have been satisfied or waived, Purchaser may, from time to time, in its sole
discretion, extend the expiration date of the Offer. The Merger Agreement
provides that if, immediately prior to the expiration date of the Offer, as it
may be extended, the Common Shares tendered and not withdrawn pursuant to the
Offer equal less than 90% of the outstanding Common Shares, Purchaser may extend
the Offer for a period not to exceed 10 business days.
THE MERGER. The Merger Agreement provides that, following the consummation
of the Offer and subject to the terms and conditions thereof, at the effective
time of the Merger (the "Effective Time") Purchaser shall be merged with and
into the Company and, as a result of the Merger, the separate corporate
existence of Purchaser shall cease, and the Company shall continue as the
Surviving Corporation and an indirect subsidiary of Tyco.
The respective obligations of Tyco and Purchaser, on the one hand, and the
Company, on the other hand, to effect the Merger are subject to the satisfaction
at or prior to the Effective Time of each of the following conditions; (i) Tyco
or Purchaser or their affiliates shall have consummated the Offer, unless such
failure to purchase is a result of a breach of Tyco's or Purchaser's obligations
under the Merger Agreement, (ii) the Merger, the Merger Agreement and the
transactions contemplated thereby shall have
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been approved by the requisite vote of the stockholders, if required by
applicable law, in order to consummate the Merger, (iii) no order, statute,
rule, regulation, executive order, stay, decree, judgment or injunction shall
have been enacted, entered, promulgated or enforced by any court or other
governmental authority which prohibits or prevents the consummation of the
Merger which has not been vacated, dismissed or withdrawn prior to the Effective
Time, and (iv) all consents of any governmental authority required for the
consummation of the Merger and the transactions contemplated by the Merger
Agreement shall have been obtained other than those consents the failure to
obtain which is not reasonably likely to have a material adverse effect on the
business, assets, condition (financial or other), liabilities or results of
operations of the Surviving Corporation and its subsidiaries taken as a whole.
At the Effective Time of the Merger, (i) each issued and outstanding Common
Share (other than Common Shares that are held by stockholders properly
exercising dissenters' rights under the DGCL and Common Shares to be cancelled
pursuant to clause (iii) below) will be canceled and extinguished and be
converted into the right to receive the Common Per Share Amount in cash payable
to the holder thereof, without interest, (ii) each issued and outstanding
Preferred Share (other than Preferred Shares that are held by stockholders
properly exercising dissenters' rights under the DGCL and Preferred Shares to be
cancelled as provided in clause (iii) below) will be cancelled and extinguished
and converted into the right to receive $1,400 per Preferred Share plus accrued
and unpaid dividends to and including the date of purchase (the "Preferred Per
Share Amount"), (iii) each Share held in the treasury of the Company and each
Share owned by Tyco or any direct or indirect wholly owned subsidiary of Tyco
immediately before the Effective Time shall be canceled and extinguished, and no
payment or other consideration shall be made with respect thereto and (iv) the
shares of Purchaser common stock outstanding immediately prior to the Merger
will be converted into 1,000 shares of the common stock of the Surviving
Corporation, which shares will constitute all of the issued and outstanding
capital stock of the Surviving Corporation.
THE COMPANY'S BOARD OF DIRECTORS. The Merger Agreement provides that
promptly upon the purchase by Tyco of Common Shares pursuant to the Offer (and
provided that the Minimum Condition has been satisfied), Tyco shall be entitled
to designate such number of directors, rounded up to the next whole number, on
the Board of Directors of the Company as will give Tyco, subject to compliance
with Section 14(f) of the Exchange Act, representation on the Board of Directors
of the Company equal to at least that number of directors which equals the
product of the total number of directors on the Board of Directors of the
Company (giving effect to the directors appointed or elected pursuant to this
sentence and including current directors serving as officers of the Company)
multiplied by the percentage that the aggregate number of Shares beneficially
owned by Tyco or any affiliate of Tyco (including such Common Shares as are
accepted for payment pursuant to the Offer, but excluding Common Shares held by
the Company) bears to the number of Shares outstanding. For this purpose, each
Common Share shall be counted as one Share, and each Preferred Share shall be
counted as the number of Common Shares into which such Preferred Share is
convertible. At such time, if requested by Tyco, the Company will also cause
each committee of the Board of Directors of the Company to include persons
designated by Tyco constituting the same percentage of each such committee as
Tyco's designees are of the Board of Directors of the Company. The Company
shall, upon request by Tyco, promptly increase the size of the Board of
Directors of the Company or exercise reasonable best efforts to secure the
resignations of such number of directors as is necessary to enable Tyco's
designees to be elected to the Board of Directors of the Company in accordance
with terms of this section and to cause Tyco's designees so to be elected.
Notwithstanding the foregoing provisions, until the Effective Time the Board of
Directors of the Company shall have at least two directors who are directors on
the date of the Merger Agreement and each of whom is neither an officer of the
Company nor a designee, shareholder, affiliate or associate (within the meaning
of the federal securities laws) of Tyco (such directors, the "Independent
Directors"). Each Independent Director shall be designated by the Company,
unless (i) the Company is then required to comply with Section VIII.2(j) of the
Preferred Stock Purchase Agreement dated as of February 2, 1998 between the
Company and the holders on January 8, 1999 of the Preferred Stock (the "Current
Preferred Holders") (which section permits Advance Capital Offshore Partners,
L.P. ("Advance") to designate one director (the
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"Advance Director") so long as Advance owns any Preferred Shares and at least
20% of the Preferred Shares remain outstanding), in which case one Independent
Director shall be an Advance Director and the other Independent Director shall
be designated by the Company, or (ii) the Company is not then required to comply
with the aforementioned Section VIII.2(j) but the Current Preferred Holders
continue to own at least 10% of the outstanding Preferred Shares (the "Current
Preferred Director Condition"), in which case one Independent Director shall be
designated by Current Preferred Holders holding a majority of the outstanding
Preferred Shares at such time excluding any Preferred Shares then held by Tyco
or Purchaser (the "Majority of Current Preferred") and the other Independent
Director shall be designated by the Company. If no Independent Directors remain,
persons shall be designated to fill the vacancies by the Company or, if the
Current Preferred Director Condition is satisfied, one such person shall be
designated by the Company and one by the Majority of Current Preferred. In any
event, each person so designated shall be neither an officer of the Company nor
a designee, shareholder, affiliate or associate of Tyco, and each such person
shall be deemed to be an Independent Director for purposes of the Merger
Agreement. Notwithstanding anything in the Merger Agreement to the contrary,
prior to the Effective Time, the unanimous vote of the Independent Directors
shall be required to (i) amend or terminate the Merger Agreement on behalf of
the Company, (ii) exercise or waive any of the Company's rights or remedies
thereunder, (iii) extend the time for performance of Tyco's obligations
thereunder, (iv) take any other action by the Company in connection with the
Merger Agreement required to be taken by the Board of Directors of the Company
or (v) amend the Company's Certificate of Incorporation or the Company's Bylaws,
each as in effect on January 8, 1999.
STOCKHOLDERS' MEETING. Pursuant to the Merger Agreement, the Company will,
if required by applicable law in order to consummate the Merger, duly call, give
notice of, convene and hold a special meeting of its stockholders as promptly as
practicable following the consummation of the Offer for the purpose of voting
upon the Merger and related transactions. The Merger Agreement provides that the
Company will, if required by applicable law in order to consummate the Merger,
prepare and file with the Commission and, when cleared by the Commission, will
mail to stockholders a proxy statement in connection with a meeting of the
Company's stockholders to vote upon the Merger and related transactions, or an
information statement, as appropriate, satisfying all requirements of the
Exchange Act.
If Purchaser acquires at least a majority of the Common Shares, it will have
sufficient voting power, when taken together with the voting power of the
Preferred Shares that it will acquire pursuant to the Preferred Stock Purchase
Agreement, to approve the Merger, even if no other stockholder votes in favor of
the Merger.
The Merger Agreement provides that in the event that Tyco or Purchaser
acquires at least 90% of each class of Shares, pursuant to the Offer, the
Preferred Stock Purchase Agreement or otherwise, Tyco, Purchaser and the Company
will take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after such acquisition, without a meeting of
stockholders of the Company, in accordance with Section 253 of the DGCL.
OPTIONS, WARRANTS AND CONVERTIBLE SECURITIES. The Merger Agreement provides
that each of the Company and Tyco shall take all reasonable actions necessary to
provide that all then outstanding options to purchase Common Shares, whether or
not then exercisable or vested ("Company Options"), shall become fully
exercisable and vested upon the consummation of the Offer. Holders of Company
Options that have become fully exercisable and vested upon the consummation of
the Offer in accordance with the provisions of the preceding sentence will have
a period of sixty days following the consummation of the Offer to surrender
their options to the Company in exchange for cash equal to the excess of (A) the
aggregate value of the Common Shares underlying such options, based on the
Common Per Share Amount, over (B) the aggregate exercise price for the Common
Shares underlying such options. Each of the Company and Tyco shall take all
reasonable actions necessary to provide that, upon consummation of the Merger,
all then outstanding Company Options shall be converted into the right to
receive cash equal to the excess of (i) the aggregate value of the Common Shares
underlying such options, based on the
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Common Per Share Amount, over (ii) the aggregate exercise price for the Common
Shares underlying such options.
The Merger Agreement provides that each of the Company and Tyco shall take
all reasonable actions necessary so that each of the warrants to purchase 50,000
Common Shares at a price of $5.00 per share, subject to adjustment, the warrants
to purchase 80,000 Common Shares at a price of $8.66 per share, subject to
adjustment, and the warrants to purchase 215,939 Common Shares at a price of
$11.11 per share, subject to adjustment (collectively, the "Company Warrants"),
shall be exercisable, from and after the Effective Time, for an amount of cash
equal in the aggregate to the Common Per Share Amount multiplied by the number
of Common Shares for which such warrant was exercisable immediately prior to the
Effective Time. Otherwise, the exercise of any Company Warrant shall remain
subject to all terms and conditions provided in the applicable Company Warrant
and/or the applicable warrant agreement.
INTERIM OPERATIONS; COVENANTS. Pursuant to the Merger Agreement, the
Company has agreed that, except as expressly contemplated or provided by the
Merger Agreement or in the Company Disclosure Letter delivered by the Company to
Tyco and Purchaser in connection with the Merger Agreement or consented to in
writing by Tyco (which consent shall not be unreasonably denied), after January
8, 1999, and prior to the Effective Time, (i) the Company shall conduct, and it
shall cause its subsidiaries to conduct, its or their businesses in the ordinary
course and consistent with past practice, and the Company shall, and it shall
cause its subsidiaries to, use its or their reasonable best efforts to preserve
substantially intact its business organization, to keep available the services
of its present officers and employees and to preserve the present commercial
relationships of the Company and its subsidiaries with persons with whom the
Company or its subsidiaries do significant business and (ii) without limiting
the generality of the foregoing, neither the Company nor any of its subsidiaries
will:
(A) amend or propose to amend its Certificate of Incorporation or Bylaws
in any material respect;
(B) authorize for issuance, issue, grant, sell, pledge, dispose of or
propose to issue, grant, sell, pledge or dispose of any shares of, or any
options, warrants, commitments, subscriptions or rights of any kind to
acquire or sell any shares of, the capital stock or other securities of the
Company or any of its subsidiaries, including, but not limited to, any
securities convertible into or exchangeable for shares of stock of any class
of the Company or any of its subsidiaries, except for (a) the issuance of
shares pursuant to the exercise of Company Options outstanding on the date
of the Merger Agreement in accordance with their present terms, (b) the
issuance of shares upon the exercise of Company Warrants outstanding on the
date of the Merger Agreement in accordance with their present terms and (c)
the issuance of shares upon the conversion of Preferred Shares outstanding
on January 8, 1999 in accordance with the present terms of the Preferred
Stock;
(C) split, combine or reclassify any shares of its capital stock or
declare, pay or set aside any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock, other than dividends to the holders of Preferred Shares in
accordance with the present terms of the Preferred Stock and dividends or
distributions to the Company or one of its subsidiaries, or directly or
indirectly redeem, purchase or otherwise acquire or offer to acquire any
shares of its capital stock or other securities;
(D) create, incur or assume any indebtedness for borrowed money or issue
any debt securities, except pursuant to the Company's bank credit agreement,
or make any loans (except as provided in clause (b) of paragraph (E) below);
(E) other than in the ordinary course of business consistent with past
practice, (a) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, indirectly, contingently or otherwise) for
the obligations of any person (other than the Company or one of its
subsidiaries); (b) make any capital expenditures or make any advances or
capital contributions to, or investments in, any other person (other than to
a subsidiary of the Company); (c) voluntarily incur any
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material liability or obligation (absolute, accrued, contingent or
otherwise); or (d) sell, transfer, mortgage, pledge or otherwise dispose of,
or encumber, or agree to sell, transfer, mortgage, pledge or otherwise
dispose of or encumber, any assets or properties, real, personal or mixed,
material to the Company and its subsidiaries taken as a whole other than to
secure debt permitted under paragraph (D);
(F) increase in any manner the compensation of any of its officers or
employees (other than, except with respect to employees who are executive
officers or directors, in the ordinary course of business reasonably
consistent with past practice) or enter into, establish, amend or terminate
any employment, consulting, retention, change in control, collective
bargaining, bonus or other incentive compensation, profit sharing, health or
other welfare, stock option or other equity, pension, retirement, vacation,
severance, deferred compensation or other compensation or benefit plan,
policy, agreement, trust, fund or arrangement with, for or in respect of,
any stockholder, officer, director, employee, consultant or affiliate other
than, in any such case referred to above, as may be required by law or as
required pursuant to the terms of agreements in effect on the date of the
Merger Agreement or in the ordinary course of business reasonably consistent
with past practice and other than arrangements with new employees (other
than employees who will be officers of the Company) hired in the ordinary
course of business reasonably consistent with past practice and providing
for compensation (other than equity-based compensation) and other benefits
consistent with those provided for similarly situated employees of the
Company as of the date of the Merger Agreement;
(G) alter through merger, liquidation, reorganization, restructuring or
in any other fashion the corporate structure or ownership of any subsidiary
or the Company;
(H) except as may be required as a result of a change in law or as
required by the Commission, change any of the accounting principles or
practices used by it;
(I) make any tax election or settle or compromise any material income
tax liability;
(J) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of liabilities
reflected or reserved against in, or contemplated by, the financial
statements (or the notes thereto) of the Company or incurred in the ordinary
course of business consistent with past practice;
(K) except to the extent necessary for the exercise of its fiduciary
duties by the Board of Directors of the Company as set forth in, and
consistent with the provisions of the Merger Agreement described below under
"No Solicitation," waive, amend or allow to lapse any term or condition of
any confidentiality or "standstill" agreement to which the Company or any
subsidiary is a party; or
(L) take, or agree in writing or otherwise to take, any of the foregoing
actions or any action which would make any of the representations or
warranties of the Company contained in the Merger Agreement untrue or
incorrect in any material respect at or prior to the Effective Time.
NO SOLICITATION. The Merger Agreement provides that the Company shall not,
directly or indirectly, through any officer, director, employee, representative
or agent of the Company or any of its subsidiaries, solicit or encourage the
initiation of (including by way of furnishing information) any inquiries or
proposals regarding any merger, sale of assets, sale of shares of capital stock
(including without limitation by way of a tender offer) or similar transactions
involving the Company or any of its subsidiaries that if consummated would
constitute an Alternative Transaction (as defined below) (any of the foregoing
inquiries or proposals being referred to herein as a "Company Takeover
Proposal"). Nothing contained in the Merger Agreement shall prevent the Board of
Directors of the Company from (i) furnishing information to a third party which
has made a BONA FIDE Company Takeover Proposal that is a Superior Proposal (as
defined below) not solicited in violation of the Merger Agreement, PROVIDED that
such third party has executed an agreement with confidentiality provisions
substantially similar to those then in effect between the Company and Tyco or
(ii) subject to compliance with the other terms of this section, considering and
negotiating a BONA FIDE
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Company Takeover Proposal that is a Superior Proposal not solicited in violation
of the Merger Agreement; PROVIDED that, as to each of clauses (i) and (ii), the
Board of Directors of the Company reasonably determines in good faith (after due
consultation with independent counsel, which may be Latham & Watkins) that it is
or is reasonably likely to be required to do so in order to discharge properly
its fiduciary duties. For purposes of the Merger Agreement, a "Superior
Proposal" means any proposal made by a third party to acquire, directly or
indirectly, for consideration consisting of cash and/or securities, all of the
equity securities of the Company entitled to vote generally in the election of
directors or all or substantially all the assets of the Company, on terms which
the Board of Directors of the Company reasonably believes (after consultation
with a financial advisor of nationally recognized reputation) to be more
favorable from a financial point of view to its stockholders than the Offer and
the Merger taking into account at the time of determination all factors relating
to such proposed transaction deemed relevant by the Board of Directors of the
Company, including, without limitation, the financing thereof, the proposed
timing thereof and all other conditions thereto and any changes to the financial
terms of the Merger Agreement proposed by Tyco and Purchaser. "Alternative
Transaction" means any of (i) a transaction pursuant to which any person (or
group of persons) other than Tyco or its affiliates (a "Third Party") acquires
or would acquire more than 20% of the outstanding shares of any class of equity
securities of the Company, whether from the Company or pursuant to a tender
offer or exchange offer or otherwise, (ii) a merger or other business
combination involving the Company pursuant to which any Third Party acquires
more than 20% of the outstanding equity securities of the Company or the entity
surviving such merger or business combination; (iii) any transaction pursuant to
which any Third Party acquires or would acquire control of assets (including for
this purpose the outstanding equity securities of subsidiaries of the Company
and securities of the entity surviving any merger or business combination
including any of the subsidiaries of the Company) of the Company or any of its
subsidiaries having a fair market value (as determined by the Board of Directors
of the Company in good faith) equal to more than 20% of the fair market value of
all the assets of the Company and its subsidiaries, taken as a whole,
immediately prior to such transaction, or (iv) any other consolidation, business
combination, recapitalization or similar transaction involving the Company or
any of its subsidiaries, other than the transactions contemplated by the Merger
Agreement; PROVIDED, HOWEVER, that the term Alternative Transaction shall not
include any acquisition of securities by a broker dealer in connection with a
BONA FIDE public offering of such securities. Notwithstanding anything to the
contrary contained in the Merger Agreement, prior to the Effective Time, the
Company may, in connection with a possible Company Takeover Proposal, refer any
third party to the provisions of the Merger Agreement described in this section
and, below, under the caption "Termination; Fees" and make a copy of such
provisions available to a third party.
The Company shall immediately notify Tyco and Purchaser after receipt of any
Company Takeover Proposal, or any modification of or amendment to any Company
Takeover Proposal, or any request for nonpublic information relating to the
Company or any of its subsidiaries in connection with a Company Takeover
Proposal or for access to the properties, books or records of the Company or any
subsidiary by any person or entity that informs the Board of Directors of the
Company or such subsidiary that it is considering making, or has made, a Company
Takeover Proposal. Such notice to Tyco and Purchaser shall be made orally and in
writing, and shall indicate the identity of the person making the Company
Takeover Proposal or intending to make the Company Takeover Proposal or
requesting non-public information or access to the books and records of the
Company, the terms of any such Company Takeover Proposal or modification or
amendment to a Company Takeover Proposal, and whether the Company is providing
or intends to provide the person making the Company Takeover Proposal with
access to information concerning the Company as provided in the preceding
paragraph. The Company shall also immediately notify Tyco and Purchaser, orally
and in writing, if it enters into negotiations concerning any Company Takeover
Proposal.
Except as set forth in this section, neither the Board of Directors of the
Company nor any committee thereof shall (i) withdraw or modify, or indicate
publicly its intention to withdraw or modify, in a manner adverse to Tyco, the
approval or recommendation by such Board of Directors or such committee of the
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Offer or the Merger and related transactions, (ii) approve or recommend, or
indicate publicly its intention to approve or recommend, any Company Takeover
Proposal or (iii) cause the Company to enter into any letter of intent,
agreement in principle, acquisition agreement or other similar agreement (each,
a "Company Acquisition Agreement") related to any Company Takeover Proposal.
Notwithstanding the foregoing, in the event that prior to the Effective Time the
Board of Directors of the Company determines in good faith, with the advice of
outside counsel, that the failure to do so could reasonably be determined to be
a breach of its fiduciary duties to the Company's stockholders under applicable
law, the Board of Directors of the Company may (subject to this and the
following sentences) approve or recommend a Superior Proposal and, in connection
therewith, withdraw or modify its approval or recommendation of the Offer or the
Merger and related transactions and/or terminate the Merger Agreement (and
concurrently with or after such termination, if it so chooses, cause the Company
to enter into any Company Acquisition Agreement with respect to any Superior
Proposal), but only at a time that is after the third business day following
Tyco's receipt of written notice advising Tyco that the Board of Directors of
the Company has received a Superior Proposal and, in the case of any previously
received Superior Proposal that has been materially modified or amended, such
modification or amendment and specifying the material terms and conditions of
such Superior Proposal, modification or amendment.
Nothing in the foregoing provisions shall prohibit the Company from taking
and disclosing to its stockholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or from making any disclosure to the
Company's stockholders if, in the good faith judgment of the Board of Directors
of the Company, with the advice of outside counsel, failure so to disclose could
be determined to be a breach of its fiduciary duties to the Company's
stockholders under applicable law; PROVIDED, HOWEVER, that neither the Company
nor its Board of Directors nor any committee thereof shall, except as permitted
by the immediately preceding paragraph, withdraw or modify or indicate publicly
its intention to withdraw or modify, its position with respect to the Offer or
the Merger and related transactions or approve or recommend, or indicate
publicly its intention to approve or recommend, a Company Takeover Proposal.
For so long as the Merger Agreement shall not have been terminated in
accordance with its terms, the Board of Directors of the Company shall not
redeem the Rights or waive or amend any provision of the Rights Agreement, in
any such case to permit or facilitate the consummation of any Company Takeover
Proposal or Alternative Transaction.
RIGHTS AGREEMENT. The Merger Agreement provides that the Board of Directors
of the Company shall take all further action, if any, necessary to render the
Rights inapplicable to the Offer, the Merger and the other transactions
contemplated by the Merger Agreement, in addition to having previously
authorized and approved an amendment to the Rights Agreement to the effect that
none of Purchaser and its affiliates shall become an "Acquiring Person" (as
defined in the Rights Agreement), and no Distribtution Date, Share Acquisition
Date or Triggering Event (each as defined in the Rights Agreement) shall occur,
by reason of the approval, execution, or delivery of the Merger Agreement, the
transactions contemplated thereby or any announcement of same.
INDEMNIFICATION AND INSURANCE. From and after the Effective Time, the
Surviving Corporation shall indemnify and hold harmless all past and present
officers and directors (the "Indemnified Parties") of the Company and of the
subsidiaries of the Company to the full extent such persons may be indemnified
by the Company pursuant to Delaware law, the Company's Certificate of
Incorporation and Bylaws, as each is in effect on January 8, 1999, for acts and
omissions (x) arising out of or pertaining to the transactions contemplated by
the Merger Agreement or arising out of the documents related to the Offer or (y)
otherwise with respect to any acts or omissions occurring or arising at or prior
to the Effective Time and shall advance reasonable litigation expenses incurred
by such persons in connection with defending any action arising out of such acts
or omissions, PROVIDED that such persons provide the requisite affirmations and
undertaking, as set forth in applicable provisions of the DGCL.
In addition, Tyco will provide, or cause the surviving Corporation to
provide, for a period of not less than six years after the Effective Time, the
Company's current directors and officers an insurance and
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indemnification policy that provides coverage for events occurring or arising at
or prior to the Effective Time (the "D&O Insurance") that is no less favorable
than the existing policy or, if substantially equivalent insurance coverage is
unavailable, the best available coverage; PROVIDED, HOWEVER, that Tyco and the
Surviving Corporation shall not be required to pay an annual premium for the D&O
Insurance in excess of 300% of the annual premium currently paid by the Company
for such insurance, but in such case shall purchase as much such coverage as
possible for such amount.
The Merger Agreement provides that the foregoing provisions are intended to
benefit the Indemnified Parties and shall be binding on all successors and
assigns of Tyco, Purchaser, the Company and the Surviving Corporation. In the
Merger Agreement, Tyco has agreed to guarantee the performance by the Surviving
Corporation of the indemnified obligations set forth above, which guaranty is
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including the bankruptcy or insolvency of the Surviving Corporation
or any person. The Indemnified Parties shall be intended third-party
beneficiaries of the foregoing provisions on indemnification and insurance.
REPRESENTATIONS AND WARRANTIES. Pursuant to the Merger Agreement, the
Company has made customary representations and warranties to Tyco and Purchaser
with respect to, among other things, its organization, capitalization,
subsidiaries, authority relative to the Merger Agreement, governmental approvals
with respect to the Merger Agreement, the absence of contractual or legal
violations resulting from the Merger Agreement, public filings, financial
statements, the absence of material adverse effects on the Company and certain
other events since December 31, 1997, the absence of undisclosed liabilities,
compliance with laws, governmental permits, litigation, material contracts,
employee benefit plans, taxes, intellectual property, labor matters, the absence
of limitations on conduct of business, title to property, leased premises,
environmental matters, insurance, customers, interested party transactions,
alarm contracts, brokers and finders, year 2000 readiness, the Company's alarm
service contracts, and the Company's central monitoring station.
REASONABLE BEST EFFORTS. Under the Merger Agreement, each of the Company,
Tyco and Purchaser has agreed to use reasonable best efforts to take all actions
and to do all things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by the Merger
Agreement, including, but not limited to, (i) obtaining all consents from
governmental authorities and other third parties required for the consummation
of the Offer and the Merger and the transactions contemplated thereby and (ii)
timely making all necessary filings under the HSR Act. The Company, Tyco and
Purchaser have also agreed to use reasonable best efforts to take all actions
and to do all things necessary to satisfy the other conditions of the closing of
the Merger.
PUBLIC ANNOUNCEMENTS. So long as the Merger Agreement is in effect, the
Company, on the one hand, and Tyco and Purchaser, on the other, have agreed not
to issue or cause the publication of any press release or any other announcement
with respect to the Offer or the Merger or the transactions contemplated thereby
without the consent of the other party (such consent not to be unreasonably
withheld or delayed), except where such release or announcement is required by
applicable law or pursuant to any applicable listing agreement with, or rules or
regulations of, any stock exchange on which shares of the capital stock of the
Company or Tyco, as the case may be, are listed or the NASD, or other applicable
securities exchange, in which case the parties will consult prior to making the
announcement.
TERMINATION; FEES. The Merger Agreement provides that it may be terminated
at any time prior to the Effective Time, whether before or after approval of the
stockholders of the Company described therein:
(a) by mutual written consent of Tyco and the Company;
(b) by either Tyco or the Company if any governmental authority shall
have issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the consummation of the
transactions contemplated by the Merger Agreement and such order, decree or
ruling or other action shall have become final and nonappealable;
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(c) by Tyco if
(i) the Company shall have breached or failed to perform in any
material respect any of its covenants or other agreements contained in
the Merger Agreement, which breach or failure to perform is incapable of
being cured or has not been cured within five days after the giving of
written notice thereof to the Company (but not later than the expiration
of the 20 business day period for which the Offer will be initially
open);
(ii) any representation or warranty of the Company shall not have
been true and correct in all material respects when made;
(iii) any representation or warranty of the Company shall cease to be
true and correct in all material respects at any later date as if made on
such date (other than representations and warranties made as of a
specified date) other than as a result of a breach or failure to perform
by the Company of any of its covenants or agreements under the Merger
Agreement; PROVIDED, HOWEVER, that such representation or warranty is
incapable of being cured or has not been cured within five days after the
giving of written notice thereof to the Company (but not later than the
expiration of the 20 business day period for which the Offer will be
initially open);
PROVIDED, HOWEVER, that the right to terminate the Merger Agreement pursuant
to the provisions described in this clause (c) shall not be available to
Tyco if Purchaser or any other affiliate of Tyco shall acquire shares of
Company Common Stock pursuant to the Offer;
(d) by Tyco if, whether or not permitted to do so by the Merger
Agreement, (i) the Board of Directors of the Company or any committee
thereof shall have withdrawn or modified in a manner adverse to Tyco or
Purchaser its approval or recommendation of the Offer, the Merger or of any
related transactions; (ii) the Board of Directors of the Company or any
committee thereof shall have approved or recommended to the stockholders of
the Company any Company Takeover Proposal or Alternative Transaction; (iii)
the Board of Directors of the Company or any committee thereof shall have
approved or recommended that the stockholders of the Company tender their
Shares in any tender or exchange offer that is an Alternative Transaction;
(iv) the Board of Directors of the Company or any committee thereof shall
have taken any position or make any disclosures to the Company's
stockholders permitted by the Merger Agreement which has the effect of any
of the foregoing; (v) the Board of Directors of the Company or any committee
thereof shall have resolved to take any of the foregoing actions; or (vi)
the Board of Directors of the Company or any committee thereof shall have
redeemed the Rights, or waived or amended any provision of the Rights
Agreement, in any such case to permit or facilitate the consummation of any
Company Takeover Proposal or Alternative Transaction;
(e) by either Tyco or the Company if, as the result of the failure of
the Minimum Condition or any of the other conditions set forth in Annex I to
the Merger Agreement, the Offer shall have terminated or expired in
accordance with its terms without Purchaser having purchased any Common
Shares pursuant to the Offer, PROVIDED that if the failure to satisfy any
conditions set forth in Annex I shall be a basis for termination of the
Merger Agreement under any other clause (a) through (h) of this section
"Termination; Fees," a termination pursuant to this clause (e) shall be
deemed a termination under such other clause;
(f) by either Tyco or the Company if the Offer shall not have been
consummated on or before March 31, 1999, PROVIDED that the right to
terminate the Merger Agreement pursuant to the provisions described in this
clause (f) shall not be available to any party whose failure to perform any
of its obligations under the Merger Agreement results in the failure of the
Offer to be consummated by such time;
(g) by the Company if Tyco or Purchaser shall have breached or failed to
perform in any material respect any of its representations, warranties,
covenants or other agreements contained in the Merger
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Agreement, which breach or failure to perform is incapable of being cured or
has not been cured within five days after the giving of written notice
thereof to Tyco; or
(h) by the Company in accordance with the provisions of the Merger
Agreement described above under "No Solicitation"; PROVIDED, HOWEVER, that
the right to terminate the Merger Agreement pursuant to the provisions
described in this clause (h) shall not be available (x) if the Company has
breached in any material respect its obligations under the provisions
described above under "No Solicitation," or (y) if the Company shall fail to
pay when due the fees and expenses provided for in the Merger Agreement.
The Company agrees that if the Merger Agreement is terminated pursuant to
(i) the provisions described in clause (d) above;
(ii) the provisions described in clause (h) above; or
(iii) the provisions described in clauses (e) or (f) above, and, with
respect to this clause (iii), at the time of such termination any person,
entity or group (as defined in Section 13(d)(3) of the Exchange Act) (other
than Tyco or any of its affiliates or any person identified in the Company's
Proxy Statement dated April 30, 1998 and who has executed the Preferred
Stock Purchase Agreement, PROVIDED that such person has not breached the
terms of such Preferred Stock Purchase Agreement) shall have become the
beneficial owner of more than 15% of the Shares and such person, entity or
group (or any affiliate of such person, entity or group) thereafter (x)
shall make a Company Takeover Proposal and, in the case of a consensual
transaction with the Company, shall substantially have negotiated the terms
thereof, at any time on or prior to the date which is six months after such
termination of the Merger Agreement, and (y) shall consummate such Company
Takeover Proposal at any time on or prior to the date which is one year
after termination of the Merger Agreement, in the case of a consensual
transaction, or six months after termination of the Merger Agreement, in the
case of a non-consensual transaction, in each case with a value per share of
Common Stock of at least $9.25 (with appropriate adjustments for
reclassifications of capital stock, stock dividends, stock splits, reverse
stock splits and similar events);
then the Company shall pay to Tyco the sum of (a) $4.5 million, as promptly as
practicable but in no event later than two business days following termination
of the Merger Agreement pursuant to the provisions described in clause (d) or
(h) above, or, in the case of clause (iii) of this paragraph, upon consummation
of such Company Takeover Proposal.
The Company further agrees that if the Merger Agreement is terminated
pursuant to the provisions described in clause (c)(i) above,
(A) the Company will pay to Tyco, as promptly as practicable but in no
event later than two business days following termination of the Merger
Agreement, the amount of all documented and reasonable costs and expenses
incurred by Tyco, Purchaser and their affiliates (including but not limited
to fees and expenses of counsel and accountants and out-of-pocket expenses
(but not fees) of financial advisors) in an aggregate amount not to exceed
$450,000 in connection with the Merger Agreement or the transactions
contemplated thereby ("Tyco Expenses"); and
(B) in the event that the company consummates a Company Takeover
Proposal (whether or not solicited in violation of the Merger Agreement)
which is publicly announced within one year from the date of termination of
the Merger Agreement, the sum of $4.5 million, less the amount of any
payment made pursuant to the preceding clause (A), which payment shall be
made not later than two business days following consummation of such Company
Takeover Proposal.
The Company further agrees that if the Merger Agreement is terminated pursuant
to the provisions described in clause (c)(ii) above, the Company will pay to
Tyco, as promptly as practicable but in no event later than two business days
following termination of the Merger Agreement, the Tyco Expenses.
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The Company shall not be obligated to make any payments to Tyco pursuant to
clause (iii) of the second preceding paragraph or clause (B) of the immediately
preceding paragraph if the Company Takeover Proposal referenced therein is a
transaction (a "Permitted Financing") in which the Company sells equity
securities for gross proceeds not in excess of $25,000,000; PROVIDED that the
securities issued, or issuable upon exercise, conversion or exchange of the
securities issued, in such Permitted Financing constitute or upon issuance would
constitute less than forty (40%) percent of the outstanding voting power of the
Company after such issuance, exercise, conversion or exchange.
GUARANTEE. Tyco has guaranteed the payment by Purchaser of the Common Per
Share Amount, the Preferred Per Share Amount and any other amounts payable by
Purchaser pursuant to the Merger Agreement and has agreed to cause Purchaser to
perform all of its other obligations under the Merger Agreement in accordance
with its terms.
(c) Stock Purchase Agreement.
In connection with the execution and delivery of the Merger Agreement,
certain stockholders of the Company entered into the Stock Purchase Agreement
with Purchaser and the Company, pursuant to which, among other things, such
stockholders agreed (i) to sell their shares of Preferred Stock to Purchaser
concurrently with the Offer at a price of $1,400 per share in cash, plus accrued
and unpaid dividends through the date of the Purchase, and (ii) to vote such
shares, at any meeting or other proceeding of stockholders of the Company prior
to the consummation of the Purchase, in opposition to any proposal by a third
party involving a merger, sale of assets or similar transaction with the
Company.
The foregoing is a summary of certain provisions of the Stock Purchase
Agreement and is qualified in its entirety by reference to the Stock Purchase
Agreement, a copy of which has been filed with the Commission as Exhibit 3 to
this Statement.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation of Board of Directors; Background
The Board of Directors of the Company (the "Board") has determined that the
Offer, the Purchase and the Merger are fair to, and in the best interests of,
the Company and its stockholders, has approved the Agreements, the Offer, the
Purchase and the Merger and recommends that the Company's stockholders accept
the Offer and tender their Common Shares pursuant to the Offer.
In July 1998, as a result of the Company's financial position and its
relatively small size in a growth and consolidating industry with a number of
larger and better capitalized competitors, the Board determined that it should
take action to consider the Company's available strategic alternatives.
Accordingly, a review of the business and financial condition of the Company was
initiated and the Board formed a special committee to recommend an investment
banker to the Board to assist the Company in the process.
In August 1998, after the special committee met with a number of investment
bankers to discuss strategic alternatives for the Company, the special committee
determined to recommend to the Board the selection of DLJ.
On August 31, 1998, a special meeting of the Board was held, at which the
Board determined to retain DLJ as the Company's financial advisor based in part
upon the recommendation of the special committee. Pursuant to an engagement
letter dated September 8, 1998 between DLJ and the Company, DLJ prepared a
confidential information memorandum regarding the Company and began making
preliminary contacts with potential strategic and financial investors.
In October 1998, with the assistance of DLJ, the Company's management
pursued contacts with a number of parties, including Tyco, regarding potential
strategic alternatives. The strategic alternatives included change of control
transactions, acquisitions of other entities, and raising capital through the
issuance of debt or equity securities. During this period, the Company contacted
36 entities to explore strategic options for the Company. Of the 36 entities
contacted by the Company, 30 reviewed an executive
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summary prepared by management and 11 executed confidentiality agreements and
subsequently received the confidential information memorandum prepared by DLJ
regarding the Company.
On December 8, 1998, in response to the initial contacts, the Company
received from Tyco a written non-binding proposal for the acquisition of all of
the Common Shares at a price of $10.00 per share in cash and all of the shares
of Preferred Stock in accordance with their terms, subject to the conditions
that the transaction would be completed no later than January 30, 1999, and Tyco
would complete its due diligence investigation with respect to the Company, and
would be satisfied with the results of such investigation.
On December 8, 1998, following receipt of Tyco's proposal, the Board held a
special meeting to discuss, with the assistance of its outside legal counsel,
the terms of such proposal. At this meeting, the Company's outside legal counsel
reviewed with the Board the effects of completing the proposed transaction by
January 30, 1999, which according to the terms of the Preferred Stock entitled
the preferred holders to a redemption payment of $1,300 per share compared to a
redemption payment of $1,500 per share if such transaction were completed on or
after February 2, 1999.
On December 9, 1998, a special meeting of the Board was held, at which DLJ
and the Company's management presented to the Board an analysis of Tyco's
proposal from a financial perspective. After considering this presentation, the
Board directed DLJ and management to attempt to negotiate an increase in the
aggregate consideration offered by Tyco for the Company's stock. DLJ and
management also updated the Board on the status of discussions relating to other
strategic alternatives. After hearing this presentation, the Board instructed
DLJ and management to request final proposals from all parties who had expressed
any interest in engaging in a transaction with the Company.
At this meeting, the Board also heard a presentation from the Company's
outside legal counsel with respect to the rights of the Company's preferred
stockholders in connection with the proposed transaction with Tyco, including a
review of the change of control provisions mandating a redemption payment of
$1,300 per share if such transaction were completed prior to February 2, 1999 or
$1,500 per share if such transaction were completed on or after February 2, 1999
as well as the vote required of the holders of Preferred Stock to approve the
transaction. After discussion, the Board concluded that the proposed transaction
as structured would require the approval of the holders of 75% of the Preferred
Stock. The Board directed DLJ and management to execute confidentiality
agreements with certain holders of Preferred Stock and to begin discussions with
such holders to obtain their approval of the terms of the proposed transaction,
including the price of $1,300 per share of Preferred Stock. Further, so as to
not prolong the process of negotiating the proposed transaction with Tyco, the
Board authorized the Company's management and outside legal counsel to proceed
with negotiations of the non-financial terms of such transaction.
From December 9 to December 15, 1998, the Company's management, with the
assistance of DLJ, executed confidentiality agreements with certain holders of
Preferred Stock and held discussions with such holders with respect to their
approval of the terms of the proposed transaction.
On December 11, 1998, Tyco delivered a draft of the Merger Agreement to the
Company.
On December 16, 1998, the Board held a special meeting to review the terms
of the draft Merger Agreement, as well as the status of other strategic
alternatives for the Company. At this meeting, the Board, together with the
Company's outside legal counsel and representatives of DLJ, reviewed the terms
and conditions of the Offer and the Merger as set forth in the draft Merger
Agreement. The Board heard presentations by its outside legal counsel with
respect to the terms and structure of the proposed transaction and the Board's
fiduciary obligations under Delaware law. In addition, DLJ, with the assistance
of management, provided a summary of the financial terms of the proposed
transaction and informed the Board that Tyco was unwilling to increase the
aggregate consideration to be paid for the Company's stock. The Company's
management and DLJ also summarized the recent discussions with certain holders
of Preferred Stock and informed the Board that such holders were unwilling to
approve a transaction with Tyco involving a price of $1,300 per share of
Preferred Stock. However, such holders suggested that they would likely consent
to such a transaction at a price of $1,500 per share of Preferred Stock (i.e.,
at the
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redemption price required under the terms of the Preferred Stock for change of
control transactions occurring on or after February 2, 1999). The Board
recognized that, without an increase in the aggregate consideration paid for the
Company's stock, the price for the Common Shares would decrease from $10.00 to
$8.67 per share if the price for the Preferred Stock increased from $1,300 to
$1,500 per share. At this time, the Board instructed DLJ and management to
continue discussions with the holders of Preferred Stock with respect to their
approval of the proposed transaction.
At this meeting, DLJ also distributed to the Board and reviewed, with the
assistance of management, a proposal received on December 15, 1998 from a third
party relating to an equity investment in the Company under two different
scenarios, including (i) an investment of $35-$40 million in new common stock to
enable the Company to make acquisitions or (ii) an investment of $20 million in
new preferred stock similar in terms to the Preferred Stock to enable the
Company to repay existing debt in order to provide the Company with additional
working capital flexibility. DLJ informed the Board that, after canvassing all
interested parties, the foregoing equity proposal was the only proposal other
than Tyco's received in the process. The Board requested that DLJ and management
prepare a financial analysis of such proposal and present it to the Board at the
next Board meeting.
On December 17, 1998, the Board held a special meeting, at which management
presented the Board with financial projections of the Company assuming the
completion of the previously presented equity proposal. DLJ also provided the
Board with an analysis of the equity proposal. Although no formal action was
taken, the Board indicated that it favored the proposed transaction with Tyco
over the equity proposal. The equity proposal was considered less favorable for
a number of reasons, including the significant dilution to the Company's
existing stockholders resulting from such proposed equity transaction and that
approval would still be required from the holders of Preferred Stock in order to
consummate such proposed equity transaction. However, the Board also indicated
that, although it favored the transaction with Tyco, it would not approve such a
transaction at a price of $8.67 per Common Share and $1,500 per share of
Preferred Stock. After discussion, the Board instructed DLJ and the Company's
management to again propose to Tyco an increase in its aggregate offering price
for the Company's stock. In addition, the Board determined that, in order to
pursue the Tyco transaction, it may be necessary for the Company to reach a
compromise with the holders of Preferred Stock regarding the offering price for
the Preferred Stock and directed DLJ and management to hold discussions with
certain holders of Preferred Stock regarding such a compromise.
From December 17 to December 23, 1998, meetings between the Company's
outside legal counsel and Tyco's outside legal counsel were held to negotiate
the non-financial terms of the draft Merger Agreement.
Also during this period, DLJ and the Company's management continued to hold
discussions with certain holders of Preferred Stock with respect to their
approval of the proposed transaction. After numerous discussions, the Company
reached a compromise with the holders of Preferred Stock, which provided that
such holders would sell their shares of Preferred Stock to Tyco at a price of
$1,400 per share (effectively waiving the required redemption payment of $1,500
per share for change of control transactions completed on or after February 2,
1999). In light of this compromise, Tyco agreed to waive the requirement that
the transaction be completed by January 30, 1999.
In addition, during this period, DLJ and management continued to discuss
with Tyco the financial terms of the proposed transaction. However, DLJ and
management were unsuccessful in convincing Tyco to increase the aggregate
consideration to be paid to the Company's stockholders.
On December 23, 1998, the Board held a special meeting at which outside
counsel for the Company again reviewed the fiduciary obligations of the Board
under Delaware law in connection with the proposed transaction and presented a
summary of the latest draft Merger Agreement and draft Stock Purchase Agreement.
At this meeting, DLJ and the Company's management reported to the Board that
certain holders of Preferred Stock had agreed to approve the transaction with
Tyco at a purchase price of $1,400 per share of Preferred Stock, which would
correspond to a price of $9.34 per Common Share, conditioned upon payment of
unpaid and accrued dividends on the Preferred Stock through the date of
Purchase. The
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Board then discussed that Tyco's position was that its offer price did not
include the payment of unpaid and accrued dividends on the Preferred Stock
during the period from October 1, 1998 through and until the Purchase. The Board
instructed DLJ and management to attempt to convince Tyco to pay such dividends
and to begin discussions with certain holders of Preferred Stock regarding their
approval of the transaction in the event Tyco remained unwilling to do so. The
Board also heard a report from DLJ and management that Tyco again had declined
to increase the aggregate consideration in the proposed transaction. In
addition, DLJ made a presentation to the Board outlining the results of the
financial analyses it had conducted to assess the fairness of the proposed
transaction. DLJ indicated that it believed that it would be in a position to
opine at the next Board meeting that the aggregate consideration to be received
by the holders of the Company's stock pursuant to the proposed transaction is
fair to such holders from a financial point of view, assuming no significant
change in the proposed terms. Although no formal action was taken, members of
the Board indicated that they would support a transaction with Tyco with the
currently proposed terms.
From December 23, 1998 to January 5, 1999, the Company's management and
outside legal counsel held ongoing discussions with Tyco to finalize the
non-financial terms of the proposed transaction. Also during this period, DLJ
and management held discussions with Tyco with respect to the payment of
dividends on the Preferred Stock. Concurrently, DLJ and management canvassed
certain holders of Preferred Stock as to whether such holders would consent to
the transaction if the Company did not pay the dividends on the Preferred Stock
during the period prior to the Purchase.
On January 5, 1999, the Board held a special meeting, at which management
reported that Tyco would not agree to include the payment of preferred dividends
in the terms of the proposed transaction. In addition, management reported that
certain holders of Preferred Stock had indicated that they would not consent to
the proposed transaction at a price of $1,400 per share of Preferred Stock
unless the Company paid dividends on the Preferred Stock during the period prior
to the Purchase. Management also explained that they believed that Tyco would be
willing to pay accrued preferred dividends if the offering price for Common
Shares was $9.25 per share. Although no formal action was taken, the members of
the Board indicated that, considering the alternatives, they would support a
transaction with Tyco at a price of $9.25 per Common Share and $1,400 per share
of Preferred Stock with the payment of dividends on the Preferred Stock. At this
time, the Board instructed management to propose to Tyco a purchase price of
$9.25 per Common Share and $1,400 per share of Preferred Stock, provided that
Tyco agreed that accrued dividends would be paid on the Preferred Stock, and to
finalize any other remaining open issues. Thereafter, Tyco agreed to a purchase
price of $9.25 per Common Share and $1,400 per share of Preferred Stock,
together with accrued and unpaid dividends through the date of Purchase.
From January 5 to January 8, 1999, the Company's outside legal counsel and
Tyco's outside legal counsel finalized the terms of the Agreements.
On January 8, 1999, the Board held a special meeting to consider the final
terms of the Offer, the Purchase, the Merger and the Agreements. At this
meeting, the Board reviewed the Offer, the Purchase, the Merger and the
Agreements with the Company's management, the Company's outside legal counsel
and representatives of DLJ. The Board heard presentations by its outside legal
counsel with respect to the terms of the proposed transaction and a summary of
the fiduciary obligations of the Board in considering such a transaction. The
Board also heard a presentation by DLJ with respect to the financial terms of
the proposed transaction.
At the conclusion of its presentation, representatives of DLJ delivered the
oral opinion of DLJ to the Board (subsequently confirmed in writing) that, as of
such date, the aggregate consideration to be received by the holders of the
Company's stock pursuant to the Agreements is fair to such stockholders from a
financial point of view.
Based upon such discussions, presentations and opinion, the Board
unanimously (i) approved the Offer, the Purchase and the Merger and the
execution of the Agreements in substantially the forms
16
<PAGE>
presented to it, and the transactions contemplated thereby and (ii) determined
to recommend that the Company's stockholders accept the Offer and tender their
Common Shares pursuant to the Offer.
Following such approval of the Company's Board, the Company and Tyco
exchanged their respective signature pages to the Merger Agreement. A joint
press release announcing the execution of the Agreements was released by the
parties prior to the opening of the financial markets on Monday January 11,
1999.
(b) Reasons for Recommendations of Board
In reaching its conclusions and recommendations described above, the Board
considered a number of factors, including the following:
(i) The Company's business, financial condition, results of operations,
assets, liabilities, business and strategic objectives, as well as the risks
involved in achieving those objectives, and the economic and market
conditions, on an historical, current and prospective basis. In particular,
the Board considered the financial condition of the Company, including the
significant working capital constraints affecting the Company and the
Company's need for additional financing.
(ii) The opinion of DLJ, the Company's financial advisor, that the
aggregate consideration to be paid to the Company's stockholders pursuant to
the Agreements is fair, from a financial point of view, to such
stockholders. A copy of the opinion rendered by DLJ to the Board, setting
forth the procedures followed, the matters considered, the scope of the
review undertaken and the assumptions made by DLJ in arriving at its
opinion, is attached hereto as Annex I and is incorporated herein by
reference. Stockholders are urged to read such opinion in its entirety.
(iii) The Company's existing and future competitive position in the
industry in which it operates, the relative size of the other participants
in the industry in which it operates and the available capital and resources
of such other participants as compared to the available capital and
resources of the Company.
(iv) The lack of indications of interest received by the Company and DLJ
since the Company retained DLJ to assist it in exploring strategic
alternatives.
(v) The historical and recent market prices of the Common Shares. In its
consideration of this factor, the Board recognized that market price levels
for the Common Shares during the first week of January 1999 (immediately
before the signing of the Agreements) were at times higher than the $9.25
Offer price, ranging to a high of $10.63 during this period, and that the
closing price of the Common Shares was $9.75 on January 8, 1999 (the date of
Board approval of the Agreements). However, the Board believed, based on
discussions with DLJ, that these market price levels may have reflected a
growing market awareness of the proposed transaction. The Board took into
account that the Offer price represents a premium of 21.1% over the average
closing price of $7.64 per Common Share during the month of December 1998,
that it represents a premium of 37.0% over the closing price of $6.75 per
share on August 31, 1998 (the date the Board determined to retain DLJ as its
financial advisor), and that it represents a premium of 23.3% over the
closing price of $7.50 per share on December 8, 1998 (the date the Company
received Tyco's proposal). The Board's consideration of historical and
recent market prices was part of a broader consideration with respect to the
other factors described herein. Notwithstanding that trading prices were at
times higher than the Offer price immediately prior to approval of the
Agreements, the Board determined that the Offer was fair to the Company's
stockholders. The Board recommended that stockholders accept the Offer as a
result of its consideration of such other factors, which included the
results of DLJ's solicitation of interest in the Company and the Board's
view of the likelihood that a higher price could be obtained or that a more
favorable alternative would be available for the Company and its
stockholders.
(vi) The purchase price of $1,400 per share of Preferred Stock
represents a 40% premium over the liquidation value of the Preferred Stock,
resulting from the change of control redemption provisions contained in the
Preferred Stock.
17
<PAGE>
(vii) The terms of the Preferred Stock, including the voting rights
associated with mergers and similar transactions and the effect of such
rights on the relative premiums for the Common Shares and Preferred Stock in
the Offer and Purchase.
(viii) The fact that neither the Offer nor the Purchase would be subject
to a financing condition.
(ix) The advice to the Board from DLJ regarding the likelihood of a
superior offer arising.
(x) The alternatives to the Offer, the Purchase and the Merger available
to the Company, including, without limitation, continuing to maintain the
Company as an independent company.
(xi) The fact that the Agreements both involve cash consideration, thus
eliminating any uncertainties in valuing the consideration to be received by
the Company's stockholders.
(xii) The financial and other terms and conditions of the Offer, the
Purchase, the Merger and the Agreements, including, without limitation, the
facts that the terms of the Agreements will not prevent other third parties
from making certain bona fide proposals subsequent to execution of the
Agreements, will not prevent the Board from determining, in the exercise of
its fiduciary duties in accordance with the Agreements, to provide
information to and engage in negotiations with such third parties and will
permit the Company, subject to the non-solicitation provisions and the
payment of the termination fee discussed above, to enter into a transaction
with a third party that would be more favorable to the Company's
stockholders than the Offer, the Purchase and the Merger.
(xiii) The structure of the transaction, which is designed, among other
things, to result in receipt by the holders of Common Shares and Preferred
Stock at the earliest practicable time of the consideration to be paid in
the Offer and the Purchase.
(xiv) The likelihood that the Offer, the Purchase and the Merger would
be consummated.
The foregoing discussion of the information and factors considered and given
weight by the Board is not intended to be exhaustive. In view of the variety of
factors considered in connection with its evaluation of the Offer, the Purchase
and the Merger, the Board did not find it practicable to, and did not, quantify
or otherwise assign relative weights to the specific factors considered in
reaching its determination. In addition, individual members of the Board may
have given different weights to different factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
In September 1998, the Company retained DLJ to render financial advisory
services and assist the Company with respect to its consideration of strategic
alternatives for the Company, including a possible sale of the Company. Pursuant
to its engagement letter with DLJ, the Company paid DLJ an initial fee of
$50,000 and has agreed to pay DLJ additional compensation as follows: (a) a fee
of $300,000 at the time DLJ notifies the Board that it is prepared to deliver
DLJ's fairness opinion with respect to a proposed transaction; (b) an additional
fee of $25,000 for each update of a prior fairness opinion; and (c) a fee equal
to 0.75% of the value of a completed transaction up to $9.00 per share, plus
2.0% of the value of a completed transaction in excess of $9.00 per share, less
the initial fee of $50,000 and the fees paid under clauses (a) and (b) above.
The Company has also agreed to reimburse DLJ's reasonable expenses,
including the fees and disbursements of its counsel, and to indemnify and defend
DLJ and certain related persons against certain liabilities in connection with
the engagement.
Except as disclosed herein, neither the Company nor any person acting on its
behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to security holders on its behalf
concerning the Offer, the Purchase or the Merger.
18
<PAGE>
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) No transactions in Common Shares have been effected during the past 60
days by the Company or, to the best of the Company's knowledge, by any executive
officer, director, subsidiary or affiliate of the Company.
(b) To the best of the Company's knowledge, each executive officer, director
and affiliate of the Company currently intends to tender to Purchaser all Common
Shares over which such person has sole dispositive power as of the expiration
date of the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth above, no negotiation is being undertaken or is
underway by the Company in response to the Offer which relates to or would
result in: (1) an extraordinary transaction such as a merger or reorganization
involving the Company; (2) a purchase, sale or transfer of a material amount of
assets by the Company; (3) a tender offer for or other acquisition of securities
by or of the Company; or (4) any material change in the present capitalization
or dividend policy of the Company.
(b) Except as set forth above, there are no transactions, Board of Directors
resolutions, agreements in principle or signed contracts in response to the
Offer that relate to or would result in one or more of the events referred to in
Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
(a) The Information Statement attached as Annex II hereto is being furnished
in connection with the possible designation by Tyco, pursuant to the Merger
Agreement, of certain persons to be appointed to the Board of Directors other
than at a meeting of the Company's stockholders, as described in Item 3(b)
above.
(b) Section 203 of the Delaware General Corporation Law
As a Delaware corporation, the Company is subject to Section 203 ("Section
203") of the Delaware General Corporation Law. Under Section 203, certain
"business combinations" between a Delaware corporation whose stock is publicly
traded or held of record by more than 2,000 stockholders and an "interested
stockholder" are prohibited for a three-year period following the date that such
a stockholder became an interested stockholder, unless (i) the corporation has
elected in its original certificate of incorporation not to be governed by
Section 203 (the Company did not make such an election), (ii) the transaction in
which the stockholder became an interested stockholder or the business
combination was approved by the board of directors of the corporation before the
other party to the business combination became an interested stockholder, (iii)
upon consummation of the transaction that made it an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the commencement of the transaction (excluding voting stock owned
by directors who are also officers or held in employee benefit plans in which
the employees do not have a confidential right to tender or vote stock held by
the plan) or (iv) the business combination was approved by the board of
directors of the corporation and ratified by 66 2/3% of the voting stock which
the interested stockholder did not own. The term "business combination" is
defined generally to include mergers or consolidations between a Delaware
corporation and an "interested stockholder," transactions with an "interested
stockholder" involving the assets or stock of the corporation or its
majority-owned subsidiaries and transactions which increase an "interested
stockholder's" percentage ownership of stock. The term "interested stockholder"
is defined generally as a stockholder who, together with affiliates and
associates, owns (or, within three years prior, did own) 15% or more of a
Delaware corporation's voting stock.
In accordance with the Agreements and Section 203, the Company's Board of
Directors approved the Offer, the Purchase and the Merger and, therefore, the
restrictions of Section 203 are inapplicable to the Offer, the Purchase and the
Merger.
19
<PAGE>
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
Exhibit 1 Excerpts from the Company's Proxy Statement for its 1998 Annual Meeting of
Stockholders held on June 30, 1998.
Exhibit 2 Agreement and Plan of Merger, dated as of January 8, 1999, among Alarmguard
Holdings, Inc., Tyco International Ltd. and T16 Acquisition Corp.
Exhibit 3 Preferred Stock Purchase Agreement, dated as of January 8, 1999, among T16
Acquisition Corp., Alarmguard Holdings, Inc. and certain stockholders of
Alarmguard Holdings, Inc.
Exhibit 4 Letter to Stockholders of Alarmguard Holdings, Inc., dated January 15, 1999.*
Exhibit 5 Joint Press Release, dated January 11, 1999, announcing the signing of the
Merger Agreement and the Stock Purchase Agreement.
Exhibit 6 Opinion of Donaldson, Lufkin & Jenrette Securities Corporation.* (attached as
Annex I hereto)
</TABLE>
- ------------------------
* Included in copies mailed to stockholders
20
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
<TABLE>
<S> <C> <C>
ALARMGUARD HOLDINGS, INC.
Date: January 15, 1999 By: /s/ RUSSELL R. MACDONNELL
-----------------------------------------
Russell R. MacDonnell
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND
PRESIDENT
</TABLE>
21
<PAGE>
ANNEX I
[DONALDSON, LUFKIN & JENRETTE LETTERHEAD]
January 8, 1999
Board of Directors
Alarmguard Holdings, Inc.
125 Frontage Road
Orange, CT 06477
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to the stockholders of Alarmguard Holdings, Inc. (the "Company") of the
aggregate consideration to be received by such stockholders as contemplated by
the terms of the Agreement and Plan of Merger, dated as of January 8, 1999 (the
"Agreement"), by and among the Company, Tyco International, Ltd. ("Tyco") and
T16 Acquisition Corp. ("Purchaser"), a wholly owned subsidiary of Tyco, pursuant
to which Purchaser will be merged with and into the Company (the "Merger").
Pursuant to the Agreement, Tyco will commence a tender offer (the "Tender
Offer") for any and all outstanding shares of the Company's common stock, par
value $.0001 per share ("Company Common Stock") at a cash price of $9.25 per
share or such higher price as may be paid in the Tender Offer (the "Offer
Price"). The Tender Offer is to be followed by the Merger in which the shares of
all holders of Company Common Stock who did not tender would be converted into
the right to receive the Offer Price. In addition, pursuant to the Preferred
Stock Purchase Agreement dated as of January 8, 1999 by and among Purchaser, the
persons listed thereon and American Stock Transfer and Trust Company, as escrow
agent, the holders of each issued and outstanding share of Series A Preferred
Stock, par value $.0001 per share ("Series A Preferred Stock"), and Series B
Preferred Stock, par value $.0001 per share ("Series B Preferred Stock" and,
together with the Series A Preferred Stock, will receive $1,400 per share of
Preferred Stock.
In arriving at our opinion, we have reviewed the Agreement and the Preferred
Stock Purchase Agreement. We also have reviewed financial and other information
that was publicly available or furnished to us by the Company including
information provided during discussions with management. Included in the
information provided during discussions with management was certain financial
projections of the Company for the period beginning December 31, 1998 and ending
December 31, 2002 prepared by the management of the Company. In addition, we
have compared certain financial and securities data of the Company with various
other companies whose securities are traded in public markets, reviewed the
historical stock prices and trading volumes of Company Common Stock, reviewed
prices and premiums paid in certain other business combinations and conducted
such other financial studies, analyses and investigations as we deemed
appropriate for purposes of this opinion.
In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
us from public sources, that was provided to us by the Company and Tyco and
their respective representatives, or that was otherwise reviewed by us. With
respect to the financial projections supplied to us, we have assumed that they
have been reasonably prepared on the basis reflecting the currently available
estimates and judgments of the management of the Company as to the future
operating and financial performance of the Company. We have not assumed any
responsibility for making an independent evaluation of any assets or liabilities
or for making any independent verification of any of the information reviewed by
us.
<PAGE>
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
development may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. Our opinion does not address the relative
merits of the Tender Offer or the Merger and the other business strategies being
considered by the Company's Board of Directors, nor does it address the Board's
decision to proceed with the Tender Offer or the Merger. Our opinion neither
constitutes (i) a recommendation to any stockholder as to whether such
stockholder should tender into the Tender Offer or vote on the proposed Merger
nor (ii) a judgment as to the appropriate allocation of consideration between
holders of Company Common Stock and Preferred Stock.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. DLJ has performed investment
banking and other services for Tyco and its affiliates in the past and has been
compensated for such services.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the aggregate consideration to be received by the holders of
Company Stock pursuant to the Agreement and the Preferred Stock Purchase
Agreement is fair to such stockholders from a financial point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Nella Domenici
<PAGE>
ANNEX II
ALARMGUARD HOLDINGS, INC.
125 FRONTAGE ROAD
ORANGE, CT 06477
------------------------
INFORMATION PURSUANT TO SECTION 14(F)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14F-1 THEREUNDER
------------------------
The following information is being furnished to holders of the common stock,
par value $.0001 per share ("Common Stock"), the Series A Preferred Stock, par
value $.0001 per share (the "Series A Preferred Stock) and Series B Preferred
Stock, par value $.0001 per share (the "Series B Preferred Stock," and together
with the Series A Preferred Stock, the "Preferred Stock") of Alarmguard
Holdings, Inc., a Delaware corporation (the "Company"), in connection with the
possible designation by Tyco International Ltd., a Bermuda company ("Tyco"), of
at least a majority of the members of the Board of Directors of the Company
pursuant to the terms of an Agreement and Plan of Merger, dated as of January 8,
1999 (the "Merger Agreement"), by and among the Company, Tyco and T16
Acquisition Corp., a Delaware corporation and an indirect wholly-owned
subsidiary of Tyco ("Purchaser").
THIS INFORMATION IS BEING PROVIDED SOLELY FOR INFORMATIONAL PURPOSES AND NOT
IN CONNECTION WITH A VOTE OF THE COMPANY'S STOCKHOLDERS.
The Merger Agreement provides that promptly following the purchase of any
shares of Common Stock pursuant to the Offer, Tyco may request that the Company
take all actions necessary to cause persons designated by Tyco to become
directors of the Company (the "Tyco Designees") so that the total number of
directorships held by such persons is proportionate to the percentage calculated
by dividing (i) the number of shares of Common Stock and Preferred Stock
beneficially owned by Tyco or any of its affiliates following consummation of
the Offer by (ii) the total number of shares of Common Stock and Preferred Stock
outstanding. For this purpose, each share of Common Stock will be counted as one
share, and each share of Preferred Stock will be counted as the number of shares
of Common Stock into which such share of Preferred Stock is convertible. The
Company has also agreed to increase the size of the Board of Directors or
exercise reasonable best efforts to secure the resignation of existing directors
so as to enable Tyco's designees to be elected to the Board of Directors in
accordance with such provisions.
The information contained in this Annex II concerning Tyco and Purchaser has
been furnished to the Company by Tyco, and the Company assumes no responsibility
for the accuracy or completeness of any such information.
CERTAIN INFORMATION CONCERNING TYCO DESIGNEES
Tyco has informed the Company that it will select the Tyco Designees from
among L. Dennis Kozlowski (age 52), Mark A. Belnick (age 52), Joshua M. Berman
(age 60), Byron S. Kalogerou (age 37), M. Brian Moroze (age 55), Michael A.
Robinson (age 33) and Mark H. Swartz (age 38), each of whom is a director or
executive officer of Tyco, certain subsidiaries of Tyco or Purchaser.
Information concerning the Tyco Designees is contained in Annex I and Annex II
to the Offer to Purchase, a copy of which is being mailed to the Company's
stockholders together with this Schedule 14D-9. The information in such Annexes
is incorporated herein by reference. In addition to the information concerning
Mr. Kozlowski in such Annexes, Mr. Kozlowski is a director of Applied Power,
Inc., Raytheon Company, Dynotech Corporation and RJR Nabisco Holdings Corp. Tyco
has also informed the Company that each of such directors and executive officers
has consented to act as a director of the Company, if so designated. It is
II-1
<PAGE>
expected that none of the Tyco Designees will receive any compensation for
services performed in his or her capacity as a director of the Company.
GENERAL INFORMATION REGARDING THE COMPANY
The Company has three classes of voting securities outstanding: Common
Stock, Series A Preferred Stock and Series B Preferred Stock. As of December 23,
1998, the Company had outstanding 5,569,983 shares of its Common Stock. Each
share of Common Stock is entitled to one vote. In addition, the Company had
outstanding 35,700 shares of Series A Preferred Stock and 5,000 shares of Series
B Preferred Stock. Each share of Preferred Stock is entitled to one vote for
each share of Common Stock issuable upon conversion of the Preferred Stock.
Accordingly, each share of Series A Preferred Stock is entitled to 121.21 votes
and each share of Series B Preferred Stock is entitled to 129.03 votes.
Currently, the Board of Directors of the Company consists of nine members.
The Board of Directors is divided into three classes. The Class I Directors
serve for a three-year term and such term will expire at the 2001 annual
meeting. Class II Directors serve for a two-year term and such term will expire
at the 1999 annual meeting. Class III Directors serve for a three-year term and
such term will expire at the year 2000 annual meeting.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
DIRECTORS OF THE COMPANY
The persons named below are the current members of the Board of Directors.
The following sets forth certain information concerning each of the nine members
of the Board of Directors as of December 31, 1998.
<TABLE>
<CAPTION>
EXPIRATION OF
NAME AGE TERM POSITION
- ------------------------------------ --- --------------- -------------------------------------------------------
<S> <C> <C> <C>
Russell R. MacDonnell............... 50 2000 Chairman, Chief Executive Officer and President
David Heidecorn..................... 42 2001 Executive Vice President, Chief Financial Officer and
Director
Stuart L. Bell...................... 45 2000 Director
Michael E. Cahr..................... 58 1999 Director
Michael M. Earley................... 43 2000 Director
Stephen L. Green.................... 47 1999 Director
Timothy A. Holt..................... 45 * Director
Thomas W. Janes..................... 43 2001 Director
Jeffrey T. Leeds.................... 42 * Director
</TABLE>
- ------------------------
* Directors nominated by the holders of Preferred Stock in accordance with the
terms of the Preferred Stock.
The following is a brief summary of the background of each director of the
Company:
RUSSELL R. MACDONNELL. Mr. MacDonnell serves as the Chief Executive Officer
and Chairman of the Board of Directors of the Company. From 1973 to 1985, Mr.
MacDonnell served as President of Sonitrol Security Systems ("Sonitrol
Security") which was the Northeast distributor for Sonitrol Corporation. From
July 1986 to May 1991, Mr. MacDonnell served as Chairman and Chief Executive
Officer of SecurityLink Corporation, which provided security alarm services and
equipment in the Northeast, Midwest, Mid-Atlantic and Southeast regions. In
December 1991, Mr. MacDonnell founded the Company.
II-2
<PAGE>
Mr. MacDonnell is a member of the Fairchester Chapter of Young Presidents
Organization, the American Society for Industrial Security, the National Burglar
and Fire Alarm Association, as well as various other security alarm industry
organizations. Mr. MacDonnell received a B.A. from Williams College in 1970 and
a J.D. from Boston University School of Law in 1973.
DAVID HEIDECORN. Mr. Heidecorn serves as Executive Vice President, Chief
Financial Officer and a director of the Company. Mr. Heidecorn is one of the
founding investors in the Company. In 1984, Mr. Heidecorn joined General
Electric Company in the International Sector. From 1986 to 1992, Mr. Heidecorn
was employed by GE Capital as a Vice President in the Leveraged Finance Group
and a Senior Vice President for the Corporate Finance Group, where he led the
Bankruptcy and Reorganization Finance activity for the Northeast. He received
his B.A. in Economics from Lehigh University and his M.B.A. in Finance from
Columbia University.
STUART L. BELL. Mr. Bell served as the Executive Vice President and Chief
Financial Officer of CUC International from 1983 to January 1995 and is the Vice
Chairman of Interval. Mr. Bell also serves as director of Harbinger Corp. and
International Telecommunication Data Systems, Inc.
MICHAEL E. CAHR. Mr. Cahr serves as Chairman of Allscripts, Inc., a
privately-owned company engaged in providing medication management solutions
through the use of technology. He has served in this position since 1994 and
also served as President and Chief Executive Officer until October 1997. He
served as a Venture Group Manager for Allstate Venture Capital, a division of
Allstate Insurance Company, between 1987 and June 1994. He served as a director
of Triton Group Ltd., from June 1993 to April 1997 and is also a director of
LifeCell Corporation and Optek Technologies, Inc.
STEPHEN L. GREEN. Mr. Green is general partner of Canaan Partners, a
venture capital fund located in Rowayton, Connecticut. Prior to joining Canaan
Partners in November 1991, he served as Managing Director in GE Capital's
Corporate Finance Group for more than five years. Mr. Green also serves as
director for the following public companies: Chartwell RE Corporation; Suiza
Foods Corporation; and Advance Paradigm Inc.
MICHAEL M. EARLEY. Mr. Earley serves as President of Triton Group
Management, Inc., a management consulting firm. He served as President and Chief
Executive Officer of Triton Group Ltd., from February 1996 to April 1997 and as
a director since June 1993. Mr. Earley served as President and Chief Operating
Officer (June 1994 to January 1996) and Senior Vice President and Chief
Financial Officer of Triton and Intermark, Inc. (1991 to 1994). He is also a
director of Ridgewood Hotels, Inc.
TIMOTHY A. HOLT. Mr. Holt has been Chief Investment Officer for Aetna Inc.
since September 1997. Mr. Holt has been employed by Aetna since 1977 in a
variety of positions, including Senior Vice President and Chief Financial
Officer for Aetna Retirement Services beginning in January 1996 and prior to
that as Vice President, Portfolio Management Group.
THOMAS W. JANES. Mr. Janes serves as Managing Director of Triumph Capital
Group, Inc., ("Triumph Capital"), a private equity money management firm which,
through its affiliates, manages Triumph Partners III, L.P., Triumph-California
Limited Partnership and Triumph-Connecticut Limited Partnership, of which Mr.
Janes is a general partner. He has been affiliated with Triumph Capital since
1990. Mr. Janes also serves as a director of Dairy Mart Convenience Stores, Inc.
JEFFREY T. LEEDS. Mr. Leeds has been a principal of Advance Capital
Management, LLC, a private equity firm located in New York, since 1995. Mr.
Leeds is also President and co-founder of Leeds Group Inc., a New York private
investment banking firm founded in 1993. From 1986 to 1993, Mr. Leeds worked in
the investment banking firm of Lazard Freres & Co. Mr. Leeds presently serves on
the boards of The Edison Project, Elsinore Corporation and The World Resources
Institute.
II-3
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The following table provides certain information about the Company's current
executive officers not serving as directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ --- ---------------------------------------------------------------------
<S> <C> <C>
Gregory J. Westhoff................. 49 Vice President of the Company and President and Chief Operating
Officer of Alarmguard, Inc.
Joseph J. Monachino................. 47 Vice President, Sales and Marketing of Alarmguard, Inc.
Peter M. Rogers..................... 45 Vice President, Operations of Alarmguard, Inc.
</TABLE>
The following is a brief summary of the background of each executive officer
of the Company listed above:
GREGORY J. WESTHOFF. Mr. Westhoff serves as Vice President of the Company
and President and Chief Operating Officer of Alarmguard, Inc. Mr. Westhoff was
the Vice President, Mid-Atlantic Region, and Chief Operating Officer of
SecurityLink Corporation, where he served from December 1989 until May 1992 in
Philadelphia, Pennsylvania. Prior to joining SecurityLink Corporation, Mr.
Westhoff was Eastern Regional Manager of Westec Security in Philadelphia from
1988 to 1989. From 1985 to 1988, Mr. Westhoff was District Manager of Rollins
Protective Services and General Manager for Warner Amex Security Systems from
1981 to 1985. Mr. Westhoff was General Manager for American Alarm from 1976 to
1981 and District Manager for Westinghouse Security System from 1969 to 1976.
Mr. Westhoff graduated from Edinboro University of Pennsylvania in 1969.
JOSEPH J. MONACHINO. Mr. Monachino serves as Vice President, Sales and
Marketing of Alarmguard, Inc. Mr. Monachino joined Alarmguard, Inc. in July 1994
to manage its sales and marketing functions. Prior to joining Alarmguard, Inc.,
Mr. Monachino formed his own marketing consulting group located in Westport,
Connecticut serving clients including Holmes Protection Group, LTD and
Dictograph Franchise Corporation. Mr. Monachino also served as Vice President of
Marketing for SecurityLink Corporation from 1987 to 1991. Mr. Monachino earned
his B.A. from Franklin College in 1973 and a Masters of Divinity from Yale
University in 1976.
PETER M. ROGERS. Mr. Rogers serves as Vice President, Operations, of
Alarmguard, Inc. Mr. Rogers joined Alarmguard, Inc. in November of 1994 to
direct Alarmguard's MIS, telecommunications, purchasing and inventory, training
and standards/procedures areas. Mr. Rogers served as Vice President of
Operations with SecurityLink Corporation from 1989 to 1991. Mr. Rogers served as
Eastern Regional Manager with Eddie Bauer from 1981 to 1984, Beekly Corporation
as Vice President Operations from 1984 to 1989, and Windsor Marketing Group as
Vice President of Sales from 1991 to 1994. Mr. Rogers earned his B.A. from
Harvard University in 1976 and his M.B.A. from Rensselaer Polytechnic Institute
in 1990.
MEETINGS AND CERTAIN COMMITTEES OF THE DIRECTORS
The Board of Directors held four regular meetings and 11 telephonic meetings
during 1998. All directors attended at least 75% of the total number of meetings
of the Board of Directors and all committees of the Board of Directors on which
they served.
The Board of Directors has delegated certain functions to the following
standing committees:
The Audit Committee recommends to the Board of Directors the engagement of
the independent auditors of the Company and reviews with the independent
auditors the scope and results of the Company's audits, the Company's internal
accounting controls, and the professional services furnished by the independent
auditors of the Company. The Audit Committee held one meeting during 1998. The
current members of the Audit Committee are Messrs. Bell and Earley.
II-4
<PAGE>
The Compensation Committee's functions are to review, approve, recommend and
report to the Chief Executive Officer and the Board of Directors matters
specifically relating to the compensation of the Company's Chief Executive
Officer and other key executives. The committee held two meetings during 1998.
The current members of the Compensation Committee are Messrs. Bell, Cahr and
Green.
The Company does not have a nominating committee of its Board of Directors.
COMPENSATION OF DIRECTORS
In 1998, each director of the Company who was not employed by the Company
received $1,000 for each meeting of the Board of Directors attended in person
and $500 for each committee meeting attended in person. Directors are also
reimbursed for their out of pocket expenses in attending meetings for the
Company.
Directors who are not employees of the Company also received options to
purchase shares of the Company's Common Stock as follows:
(1) Each director of the Company who was first elected or appointed a
director at the time of the merger with Triton Group Ltd. on April 15, 1997,
received a non-discretionary automatic grant of non-qualified ten-year stock
options for the purchase of 10,000 shares of Common Stock at an exercise
price of $7.50, the value of Common Stock at date of grant. Options granted
vest ratably over a three-year period.
(2) On July 1, 1998, each non-employee Director received a
non-discretionary automatic grant of non-qualified stock options for the
purchase of 10,000 shares of the Company's Common Stock at an exercise price
of $9.625, the value of the Common Stock at the date of grant. Options
granted vest ratably over a three-year period.
EXECUTIVE COMPENSATION
The following table shows the cash compensation paid by the Company and its
subsidiaries as well as certain other compensation paid or accrued in 1996, 1997
and 1998 to the Chairman of the Board and Chief Executive Officer of the
Company, and the four most highly compensated executive officers of the Company.
II-5
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-------------
ANNUAL COMPENSATION SECURITIES
-------------------------------- UNDERLYING ALL OTHER
YEAR SALARY BONUS(1) OPTIONS(#)(2) COMPENSATION(1)(4)
--------- ---------- --------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Russell R. MacDonnell.......................... 1998 $ 290,000 $ 90,000 90,000 $ 5,963(5)
Chairman, Chief Executive Officer 1997 275,000 90,000 110,000 81,254(3)
and President 1996 271,882 67,500 0 1,758
David Heidecorn................................ 1998 210,000 90,000 70,000 1,393
Executive Vice President 1997 200,000 65,000 65,000 51,780(3)
and Chief Financial Officer.................... 1996 193,349 57,500 0 1,349
Gregory J. Westhoff............................ 1998 170,000 65,000 60,000 1,128
Vice President and 1997 150,000 65,000 40,000 1,348
President of Alarmguard, Inc................... 1996 140,835 40,000 0 1,016
Joseph J. Monachino............................ 1998 125,000 20,000 20,000 1,659
Vice President, Sales and 1997 121,000 15,000 16,000 2,219
Marketing of Alarmguard, Inc. 1996 120,069 15,000 0 1,593
Peter M. Rogers................................ 1998 115,000 40,000 25,000 1,526
Vice President, Operations 1997 100,000 30,000 16,000 1,719
of Alarmguard, Inc. 1996 95,000 20,000 0 1,356
</TABLE>
- ------------------------
(1) Of the compensation reported as Bonus and All Other Compensation in 1997 for
Messrs. MacDonnell and Heidecorn, $125,000 and $75,000, respectively, was
paid in the form of debentures.
(2) Number of shares of Common Stock underlying options granted on March 10,
1998.
(3) Includes special one time bonuses in 1997 provided to Messrs. MacDonnell and
Heidecorn in connection with the merger with Triton Group Ltd.
(4) Other compensation consists of contributions by the Company on behalf of
each of the named individuals in connection with the Company's 401(k)
Savings Plan.
(5) Includes $4,065 of life insurance premiums paid by the Company.
STOCK OPTIONS
The following table sets forth certain information regarding stock options
granted in 1998 to the five individuals named in the Summary Compensation Table.
In addition, in accordance with the rules of the Securities and Exchange
Commission (the "Commission"), the table also shows a hypothetical potential
realizable value of such options based on assumed rates of annual compounded
stock price appreciation of 5% and 10% from the date the options were granted
over the full option term. The assumed rates of growth were selected by the
Commission for illustration purposes only, and are not intended to predict
future stock prices, which will depend upon market conditions and the Company's
future performance and prospects.
II-6
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR (1998)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENT ANNUAL RATES OF STOCK
OF TOTAL PRICE APPRECIATION
# OF OPTIONS EXERCISE EXPIRATION FOR OPTION TERM
OPTIONS GRANTED TO PRICE DATE OF ------------------------
GRANTED EMPLOYEES ($/SH) GRANT 5% ($) 10%($)
----------- ------------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Russell R. MacDonnell............................... 90,000 25% $ 10.00 3/10/08 $ 566,005 $ 1,434,368
David Heidecorn..................................... 70,000 19% 10.00 3/10/08 440,226 1,115,620
Gregory J. Westhoff................................. 60,000 16% 10.00 3/10/08 377,337 956,245
Joseph J. Monachino................................. 20,000 5% 10.00 3/10/08 125,779 318,748
Peter M. Rogers..................................... 25,000 7% 10.00 3/10/08 157,224 398,436
</TABLE>
The five individuals named in the above table received 265,000 options. The
options expire on March 10, 2008, and vest over four years.
OPTIONS EXERCISED AND HOLDINGS
The following table sets forth the number of shares covered by both
exercisable and non-exercisable stock options as of December 31, 1998 for the
five individuals named in the Summary Compensation Table. Also reported are the
values for "in-the-money" options which represent the positive spread between
the exercise price of any such existing stock options and the closing market
price of Common Stock at December 31, 1998. None of those persons exercised any
stock options in 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN
NUMBER OF UNEXERCISED THE
OPTIONS AT FISCAL MONEY OPTIONS AT FISCAL
YEAR-END(1) YEAR-END(2)
------------------------ ------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Russell R. MacDonnell.......................... 42,774 174,524 $ 131,452 $ 56,776
David Heidecorn................................ 23,887 119,762 66,977 32,137
Gregory H. Westhoff............................ 14,968 90,920 43,237 22,056
Joseph J. Monachino............................ 8,831 32,414 39,269 9,175
Peter M. Rogers................................ 4,552 37,184 6,234 7,411
</TABLE>
- ------------------------
(1) Number of options that are exercisable and unexercisable as of December 31,
1998.
(2) Value of exercisable and unexercisable options with a December 31, 1998
market price of $8.00. Grants have exercise prices of $0.27, $0.33, $7.50
and $10.00.
SEVERANCE AGREEMENTS
Messrs. MacDonnell, Heidecorn and Westhoff are parties to severance
agreements (the "Severance Agreements") with the Company. The Severance
Agreements provide that in the event each is involuntarily terminated by the
Company without "cause" or resigns for "good reason" (as such terms are defined
in the Severance Agreements), he will be provided with the following termination
payments and benefits: (a) any earned and accrued but unpaid installment of his
base salary; (b) an amount equal to the sum of his annual base salary and the
average of his last three years' bonus compensation earned from the Company; (c)
reimbursements of reasonable expenses incurred for a period of one year in
seeking subsequent
II-7
<PAGE>
employment, to a maximum of $25,000; (d) benefit continuation for a period of
one year; and (e) awards under the Company's 1997 Stock Incentive Plan will
continue to vest or be exercisable for the duration of the term of such award as
if his employment with the Company had continued during such term. In the event
of termination of employment by reason of his death, the Company will pay to his
designated beneficiary or estate the amounts and benefits described in
subparagraphs (a) and (b) above, and will allow an acceleration of the vesting
and exercisability of all awards granted under the 1997 Stock Incentive Plan. In
the event of termination of employment for cause, disability, or his resignation
without good reason, then the Company will pay to him only the payments and
benefits described in subparagraph (a) above (except that, in the case of a
disability, such executive will also receive the benefits set forth in
subparagraph (e) above).
In the event of the termination or resignation for any reason after a
"change in control" (as such term is defined in the Severance Agreements) of the
Company, the Company will pay to each individual (i) the amounts described in
subparagraph (a) in the previous paragraph, (ii) the amounts described in
paragraph (b) and (iii) the benefits described in subparagraphs (c) and (d) in
the previous paragraph (the "Change in Control Benefits"). Termination or
resignation for any reason after a change in control will also cause the
accelerated vesting and lapse of restriction provisions of the 1997 Stock
Incentive Plan to become applicable to the awards granted. The Change in Control
Benefits and the accelerated vesting and lapse in restriction provisions of the
1997 Stock Incentive Plan will also be applicable in the event of his
termination of employment by the Company within the four month period (i) prior
to the date of a change in control of the Company, (ii) following commencement
of certain "tender offers" for the Company's stock, (iii) following the
execution by the Company of an agreement the consummation of which would
constitute a change in control, (iv) following the solicitation of proxies for
the election of directors by anyone other than the Company, or (v) following the
approval of the Company's stockholders of certain transactions the consummation
of which would result in a change of control.
The Severance Agreements provide for certain non-competition restrictions on
Messrs. MacDonnell, Heidecorn and Westhoff. Pursuant to the Severance
Agreements, they agree that they will not (with certain exceptions) (i) during
the period of their employment with the Company, and (ii) in the event of their
termination or resignation from employment for any reason (other than in
connection with a change in control), for the one-year period thereafter, own,
manage, lend to or join (as an employee or otherwise) any business which
"competes" with the Company, as defined in the Severance Agreements (generally,
an entity will be deemed to compete with the Company if it is engaged in the
residential and/or commercial security alarm business).
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee"),
which consists of three non-employee directors, is responsible for reviewing and
making recommendations to the Board with respect to the Company's executive
compensation policies.
The Company believes that there should be a direct relationship between
executive compensation and value delivered to stockholders and the Company's
compensation structure is based on this philosophy. The Company believes that
the base compensation for its executives should be competitive, enabling the
Company to attract and retain the best available people. Additionally, the
Company believes that bonus compensation based on realistic targets provides the
motivation to the executive to strive to meet or exceed Company goals. Since the
inception of Alarmguard in 1992, the Company has used stock options as a means
of providing performance-based compensation to all executive officers. The
Company believes that stock options are a key ingredient to executive
compensation because they serve to align the interest of executive officers with
stockholder value.
The compensation of the Company's Chief Executive Officer, Russell R.
MacDonnell, like the other executive officers, consists of a combination of
salary, bonus and stock options. In determining the
II-8
<PAGE>
compensation of the Company's officers, which includes salary, bonus and stock
options, the Committee considers a combination of objective and subjective
performance criteria, all of which the Committee believes contribute to
stockholder value. Objective criteria include:
- MRR, EBITDA and Adjusted EBITDA growth
- MRR gross attrition
The Committee, in conjunction with the Board of Directors, reviews the
business plans and projections prepared by management and compares the Company's
actual performance to the objective criteria set forth in such plans and
projections.
Subjective criteria considered by the Committee in determining executive
officer compensation include the consummation of appropriately priced
acquisitions, the successful integration of such acquisitions, growth in
Alarmguard's direct marketing and dealer programs, the enhancement of the
Company's central monitoring station and facilities and the success in capital
raising. Bonuses accrued for 1998 reflect the Company's growth through
acquisitions during the year and outstanding operational performance. The
Committee also considers compensation paid to other persons with comparable
skills and experience in the security industry and other service industries, the
Company's performance in comparison to its competitors and performance in each
executive's specific area of responsibility. In 1998, the Committee and the
Board of Directors also considered bonus compensation for executive officers in
connection with the Company's evaluation of strategic alternatives which may
result in the sale of the Company. The amounts that will be awarded upon
completion of the sale of the Company were based on individual officers
contribution to the process as well as to the overall success of the effort.
The Company has entered into severance agreements with the three key
executives which provide for termination benefits under certain circumstances,
including a termination without cause or the termination or resignation in
connection with a change in control of the Company. The termination benefits
include one-year's annual salary, an amount representing the average annual
bonus amount paid over the last three years and the continuation of certain
health and welfare plan benefits for up to one year. Four other officers have
severance agreements with the Company which provide for termination benefits
comprised of one-year's salary.
Submitted by the Compensation
Committee of
The Company's Board of Directors,
January 11, 1999
Stuart L. Bell
Michael E. Cahr
Stephen L. Green
- --------------------------------------------------------------------------------
1. MRR means monthly recurring revenue that the Company (or, if the context
requires, another company in the security alarm industry) is entitled to
receive under contracts in effect at the end of such period. MRR is a term
commonly used in the security alarm industry as a measure of the size of the
company. It does not measure profitability or performance, and does not
include any allowance for future subscriber attrition or for uncollectible
accounts receivable.
2. EBITDA is earnings before interest, income taxes, depreciation and
amortization.
3. Adjusted EBITDA is derived by adding to EBITDA the expenses net of related
revenues associated with the Company's Direct Marketing Program and
acquisition integration expenses.
II-9
<PAGE>
STOCK PERFORMANCE GRAPH
The following chart compares the cumulative total stockholder returns on
Common Stock since April 16, 1997 (the date on which Common Stock was first
traded on the American Stock Exchange following the merger with Triton Group
Ltd.) to the cumulative total returns over the same period of the Russell 2000
index and a peer group index comprised of the common stock of Borg Warner
Security Corporation, The Pittston Brinks Group, Protection One, Inc., and
Response USA (the "Peer Group"). The Peer Group is based on the selection of
companies operating in the security alarm monitoring business. The annual
returns for the Peer Group index are weighted based on the capitalization of
each company within the Peer Group at the beginning of each period for which a
return is indicated. The chart assumes the value of the investment in Common
Stock and each index was $100 at April 16, 1997 and that all dividends were
reinvested.
COMPARISON OF 20 MONTH CUMULATIVE TOTAL RETURN*
AMONG ALARMGUARD HOLDINGS, INC., THE RUSSELL 2000 INDEX
AND A PEER GROUP
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
4/1/97 6/1/97 9/1/97 12/1/97 3/1/98
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALARMGUARD HOLDINGS, INC. 100 122 117 140 133
PEER GROUP 100 103 133 131 136
RUSSELL 2000 100 116 134 129 142
<CAPTION>
6/1/98 9/1/98 12/1/98
<S> <C> <C> <C>
ALARMGUARD HOLDINGS, INC. 125 97 107
PEER GROUP 128 112 105
RUSSELL 2000 138 110 128
</TABLE>
* $100 INVESTED ON 4/16/97 IN STOCK OR ON 3/31/97
IN INDEX - INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
II-10
<PAGE>
CERTAIN TRANSACTIONS
The Company paid Triton Group Management, Inc., an entity in which Mr.
Earley, a director of the Company, is the President and 50% stockholder,
$180,000 during 1998 for management consulting services in connection with the
disposition of certain assets of the Company and in connection with operating as
a public company.
On July 1, 1993, the Company entered into a lease with respect to the
Company's executive offices, central monitoring station and administrative
headquarters located at 125 Frontage Road, Orange, Connecticut, with 125
Frontage Road LLC, a company controlled by Russell R. MacDonnell, Chairman,
Chief Executive Officer and President of the Company. This lease expires on June
30, 2005 and provides for monthly rent payments of approximately $28,000 per
month for an aggregate of $336,000 per year. The Company believes that the lease
is on terms no less favorable than are available from an unaffiliated third
party.
The wife of Russell R. MacDonnell owns a controlling interest in Rapid
Response ("Rapid Response"), a company that performs wholesale security alarm
monitoring services. In connection with the Company's acquisition program, the
Company from time to time purchases subscriber accounts from sellers which
utilize the service of Rapid Response pursuant to contracts that pre-date such
acquisitions. The Company allows such contracts to be completed before
integrating the subscribers into the Company's monitoring services.
Additionally, Rapid Response has also provided the Company with supplemental
central station programming and has been developing a backup central station
redundancy plan jointly with the Company. In connection with this arrangement,
the Company incurred costs of $90,000 in 1998. The Company believes that the
transactions with Rapid Response are on terms no less favorable than are
available from unaffiliated third parties.
SECURITIES OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of the close of business on December 31,
1998, information as to the ownership of the Common Stock, including (i) those
stockholders known to the Company to be the beneficial owners of more than 5% of
the outstanding shares of the Common Stock (based solely upon filings by each of
such stockholders with the Commission on Schedule 13D or Schedule 13G), and (ii)
each director, (iii) each of the executive officers named in the Summary
Compensation Table and (iv) the directors and all executive officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
BENEFICIAL OWNER OWNED PERCENT OF CLASS
- ----------------------------------------------------------------------- ------------------------ -----------------
<S> <C> <C>
Canaan Entities(1)..................................................... 1,438,264 23.1%
105 Rowayton Avenue
Rowayton, CT 06853
OZ Management, L.L.C. (2).............................................. 1,121,212 16.8%
153 E. 53rd Street, 44th Floor
New York, NY 10022
Triumph-Connecticut Limited Partnership................................ 767,554 13.8%
60 State Street, 21st Floor
Boston, MA 02109
Advance Capital Partners, L.P. (3)..................................... 878,787 13.6%
Advance Capital Offshore Partners, L.P.
660 Madison Avenue, 15th Floor
New York, NY 10021
</TABLE>
II-11
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
BENEFICIAL OWNER OWNED PERCENT OF CLASS
- ----------------------------------------------------------------------- ------------------------ -----------------
<S> <C> <C>
Lehman Brothers Capital Partners III, L.P. (7)......................... 606,061 9.8%
c/o Lehman Brothers
Three World Financial Center
New York, NY 10285
Aetna Life Insurance Company (8)....................................... 606,061 9.8%
151 Farmington Avenue
Hartford, CT 06516
Elliott Associates L.P. (4)............................................ 484,848 8.0%
712 Fifth Avenue, 36th Floor
New York, NY 10019
ING Baring US Capital Corp............................................. 375,346 6.7%
667 Madison Avenue, 3rd Floor
New York, NY 10021
The Capital Group Companies, Inc. (6).................................. 360,000 6.5%
333 South Hope Street
Los Angeles, CA 90071
Exeter Capital Partners IV, L.P. (9)................................... 303,030 5.2%
10 East 53rd Street
New York, NY 10022
Russell R. MacDonnell (10)............................................. 144,550 2.6%
David Heidecorn (11)................................................... 71,708 1.3%
Stuart L. Bell (12).................................................... 125,719 2.2%
Michael E. Cahr (13)................................................... 10,833 *
Michael M. Earley (14)................................................. 43,453 *
Stephen L. Green (15).................................................. 1,438,264 23.1
Thomas W. Janes (16)................................................... 767,554 13.8
Joseph J. Monachino (17)............................................... 8,830 *
Peter M. Rogers (18)................................................... 4,552 *
Gregory J. Westhoff (19)............................................... 37,969 *
Jeffrey T. Leeds (20).................................................. 878,787 13.6%
Timothy A. Holt (21)................................................... 606,061 9.8%
Directors and Executive Officers as a Group (12 persons) (22).......... 4,138,280 52.3%
</TABLE>
- ------------------------
* Less than 1%
(1) Shares indicated as beneficially owned by Canaan include 231,014 shares
beneficially owned by Canaan Venture Limited Partnership and 562,089 shares
beneficially owned by Canaan Venture Offshore Limited Partnership. Each of
the Canaan entities has sole voting power with respect to its shares. Shares
indicated as beneficially owned by Canaan include shares issuable upon the
conversion of 5,000 shares of Series B Preferred Stock.
(2) Issuable upon the conversion of 9,250 shares of Series A Preferred Stock.
(3) Issuable upon the conversion of 7,250 shares of Series A Preferred Stock.
(4) Issuable upon the conversion of 4,000 shares of Series A Preferred Stock.
II-12
<PAGE>
(5) The information is presented as of December 31, 1998 and is based on a
Schedule 13G filed with the Commission.
(6) The information, presented as of December 31, 1998, includes The Capital
Group Companies, Inc., Capital Research and Management Company and SMALLCAP
World Fund, Inc. and is based on a Schedule 13G filed with the Commission.
(7) Issuable upon the conversion of 5,000 shares of Series A Preferred Stock.
(8) Issuable upon the conversion of 5,000 shares of Series A Preferred Stock.
(9) Issuable upon the conversion of 2,500 shares of Series A Preferred Stock.
(10) Includes 15,152 shares of Common Stock issuable upon the conversion of 125
shares of Series A Preferred Stock, 5,868 shares of Common Stock issuable
upon the exercise of warrants and options exercisable within 60 days to
purchase 42,773 shares of Common Stock.
(11) Includes 9,091 shares of Common Stock issuable upon the conversion of 75
shares of Series A Preferred Stock, 3,521 shares of Common Stock issuable
upon the exercise of warrants and options exercisable within 60 days to
purchase 23,886 shares of Common Stock.
(12) Includes 9,200 shares held by Mr. Bell as custodian for the benefit of his
three minor children and 6,105 shares held by BF Partners, of which Mr. Bell
is a partner. Mr. Bell has sole voting power with respect to such 6,105
shares. Also includes 48,484 shares of Common Stock issuable upon the
conversion of 400 shares of Series A Preferred Stock, 18,777 shares of
Common Stock issuable upon the exercise of warrants and options exercisable
within 60 days to purchase 3,333 shares of Common Stock.
(13) Includes options exercisable within 60 days to purchase 3,333 shares of
Common Stock.
(14) Includes 120 shares held by Mr. Earley's spouse and options exercisable
within 60 days to purchase 3,333 shares of Common Stock.
(15) Mr. Green is a general partner of various venture capital investment funds
that may be deemed to be affiliated with the Canaan entities, and thus,
under the rules and regulations of the Commission, may be deemed to be the
beneficial owner of the shares of the Common Stock owned by those funds.
Accordingly, such shares are included in the table as beneficially owned by
Mr. Green. Mr. Green is not a general partner of the Canaan entities, and
has no voting power with respect to such shares. Mr. Green disclaims
beneficial ownership of such shares.
(16) Mr. Janes is a general partner of Triumph, and thus, under the rules and
regulation of the Commission, may be deemed to be the beneficial owner of
Triumph's common stock. Accordingly, such shares are included in the table
as beneficially owned by Mr. Janes. Triumph has sole voting power with
respect to such shares. Mr. Janes disclaims beneficial ownership of such
shares.
(17) Includes options exercisable within 60 days to purchase 8,830 shares of
Common Stock.
(18) Includes options exercisable within 60 days to purchase 4,552 shares of
Common Stock.
(19) Includes options exercisable within 60 days to purchase 14,968 shares of
Common Stock.
(20) Issuable upon the conversion of 5,000 shares of Series A Preferred Stock
beneficially owned by Advance Capital Management ("Advance"). Mr. Leeds is
the founder and principal of Advance, and thus, under the rules and
regulations of the Commission, may be deemed to be the beneficial owner of
such shares. Accordingly, such shares are included in the table as
beneficially owned by Mr. Leeds. Mr. Leeds disclaims beneficial ownership of
such shares.
(21) Issuable upon the conversion of 5,000 shares of Series A Preferred Stock
beneficially owned by Aetna Life Insurance Co. ("Aetna"). Mr. Holt is the
Chief Investment Officer of Aetna, and thus, under the
II-13
<PAGE>
rules and regulations of the Commission, may be deemed to be the beneficial
owner of such shares. Accordingly, such shares are included in the table as
beneficially owned by Mr. Holt. Mr. Holt disclaims beneficial ownership of
such shares.
(22) Includes 105,008 shares issuable upon exercise of options and 2,202,736
shares issuable upon conversion of Series A Preferred Stock and Series B
Preferred Stock.
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers who own more than 10% of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission and the American Stock Exchange initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Officers, directors and greater than 10% stockholders
are required by Securities and Exchange Commission regulation to furnish the
Company with copies of all Section 16(a) forms they file. To the Company's
knowledge, based solely on review of the copies of such reports furnished to the
Company and written representations that no other reports were required, all
Section 16(a) filing requirements applicable to the Company's officers,
directors and greater than 10% beneficial owners were complied with by such
persons during the period ended December 31, 1998.
II-14
<PAGE>
Exhibit 4
[ALARMGUARD HOLDINGS, INC. LETTERHEAD]
January 15, 1999
Dear Stockholder:
We are pleased to inform you that on January 8, 1999, Alarmguard Holdings,
Inc. (the "Company") entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Tyco International Ltd. ("Tyco") and its subsidiary T16
Acquisition Corp. ("Purchaser"), which provides for the acquisition of the
Company by Tyco. Under the terms of the Merger Agreement, Purchaser today
commenced a tender offer (the "Offer") to purchase all of the Company's
outstanding shares of common stock at a price of $9.25 per share in cash. In
addition, all of the holders of the preferred stock of the Company have entered
into a Preferred Stock Purchase Agreement (the "Stock Purchase Agreement") with
Purchaser, which provides that such holders will sell their shares of preferred
stock to Purchaser at a price of $1,400 per share in cash, plus accrued and
unpaid dividends, upon consummation of the Offer (the "Purchase").
Following the successful completion of the Offer and the Purchase, Purchaser
will be merged with the Company (the "Merger"), and all shares of common stock
not purchased in the Offer will receive in the Merger the same $9.25 per share
in cash. Completion of the Offer, the Purchase and the Merger are subject to
antitrust approvals and other customary conditions.
THE COMPANY'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT, THE STOCK PURCHASE AGREEMENT, THE OFFER, THE PURCHASE AND THE MERGER
AND DETERMINED THAT THE TERMS OF THE OFFER, THE PURCHASE AND THE MERGER ARE FAIR
TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS. ACCORDINGLY,
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU ACCEPT THE OFFER AND TENDER ALL OF
YOUR SHARES OF COMMON STOCK PURSUANT TO THE OFFER.
In arriving at its recommendation, the Company's Board of Directors gave
careful consideration to a number of factors which are described in the enclosed
Schedule 14D-9, including the opinion of the Company's financial advisor,
Donaldson, Lufkin & Jenrette Securities Corporation, that the aggregate
consideration to be received by the holders of the Company's stock pursuant to
the Merger Agreement and the Stock Purchase Agreement is fair to such
stockholders from a financial point of view.
Additional information with respect to the Offer, the Purchase and the
Merger is contained in the enclosed Schedule 14D-9, and we urge you to consider
this information carefully.
On behalf of the management and directors of the Company, we thank you for
the support you have given the Company.
Sincerely yours,
/s/ Russell R. MacDonnell
Russell R. MacDonnell
Chairman, Chief Executive Officer and
President
<PAGE>
EXHIBIT 1
COMPENSATION OF DIRECTORS
In 1997, each director of the Company who was not employed by the Company
received $1,000 for each meeting attended in person or a committee thereof.
Directors are also reimbursed for their out of pocket expenses in attending
meetings for the Company.
Directors who are not employees of the Company also received options to purchase
shares of the Company's Common Stock as follows:
(1) Each director of the Company who was first elected or appointed a
director at the time of the merger with Triton Group Ltd. on April
15, 1997, received a non-discretionary automatic grant of
non-qualified ten-year stock options for the purchase of 10,000
shares of the Company's Common Stock at an exercise price of
$7.50, the value of Common Stock at date of grant. Options granted
vest ratably over a three-year period.
(2) Thereafter as of the day after the Annual Meeting of Stockholders
of the Company to be held in calendar years 1998 and 1999, each
non-employee Director will receive additional non-discretionary
automatic grants of non- qualified stock options for the purchase
of 10,000 shares of the Company's Common Stock in each such year.
The exercise price of each share of the Company's Common Stock
subject to any eligible Director's option will be equal to the
fair market value of a share of the Company's Common Stock on the
date such option is granted.
CERTAIN TRANSACTIONS
Prior to April 15, 1997, Triumph Capital and BF Partners held debentures issued
by the Company (the "Old Debentures") in the principal amounts of $2,014,800 and
$99,000 respectively. Stuart L. Bell, a member of the Company's Board, is a
general partner of BF Partners and Thomas W. Janes, a member of the Company's
Board, is a managing director of Triumph Capital.
Pursuant to the terms of the Old Debentures, Alarmguard paid interest to each
Subordinated Debt Holder at the rate of 10% per annum through April 15, 1997 and
the Old Debentures were to be redeemed at par by March 31, 1998. On April 15,
1997, in connection with the consummation of the Merger with Triton Group Ltd.
(the "Merger"), the Company refinanced the Old Debentures with newly issued
subordinated debentures (the "New Debentures"). The Old Debentures held by
Triumph Capital were redeemed at par. The Old Debentures of BF Partners were
exchanged for New Debentures and BF Partners purchased additional New Debentures
in the principal amount of $301,000. The New Debentures bear interest at 15% per
annum. In addition, the Company issued warrants to each of the former holders of
Old Debentures to purchase an aggregate of 215,939 shares of Common Stock at an
exercise price of $11.11 per share. Russell R. MacDonnell and David Heidecorn
received $125,000 and $75,000 in New Debentures as well as a pro rata share of
the Warrants. The New Debentures were paid to Messrs. MacDonnell and Heidecorn
in lieu of cash bonus compensation.
The Company paid Triton Group Management, Inc., an entity in which Mr. Earley, a
Director of the Company, is the President and 50% stockholder, $140,000 during
1997 for management consulting services in connection with the disposition of
certain assets of the Company and in connection with operating as a public
company.
On July 1, 1993, the Company entered into a lease with respect to the Company's
executive offices, central monitoring station and administrative headquarters
located at 125 Frontage Road, Orange, Connecticut, with 125 Frontage Road LLC, a
company controlled by Russell R. MacDonnell, Chairman, Chief Executive Officer
and President of the Company. This lease expires on June 30, 2005 and provides
for monthly rent payments of $27,000
<PAGE>
per month for an aggregate of $324,000 per year. The Company believes that the
lease is on terms no less favorable than are available from an unaffiliated
third party.
The wife of Russell R. MacDonnell owns a controlling interest in Rapid Response
("Rapid Response"), a company that performs wholesale security alarm monitoring
services. In connection with the Company's acquisition program, the Company from
time to time purchases subscriber accounts from sellers which utilize the
service of Rapid Response pursuant to contracts that pre-date such acquisitions.
The Company allows such contracts to be completed before integrating the
subscribers into the Company's monitoring services. The Company paid Rapid
Response $73,000 in 1997. The Company believes that the transactions with Rapid
Response are on terms no less favorable than are available from unaffiliated
third parties.
OWNERSHIP OF COMPANY STOCK BY CERTAIN HOLDERS, DIRECTORS AND OFFICERS
The following table sets forth, as of the close of business on April 30, 1998,
information as to the ownership of the Company's Common Stock, including (i)
those stockholders known to the Company to be the beneficial owners of more than
5% of the outstanding shares of the Company's Common Stock (based solely upon
filings by each of such stockholders with the Securities and Exchange Commission
(the "Commission"), on Schedule 13D or Schedule 13G), and (ii) each director and
the nominees for director, (iii) each of the executive officers named in the
Summary Compensation Table and (iv) the directors and all executive officers as
a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNER SHARES BENEFICIALLY OWNED PERCENT OF CLASS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Canaan Entities(1) 1,438,264 23.05%
105 Rowayton Avenue
Rowayton, CT 06853
OZ Management, L.L.C. (2) 1,121,212 16.70%
153 E. 53rd Street, 44th Floor
New York, NY 10022
Triumph-Connecticut Limited Partnership 767,554 13.72%
60 State Street, 21st Floor
Boston, MA 02109
Advance Capital Partners, L.P. (3) 878,787 13.58%
Advance Capital Offshore Partners, L.P.
660 Madison Avenue, 15th Floor
New York, NY 10021
Elliott Associates L.P. (4) 484,848 7.98%
712 Fifth Avenue, 36th Floor
New York, NY 10019
Ryback Management Corporation (5) 369,430 6.60%
7711 Carondelet Ave.
Box 16900
St. Louis, MO 63105
The Capital Group Companies, Inc. (6) 360,000 6.44%
333 South Hope Street
Los Angeles, CA 90071
Lehman Brothers Capital Partners III, 606,061 9.78%
L.P. (7)
c/o Lehman Brothers
Three World Financial Center
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
New York, NY 10285
Aetna Life Insurance Company (8) 606,061 9.78%
151 Farmington Avenue
Hartford, CT 06516
Exeter Capital Partners IV, L.P. (9) 303,030 5.14%
10 East 53rd Street
New York, NY 10022
Russell R. MacDonnell (10) 144,550 2.56%
David Heidecorn (11) 71,708 1.27%
Stuart L. Bell (12) 125,719 2.22%
Michael E. Cahr (13) 10,833 *
Michael M. Earley (14) 43,453 *
Stephen L. Green (15) 1,438,264 23.05%
Thomas W. Janes (16) 767,554 13.72%
Joseph J. Monachino (17) 8,830 *
Peter M. Rogers (18) 4,552 *
Gregory J. Westhoff (19) 37,969 *
Jeffrey T. Leeds (20) 878,787 13.58%
Timothy A. Holt (21) 606,061 9.78%
Directors and Executive Officers 4,138,280 52.19%
as a Group (12 persons) (22)
</TABLE>
- ---------------------------------------
*Less than 1%
(1) Shares indicated as beneficially owned by Canaan include 231,014 shares
beneficially owned by Canaan Venture Limited Partnership and 562,089 shares
beneficially owned by Canaan Venture Offshore Limited Partnership. Each of
the Canaan entities has sole voting power with respect to its shares.
Shares indicated as beneficially owned by Canaan include shares issuable
upon the conversion of 5,000 shares of Series B Preferred Stock.
(2) Issuable upon the conversion of 9,250 shares of Series A Preferred Stock.
(3) Issuable upon the conversion of 7,250 shares of Series A Preferred Stock.
(4) Issuable upon the conversion of 4,000 shares of Series A Preferred Stock.
(5) Includes 369,430 shares beneficially owned by Lindner Growth Fund. Ryback
has sole voting and dispositive power over all of such shares.
(6) Includes The Capital Group Companies, Inc., Capital Research and Management
Company and SMALLCAP World Fund, Inc.
(7) Issuable upon the conversion of 5,000 shares of Series A Preferred Stock.
(8) Issuable upon the conversion of 5,000 shares of Series A Preferred Stock.
(9) Issuable upon the conversion of 2,500 shares of Series A Preferred Stock.
(10) Includes 15,152 shares of Common Stock issuable upon the conversion of 125
shares of Series A Preferred Stock, 5,868 shares of Common Stock issuable
upon the exercise of Warrants and options exercisable within 60 days to
purchase 42,773 shares of Common Stock.
<PAGE>
(11) Includes 9,091 shares of Common Stock issuable upon the conversion of 75
shares of Series A Preferred Stock, 3,521 shares of Common Stock issuable
upon the exercise of Warrants and options exercisable within 60 days to
purchase 23,886 shares of Common Stock.
(12) Includes 9,200 shares held by Mr. Bell as custodian for the benefit of his
three minor children and 6,105 shares held by BF Partners, of which Mr.
Bell is a partner. Mr. Bell has sole voting power with respect to such
6,105 shares. Also includes 48,484 shares of Common Stock issuable upon the
conversion of 400 shares of Series A Preferred Stock, 18,777 shares of
Common Stock issuable upon the exercise of Warrants and options exercisable
within 60 days to purchase 3,333 shares of Common Stock.
(13) Includes options exercisable within 60 days to purchase 3,333 shares of
Common Stock.
(14) Includes 120 shares held by Mr. Earley's spouse and options exercisable
within 60 days to purchase 3,333 shares of Common Stock.
(15) Mr. Green is a general partner of various venture capital investment funds
that may be deemed to be affiliated with the Canaan entities, and thus,
under the rules and regulations of the Commission, may be deemed to be the
beneficial owner of the shares of the Company's Common Stock owned by those
funds. Accordingly, such shares are included in the table as beneficially
owned by Mr. Green. Mr. Green is not a general partner of the Canaan
entities, and has no voting power with respect to such shares. Mr. Green
disclaims beneficial ownership of such shares.
(16) Mr. Janes is a general partner of Triumph, and thus, under the rules and
regulation of the Commission, may be deemed to be the beneficial owner of
Triumph's Common Stock. Accordingly, such shares are included in the table
as beneficially owned by Mr. Janes. Triumph has sole voting power with
respect to such shares. Mr. Janes disclaims beneficial ownership of such
shares.
(17) Includes options exercisable within 60 days to purchase 8,830 shares of
Common Stock.
(18) Includes options exercisable within 60 days to purchase 4,552 shares of
Common Stock.
(19) Includes options exercisable within 60 days to purchase 14,968 shares of
Common Stock.
(20) Issuable upon the conversion of 5,000 shares of Series A Preferred Stock
beneficially owned by Advance Capital Management ("Advance"). Mr. Leeds is
the founder and principal of Advance, and thus, under the rules and
regulations of the Commission, may be deemed to be the beneficial owner of
such shares. Accordingly, such shares are included in the table as
beneficially owned by Mr. Leeds. Mr. Leeds disclaims beneficial ownership
of such shares.
(21) Issuable upon the conversion of 5,000 shares of Series A Preferred Stock
beneficially owned by Aetna Life Insurance Co. ("Aetna"). Mr. Holt is the
Chief Investment Officer of Aetna, and thus, under the rules and
regulations of the Commission, may be deemed to be the beneficial owner of
such shares. Accordingly, such shares are included in the table as
beneficially owned by Mr. Holt. Mr. Holt disclaims beneficial ownership of
such shares.
(22) Includes 105,008 shares issuable upon exercise of options and 2,202,736
shares issuable upon conversion of Series A Preferred Stock and Series B
Preferred Stock.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table shows the cash compensation paid by the Company and its
subsidiaries as well as certain other compensation paid or accrued in 1996 and
1997 to the Chairman of the Board and Chief Executive Officer of the Company,
and the four most highly compensated Executive Officers of the Company. The
Executives of the Company were not executives of the predecessor company, and as
such their 1995 compensation is not included below.
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
------------------------------------- UNDERLYING ALL OTHER
YEAR SALARY BONUS(1) OPTIONS(#)(2) COMPENSATION(1)(4)
- --------------------------------------- ----------- ------------- ----------- ---------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Russell R. MacDonnell 1997 $275,000 $90,000 110,000 $81,254(3)(5)
Chairman, President and 1996 271,882 67,500 0 1,758
Chief Executive Officer
David Heidecorn 1997 200,000 65,000 65,000 51,780(3)
Executive Vice President 1996 193,349 57,500 0 1,349
and Chief Financial Officer
Gregory J. Westhoff 1997 150,000 65,000 40,000 1,348
Vice President and 1996 140,835 40,000 0 1,016
President of Alarmguard, Inc.
Joseph J. Monachino 1997 121,000 15,000 16,000 2,219
Vice President, Sales and 1996 120,069 15,000 0 1,593
Marketing of Alarmguard, Inc.
Peter M. Rogers 1997 100,000 30,000 16,000 1,719
Vice President, Operations 1996 95,000 20,000 0 1,356
of Alarmguard, Inc.
- --------------------------------------- ----------- ------------- ---------------- --------------- -------------------
</TABLE>
- --------------------
(1) Of the compensation reported as Bonus and All Other Compensation in 1997
for Messrs. MacDonnell and Heidecorn, $125,000 and $75,000, respectively,
was paid in the form of New Debentures. See "Certain Transactions."
(2) Number of shares of Common Stock underlying options granted on April 16,
1997.
(3) Includes special one time bonuses in 1997 provided to Messrs. MacDonnell
and Heidecorn in connection with the merger with Triton Group Ltd.
(4) Other compensation consists of contributions by the Company on behalf of
each of the named individuals in connection with the Company's 401(k)
Savings Plan.
(5) Includes $3,773 of life insurance premiums paid by the Company.
STOCK OPTIONS
The following table sets forth certain information regarding stock options
granted in 1997 to the five individuals named in the Summary Compensation Table.
In addition, in accordance with the Commission's rules, the table also shows a
hypothetical potential realizable value of such options based on assumed rates
of annual compounded stock price appreciation of 5% and 10% from the date the
options were granted over the full option term. The assumed rates of growth were
selected by the Commission for illustration purposes only, and are not intended
to predict future stock prices, which will depend upon market conditions and the
Company's future performance and prospects.
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANT IN LAST FISCAL YEAR (1997)
POTENTIAL REALIZABLE
PERCENT VALUE AT ASSUMED
OF TOTAL ANNUAL RATES OF STOCK
# OF OPTIONS EXERCISE EXPIRATION PRICE APPRECIATION
OPTIONS GRANTED TO PRICE DATE OF FOR OPTION TERM
GRANTED EMPLOYEES ($/SH) GRANT 5% ($) 10%($)
- ---------------------------------- ---------- -------------- -------------- -------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Russell R. MacDonnell 110,000 32% $7.50 4/16/07 $518,838 $1,314,838
David Heidecorn 65,000 19% 7.50 4/16/07 306,586 776,949
Gregory J. Westhoff 40,000 12% 7.50 4/16/07 188,668 478,123
Joseph J. Monachino 16,000 5% 7.50 4/16/07 75,467 191,249
Peter M. Rogers 16,000 5% 7.50 4/16/07 75,467 191,249
- ---------------------------------- -------------- -------------- ------------ ------------- ------------ -------------
</TABLE>
A total of 339,000 stock options were granted to certain members of management
on April 16, 1997 at $7.50 per share. The five individuals named in the above
table received 247,000 options. The options expire on April 16, 2007 and vest
over four years.
OPTIONS EXERCISED AND HOLDINGS
The following table sets forth certain information concerning stock option
exercises by the five individuals named in the Summary Compensation Table during
1997, including the aggregate value of gains on the date of exercise. In
addition, this table includes the number of shares covered by both exercisable
and non-exercisable stock options as of December 31, 1997. Also reported are the
values for "in-the-money" options which represent the positive spread between
the exercise price of any such existing stock options and the closing market
price of Common Stock at December 31, 1997.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN THE
OPTIONS AT FISCAL YEAR-END(1) MONEY OPTIONS AT FISCAL YEAR-END (2)
------------------------------ ------------------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------- ----------------------------------- ------ ------------------------------------------
<S> <C> <C> <C> <C>
Russell R. MacDonnell 42,773 84,524 $449,116 $887,503
David Heidecorn 23,886 49,762 250,808 522,502
Gregory H. Westhoff 14,968 30,920 157,167 324,661
Joseph J. Monachino 8,830 12,414 92,718 130,347
Peter M. Rogers 4,552 12,184 47,796 127,932
- ------------------------------------ --------------- ----------------------------- ------------------ ----------------
</TABLE>
(1) Number of options that are exercisable and unexercisable as of June 30,
1998.
<PAGE>
(2) Value of exercisable and unexercisable options with a December 31, 1997
market price of $10.50. Grants in 1994 and 1995 have a $0.33 exercise price
and the 1997 grant has a $7.50 exercise price.
SEVERANCE AGREEMENTS
Messrs. MacDonnell, Heidecorn and Westhoff are parties to severance agreements
(the "Severance Agreements") with the Company. The Severance Agreements provide
that in the event each is involuntarily terminated by the Company without
"cause" or resigns for "good reason" (as such terms are defined in the Severance
Agreements), he will be provided with the following termination payments and
benefits: (a) any earned and accrued but unpaid installment of his base salary;
(b) an amount equal to the sum of his annual base salary and the average of his
last three years' bonus compensation earned from the Company; (c) reimbursements
of reasonable expenses incurred for a period of one year in seeking subsequent
employment, to a maximum of $25,000; (d) benefit continuation for a period of
one year; and (e) awards under the 1997 Stock Incentive Plan will continue to
vest or be exercisable for the duration of the term of such award as if his
employment with the Company had continued during such term. In the event of
termination of employment by reason of his death, the Company will pay to his
designated beneficiary or estate the amounts and benefits described in
subparagraphs (a) and (b) above, and will allow an acceleration of the vesting
and exercisability of all awards granted under the 1997 Stock Incentive Plan. In
the event of termination of employment for cause, disability, or his resignation
without good reason, then the Company will pay to him only the payments and
benefits described in subparagraph (a) above (except that, in the case of a
disability, such Executive will also receive the benefits set forth in
subparagraph (e) above).
In the event of the termination or resignation for any reason after a "change in
control" (as such term is defined in the Severance Agreements) of the Company,
the Company will pay to each individual (i) the amounts described in
subparagraph (a) in the previous paragraph, (ii) the amounts described in
paragraph (b) and (iii) the benefits described in subparagraphs (c) and (d) in
the previous paragraph (the "Change in Control Benefits"). Termination or
resignation for any reason after a change in control will also cause the
accelerated vesting and lapse of restriction provisions of the 1997 Stock
Incentive Plan to become applicable to the awards granted. The Change in Control
Benefits and the accelerated vesting and lapse in restriction provisions of the
1997 Stock Incentive Plan will also be applicable in the event of his
termination of employment by the Company within the four month period (i) prior
to the date of a change in control of the Company, (ii) following commencement
of certain "tender offers" for the Company's stock, (iii) following the
execution by the Company of an agreement the consummation of which would
constitute a change in control, (iv) following the solicitation of proxies for
the election of directors by anyone other than the Company, or (v) following the
approval of the Company's' stockholders of certain transactions the consummation
of which would result in a change of control.
The Severance Agreements provide for certain non-competition restrictions on
Messrs. MacDonnell, Heidecorn and Westhoff. Pursuant to the Severance
Agreements, they agree that they will not (with certain exceptions) (i) during
the period of their employment with the Company, and (ii) in the event of the
their termination or resignation from their employment for any reason (other
than in connection with a change in control), for the one-year period
thereafter, own, manage, lend to or join (as an employee or otherwise) any
business which "competes" with the Company, as defined in the Severance
Agreements (generally, an entity will be deemed to compete with the Company if
it is engaged in the residential and/or commercial security alarm business).
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee"), which
consists of three non-employee directors, is responsible for reviewing and
making recommendations to the Board with respect to the Company's executive
compensation policies.
The Company believes that there should be a direct relationship between
executive compensation and value delivered to stockholders and the Company's
compensation structure is based on this philosophy. The Company believes that
the base compensation for its executives should be competitive, enabling the
Company to attract and
<PAGE>
retain the best available people. Additionally, the Company believes that bonus
compensation based on realistic targets provides the motivation to the executive
to strive to meet or exceed Company goals. Since the inception of Alarmguard in
1992, the Company has used stock options as a means of providing
performance-based compensation to all executive officers. The Company believes
that stock options are a key ingredient to executive compensation because they
serve to align the interest of executive officers with stockholder value.
The compensation of the Company's Chief Executive Officer, Russell R.
MacDonnell, like the other executive officers, consists of a combination of
salary, bonus and stock options. In addition to those factors applying generally
to all executives as indicated below, Mr. McDonnell's compensation for fiscal
1997 reflects the Company's successful merger with Triton Group Ltd. in April
1997, as well as the Company's growth in MRR1, EBITDA2 and Adjusted EBITDA3
pursuant to the Company's aggressive growth plan.
The Company has entered into severance agreements with the three key executives
which provide for termination benefits under certain circumstances, including a
termination without cause or the termination or resignation in connection with a
change in control of the Company. The termination benefits include one-year's
annual salary, an amount representing the average annual bonus amount paid over
the last three years and the continuation of certain health and welfare plan
benefits for up to one year.
In determining the compensation of the Company's executive officers, which
includes salary, bonus and stock options, the Committee considers a combination
of objective and subjective performance criteria, all of which the Committee
believes contribute to stockholder value. Objective criteria include:
- MRR, EBITDA and Adjusted EBITDA growth
- MRR gross attrition
The Committee, in conjunction with the Board of Directors, reviews the business
plans and projections prepared by management and compares the Company's actual
performance to the objective criteria set forth in such plans and projections.
Subjective criteria considered by the Committee in determining executive officer
compensation include the consummation of appropriately priced acquisitions, the
successful integration of such acquisitions, growth in Alarmguard's direct
marketing and dealer programs, the enhancement of the Company's central
monitoring station and facilities and the success in capital raising. Bonuses
paid for fiscal year 1997 performance reflect Alarmguard's merger with Triton
Group Ltd. in April 1997, the successful acquisition of several security
companies, principally Protective Alarms, Inc., and internal growth programs.
The Committee also considers compensation paid to other persons with comparable
skills and experience in the security industry and other service industries, the
Company's performance in comparison to its competitors and performance in each
executive's specific area of responsibility.
Submitted by the Compensation Committee of
The Company's Board of Directors,
April 15, 1998
Stuart L. Bell
Michael E. Cahr
Stephen L. Green
- -------------------------------------------------------------------------------
1. MRR means monthly recurring revenue that the Company (or, if the context
requires, another company in the security alarm industry) is entitled to
receive under contracts in effect at the end of such period. MRR is a term
commonly used in the security alarm industry as a measure of the size of
the company. It does not measure profitability or performance, and does not
include any allowance for future subscriber attrition or for uncollectible
accounts receivable.
2. EBITDA is earnings before interest, income taxes, depreciation and
amortization.
<PAGE>
3. Adjusted EBITDA is derived by adding to EBITDA the expenses net of related
revenues associated with the Company's Direct Marketing Program and
acquisition integration expenses.
<PAGE>
EXHIBIT 2
ALARMGUARD HOLDINGS, INC.,
TYCO INTERNATIONAL LTD.
and
T16 ACQUISITION CORP.
AGREEMENT AND PLAN OF MERGER
------------------------------
------------------------------
Dated as of January 8, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE I
TENDER OFFER AND MERGER
<S> <C>
1.1. The Offer ................................................................................................ 2
1.2. Company Action............................................................................................ 4
1.3. Directors ................................................................................................ 5
1.4. The Merger ............................................................................................... 7
1.5. Effective Time............................................................................................ 7
1.6. Conversion of Shares...................................................................................... 7
1.7. Dissenting Shares......................................................................................... 8
1.8. Surrender of Shares....................................................................................... 9
1.9. Options and Warrants...................................................................................... 10
1.10. Certificate of Incorporation and Bylaws................................................................... 11
1.11. Directors and Officers.................................................................................... 11
1.12. Other Effects of Merger................................................................................... 11
1.13. Proxy Statement........................................................................................... 11
1.14. Additional Actions........................................................................................ 12
1.15. Merger Without Meeting of Stockholders.................................................................... 13
1.16. Lost, Stolen or Destroyed Certificates.................................................................... 13
1.17. Material Adverse Effect................................................................................... 13
</TABLE>
<TABLE>
<CAPTION>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
<S> <C>
2.1. Organization and Good Standing............................................................................ 14
2.2. Capitalization............................................................................................ 14
2.3. Subsidiaries.............................................................................................. 15
2.4. Authorization; Binding Agreement.......................................................................... 15
2.5. Governmental Approvals.....................................................................................16
2.6. No Violations............................................................................................. 16
2.7. Securities Filings........................................................................................ 17
2.8. Company Financial Statements.............................................................................. 17
2.9. Absence of Certain Changes or Events...................................................................... 17
2.10. No Undisclosed Liabilities................................................................................ 18
2.11. Compliance with Laws...................................................................................... 18
2.12. Permits................................................................................................... 18
2.13. Litigation ............................................................................................... 18
2.14. Contracts ................................................................................................ 19
2.15. Employee Benefit Plans.................................................................................... 20
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
2.16. Taxes and Returns......................................................................................... 22
2.17. Intellectual Property..................................................................................... 25
2.18. Disclosure Documents...................................................................................... 25
2.19. Labor Matters............................................................................................. 26
2.20. Limitation on Business Conduct............................................................................ 26
2.21. Title to Property......................................................................................... 26
2.22. Leased Premises........................................................................................... 27
2.23. Environmental Matters..................................................................................... 27
2.24. Insurance................................................................................................. 29
2.25. Customers................................................................................................. 29
2.26. Interested Party Transactions............................................................................. 29
2.27. Alarm Contracts........................................................................................... 29
2.28. Finders and Investment Bankers............................................................................ 29
2.29. Fairness Opinion.......................................................................................... 29
2.30. Takeover Statutes......................................................................................... 30
2.31. Full Disclosure........................................................................................... 30
2.32. Year 2000................................................................................................. 30
2.33. Rights Agreement.......................................................................................... 31
2.34. Standard Form Contracts................................................................................... 31
2.35. Central Station/Inspection................................................................................ 32
</TABLE>
<TABLE>
<CAPTION>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
<S> <C>
3.1. Organization and Good Standing............................................................................ 33
3.2. Authorization; Binding Agreement.......................................................................... 33
3.3. Governmental Approvals.................................................................................... 33
3.4. No Violations............................................................................................. 33
3.5. Disclosure Documents...................................................................................... 34
3.6. Finders and Investment Bankers............................................................................ 34
3.7. Financing Arrangements.................................................................................... 34
3.8. No Prior Activities....................................................................................... 35
</TABLE>
<TABLE>
<CAPTION>
ARTICLE IV
ADDITIONAL COVENANTS OF THE COMPANY
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4.1. Conduct of Business of the Company and the Company Subsidiaries .......................................... 35
4.2. Notification of Certain Matters........................................................................... 37
4.3. Access and Information.................................................................................... 38
4.4. Stockholder Approval...................................................................................... 38
4.5. Reasonable Best Efforts................................................................................... 38
4.6. Public Announcements...................................................................................... 39
</TABLE>
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<TABLE>
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4.7. Compliance ............................................................................................... 39
4.8. No Solicitation........................................................................................... 39
4.9. SEC and Stockholder Filings............................................................................... 42
4.10. Takeover Statutes......................................................................................... 42
4.11. Rights Agreement.......................................................................................... 42
</TABLE>
<TABLE>
<CAPTION>
ARTICLE V
ADDITIONAL COVENANTS OF PURCHASER AND PARENT
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5.1. Reasonable Best Efforts................................................................................... 42
5.2. Public Announcements...................................................................................... 43
5.3. Compliance ............................................................................................... 43
5.4. Employee Benefit Plans.................................................................................... 43
5.5. Indemnification........................................................................................... 44
5.6. Voting of Shares.......................................................................................... 45
5.7. Guarantee of Parent....................................................................................... 45
</TABLE>
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ARTICLE VI
MERGER CONDITIONS
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6.1. Offer..................................................................................................... 45
6.2. Stockholder Approval...................................................................................... 45
6.3. No Injunction or Action................................................................................... 45
6.4. Governmental Approvals.................................................................................... 46
</TABLE>
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ARTICLE VII
TERMINATION AND ABANDONMENT
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7.1. Termination .............................................................................................. 46
7.2. Effect of Termination and Abandonment..................................................................... 48
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ARTICLE VIII
MISCELLANEOUS
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8.1. Confidentiality........................................................................................... 48
8.2. Amendment and Modification................................................................................ 49
8.3. Waiver of Compliance; Consents............................................................................ 49
8.4. Survival ................................................................................................. 50
8.5. Notices................................................................................................... 50
8.6. Binding Effect; Assignment................................................................................ 51
8.7. Expenses ................................................................................................. 51
8.8. Governing Law............................................................................................. 53
8.9. Counterparts.............................................................................................. 53
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<TABLE>
<CAPTION>
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8.10. Interpretation............................................................................................ 53
8.11. Entire Agreement.......................................................................................... 54
8.12. Severability ............................................................................................. 54
8.13. Specific Performance...................................................................................... 54
8.14. Third Parties............................................................................................. 55
8.15. Disclosure Letter......................................................................................... 55
Annex I................................................................................................ A1
Glossary of Defined Terms.............................................................................. G1
</TABLE>
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (THIS "AGREEMENT") is made
and entered into as of January 8, 1999, by and among ALARMGUARD HOLDINGS, INC.,
a Delaware corporation (the "COMPANY"), TYCO INTERNATIONAL LTD., a Bermuda
company ("PARENT"), and T16 ACQUISITION CORP., a Delaware corporation and an
indirect wholly owned subsidiary of Parent ("PURCHASER").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of the Company,
Purchaser and Parent have approved the acquisition by Purchaser of the Company;
and
WHEREAS, in furtherance thereof, it is proposed that Purchaser
will make a cash tender offer (the "OFFER") to acquire all of the issued and
outstanding shares of common stock, par value $.0001 per share, of the Company
("COMPANY COMMON STOCK") together with the associated right to purchase shares
of Series C Junior Participating Preferred Stock of the Company, par value
$.0001 per share (the "RIGHTS"), issued pursuant to the Rights Agreement (the
"RIGHTS AGREEMENT"), dated as of April 10, 1998, between the Company and
American Stock Transfer & Trust Company, as Rights Agent (the shares of Company
Common Stock together with the associated Rights are referred to as the "COMMON
SHARES"), for $9.25 per share, or such higher price as may be paid in the Offer
(the "COMMON PER SHARE AMOUNT"), subject to any applicable withholding, net to
the seller in cash without interest; and
WHEREAS, Purchaser has entered into a Preferred Stock Purchase
Agreement (the "PREFERRED STOCK PURCHASE AGREEMENT") with the holders of at
least 75% of the issued and outstanding shares ("PREFERRED SHARES," and,
together with the Common Shares, the "SHARES") of the Series A and Series B
preferred stock of the Company ("COMPANY PREFERRED STOCK," and, together with
the Company Common Stock, the "COMPANY STOCK"), pursuant to which Purchaser will
acquire the Preferred Shares for $1,400 per share plus accrued but unpaid
dividends to and including the date of purchase (the "PREFERRED PER SHARE
AMOUNT," and together with the Common Per Share Amount, as applicable, the "PER
SHARE AMOUNT"), subject to any applicable withholding, net to the seller in cash
without interest; and
WHEREAS, also in furtherance of such acquisition, the
respective Boards of Directors of the Company, Purchaser and Parent have each
approved the merger (the "MERGER") of Purchaser with and into the Company
following the Offer in accordance with the laws of the State of Delaware; and
WHEREAS, the Board of Directors of the Company has approved
and resolved to recommend acceptance of the Offer and the Merger to the holders
of Shares and has determined that the consideration to be paid for each Share in
the Offer and the Merger is fair to and in the best interest of the holders of
Common Shares and to recommend that the holders
<PAGE>
of such Shares accept the Offer and that the holders of Common Shares and
Preferred Shares approve this Agreement and the transactions contemplated
hereby; and
WHEREAS, the Company, Purchaser and Parent desire to make
certain representations, warranties and agreements in connection with, and
establish various conditions precedent to, the transactions contemplated hereby;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements hereinafter set forth, the
parties hereto agree as follows:
ARTICLE I
TENDER OFFER AND MERGER
1.1 THE OFFER. (a) Provided that this Agreement shall not have
been terminated in accordance with SECTION 7.1 hereof and that none of the
events set forth in ANNEX I hereto shall have occurred and be existing,
Purchaser shall commence (within the meaning of Rule 14d-2 under the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder (the
"SECURITIES EXCHANGE ACT")) the Offer as promptly as practicable, but in no
event later than five business days following the first public announcement of
the Offer, and shall use reasonable best efforts to consummate the Offer. The
obligation of Purchaser to accept for payment any Common Shares tendered shall
be subject to the satisfaction of only those conditions set forth in ANNEX I
hereto. The Common Per Share Amount payable in the Offer shall be net to each
seller in cash, subject to reduction only for any applicable federal back-up
withholding or stock transfer taxes payable by such seller. The Company agrees
that no Common Shares held by the Company or any Company Subsidiaries (as
defined below) will be tendered pursuant to the Offer.
(b) Without the prior written consent of the Company,
Purchaser shall not (i) decrease the Common Per Share Amount or change the form
of consideration payable in the Offer, (ii) decrease the number of Common Shares
sought in the Offer, (iii) amend or waive satisfaction of the Minimum Condition
(as defined in ANNEX I hereto) or (iv) impose additional conditions to the Offer
or amend any other term of the Offer in any manner adverse to the holders of the
Common Shares. The Offer shall initially expire twenty (20) business days after
the date of its commencement, unless this Agreement is terminated in accordance
with ARTICLE VII hereof, in which case the Offer (whether or not previously
extended in accordance with the terms hereof) shall expire on such date of
termination. Purchaser agrees that it shall not terminate or withdraw the Offer
or extend the expiration date of the Offer unless at the expiration date of the
Offer the conditions to the Offer described in ANNEX I hereto shall not have
been satisfied or earlier waived. Notwithstanding the foregoing, Purchaser may,
without the consent of the Company, extend the Offer at any time, and from time
to time, (i) if at the then scheduled expiration date of the Offer any of the
conditions to Purchaser's obligation to accept for payment and pay for Common
Shares shall not have been satisfied or waived, until
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<PAGE>
such time as such conditions are satisfied or waived; (ii) for any period
required by any rule, regulation, interpretation or position of the Securities
and Exchange Commission (the "SEC") or its staff applicable to the Offer; or
(iii) if all conditions to Purchaser's obligation to accept for payment and pay
for Common Shares are satisfied or waived but the number of Common Shares
tendered is less than 90% of the then outstanding number of Common Shares, for
an aggregate period of not more than ten (10) business days (for all such
extensions) beyond the latest expiration date that would be permitted under
clause (i) or (ii) of this sentence.
(c) The Offer shall be made by means of an offer to purchase
(the "OFFER TO PURCHASE") having only the conditions set forth in ANNEX I
hereto. As soon as practicable on the date the Offer is commenced, Purchaser
shall file with the SEC a Tender Offer Statement on Schedule 14D-1 (together
with all amendments and supplements thereto, the "SCHEDULE 14D-1") with respect
to the Offer that will comply in all material respects with the provisions of,
and satisfy in all material respects the requirements of, such Schedule 14D-1
and all applicable federal securities laws and will contain (including as an
exhibit) or incorporate by reference the Offer to Purchase and forms of the
related letter of transmittal and summary advertisement (which documents,
together with any supplements or amendments thereto, and any other SEC schedule
or form which is filed in connection with the Offer and related transactions,
are referred to collectively herein as the "OFFER DOCUMENTS"). Each of Parent,
Purchaser and the Company agrees promptly to correct any information provided by
it for use in the Schedule 14D-1 or the Offer Documents if and to the extent
that such information shall have become false or misleading in any material
respect and to supplement the information provided by it specifically for use in
the Schedule 14D-1 or the Offer Documents to include any information that shall
become necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, and Purchaser further
agrees to take all steps necessary to cause the Schedule 14D-1, as so corrected
or supplemented, to be filed with the SEC and the Offer Documents, as so
corrected or supplemented, to be disseminated to holders of Common Shares, in
each case as and to the extent required by applicable federal securities laws.
The Company and its counsel shall be given a reasonable opportunity to review
and comment on any Offer Documents before they are filed with the SEC, and
Parent and Purchaser shall consider any such comments in good faith.
(d) Upon the terms and subject to the conditions of the Offer,
Purchaser shall accept for payment and pay for Common Shares as soon as
permitted under the terms of the Offer and applicable law.
1.2 COMPANY ACTION. (a) The Company hereby approves and
consents to the Offer and represents and warrants that the Board of Directors of
the Company, at a meeting duly called and held on January 8, 1999, at which a
majority of the Directors was present, duly approved and adopted this Agreement
and the transactions contemplated hereby, including the Offer and the Merger,
recommended that stockholders of the Company accept the Offer, tender their
Common Shares pursuant to the Offer and approve this Agreement and the
transactions contemplated hereby, including the Merger, and determined that this
3
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Agreement and the transactions contemplated hereby, including the Offer and the
Merger, are fair to and in the best interests of the stockholders of the
Company. The Company hereby consents to the inclusion in the Offer Documents of
such recommendation of the Board of Directors of the Company. The Company
represents that its Board of Directors has received the written opinion (the
"FAIRNESS OPINION") of Donaldson, Lufkin & Jenrette Securities Corporation (the
"FINANCIAL ADVISOR") that the proposed consideration to be received by the
holders of Common Shares pursuant to the Offer and the Merger is fair to such
holders from a financial point of view. The Company has been authorized by the
Financial Advisor to permit, subject to the prior review and consent by the
Financial Advisor (such consent not to be unreasonably withheld), the inclusion
of the Fairness Opinion (or a reference thereto) in the Offer Documents, the
Schedule 14D-9 (as hereinafter defined) and the Proxy Statement (as hereinafter
defined).
(b) The Company shall file with the SEC, as promptly as
practicable after the filing by Parent of the Schedule 14D-1 with respect to the
Offer, a Tender Offer Solicitation/ Recommendation Statement on Schedule 14D-9
(together with any amendments or supplements thereto, the "SCHEDULE 14D-9") that
will comply in all material respects with the provisions of all applicable
federal securities laws. The Company shall mail such Schedule 14D-9 to the
stockholders of the Company as promptly as practicable after the commencement of
the Offer. The Schedule 14D-9 and the Offer Documents shall contain the
recommendations of the Board of Directors of the Company described in SECTION
1.2(a) hereof. The Company agrees promptly to correct the Schedule 14D-9 if and
to the extent that it shall become false or misleading in any material respect
(and each of Parent and Purchaser, with respect to written information supplied
by it specifically for use in the Schedule 14D-9, shall promptly notify the
Company of any required corrections of such information and cooperate with the
Company with respect to correcting such information) and to supplement the
information contained in the Schedule 14D-9 to include any information that
shall become necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, and the Company shall
take all steps necessary to cause the Schedule 14D-9 as so corrected or
supplemented to be filed with the SEC and disseminated to holders of Common
Shares to the extent required by applicable federal securities laws. Purchaser
and its counsel shall be given a reasonable opportunity to review and comment on
the Schedule 14D-9 before it is filed with the SEC, and the Company shall
consider any such comments in good faith.
(c) In connection with the Offer, the Company shall promptly
upon execution of this Agreement furnish Purchaser with mailing labels
containing the names and addresses of all record holders of Common Shares and
security position listings of Common Shares held in stock depositories, each as
of a recent date, and shall promptly furnish Purchaser with such additional
information reasonably available to the Company, including updated lists of
stockholders, mailing labels and security position listings, and such other
information and assistance as Purchaser or its agents may reasonably request for
the purpose of communicating the Offer to the record and beneficial holders of
Common Shares. Subject
4
<PAGE>
to the requirements of applicable law and except as necessary to disseminate the
Offer Documents and otherwise for the purpose of effecting the transactions
contemplated hereby, Parent and Purchaser shall hold in confidence the materials
furnished pursuant to this SECTION 1.2(c), use such information only in
connection with the Offer, the Merger and the other transactions contemplated by
this Agreement and, if this Agreement is terminated, as promptly as practicable
return to the Company such materials and all copies thereof in the possession of
Parent and Purchaser.
1.3 DIRECTORS. Promptly upon the purchase by Parent of Common
Shares pursuant to the Offer (and provided that the Minimum Condition has been
satisfied), Parent shall be entitled to designate such number of directors,
rounded up to the next whole number, on the Board of Directors of the Company as
will give Parent, subject to compliance with Section 14(f) of the Securities
Exchange Act, representation on the Board of Directors of the Company equal to
at least that number of directors which equals the product of the total number
of directors on the Board of Directors of the Company (giving effect to the
directors appointed or elected pursuant to this sentence and including current
directors serving as officers of the Company) multiplied by the percentage that
the aggregate number of Shares beneficially owned by Parent or any affiliate of
Parent (including for purposes of this SECTION 1.3 such Shares as are accepted
for payment pursuant to the Offer, but excluding Shares held by the Company)
bears to the number of Shares outstanding. For this purpose, each Common Share
shall be counted as one Share, and each Preferred Share shall be counted as the
number of Common Shares into which such Preferred Share is convertible. At such
time, if requested by Parent, the Company will also cause each committee of the
Board of Directors of the Company to include persons designated by Parent
constituting the same percentage of each such committee as Parent's designees
are of the Board of Directors of the Company. The Company shall, upon request by
Parent, promptly increase the size of the Board of Directors of the Company or
exercise reasonable best efforts to secure the resignations of such number of
directors as is necessary to enable Parent's designees to be elected to the
Board of Directors of the Company in accordance with the terms of this SECTION
1.3 and to cause Parent's designees so to be elected; PROVIDED, HOWEVER, that,
in the event that Parent's designees are appointed or elected to the Board of
Directors of the Company, until the Effective Time (as hereinafter defined) the
Board of Directors of the Company shall have at least two directors who are
directors on the date hereof and each of whom is neither an officer of the
Company nor a designee, shareholder, affiliate or associate (within the meaning
of the federal securities laws) of Parent (such directors, the "INDEPENDENT
DIRECTORS"); PROVIDED, FURTHER, that each Independent Director shall be
designated by the Company, unless (i) the Company is then required to comply
with Section VIII.2(j) of the Preferred Stock Purchase Agreement dated as of
February 2, 1998 between the Company and the holders on the date of this
Agreement of the Company Preferred Stock (the "CURRENT PREFERRED HOLDERS")
(which section permits Advance Capital Offshore Partners, L.P. ("ADVANCE") to
designate one director (the "ADVANCE DIRECTOR") so long as Advance owns any
Preferred Shares and at least 20% of the Preferred Shares remain outstanding),
in which case one Independent Director shall be an Advance Director and the
other Independent Director shall be designated by the Company, or (ii) the
5
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Company is not then required to comply with the aforementioned Section VIII.2(j)
but the Current Preferred Holders continue to own at least 10% of the
outstanding Preferred Shares (the "CURRENT PREFERRED DIRECTOR CONDITION"), in
which case one Independent Director shall be designated by Current Preferred
Holders holding a majority of the outstanding Preferred Shares at such time
excluding any Preferred Shares then held by Parent or Purchaser (the "MAJORITY
OF CURRENT PREFERRED") and the other Independent Director shall be designated by
the Company; PROVIDED, FURTHER, that if no Independent Directors remain, persons
shall be designated to fill the vacancies by the Company or, if the Current
Preferred Director Condition is satisfied, one such person shall be designated
by the Company and one by the Majority of Current Preferred, in any event each
person so designated shall be neither an officer of the Company nor a designee,
shareholder, affiliate or associate of Parent, and each such person shall be
deemed to be an Independent Director for purposes of this Agreement. Subject to
applicable law, the Company shall promptly take all action necessary pursuant to
Section 14(f) of the Securities Exchange Act and Rule 14f-1 promulgated
thereunder in order to fulfill its obligations under this SECTION 1.3 and shall
include in the Schedule 14D-9 mailed to stockholders promptly after the
commencement of the Offer (or in an amendment thereof or an information
statement pursuant to Rule 14f-1 if Parent has not theretofore designated
directors) such information with respect to the Company and its officers and
directors as is required under Section 14(f) and Rule 14f-1 in order to fulfill
its obligations under this SECTION 1.3. Parent will supply the Company and be
solely responsible for any information with respect to itself and its nominees,
officers, directors and affiliates required by such Section 14(f) and Rule
14f-1. Notwithstanding anything in this Agreement to the contrary, prior to the
Effective Time, the unanimous vote of the Independent Directors shall be
required to (i) amend or terminate this Agreement on behalf of the Company, (ii)
exercise or waive any of the Company's rights or remedies hereunder, (iii)
extend the time for performance of Parent's obligations hereunder, (iv) take any
other action by the Company in connection with this Agreement required to be
taken by the Board of Directors of the Company or (v) amend the Company's
Certificate of Incorporation or the Company's Bylaws, each as in effect on the
date of this Agreement.
1.4 THE MERGER. Upon the terms and subject to the conditions
of this Agreement, the Merger shall be consummated in accordance with the
Delaware General Corporation Law (the "DELAWARE CODE"). At the Effective Time
(as defined in SECTION 1.5 hereof), upon the terms and subject to the conditions
of this Agreement, Purchaser shall be merged with and into the Company in
accordance with the Delaware Code and the separate existence of Purchaser shall
thereupon cease, and the Company, as the surviving corporation in the Merger
(the "SURVIVING CORPORATION"), shall continue its corporate existence under the
laws of the State of Delaware as an indirect subsidiary of Parent. The parties
shall prepare and execute a certificate of merger (the "CERTIFICATE OF MERGER")
in order to comply in all respects with the requirements of the Delaware Code
and with the provisions of this Agreement.
1.5 EFFECTIVE TIME. The Merger shall become effective at the
time of the filing
6
<PAGE>
of the Certificate of Merger with the Secretary of State of Delaware in
accordance with the applicable provisions of the Delaware Code or at such later
time as may be specified in the Certificate of Merger. As soon as practicable
after all of the conditions set forth in ARTICLE VI of this Agreement have been
satisfied or waived by the party or parties entitled to the benefit of the same,
the parties hereto shall cause the Merger to become effective. Parent and the
Company shall mutually determine the time of such filing and the place where the
closing of the Merger (the "CLOSING") shall occur. The time when the Merger
shall become effective is herein referred to as the "EFFECTIVE TIME", and the
date on which the Effective Time occurs is herein referred to as the "CLOSING
DATE."
1.6 CONVERSION OF SHARES. At the Effective Time, by virtue of
the Merger and without any action on the part of Purchaser, the Company or the
holder of any of the securities specified below:
(a) Each Common Share issued and outstanding immediately
before the Effective Time (other than any Dissenting Shares (as hereinafter
defined) and Common Shares to be canceled pursuant to SECTION 1.6(c)) shall be
canceled and extinguished and be converted into the right to receive the Common
Per Share Amount in cash payable to the holder thereof, without interest, upon
surrender of the certificate representing such Common Share in accordance with
SECTION 1.8 hereof. From and after the Effective Time, the holders of
certificates evidencing ownership of Common Shares outstanding immediately prior
to the Effective Time shall cease to have any rights with respect to such Common
Shares except as otherwise provided for herein or by applicable Law.
(b) Each Preferred Share issued and outstanding immediately
before the Effective Time (other than any Dissenting Shares and Preferred Shares
to be canceled pursuant to SECTION 1.6(c)) shall be canceled and extinguished
and be converted into the right to receive the Preferred Per Share Amount in
cash payable to the holder thereof, without interest, upon surrender of the
certificate representing such Preferred Share in accordance with SECTION 1.8
hereof. From and after the Effective Time, the holders of certificates
evidencing ownership of Preferred Shares outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such Preferred
Shares except as otherwise provided for herein or by applicable Law.
(c) Each Share held in the treasury of the Company and each
Share owned by Parent or any direct or indirect wholly owned subsidiary of
Parent immediately before the Effective Time shall be canceled and extinguished,
and no payment or other consideration shall be made with respect thereto.
(d) The shares of Purchaser common stock outstanding
immediately prior to the Merger shall be converted into 1,000 shares of the
common stock of the Surviving Corporation (the "SURVIVING CORPORATION COMMON
STOCK"), which shares of the Surviving Corporation Common Stock shall constitute
all of the issued and outstanding capital stock of
7
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the Surviving Corporation and shall be owned by an indirect subsidiary of
Parent.
1.7 DISSENTING SHARES. (a) Notwithstanding any provision of
this Agreement to the contrary, any Shares issued and outstanding immediately
prior to the Effective Time and held by a holder who has demanded and perfected
his demand for appraisal of his Shares in accordance with the Delaware Code
(including but not limited to Section 262 thereof), and as of the Effective Time
has neither effectively withdrawn nor lost his right to such appraisal
("DISSENTING SHARES"), shall not be converted into or represent a right to
receive cash pursuant to SECTION 1.6 hereof, but the holder thereof shall be
entitled to only such rights as are granted by the Delaware Code.
(b) Notwithstanding the provisions of SECTION 1.7(a) hereof,
if any holder of Shares who demands appraisal of his Shares under the Delaware
Code shall effectively withdraw or lose (through failure to perfect or
otherwise) his right to appraisal, then as of the Effective Time or the
occurrence of such event, whichever occurs later, such holder's Shares shall
automatically be converted into and represent only the right to receive cash as
provided in SECTION 1.6 hereof, without interest thereon, upon surrender of the
certificate or certificates representing such Shares.
(c) The Company shall give Purchaser (i) prompt notice of any
written demands for appraisal or payment of the fair value of any Shares,
withdrawals of such demands and any other instruments served pursuant to the
Delaware Code received by the Company after the date hereof and (ii) the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal under the Delaware Code. The Company shall not voluntarily make
any payment with respect to any demands for appraisal and shall not, except with
the prior written consent of Purchaser, settle or offer to settle any such
demands.
1.8 SURRENDER OF SHARES. (a) Prior to the Effective Time,
Purchaser shall appoint American Stock Transfer & Trust Company or such other
commercial bank or trust company designated by Purchaser and reasonably
acceptable to the Company to act as exchange agent hereunder (the "EXCHANGE
AGENT") for the payment of the Per Share Amount upon surrender of certificates
representing the Shares. All of the fees and expenses of the Exchange Agent
shall be borne by Purchaser.
(b) Parent shall cause the Surviving Corporation to provide
the Exchange Agent with cash in amounts necessary to pay for all of the Shares
pursuant to SECTION 1.8(c) hereof when and as such amounts are needed by the
Exchange Agent.
(c) On the Closing Date, Purchaser shall instruct the Exchange
Agent to mail to each holder of record of a certificate representing any Shares
canceled upon the Merger pursuant to SECTIONS 1.6(a) AND (b) hereof, within five
business days of receiving from the Company a list of such holders of record,
(i) a letter of transmittal (which shall specify that
8
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delivery shall be effected, and risk of loss and title to the certificates shall
pass, only upon delivery of the certificates to the Exchange Agent and shall be
in such form and have such other provisions as Parent may reasonably specify)
and (ii) instructions for use in effecting the surrender of the certificates.
Each holder of a certificate or certificates representing any Shares canceled
upon the Merger pursuant to SECTIONS 1.6(a) AND (b) hereof may thereafter
surrender such certificate or certificates to the Exchange Agent, as agent for
such holder, to effect the surrender of such certificate or certificates on such
holder's behalf for a period ending one year after the Effective Time. Upon the
surrender of certificates representing the Shares, Parent shall cause the
Exchange Agent to pay the holder of such certificates in exchange therefor cash
in an amount equal to the applicable Per Share Amount multiplied by the number
of Shares represented by such certificate. Until so surrendered, each such
certificate (other than certificates representing Dissenting Shares) shall
represent solely the right to receive the aggregate Per Share Amount relating
thereto.
(d) If payment of cash in respect of canceled Shares is to be
made to a person other than the person in whose name a surrendered certificate
or instrument is registered, it shall be a condition to such payment that the
certificate or instrument so surrendered shall be properly endorsed or shall be
otherwise in proper form for transfer and that the person requesting such
payment shall have paid any transfer and other taxes required by reason of such
payment in a name other than that of the registered holder of the certificate or
instrument surrendered or shall have established to the satisfaction of Parent
or the Exchange Agent that such tax either has been paid or is not payable.
(e) At the Effective Time, the stock transfer books of the
Company shall be closed, and no transfer of Shares shall be made thereafter,
other than transfers of Shares that have occurred prior to the Effective Time.
In the event that, after the Effective Time, certificates are presented to the
Surviving Corporation, they shall be canceled and exchanged for cash as provided
in SECTIONS 1.6(a) AND (b).
(f) The Per Share Amount paid in the Merger shall be net to
the holder of Shares in cash, and without interest thereon subject to reduction
only for any applicable federal back-up withholding or stock transfer taxes
payable by such holder.
(g) Promptly following the date which is one year after the
Effective Time, the Exchange Agent shall deliver to Parent all cash,
certificates and other documents in its possession relating to the transactions
contemplated hereby, and the Exchange Agent's duties shall terminate.
Thereafter, each holder of a certificate representing Shares (other than
certificates representing Dissenting Shares and certificates representing Shares
held directly or indirectly by Parent or in the treasury of the Company) may
surrender such certificate to the Surviving Corporation and (subject to any
applicable abandoned property, escheat or similar law) receive in consideration
therefor the aggregate Per Share Amount relating thereto, without any interest
thereon.
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(h) None of the Company, Parent, the Surviving Corporation or
the Exchange Agent shall be liable to any holder of Shares for any cash
delivered to a public official pursuant to any abandoned property, escheat or
similar law, rule, regulation, statute, order, judgment or decree.
1.9 OPTIONS AND WARRANTS. (a) Each of the Company and Parent
shall take all reasonable actions necessary to provide that all then outstanding
options to purchase Company Common Stock, whether or not then exercisable or
vested ("COMPANY OPTIONS"), shall become fully exercisable and vested upon the
consummation of the Offer. Holders of Company Options that have become fully
exercisable and vested upon the consummation of the Offer in accordance with the
provisions of the preceding sentence will have a period of sixty (60) days
following the consummation of the Offer to surrender their options to the
Company in exchange for cash equal to the excess of (i) the aggregate value of
the Common Shares underlying such options, based on the Common Per Share Amount,
over (ii) the aggregate exercise price for the Common Shares underlying such
options. Each of the Company and Parent shall take all reasonable actions
necessary to provide that, upon consummation of the Merger, all then outstanding
Company Options shall be converted into the right to receive cash equal to the
excess of (i) the aggregate value of the Common Shares underlying such options,
based on the Common Per Share Amount, over (ii) the aggregate exercise price for
the Common Shares underlying such options.
(b) Each of the Company and Parent shall take all reasonable
actions necessary so that each of the warrants to purchase 50,000 shares of
Company Common Stock at a price of $5.00 per share, subject to adjustment (the
"PATRICOF WARRANTS"), the warrants to purchase 80,000 shares of Company Common
Stock at a price of $8.66 per share, subject to adjustment (the "LEHMAN
WARRANTS"), and the warrants to purchase 215,939 shares of Company Common Stock
at a price of $11.11 per share, subject to adjustment (the "SUBORDINATED DEBT
WARRANTS" and together with the Patricof Warrants and the Lehman Warrants, the
"COMPANY WARRANTS"), shall be exercisable, from and after the Effective Time,
for an amount of cash equal in the aggregate to the Common Per Share Amount
multiplied by the number of shares of Company Common Stock for which such
warrant was exercisable immediately prior to the Effective Time. Otherwise, the
exercise of any Company Warrant shall remain subject to all terms and conditions
provided in the applicable Company Warrant and/or Warrant Agreement.
1.10 CERTIFICATE OF INCORPORATION AND BYLAWS. Subject to
SECTION 5.5 hereof, unless otherwise determined by Parent prior to the Effective
Time, at and after the Effective Time (a) the Restated Certificate of
Incorporation of the Company, as in effect immediately prior to the Effective
Time, shall be the Certificate of Incorporation of the Surviving Corporation
until thereafter amended as provided by the Delaware Code and such Certificate
of Incorporation; PROVIDED, HOWEVER, that (i) Article IV shall be amended and
restated in its entirety to provide that the capital stock of the Surviving
Corporation shall consist of 1,000 shares of Common Stock, par value $.01 per
share; (ii) Article V shall be amended and
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restated in its entirety to provide that the Surviving Corporation's Board shall
consist of not less than three members, all of a single class, with the exact
number to be fixed from time to time by resolution of the Board of Directors;
and (iii) Article VII shall be deleted in its entirety; and (b) the Bylaws of
the Surviving Corporation shall be the Bylaws of Purchaser in effect at the
Effective Time (subject to any subsequent amendments).
1.11 DIRECTORS AND OFFICERS. At and after the Effective Time,
the directors of Purchaser immediately prior to the Effective Time shall be the
initial directors of the Surviving Corporation, and the officers of the Company
immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, in each case until their successors are duly elected or
appointed and qualified.
1.12 OTHER EFFECTS OF MERGER. The Merger shall have all
further effects as specified in the applicable provisions of the Delaware Code.
1.13 PROXY STATEMENT. (a) Following the consummation of the
Offer and if required by the Securities Exchange Act because of action by the
Company's stockholders necessary in order to consummate the Merger, the Company
shall prepare and file with the SEC and, when cleared by the SEC, shall mail to
stockholders, a proxy statement in connection with a meeting of the Company's
stockholders to vote upon the adoption of this Agreement and the Merger and the
transactions contemplated hereby and thereby (the "COMPANY PROPOSALS"), or an
information statement, as appropriate, satisfying all requirements of the
Securities Exchange Act (such proxy or information statement in the form mailed
by the Company to its stockholders, together with any and all amendments or
supplements thereto, is herein referred to as the "PROXY STATEMENT").
(b) Parent will furnish the Company with such information
concerning Parent and its subsidiaries as is necessary in order to cause the
Proxy Statement, insofar as it relates to Parent and its subsidiaries, to comply
with applicable Law. Parent agrees promptly to advise the Company if, at any
time prior to the meeting of stockholders of the Company referenced herein, any
Parent Information (as defined below) in the Proxy Statement is or becomes
incorrect or incomplete in any material respect and to provide the Company with
the information needed to correct such inaccuracy or omission. Parent will
furnish the Company with such supplemental information as may be necessary in
order to cause the Proxy Statement, insofar as it relates to Parent and its
subsidiaries, to comply with applicable Law after the mailing thereof to the
stockholders of the Company.
(c) The Company and Parent agree to cooperate in making any
preliminary filings of the Proxy Statement with the SEC, as promptly as
practicable, pursuant to Rule 14a-6 under the Securities Exchange Act.
(d) The Company shall provide Parent for its review a copy of
the Proxy Statement prior to each filing thereof, with reasonable time and
opportunity for such review.
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Parent authorizes the Company to utilize in the Proxy Statement the information
concerning Parent and its subsidiaries provided to the Company in connection
with, or contained in, the Proxy Statement.
1.14 ADDITIONAL ACTIONS. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of Purchaser or the Company or otherwise to carry
out this Agreement, the officers and directors of the Company and Purchaser
shall be authorized to execute and deliver, in the name and on behalf of
Purchaser or the Company, all such deeds, bills of sale, assignments and
assurances and to take and do, in the name and on behalf of Purchaser or the
Company, all such other actions and things as may be necessary or desirable to
vest, perfect or confirm any and all right, title and interest in, to and under
such rights, properties or assets in the Surviving Corporation or otherwise to
carry out this Agreement.
1.15 MERGER WITHOUT MEETING OF STOCKHOLDERS. Notwithstanding
the foregoing provisions of this ARTICLE I, in the event that Purchaser, or any
other direct or indirect subsidiary of Parent, shall acquire at least 90 percent
of the outstanding shares of each class of Shares, the parties hereto agree to
take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after the expiration of the Offer without a
meeting of stockholders of the Company, in accordance with Section 253 of the
Delaware Code.
1.16 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
certificates representing shares of Company Stock shall have been lost, stolen
or destroyed, the Exchange Agent shall make such payment in exchange for such
lost, stolen or destroyed certificates upon the making of an affidavit of that
fact by the holder thereof; PROVIDED, HOWEVER, that Parent may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificates to deliver a bond in such
sum as it may reasonably direct as indemnity against any claim that may be made
against Parent or the Exchange Agent with respect to the certificates alleged to
have been lost, stolen or destroyed.
1.17 MATERIAL ADVERSE EFFECT. When used in connection with the
Company or any Company Subsidiaries or Parent or any of its subsidiaries, as the
case may be, the term "MATERIAL ADVERSE EFFECT" means any change, effect or
circumstance that, individually or when taken together with all other similar
changes, effects or circumstances that have occurred during the period relevant
to the determination of such Material Adverse Effect, is or is reasonably likely
to be materially adverse to the business, assets (including intangible assets),
financial condition or results of operations of the Company and any Company
Subsidiaries or Parent and its subsidiaries, as the case may be, in each case
taken as a whole; PROVIDED, HOWEVER, that any change, effect or circumstance
directly resulting from the resignation of any
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of the Company's employees in response to the public announcement of the
transactions contemplated by this Agreement shall not be taken into
consideration in determining whether a Material Adverse Effect has occurred with
respect to the Company. Changes, effects and circumstances referred to in any of
the provisions of SECTION 2.15 hereof shall be deemed similar for purposes of
this SECTION 1.17.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Purchaser
that, except as set forth in the correspondingly numbered Sections of the
letter, dated the date hereof, from the Company to Parent (the "COMPANY
DISCLOSURE LETTER"):
2.1 ORGANIZATION AND GOOD STANDING. The Company and each of
the Company Subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. The Company and
each of the Company Subsidiaries is duly qualified or licensed and in good
standing to do business in each jurisdiction in which the character of the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except where the failure
to be so duly qualified or licensed and in good standing would not reasonably be
expected to have a Material Adverse Effect. The Company has heretofore made
available to Parent accurate and complete copies of the Certificate of
Incorporation and Bylaws, as currently in effect, of the Company. For purposes
of this Agreement, the term "COMPANY SUBSIDIARY" shall mean any "subsidiary" (as
such term is defined in Rule 1-02 of Regulation S-X of the SEC) of the Company.
2.2 CAPITALIZATION. As of the date hereof, the authorized
capital stock of the Company consists of (A) 25,000,000 shares of Company Common
Stock and (B) 5,000,000 shares of Company Preferred Stock, of which 35,700 have
been designated as Series A Preferred Stock and 5,000 shares have been
designated as Series B Preferred Stock. As of December 23, 1998, (i) 5,569,983
shares of Company Common Stock were issued and outstanding, (ii) 35,700 shares
of Series A Preferred Stock were issued and outstanding, (iii) 5,000 shares of
Series B Preferred Stock were issued and outstanding, (iv) no shares of Company
Common Stock or shares of Company Preferred Stock were issued and held in the
treasury of the Company, (vi) no shares of Company Common Stock or Company
Preferred Stock were held by Company Subsidiaries, (vii) 4,972,434 shares of
Company Common Stock were reserved for future issuance upon conversion of the
outstanding shares of Company Preferred Stock, (viii) 849,083 shares of Company
Common Stock were reserved for future issuance pursuant to outstanding Company
Options, and (ix) 345,939 shares of Company Common Stock were reserved for
future issuance upon exercise of Company Warrants. No material change in the
capitalization of the Company has occurred between December 23, 1998 and the
date hereof. No other capital stock of the Company is authorized or issued. All
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issued and outstanding shares of the Company Stock are duly authorized, validly
issued, fully paid and non-assessable. Except as set forth in the Company
Securities Filings (as hereinafter defined) filed prior to the date of this
Agreement or as otherwise contemplated by this Agreement, as of the date hereof,
there are no outstanding rights, subscriptions, warrants, puts, calls,
unsatisfied preemptive rights, options or other agreements of any kind relating
to any of the outstanding, authorized but unissued or treasury shares of the
capital stock or any other security of the Company, and there is no authorized
or outstanding security of any kind convertible into or exchangeable for any
such capital stock or other security. Except as disclosed in the Company
Securities Filings filed prior to the date of this Agreement, there are no
obligations, contingent or other, of the Company or any Company Subsidiary to
repurchase, redeem or otherwise acquire any shares of Company Common Stock or
the capital stock of any Company Subsidiary or to provide funds to or make any
investment (in the form of a loan, capital contribution or otherwise) in any
such Company Subsidiary or any other entity.
2.3 SUBSIDIARIES. Section 2.3 of the Company Disclosure Letter
sets forth the name and jurisdiction of incorporation of each Company
Subsidiary, each of which is wholly owned by the Company except as otherwise
indicated in said Section 2.3 of the Company Disclosure Letter. All of the
capital stock and other interests of the Company Subsidiaries so held by the
Company are owned by it or a Company Subsidiary as indicated in said Section 2.3
of the Company Disclosure Letter, free and clear of any claim, lien, encumbrance
or security interest with respect thereto. All of the outstanding shares of
capital stock of each of the Company Subsidiaries directly or indirectly held by
the Company are duly authorized, validly issued, fully paid and non-assessable
and were issued free of preemptive rights and in compliance with applicable
Laws. No equity securities or other interests of any of the Company Subsidiaries
are or may become required to be issued or purchased by reason of any options,
warrants, rights to subscribe to, puts, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for, shares of any capital stock of any Company Subsidiary, and there are no
contracts, commitments, understandings or arrangements by which any Company
Subsidiary is bound to issue additional shares of its capital stock, or options,
warrants or rights to purchase or acquire any additional shares of its capital
stock or securities convertible into or exchangeable for such shares. Except as
set forth in the Company Securities Filings filed prior to the date of this
Agreement or Section 2.3 of the Company Disclosure Letter, the Company does not
directly or indirectly own any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for any equity or similar
interest in, any corporation, partnership, joint venture or other business
association or entity, with respect to which interest the Company has invested
or is required to invest $100,000 or more, excluding securities in any publicly
traded company held for investment by the Company and comprising less than five
percent of the outstanding stock of such company.
2.4 AUTHORIZATION; BINDING AGREEMENT. The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the
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transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby, including, but not
limited to, the Merger, have been duly and validly authorized by the Company's
Board of Directors, and no other corporate proceedings on the part of the
Company or any Company Subsidiary are necessary to authorize the execution and
delivery of this Agreement or to consummate the transactions contemplated hereby
(other than (i) the consent of the holders of 75% of the outstanding Preferred
Shares and (ii) adoption of this Agreement by the holders of Shares with voting
power equal to a majority of the voting power of all outstanding Shares in
accordance with the Delaware Code). This Agreement has been duly and validly
executed and delivered by the Company and constitutes the legal, valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms, except to the extent that enforceability thereof may be limited
by applicable bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by principles of
equity regarding the availability of remedies ("ENFORCEABILITY EXCEPTIONS").
2.5 GOVERNMENTAL APPROVALS. No consent, approval, waiver or
authorization of, notice to or declaration or filing with ("CONSENT") any nation
or government, any state or other political subdivision thereof or any entity,
authority or body exercising executive, legislative, judicial or regulatory
functions of or pertaining to government, including, without limitation, any
governmental or regulatory authority, agency, department, board, commission or
instrumentality, any court, tribunal or arbitrator and any self-regulatory
organization ("GOVERNMENTAL AUTHORITY"), on the part of the Company or any of
the Company Subsidiaries is required in connection with the execution or
delivery by the Company of this Agreement or the consummation by the Company of
the transactions contemplated hereby other than (i) the filing of the
Certificate of Merger with the Secretary of State of Delaware in accordance with
the Delaware Code, (ii) filings with the SEC, (iii) filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder (the "HSR ACT"), (iv) consents or filings
required under the Communications Act of 1934, as amended, relating to change in
ownership or control of certain business radio and related licenses held by the
Company or the Company Subsidiaries, (v) filings pursuant to the rules and
regulations of the American Stock Exchange ("AMEX") and (vi) those Consents
that, if they were not obtained or made, would not reasonably be expected to
have a Material Adverse Effect.
2.6 NO VIOLATIONS. The execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby and
compliance by the Company with any of the provisions hereof will not (i)
conflict with or result in any breach of any provision of the Certificate of
Incorporation or Bylaws of the Company or any of the Company Subsidiaries, (ii)
require any Consent under or result in a violation or breach of, or constitute
(with or without notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of, any Company Material Contract (as hereinafter
defined), (iii) result in the creation or imposition of any lien or encumbrance
of any kind upon any of the assets of the Company or
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any Company Subsidiary or (iv) subject to obtaining the Consents from
Governmental Authorities referred to in SECTION 2.5 hereof, violate any
applicable provision of any statute, law, rule or regulation or any order,
decision, injunction, judgment, award or decree ("LAW") to which the Company or
any Company Subsidiary or its assets or properties are subject, except, in the
case of each of clauses (ii), (iii) and (iv) above, for any deviations from the
foregoing which would not reasonably be expected to have a Material Adverse
Effect.
2.7 SECURITIES FILINGS. The Company has made available to
Parent true and complete copies of (i)its Annual Report on Form 10-K, for the
year ended December 31, 1997, as filed with the SEC, (ii) its proxy statements
relating to all of the meetings of stockholders (whether annual or special) of
the Company since January 1, 1996 as filed with the SEC, and (iii) all other
reports, statements and registration statements and amendments thereto
(including, without limitation, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K, as amended) filed by the Company with the SEC since January
1, 1998. The reports and statements set forth in clauses (i) through (iii)
above, and those subsequently provided or required to be provided pursuant to
this SECTION 2.7, are referred to collectively herein as the "COMPANY SECURITIES
FILINGS." Except as set forth in Section 2.7 of the Company Disclosure Letter,
as of their respective dates, or as of the date of the last amendment thereof,
if amended after filing, the Company Securities Filings (i) were prepared in all
material respects in accordance with the requirements of the Securities Act of
1933, as amended (the "SECURITIES ACT") and the rules and regulations
promulgated thereunder, or the Securities Exchange Act, as the case may be, and
none of the Company Securities Filings contained or, as to the Company
Securities Filings subsequent to the date hereof, will contain, any untrue
statement of a material fact or omitted or, as to the Company Securities Filings
subsequent to the date hereof, will omit, to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
2.8 COMPANY FINANCIAL STATEMENTS. The audited consolidated
financial statements and unaudited interim financial statements of the Company
included in the Company Securities Filings (the "COMPANY FINANCIAL STATEMENTS")
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis (except as may be indicated therein or in the
notes thereto) and present fairly, in all material respects, the financial
position of the Company and the Company Subsidiaries as at the dates thereof and
the results of their operations and cash flows for the periods then ended
subject, in the case of the unaudited interim financial statements, to normal
year-end audit adjustments, any other adjustments described therein and the fact
that certain information and notes have been condensed or omitted in accordance
with the Securities Exchange Act.
2.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in the Company Securities Filings filed prior to the date of this Agreement or
Section 2.9 of the Company Disclosure Letter, since December 31, 1997, through
the date of this Agreement, there has not been: (i) any event that has had or
would reasonably be expected to have a
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Material Adverse Effect; (ii) any declaration, payment or setting aside for
payment of any dividend or other distribution or any redemption or other
acquisition of any shares of capital stock or securities of the Company by the
Company; (iii) any material damage or loss to any material asset or property,
whether or not covered by insurance; (iv) any change by the Company in
accounting principles or practices; (v) any material revaluation by the Company
of any of its assets, including writing down the value of inventory or writing
off notes or accounts receivable other than in the ordinary course of business;
(vi) any sale of a material amount of property of the Company, except in the
ordinary course of business; or (vii) any other action or event, involving an
amount exceeding $250,000, that would have required the consent of Parent
pursuant to SECTION 4.1 hereof had such action or event occurred after the date
of this Agreement.
2.10 NO UNDISCLOSED LIABILITIES. Except as set forth in the
Company Securities Filings filed prior to the date of this Agreement or Section
2.10 of the Company Disclosure Letter, neither the Company nor any Company
Subsidiary has any liabilities (absolute, accrued, contingent or otherwise),
except liabilities (a) in the aggregate adequately provided for in the Company's
audited balance sheet (including any related notes thereto) for the fiscal year
ended December 31, 1997 included in the Company's 1997 Annual Report on Form
10-K (the "1997 BALANCE SHEET"), (b) incurred in the ordinary course of business
and not required under generally accepted accounting principles to be reflected
on the 1997 Balance Sheet, (c) incurred since December 31, 1997 in the ordinary
course of business consistent with past practice, (d) incurred in connection
with this Agreement or (e) which would not reasonably be expected to have a
Material Adverse Effect.
2.11 COMPLIANCE WITH LAWS. The business of the Company and
each of the Company Subsidiaries has been operated in compliance with all Laws
applicable thereto, except for any non-compliance which would not reasonably be
expected to have a Material Adverse Effect.
2.12 PERMITS. Except as set forth in Section 2.12 of the
Company Disclosure Letter, (i) the Company and the Company Subsidiaries have all
permits, certificates, licenses, approvals and other authorizations from
Governmental Authorities required in connection with the operation of their
respective businesses (collectively, "COMPANY PERMITS"), (ii) neither the
Company nor any Company Subsidiary is in violation of any Company Permit and
(iii) no proceedings are pending or, to the knowledge of the Company,
threatened, to revoke or limit any Company Permit, except, in the case of each
of clauses (i), (ii) and (iii) above, those the absence or violation of which
would not reasonably be expected to have a Material Adverse Effect.
2.13 LITIGATION. Except as disclosed in the Company Securities
Filings filed prior to the date of this Agreement or Section 2.13 of the Company
Disclosure Letter, there is no suit, action or proceeding ("LITIGATION") pending
or, to the knowledge of the Company, threatened against the Company or any of
the Company Subsidiaries which, individually or in
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the aggregate, would reasonably be expected to have a Material Adverse Effect,
nor is there any judgment, decree, injunction, rule or order of any Governmental
Authority outstanding against the Company or any Company Subsidiary which,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect. Except as set forth in the Company Securities Filings
filed prior to the date of this Agreement or Section 2.13 of the Company
Disclosure Letter, since December 31, 1997, and prior to or on the date hereof,
there have been no actions, suits or proceedings made or pending against the
Company or any Company Subsidiary alleging (x) any Environmental Claims (as
hereinafter defined) or (y) any claim against the Company in connection with its
rendering of any security services, except for (i) such claims (not resulting as
of the date hereof in an action, suit or proceeding) not exceeding in any
individual case $500,000 or (ii) such actions, suits or proceedings which, in
the case of either clause (x) or (y) above, would not reasonably be expected to
result in liability to the Company or any Company Subsidiary, not covered by
insurance, of $100,000 or more in any individual case or (without regard to
whether or not any thereof is covered by insurance) $500,000 in the aggregate.
The Company has not established any reserves in the Company Financial Statements
with respect to claims referred to in clauses (x) and (y) of the preceding
sentence. Section 2.13 of the Company Disclosure Letter lists all letters
received by the Company from insurance carriers asserting a reservation of
rights with respect to any action, suit or proceeding in which $25,000 or more
is at stake.
2.14 CONTRACTS. Section 2.14 of the Company Disclosure Letter
includes a list of all loan agreements and financing agreements and of all
equipment lease financing agreements involving obligations of the Company or any
Company Subsidiary in excess of $250,000. Neither the Company nor any of the
Company Subsidiaries is a party or is subject to any note, bond, mortgage,
indenture, contract, lease, license, agreement or instrument that is required to
be described in or filed as an exhibit to any Company Securities Filing filed
prior to the date of this Agreement (collectively with those agreements listed
in Section 2.14 of the Company Disclosure letter, the "COMPANY MATERIAL
CONTRACTS") that is not so described in or filed as required by the Securities
Act or the Securities Exchange Act, as the case may be. The Company is not a
party to any agreements to acquire in the future the stock or substantially all
the assets of another person. Except as disclosed in the Company Securities
Filings filed prior to the date of this Agreement, all such Company Material
Contracts are valid and binding and are in full force and effect and nforceable
against the Company or such Company Subsidiary in accordance with their
respective terms, subject to the Enforceability Exceptions. Neither the Company
nor any Company Subsidiary is in violation or breach of or default under any
such Company Material Contract where such violation or breach would reasonably
be expected to have a Material Adverse Effect. To the knowledge of the Company,
no party (other than the Company or Company Subsidiaries) is in default,
violation or breach of any Company Material Contract where such violation or
breach would reasonably be expected to have a Material Adverse Effect.
2.15 EMPLOYEE BENEFIT PLANS. (a) Section 2.15(a) of the
Company Disclosure Letter lists all employee pension benefit plans (as defined
in Section 3(2) of the Employee
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Retirement Income Security Act of 1974, as amended ("ERISA")), all employee
welfare benefit plans (as defined in Section 3(1) of ERISA) and all other bonus,
stock option, stock purchase, incentive, deferred compensation, supplemental
retirement, severance and other similar fringe or employee benefit plans,
programs or arrangements, and any employment, executive compensation or
severance agreements, written or otherwise, as amended, modified or
supplemented, for the benefit of, or relating to, any former or current
employee, officer or consultant who is an individual or an individual doing
business in a corporate form (or any of their beneficiaries) of the Company or
any other entity (whether or not incorporated) which is a member of a controlled
group including the Company or which is under common control with the Company
(an "ERISA AFFILIATE") within the meaning of Section 414(b), (c), (m) or (o) of
the Internal Revenue Code of 1986, as amended, and the regulations thereunder
(the "CODE") or Section 4001(a)(14) or (b) of ERISA, or any Company Subsidiary,
with respect to which the Company has or could have any current (actual or
contingent) material liability (together for purposes of this SECTION 2.15, the
"EMPLOYEE PLANS"). Prior to the date of this Agreement, the Company has provided
or made available to Parent copies of (i) each such written Employee Plan (or a
written description of any Employee Plan which is not written) and all related
trust agreements, insurance and other contracts (including policies), summary
plan descriptions, summaries of material modifications and any material
communications to plan participants, (ii) the three most recent annual reports
on Form 5500 series, with accompanying schedules and attachments, filed with
respect to each Employee Plan required to make such a filing, (iii) the latest
reports which have been filed with the Department of Labor with respect to each
Employee Plan required to make such filing and (iv) the most recent favorable
determination letters issued for each Employee Plan and related trust which is
subject to Parts 1, 2 and 4 of Subtitle B of Title I of ERISA (and, if an
application for such determination is pending, a copy of the application for
such determination).
(b) (i) None of the Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person (other than in
accordance with Section 4980B of the Code or Part 6 of Subtitle B of Title I of
ERISA), and none of the Employee Plans is a "multiemployer plan" as such term is
defined in Section 3(37) of ERISA; (ii) to the knowledge of the Company, no
"party in interest" or "disqualified person" (as defined in Section 3(14) of
ERISA and Section 4975 of the Code) has at any time engaged in a transaction
with respect to any Employee Plan which could subject the Company or any ERISA
Affiliate, directly or indirectly, to a tax, penalty or other liability for
prohibited transactions under ERISA or Section 4975 of the Code, except for any
such tax, penalty or liability that would not reasonably be expected to result
in a Material Adverse Effect; (iii) to the knowledge of the Company, no
fiduciary of any Employee Plan has breached any of the responsibilities or
obligations imposed upon fiduciaries under Title I of ERISA, except where such
breach would not reasonably be expected to result in a Material Adverse Effect;
(iv) all Employee Plans have been established and maintained substantially in
accordance with their terms and have operated in compliance with the
requirements prescribed by any and all statutes (including ERISA and the Code),
orders, or governmental rules and regulations currently in effect with respect
thereto (including all applicable requirements for notification to participants
or the
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Department of Labor, the Internal Revenue Service (the "IRS") or the Secretary
of the Treasury), except where failure to do so would not reasonably be expected
to result in a Material Adverse Effect; and the Company and each Company
Subsidiary have performed all obligations required to be performed by them
under, are not in default under or in violation of any Employee Plan except
where failure to do so would not reasonably be expected to result in a Material
Adverse Effect, and have no knowledge of any default or violation by any other
party to, any of the Employee Plans; (v) each Employee Plan which is subject to
Parts 1, 2 and 4 of Subtitle B of ERISA is the subject of a favorable
determination letter from the IRS, and to the knowledge of the Company nothing
has occurred which may reasonably be expected to impair such determination; (vi)
all contributions required to be made with respect to any Employee Plan pursuant
to the terms of the Employee Plan have been made on or before their due dates
except for any failure to make contributions that would not reasonably be
expected to result in a Material Adverse Effect; (vii) no facts exist or have
existed under which the Company or any ERISA Affiliate could incur any liability
under Title IV of ERISA; and (viii) there are no complaints, charges or claims
against the Company pending or to the Company's knowledge threatened to be
brought by or filed with any governmental authority based on, arising out of, in
connection with or otherwise relating to the classification of any individual by
the Company as an independent contractor or "leased employee" (within the
meaning of section 414(n) of the Code) rather than as an employee.
(c) Section 2.15(c) of the Company Disclosure Letter sets
forth a true and complete list of each current or former employee, officer or
director of the Company or any Company Subsidiary who holds (i) any option to
purchase Company Common Stock as of the date hereof, together with the number of
shares of Company Common Stock subject to such option, the option price of such
option (to the extent determined as of the date hereof), whether such option is
intended to qualify as an incentive stock option within the meaning of Section
422(b) of the Code (an "ISO"), and the expiration date of such option; (ii) any
shares of Company Common Stock that are restricted as a result of an agreement
with or stock plan of the Company; and (iii) any other right, directly or
indirectly, to receive Company Common Stock, except as otherwise disclosed in
Section 2.15 of the Company Disclosure Letter, together with the number of
shares of Company Stock subject to such right. Section 2.15(c) of the Company
Disclosure Letter also sets forth the total number of any such ISOs and any such
nonqualified options and other such rights.
(d) Unless otherwise disclosed in Section 2.15(a) of the
Company Disclosure Letter, Section 2.15(d) of the Company Disclosure Letter sets
forth a true and complete list of (i) all employment agreements with officers of
the Company or any of the Company Subsidiaries; (ii) all agreements with
consultants who are individuals obligating the Company or any of the Company
Subsidiaries to make annual cash payments in an amount exceeding $100,000; (iii)
all agreements which individually or in the aggregate are or could be material
with respect to the services of independent contractors or leased employees who
are individuals or individuals doing business in a corporate form whether or not
they participate in any of the Employee Plans; (iv) all officers of the Company
or any of the Company
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Subsidiaries who have executed a non-competition agreement with the Company or
any of the Company Subsidiaries; (v) all severance agreements, programs and
policies of the Company or any of the Company Subsidiaries with or relating to
its employees, in each case with outstanding commitments exceeding $100,000,
excluding programs and policies required to be maintained by law; and (vi) all
plans, programs, agreements and other arrangements of the Company which contain
change in control provisions.
(e) (i) Except as set forth in Section 2.15(e) of the Company
Disclosure Letter, no Employee Plan is an employee stock ownership plan (within
the meaning of Section 4975(e)(7) of the Code) or otherwise invests in Company
Stock; and (ii) the consummation of the transactions contemplated by this
Agreement will not result in an increase in the amount of compensation or
benefits or accelerate the vesting or timing of payment of any benefits or
compensation payable in respect of any employee except as otherwise provided in
SECTION 1.9 hereof or disclosed in Section 2.15(e) of the Company Disclosure
Letter or except where such increase or acceleration would not reasonably be
expected to result in a Material Adverse Effect. The Company will take all
actions within its control to ensure that all actions required to be taken by a
fiduciary of any Employee Plan in order to effectuate the transaction
contemplated by this Agreement shall comply with the terms of such Plan, ERISA
and other applicable laws. The Company will take all actions within its control
to ensure that all actions required to be taken by a trustee of any Employee
Plan that owns Company Stock shall have been duly authorized by the appropriate
fiduciaries of such Plan and shall comply with the terms of such Plan, ERISA and
other applicable laws.
(f) The Company maintains no Employee Plan covering non-U.S.
employees.
(g) The Company has fiduciary liability insurance of at least
$500,000 in effect covering the fiduciaries of the Employee Plans (including the
Company) with respect to whom the Company may have liability.
2.16 TAXES AND RETURNS. (a) The Company and each of the
Company Subsidiaries has timely filed, or caused to be timely filed, all
material Tax Returns (as hereinafter defined) required to be filed by it, and
all such tax returns are true, complete and correct in all material respects,
and has timely paid, collected or withheld, or caused to be paid, collected or
withheld, all material amounts of Taxes (as hereinafter defined) required to be
paid, collected or withheld, other than such Taxes for which adequate reserves
in the Company Financial Statements have been established or which are being
contested in good faith. Except as set forth in Section 2.16 of the Company
Disclosure Letter, there are no material claims or assessments pending against
the Company or any of the Company Subsidiaries for any alleged deficiency in any
Tax, and the Company has not been notified in writing of any proposed Tax claims
or assessments against the Company or any of the Company Subsidiaries (other
than in each case, claims or assessments for which adequate reserves in the
Company Financial Statements have been established or which are being contested
in good faith or are immaterial in amount). Except as would not reasonably be
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expected to have a Material Adverse Effect: (i) neither the Company nor any of
the Company Subsidiaries has executed any waivers or extensions of any
applicable statute of limitations to assess any material amount of Taxes; and
(ii) there are no outstanding requests by the Company or any of the Company
Subsidiaries for any extension of time within which to file any material Tax
Return or within which to pay any material amounts of Taxes shown to be due on
any Tax Return. The statute of limitations period for assessment of federal
income taxes has expired for all taxable years through the taxable year of
Security Systems Holdings, Inc. ending December 31, 1994, and of Triton Group
Ltd. ending March 31, 1994. To the best knowledge of the Company, there are no
liens for material amounts of Taxes on the assets of the Company or any of the
Company Subsidiaries except for statutory liens for current Taxes not yet due
and payable. There are no outstanding powers of attorney enabling any party to
represent the Company or any of the Company Subsidiaries with respect to Tax
matters.
(b) For purposes of this Agreement, the term "TAX" shall mean
any federal, state, local, foreign or provincial income, gross receipts,
property, sales, use, license, excise, franchise, employment, payroll,
alternative or add-on minimum, ad valorem, transfer or excise tax, or any other
tax, custom, duty, governmental fee or other like assessment or charge of any
kind whatsoever, together with any interest or penalty imposed by any
Governmental Authority. The term "TAX RETURN" shall mean a report, return or
other information (including any attached schedules or any amendments to such
report, return or other information) required to be supplied to or filed with a
governmental entity with respect to any Tax, including an information return,
claim for refund, amended return or declaration or estimated Tax.
(c) (i) Except as set forth in Section 2.16 of the Company
Disclosure Letter, neither the Company nor any of the Company Subsidiaries has,
since consummation of the Triton Group Ltd. plan of reorganization pursuant to
Chapter 11 of the United States Bankruptcy Code on June 25, 1993, been a member
of an affiliated group within the meaning of Section 1504 of the Code or filed
or been included in a combined, consolidated or unitary Tax Return, other than
of the Company and the Company Subsidiaries; (ii) other than with respect to the
Company and the Company Subsidiaries, neither the Company nor any of the Company
Subsidiaries is currently liable for Taxes of any other person, or is currently
under any contractual obligation to indemnify any person with respect to Taxes
(except for customary agreements to indemnify lenders or securityholders in
respect of taxes other than income taxes), or is a party to any tax sharing
agreement or any other agreement providing for payments by the Company or any of
the Company Subsidiaries with respect to Taxes; (iii) neither the Company nor
any of the Company Subsidiaries is a party to any joint venture, partnership or
other arrangement or contract which could be treated as a partnership for
federal income tax purposes; (iv) neither the Company nor any of the Company
Subsidiaries has entered into any sale leaseback or any leveraged lease
transaction that fails to satisfy the requirements of Revenue Procedure 75-21
(or similar provisions of foreign law); (v) neither the Company nor any of the
Company Subsidiaries has agreed or is required, as a result of a
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change in method of accounting or otherwise, to include any adjustment under
Section 481 of the Code (or any corresponding provision of state, local or
foreign law) in taxable income; (vi) neither the Company nor any of the Company
Subsidiaries is a party to any agreement, contract, arrangement or plan that
would result (taking into account the transactions contemplated by this
Agreement), separately or in the aggregate, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code; (vii) the
prices for any property or services (or for the use of property) provided by the
Company or any of the Company Subsidiaries to any other subsidiary or to the
Company have been arm's length prices, determined using a method permitted by
the Treasury Regulations under Section 482 of the Code; (viii) neither the
Company nor any of the Company Subsidiaries is liable with respect to any
indebtedness the interest of which is not deductible for applicable federal,
foreign, state or local income tax purposes; (ix) neither the Company nor any of
the Company Subsidiaries is a "consenting corporation" under Section 341(f) of
the Code or any corresponding provision of state, local or foreign law; and (x)
none of the assets owned by the Company or any of the Company Subsidiaries is
property that is required to be treated as owned by any other person pursuant to
Section 168(g)(8) of the Internal Revenue Code of 1954, as amended, as in effect
immediately prior to the enactment of the Tax Reform Act of 1986, or is
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
(d) The amount of net operating losses (as defined in Section
172 of the Code) of the Company and the Company Subsidiaries as of the end of
the fiscal year ended December 31, 1997 is as set forth in the Company's
financial statements for such year.
Each of the statements made in this SECTION 2.16 shall be deemed true and
correct for purposes of this Agreement unless in any such case any failure of
such statement to be true or correct would reasonably be expected to result in a
Material Adverse Effect.
2.17 INTELLECTUAL PROPERTY. The Company or the Company
Subsidiaries own, or are licensed or otherwise possess legal enforceable rights
to use, all patents, trademarks, trade names, service marks, copyrights and any
applications therefor, technology, know-how, trade secrets, computer software
programs or applications, domain names and tangible or intangible proprietary
information or materials that are used in the respective businesses of the
Company and the Company Subsidiaries as currently conducted, except for any such
failures to own, be licensed or possess that would not reasonably be expected to
have a Material Adverse Effect. To the best knowledge of the Company, there are
no valid grounds for any bona fide claims (i) to the effect that the business of
the Company or any of the Company Subsidiaries infringes on any copyright,
patent, trademark, service mark or trade secret; (ii) against the use by the
Company or any of the Company Subsidiaries of any trademarks, trade names, trade
secrets, copyrights, patents, technology, know-how or computer software programs
and applications used in the business of the Company or any of the Company
Subsidiaries as currently conducted or as proposed to be conducted; (iii)
challenging the ownership, validity or effectiveness of any of the patents,
registered and material unregistered trademarks and service marks, registered
copyrights, trade names and any applications
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therefor owned by the Company or any of the Company Subsidiaries (the "COMPANY
INTELLECTUAL PROPERTY RIGHTS") or other trade secret material to the Company; or
(iv) challenging the license or legally enforceable right to use of any
third-party patents, trademarks, service marks and copyrights by the Company or
any of the Company Subsidiaries, except, in the case of each of clauses (i),
(ii), (iii) and (iv) above, for matters that, if determined adversely to the
Company, would not reasonably be expected to have a Material Adverse Effect. To
the best knowledge of the Company, all material patents, registered trademarks,
service marks and copyrights held by the Company are valid and subsisting.
Except as set forth in the Company Securities Filings filed prior to the date of
this Agreement or Section 2.17 of the Company Disclosure Letter, to the
Company's knowledge, there is no material unauthorized use, infringement or
misappropriation of any of the Company Intellectual Property by any third party,
including any employee or former employee of the Company or any of the Company
Subsidiaries.
2.18 DISCLOSURE DOCUMENTS. The Proxy Statement will comply in
all material respects with the applicable requirements of the Securities
Exchange Act except that no representation or warranty is being made by the
Company with respect to the Parent Information included in the Proxy Statement.
The Proxy Statement will not, at the time the Proxy Statement is filed with the
SEC or first sent to stockholders, at the time of the Company's stockholders'
meeting or at the Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading except that no representation or
warranty is being made by the Company with respect to the Parent Information
included in the Proxy Statement. The Schedule 14D-9 will comply in all material
respects with the Securities Exchange Act except that no representation or
warranty is being made by the Company with respect to the Parent Information
included in the Schedule 14D-9. Neither the Schedule 14D-9 nor any of the
information relating to the Company or its affiliates provided by or on behalf
of the Company specifically for inclusion in the Schedule 14D-1 or the Offer
Documents will, at the respective times the Schedule 14D-9, the Schedule 14D-1
and the Offer Documents are filed with the SEC and are first published, sent or
given to stockholders of the Company, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
2.19 LABOR MATTERS. Except as set forth in the Company
Securities Filings filed prior to the date of this Agreement, (i) there are no
controversies pending or, to the knowledge of the Company or any of the Company
Subsidiaries, threatened, between the Company or any of the Company Subsidiaries
and any of their respective employees, which controversies would reasonably be
expected to have a Material Adverse Effect; (ii) neither the Company nor any of
the Company Subsidiaries is a party to any material collective bargaining
agreement or other labor union contract applicable to persons employed by the
Company or the Company Subsidiaries, nor, as of the date of this Agreement, does
the Company or any of the
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Company Subsidiaries know of any activities or proceedings of any labor union to
organize any such employees; and (iii) neither the Company nor any of the
Company Subsidiaries has any knowledge of any strikes, slowdowns, work
stoppages, lockouts, or threats thereof, by or with respect to any employees of
the Company or any of the Company Subsidiaries which would reasonably be
expected to have a Material Adverse Effect.
2.20 LIMITATION ON BUSINESS CONDUCT. Except as set forth in
the Company Securities Filings filed prior to the date of this Agreement,
neither the Company nor any of the Company Subsidiaries is a party to, or has
any obligation under, any contract or agreement, written or oral, which contains
any covenants currently or prospectively limiting in any material respect the
freedom of the Company or any of the Company Subsidiaries to engage in any line
of business or to compete with any entity.
2.21 TITLE TO PROPERTY. Except as set forth in the Company
Securities Filings filed prior to the date of this Agreement or Section 2.21 of
the Company Disclosure Letter, each of the Company and each of the Company
Subsidiaries owns the properties and assets that it purports to own free and
clear of all liens, charges, mortgages, security interests or encumbrances of
any kind ("LIENS"), except for Liens which arise in the ordinary course of
business and do not materially impair the Company's or the Company Subsidiaries'
ownership or use of such properties or assets, Liens for taxes not yet due and
Liens securing obligations under the Fourth Amended and Restated Term Loan and
Acquisition Credit Agreement, dated as of July 31, 1998, by and among
Alarmguard, Inc., as Borrower, the Company, as Guarantor, and BankBoston, N.A.
and the other banks parties thereto, as Lenders (the "CREDIT AGREEMENT"). With
respect to the property and assets it leases, the Company, the Company
Subsidiaries, and to the best of the Company's knowledge each of the other
parties thereto, is in material compliance with such leases, and the Company or
the Company Subsidiaries, as the case may be, hold a valid leasehold interest
free of any Liens, except those referred to above. The rights, properties and
assets presently owned, leased or licensed by the Company and the Company
Subsidiaries include all rights, properties and assets necessary to permit the
Company and the Company Subsidiaries to conduct their business in all material
respects in the same manner as their businesses have been conducted prior to the
date hereof.
2.22 LEASED PREMISES. Neither the Company nor any of the
Company Subsidiaries owns any real property. Each of the buildings, structures
and premises leased by the Company or any of the Company Subsidiaries is in
reasonably good repair and operating condition, except as would not reasonably
be expected to have a Material Adverse Effect.
2.23 ENVIRONMENTAL MATTERS. (a) Except as set forth in the
Company Securities Filings filed prior to the date of this Agreement or Section
2.23 of the Company Disclosure Letter, the Company and the Company Subsidiaries
are in material compliance with the Environmental Laws (as hereinafter defined),
which compliance includes the possession by the Company and the Company
Subsidiaries of all material permits and governmental authorizations required
under applicable Environmental Laws, and compliance in all material
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respects with the terms and conditions thereof, except in each case where such
non-compliance would not reasonably be expected to have a Material Adverse
Effect. Neither the Company nor any of the Company Subsidiaries has received any
communication (written or oral), whether from a governmental authority, citizens
group, employee or otherwise, that alleges that the Company or any of the
Company Subsidiaries is not in such material compliance, and there are no
circumstances that may prevent or interfere with such compliance in the future,
except where such non-compliance would not reasonably be expected to have a
Material Adverse Effect.
(b) Except as set forth in Section 2.23 of the Company
Disclosure Letter, there are no Environmental Claims (as hereinafter defined),
including claims based on "arranger liability," pending or, to the best
knowledge of the Company, threatened against the Company or any of the Company
Subsidiaries or against any person or entity whose liability for any
Environmental Claim the Company or any of the Company Subsidiaries has retained
or assumed either contractually or by operation of law, except for such
Environmental Claims that would not reasonably be expected to have a Material
Adverse Effect.
(c) Except as set forth in Section 2.23 of the Company
Disclosure Letter, to the best knowledge of the Company, there are no past or
present actions, inactions, activities, circumstances, conditions, events or
incidents, including the release, emission, discharge, presence or disposal of
any Material of Environmental Concern (as hereinafter defined), that would form
the basis of any Environmental Claim against the Company or any of the Company
Subsidiaries or against any person or entity whose liability for any
Environmental Claim the Company or any of the Company Subsidiaries have retained
or assumed either contractually or by operation of law, except for such
Environmental Claims that would not reasonably be expected to have a Material
Adverse Effect.
(d) Except as set forth in Section 2.23 of the Company
Disclosure Letter, the Company is in compliance in all material respects with
Environment Laws as they relate to (i) any on-site or off-site locations where
the Company or any of the Company Subsidiaries has stored, disposed or arranged
for the disposal of Materials of Environmental Concern for itself (but not on
behalf of others) or (ii) any underground storage tanks located on property
owned or leased by the Company or any of the Company Subsidiaries. To the
knowledge of Company, there is no asbestos contained in or forming part of any
building, building component, structure or office space owned or leased by the
Company or any of the Company Subsidiaries. To the knowledge of Company, no
polychlorinated biphenyls (PCB's) or PCB-containing items are used or stored at
any property owned or leased by the Company or any of the Company Subsidiaries.
(e) For purposes of this Agreement:
(i) "ENVIRONMENTAL CLAIM" means any written claim, action,
cause of action, investigation or notice by any person or entity
alleging potential liability (including
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potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property
damages, personal injuries, or penalties) arising out of, based on or
resulting from (x) the presence, or release into the environment, of
any Material of Environmental Concern at any location, whether or not
owned or operated by the Company or any of the Company Subsidiaries, or
(y) circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law.
(ii) "ENVIRONMENTAL LAWS" means all Federal, state, local and
foreign laws or regulations relating to pollution or protection of
human health and the environment (including ambient air, surface water,
ground water, land surface or sub-surface strata), including laws and
regulations relating to emissions, discharges, releases or threatened
releases of Materials of Environmental Concern, or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Materials of Environmental Concern.
(iii) "MATERIALS OF ENVIRONMENTAL CONCERN" means chemicals,
pollutants, contaminants, hazardous materials, hazardous substances and
hazardous wastes, toxic substances, petroleum and petroleum products
that are regulated under the Environmental Laws.
2.24 INSURANCE. The Company maintains insurance that provides
adequate coverage for normal risks incident to the business of the Company and
the Company Subsidiaries and their respective properties and assets and in
character and amount comparable to that carried by persons engaged in similar
businesses. The insurance polices maintained by the Company are with reputable
insurance carriers and have no premium delinquencies.
2.25 CUSTOMERS. No customer of the Company accounted for more
than 4.0% of the revenues of the Company and the Company Subsidiaries for the
fiscal year ended December 31, 1997.
2.26 INTERESTED PARTY TRANSACTIONS. Except as set forth in the
Company Securities Filings filed prior to the date of this Agreement, since the
date of the Company's proxy statement dated April 30, 1998, no event has
occurred that would be required to be reported as a Certain Relationship or
Related Transaction, pursuant to Item 404 of Regulation S-K promulgated by the
SEC, except for contracts entered into in the ordinary course of business of the
Company, on an arms-length basis, with terms no less favorable to the Company
than would reasonably be expected in a similar transaction with an unaffiliated
third party.
2.27 ALARM CONTRACTS. The Chief Executive Officer and the
Chief Financial Officer of the Company believe, following reasonable inquiry,
that no more than 20% of accounts for alarm system monitoring and/or service
owned by the Company or any Company Subsidiary are not evidenced by a written
contract.
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2.28 FINDERS AND INVESTMENT BANKERS. Neither the Company nor
any of its officers or directors has employed any broker, finder or financial
advisor or otherwise incurred any liability for any brokerage fees, commissions,
or financial advisors' or finders' fees in connection with the transactions
contemplated hereby, other than pursuant to an agreement with Donaldson, Lufkin
& Jenrette Securities Corporation, the terms of which are as set forth in
Section 2.10 of the Company Disclosure Letter.
2.29 FAIRNESS OPINION. The Company's Board of Directors has
received from its financial advisor, Donaldson, Lufkin & Jenrette Securities
Corporation, a written opinion addressed to it for inclusion in the Schedule
14D-9 and the Proxy Statement to the effect that the consideration to be
received by the stockholders of the Company pursuant to each of the Offer and
the Merger is fair to the Company's stockholders from a financial point of view.
2.30 TAKEOVER STATUTES. Assuming Parent and its "associates"
and "affiliates" (as defined in Section 203 of the Delaware Code) collectively
beneficially own and have beneficially owned at all times during the three-year
period prior to the date hereof less than fifteen percent (15%) of the Company
Stock outstanding, Section 203 of the Delaware Code is, and shall be,
inapplicable to the acquisition of Shares pursuant to the Offer and the Merger.
2.31 FULL DISCLOSURE. No statement contained in any
certificate or schedule, including, without limitation, the Company Disclosure
Letter, furnished or to be furnished by the Company or the Company Subsidiaries
to Parent or Purchaser in, or pursuant to the provisions of, this Agreement
contains or shall contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary, in the light of the
circumstances under which it was made, in order to make the statements herein or
therein not misleading.
2.32 YEAR 2000. Except as would not reasonably be expected to
have a Material Adverse Effect on the Company:
(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 the Company 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 the Company
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
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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 the
Company 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 the Company 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 the Company 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.
2.33 RIGHTS AGREEMENT. The Board of Directors of the Company
has authorized and approved an amendment to the Rights Agreement to the effect
that (i) none of Parent, Purchaser or their affiliates, either individually or
as a group, shall become an "ACQUIRING PERSON" (as defined in the Rights
Agreement), and (ii) no Distribution Date, Share Acquisition Date or Trigger
Event (as each such term is defined in the Rights Agreement) shall occur, with
respect to each of clauses (i) and (ii), by reason of the approval, execution or
delivery of this Agreement, the consummation of the transactions contemplated
hereby or any announcement of the same. The Company and the Rights Agent (as
defined in the Rights Agreement) shall execute such amendment to the Rights
Agreement no later than the second business day following the date hereof.
2.34 STANDARD FORM CONTRACTS (a) The term "STANDARD FORM
SERVICE CONTRACT" shall mean any written contract between the Company or any
Company Subsidiary and its respective customers which contains a clause that
either limits the liability of the Company or such Company Subsidiary to a sum
not in excess of the lesser of (A) $500, or (B) six times the monthly service
charge pursuant to any such agreement, for losses from whatever cause (including
the negligence of the Company or such Company Subsidiary) or that exculpates the
Company or such Company Subsidiary from all liability and such clause has not
been modified in any material respect, either as a result of any other document
or as a result of a course of dealing between the Company or such Company
Subsidiary and its customers. To the best of the Company's knowledge, none of
the Company or any Company Subsidiary has entered into any service contract or
agreement with any of its customers other than pursuant to a Standard Form
Service Contract. Each Standard Form Service Contract which the Company or any
Company Subsidiary has with its customers and each of the terms, provisions and
conditions thereof are valid, binding and in full force and effect, subject to
the Enforceability
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Exceptions.
(b) Since January 1, 1996, the Company has not materially
increased the service charges payable by its customers.
(c) The Company and the Company Subsidiaries have no material
free, bartered or discounted service liability to customers existing with
respect to its business. The Company and the Company Subsidiaries have no
obligation or liability for the refund of any material monies to its customers
other than obligations to refund deposits made by customers in the ordinary
course of business.
(d) To the best of the Company's knowledge, all service
contracts or agreements negotiated with residential customers have provided the
3-day right of recision in compliance in all material respects with the
provisions of 16 C.F.R. Part 429 (Cooling-Off Period for Door-to-Door Sales) and
any applicable state laws.
2.35 CENTRAL STATION/INSPECTION. The Company's central station
located at 125 Frontage Road, Orange, Connecticut 06477, has been approved
and/or listed by Underwriters' Laboratory and by the other insurance rating
organizations indicated in Section 2.35 of the Company Disclosure Letter; is
operated in conformity in all material respects with current Underwriters'
Laboratory and such other applicable insurance rating organization's standards;
and no such approval and/or listings are suspended or, to the best of the
Company's knowledge, threatened to be suspended. Except as set forth in Section
2.35 of the Company Disclosure Letter, no material deficiency reports have been
issued by Underwriters' Laboratory or by any other applicable insurance rating
organizations relating to the operations of such facility and, as to any such
reports which have been issued, all material deficiencies noted therein have
been remedied to the satisfaction of the issuer of such report. Section 2.35 of
the Company Disclosure Letter also sets forth, as of the date of this Agreement,
a listing of the dates upon which the last inspection of the central station
location was conducted by Underwriters' Laboratory and the other appropriate
insurance rating organizations. All required fire inspections with respect to
each fire alarm system installed at the premises of customers of the Company
have been performed as required in accordance with the obligations and
commitments of the Company to its customers, to Underwriters' Laboratory and to
any other applicable insurance rating organizations, other than any such
inspections the absence of which would not reasonably be expected to have a
Material Adverse Effect. All Underwriters' Laboratory or other applicable
insurance rating organization's certificates issued for alarm systems installed
at the premises of the Company's customers have been properly issued and the
systems for which such certificates have been issued comply in all respects with
all of the Underwriters' Laboratory or other applicable insurance rating
organization's specifications and standards for such systems, other than any
such matters that would not reasonably be expected to have a Material Adverse
Effect.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser jointly and severally represent and
warrant to the Company that:
3.1 ORGANIZATION AND GOOD STANDING. Each of Parent and
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted.
3.2 AUTHORIZATION; BINDING AGREEMENT. Parent and Purchaser
have all requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby, including, but not limited to, the Merger, have been duly
and validly authorized by the respective Boards of Directors of Parent and
Purchaser, as appropriate, and no other corporate proceedings on the part of
Parent, Purchaser or any other subsidiary of Parent are necessary to authorize
the execution and delivery of this Agreement or to consummate the transactions
contemplated hereby (other than the requisite approval by the sole stockholder
of Purchaser of this Agreement and the Merger). This Agreement has been duly and
validly executed and delivered by each of Parent and Purchaser and constitutes
the legal, valid and binding agreement of Parent and Purchaser, enforceable
against each of Parent and Purchaser in accordance with its terms, subject to
the Enforceability Exceptions.
3.3 GOVERNMENTAL APPROVALS. No Consent from or with any
Governmental Authority on the part of Parent or Purchaser is required in
connection with the execution or delivery by Parent and Purchaser of this
Agreement or the consummation by Parent and Purchaser of the transactions
contemplated hereby other than (i) filings with the SEC and (ii) filings under
the HSR Act.
3.4 NO VIOLATIONS. The execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby and
compliance by Parent or Purchaser with any of the provisions hereof will not (i)
conflict with or result in any breach of any provision of the Memorandum of
Association or Bye-laws or other governing instruments of Parent or any
subsidiary of Parent, (ii) require any Consent under or result in a violation or
breach of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under any of the terms, conditions or provisions of, any material note, bond,
mortgage, indenture, contract, lease, license, agreement or instrument to which
Parent is a party or by which Parent or any of its assets or property is
subject, (iii) result in the creation or imposition of any material lien or
encumbrance of any kind upon any of the assets of Parent or any subsidiary of
Parent or (iv)
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subject to obtaining the Consents from Governmental Authorities referred to in
SECTION 3.3 hereof, violate any Law to which Parent or any subsidiary of Parent
or its assets or properties are subject, except in any such case for any such
conflicts, violations, breaches, defaults or other occurrences that would not
prevent or delay consummation of the Offer or the Merger, or otherwise
materially and adversely affect the ability of Parent or Purchaser to perform
their respective obligations under this Agreement.
3.5 DISCLOSURE DOCUMENTS. None of the information supplied by
Parent, its officers, directors, representatives, agents or employees (the
"PARENT INFORMATION") for inclusion in the Proxy Statement will, at the time the
Proxy Statement is filed with the SEC or first mailed to the Company's
stockholders, at the time of the Company's stockholders' meeting or at the
Effective Time, contain any untrue statement of a material fact, or will omit to
state any material fact necessary in order to make the statements therein, in
light of the circumstances in which they were made not misleading or necessary
to correct any statement in any earlier communication with respect to the
solicitation of proxies for such stockholders' meeting which has become false or
misleading. Neither the Schedule 14D-1 or the Offer Documents or any amendments
thereof or supplements thereto nor any of the Parent Information provided
specifically for inclusion in the Schedule 14D-9 will, at the respective times
the Schedule 14D-1, the Offer Documents or the Schedule 14D-9 are filed with the
SEC or first published, sent or given to the Company's stockholders, contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. Notwithstanding the foregoing, neither
Parent nor Purchaser makes any representation or warranty with respect to any
information that has been supplied by the Company or its accountants, counsel or
other authorized representatives for use in any of the foregoing documents. The
Schedule 14D-1 and the Offer Documents will comply as to form in all material
respects with the provisions of the Securities Exchange Act.
3.6 FINDERS AND INVESTMENT BANKERS. Neither Parent, Purchaser
nor any of their respective officers or directors has employed any broker,
finder or financial advisor or otherwise incurred any liability for any
brokerage fees, commissions or financial advisors' or finders' fees in
connection with the transactions contemplated hereby.
3.7 FINANCING ARRANGEMENTS. Parent (including for this purpose
one or more of its wholly-owned subsidiaries) has funds available to it
sufficient to enable the Purchaser to purchase the Shares in accordance with the
terms of this Agreement and to pay all amounts due (or which will, as a result
of the transactions contemplated hereby, become due) in respect of any
indebtedness of the Company for money borrowed.
3.8 NO PRIOR ACTIVITIES. Except for obligations or liabilities
incurred in connection with its incorporation or organization or the negotiation
and consummation of this Agreement and the transactions contemplated hereby
(including any financing in connection therewith), Purchaser has not incurred
any obligations or liabilities and has not engaged in any
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business or activities of any type or kind whatsoever or entered into any
agreements or arrangements with any person or entity.
ARTICLE IV
ADDITIONAL COVENANTS OF THE COMPANY
The Company covenants and agrees as follows:
4.1 CONDUCT OF BUSINESS OF THE COMPANY AND THE COMPANY
SUBSIDIARIES. (a) Unless Parent shall otherwise consent in writing (which
consent shall not be unreasonably withheld) and except as expressly contemplated
by this Agreement or in the Company Disclosure Letter, during the period from
the date of this Agreement to the Effective Time, (i) the Company shall conduct,
and it shall cause the Company Subsidiaries to conduct, its or their businesses
in the ordinary course and consistent with past practice, and the Company shall,
and it shall cause the Company Subsidiaries to, use its or their reasonable best
efforts to preserve substantially intact its business organization, to keep
available the services of its present officers and employees and to preserve the
present commercial relationships of the Company and the Company Subsidiaries
with persons with whom the Company or the Company Subsidiaries do significant
business and (ii) without limiting the generality of the foregoing, neither the
Company nor any of the Company Subsidiaries will:
(A) amend or propose to amend its Certificate of
Incorporation or Bylaws in any material respect;
(B) authorize for issuance, issue, grant, sell, pledge,
dispose of or propose to issue, grant, sell, pledge or dispose of any shares of,
or any options, warrants, commitments, subscriptions or rights of any kind to
acquire or sell any shares of, the capital stock or other securities of the
Company or any of the Company Subsidiaries, including, but not limited to, any
securities convertible into or exchangeable for shares of stock of any class of
the Company or any of the Company Subsidiaries, except for (a) the issuance of
shares pursuant to the exercise of Company Options outstanding on the date of
this Agreement in accordance with their present terms, (b) the issuance of
shares upon the exercise of Company Warrants outstanding on the date of this
Agreement in accordance with their present terms and (c) the issuance of shares
upon the conversion of Preferred Shares outstanding on the date of this
Agreement in accordance with the present terms of the Company Preferred Stock;
(C) split, combine or reclassify any shares of its
capital stock or declare, pay or set aside any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock, other than dividends to the holders of Preferred Shares in
accordance with the present terms of the Company Preferred Stock and dividends
or distributions to the Company or a Company Subsidiary, or directly or
indirectly redeem, purchase or otherwise acquire or offer to acquire any shares
of its capital stock or other securities;
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(D) create, incur or assume any indebtedness for borrowed
money or issue any debt securities, except pursuant to the Credit Agreement, or
make any loans (except as provided in clause (b) of paragraph (E) below);
(E) other than in the ordinary course of business
consistent with past practice, (a) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, indirectly, contingently or
otherwise) for the obligations of any person (other than the Company or a
Company Subsidiary); (b) make any capital expenditures or make any advances or
capital contributions to, or investments in, any other person (other than to a
Company Subsidiary); (c) voluntarily incur any material liability or obligation
(absolute, accrued, contingent or otherwise); or (d) sell, transfer, mortgage,
pledge or otherwise dispose of, or encumber, or agree to sell, transfer,
mortgage, pledge or otherwise dispose of or encumber, any assets or properties,
real, personal or mixed, material to the Company and the Company Subsidiaries
taken as a whole other than to secure debt permitted under paragraph (D);
(F) increase in any manner the compensation of any of its
officers or employees (other than, except with respect to employees who are
executive officers or directors, in the ordinary course of business reasonably
consistent with past practice) or enter into, establish, amend or terminate any
employment, consulting, retention, change in control, collective bargaining,
bonus or other incentive compensation, profit sharing, health or other welfare,
stock option or other equity, pension, retirement, vacation, severance, deferred
compensation or other compensation or benefit plan, policy, agreement, trust,
fund or arrangement with, for or in respect of, any stockholder, officer,
director, employee, consultant or affiliate other than, in any such case
referred to above, as may be required by Law or as required pursuant to the
terms of agreements in effect on the date of this Agreement or in the ordinary
course of business reasonably consistent with past practice and other than
arrangements with new employees (other than employees who will be officers of
the Company) hired in the ordinary course of business reasonably consistent with
past practice and providing for compensation (other than equity-based
compensation) and other benefits reasonably consistent with those provided for
similarly situated employees of the Company as of the date hereof;
(G) alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or ownership of
any subsidiary or the Company;
(H) except as may be required as a result of a change in
law or as required by the SEC, change any of the accounting principles or
practices used by it;
(I) make any tax election or settle or compromise any
material income tax liability;
(J) pay, discharge or satisfy any material claims,
liabilities or obligations
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(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice of liabilities reflected or
reserved against in, or contemplated by, the financial statements (or the
notes thereto) of the Company or incurred in the ordinary course of business
consistent with past practice;
(K) except to the extent necessary for the exercise of
its fiduciary duties by the Board of Directors of the Company as set forth in,
and consistent with the provisions of, SECTION 4.8 hereof, waive, amend or allow
to lapse any term or condition of any confidentiality or "standstill" agreement
to which the Company or any subsidiary is a party; or
(L) take, or agree in writing or otherwise to take, any
of the foregoing actions or any action which would make any of the
representations or warranties of the Company contained in this Agreement untrue
or incorrect in any material respect at or prior to the Effective Time.
(b) The Company shall, and the Company shall cause each of the
Company Subsidiaries, to comply with all Laws applicable to it or any of its
properties, assets or business and to maintain in full force and effect all the
Company Permits necessary for such business, except in any such case for any
failure so to comply or maintain that would not reasonably be expected to result
in a Material Adverse Effect.
4.2 NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to Parent if any of the following occur after the date of this
Agreement: (i) receipt of any notice or other communication in writing from any
third party alleging that the Consent of such third party is or may be required
in connection with the transactions contemplated by this Agreement, provided
that such Consent would have otherwise been required to have been disclosed in
this Agreement; (ii) receipt of any material notice or other communication from
any Governmental Authority (including, but not limited to, the National
Association of Securities Dealers ("NASD"), the AMEX or any other securities
exchange) in connection with the transactions contemplated by this Agreement;
(iii) the occurrence of an event which would be reasonably likely (A) to have a
Material Adverse Effect or (B) to cause any condition set forth in ANNEX I
hereto to be unsatisfied in any material respect at any time prior to the
consummation of the Offer; or (iv) the commencement or threat of any Litigation
involving or affecting the Company or any of the Company Subsidiaries, or any of
their respective properties or assets, or, to the Company's knowledge, any
employee, agent, director or officer, in his or her capacity as such, of the
Company or any of the Company Subsidiaries which, if pending on the date hereof,
would have been required to have been disclosed in this Agreement or which
relates to the consummation of the Offer or the Merger.
4.3 ACCESS AND INFORMATION. Between the date of this Agreement
and the Effective Time, and without intending by this SECTION 4.3 to limit any
of the other obligations of the parties under this Agreement, the Company will
give, and shall direct its accountants
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and legal counsel to give, Parent and its authorized representatives (including,
without limitation, its financial advisors, accountants and legal counsel), at
reasonable times and without undue disruption to or interference with the normal
conduct of the business and affairs of the Company, access as reasonably
required in connection with the transactions provided for in this Agreement to
all offices and other facilities and to all contracts, agreements, commitments,
books and records of or pertaining to the Company and the Company Subsidiaries
and will furnish Parent with (a) such financial and operating data and other
information with respect to the business and properties of the Company and the
Company Subsidiaries as Parent may from time to time reasonably request in
connection with such transactions and (b) a copy of each material report,
schedule and other document filed or received by the Company or any of the
Company Subsidiaries pursuant to the requirements of applicable securities laws,
the NASD or the AMEX.
4.4 STOCKHOLDER APPROVAL. As soon as practicable following the
consummation of the Offer, the Company will take all steps necessary to duly
call, give notice of, convene and hold a meeting of its stockholders for the
purpose of voting upon the Company Proposals and for such other purposes as may
be necessary or desirable in connection with effectuating the transactions
contemplated hereby, if such meeting is required. Except as otherwise
contemplated by this Agreement, the Board of Directors of the Company will
recommend to the stockholders of the Company that they approve the Company
Proposals.
4.5 REASONABLE BEST EFFORTS. Subject to the terms and
conditions herein provided, the Company agrees to use reasonable best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement,
including, but not limited to, (i) obtaining all Consents from Governmental
Authorities and other third parties required for the consummation of the Offer
and the Merger and the transactions contemplated thereby and (ii) timely making
all necessary filings under the HSR Act. Upon the terms and subject to the
conditions hereof, the Company agrees to use reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary to satisfy the other conditions of the Closing set forth herein.
4.6 PUBLIC ANNOUNCEMENTS. So long as this Agreement is in
effect, the Company shall not, and shall use reasonable best efforts to cause
its affiliates not to, issue or cause the publication of any press release or
any other announcement with respect to the Offer or the Merger or the
transactions contemplated hereby without the consent of Parent (such consent not
to be unreasonably withheld or delayed), except where such release or
announcement is required by applicable Law or pursuant to any applicable listing
agreement with, or rules or regulations of, the NASD or the AMEX, in which case
the Company, prior to making such announcement, will consult with Parent
regarding the same.
4.7 COMPLIANCE. In consummating the transactions contemplated
hereby, the Company shall comply in all material respects with the provisions of
the Securities Exchange
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Act and the Securities Act and shall comply, and cause the Company Subsidiaries
to comply or to be in compliance, in all material respects, with all other
applicable Laws.
4.8 NO SOLICITATION. (a) The Company shall not, directly or
indirectly, through any officer, director, employee, representative or agent of
the Company or any of the Company Subsidiaries, solicit or encourage the
initiation of (including by way of furnishing information) any inquiries or
proposals regarding any merger, sale of assets, sale of shares of capital stock
(including without limitation by way of a tender offer) or similar transactions
involving the Company or any Company Subsidiaries that if consummated would
constitute an Alternative Transaction (as defined below) (any of the foregoing
inquiries or proposals being referred to herein as a "COMPANY TAKEOVER
PROPOSAL"). Nothing contained in this Agreement shall prevent the Board of
Directors of the Company from (i) furnishing information to a third party which
has made a BONA FIDE Company Takeover Proposal that is a Superior Proposal (as
defined below) not solicited in violation of this Agreement, provided that such
third party has executed an agreement with confidentiality provisions
substantially similar to those then in effect between the Company and Parent or
(ii) subject to compliance with the other terms of this SECTION 4.8, considering
and negotiating a bona fide Company Takeover Proposal that is a Superior
Proposal not solicited in violation of this Agreement; provided that, as to each
of clauses (i) and (ii), the Board of Directors of the Company reasonably
determines in good faith (after due consultation with independent counsel, which
may be Latham & Watkins) that it is or is reasonably likely to be required to do
so in order to discharge properly its fiduciary duties. For purposes of this
Agreement, a "SUPERIOR PROPOSAL" means any proposal made by a third party to
acquire, directly or indirectly, for consideration consisting of cash and/or
securities, all of the equity securities of the Company entitled to vote
generally in the election of directors or all or substantially all the assets of
the Company, on terms which the Board of Directors of the Company reasonably
believes (after consultation with a financial advisor of nationally recognized
reputation) to be more favorable from a financial point of view to its
stockholders than the Offer and the Merger taking into account at the time of
determination all factors relating to such proposed transaction deemed relevant
by the Board of Directors of the Company, including, without limitation, the
financing thereof, the proposed timing thereof and all other conditions thereto
and any changes to the financial terms of this Agreement proposed by Parent and
Purchaser. "ALTERNATIVE TRANSACTION" means any of (i) a transaction pursuant to
which any person (or group of persons) other than Parent or its affiliates (a
"THIRD PARTY") acquires or would acquire more than 20% of the outstanding shares
of any class of equity securities of the Company, whether from the Company or
pursuant to a tender offer or exchange offer or otherwise, (ii) a merger or
other business combination involving the Company pursuant to which any Third
Party acquires more than 20% of the outstanding equity securities of the Company
or the entity surviving such merger or business combination (iii) any
transaction pursuant to which any Third Party acquires or would acquire control
of assets (including for this purpose the outstanding equity securities of
Company Subsidiaries and securities of the entity surviving any merger or
business combination including any of the Company Subsidiaries) of the Company
or any Company Subsidiaries having a fair market value (as determined by the
Board of Directors of the Company in good faith) equal to more
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than 20% of the fair market value of all the assets of the Company and the
Company Subsidiaries, taken as a whole, immediately prior to such transaction,
or (iv) any other consolidation, business combination, recapitalization or
similar transaction involving the Company or any of the Company Subsidiaries,
other than the transactions contemplated by this Agreement; PROVIDED, HOWEVER,
that the term Alternative Transaction shall not include any acquisition of
securities by a broker dealer in connection with a bona fide public offering of
such securities. Notwithstanding anything to the contrary contained in this
SECTION 4.8 or elsewhere in this Agreement, prior to the Effective Time, the
Company may, in connection with a possible Company Takeover Proposal, refer any
third party to this SECTION 4.8 and SECTION 8.7 and make a copy of this SECTION
4.8 and SECTION 8.7 available to a third party.
(b) The Company shall immediately notify Parent and Purchaser
after receipt of any Company Takeover Proposal, or any modification of or
amendment to any Company Takeover Proposal, or any request for nonpublic
information relating to the Company or any of the Company Subsidiaries in
connection with a Company Takeover Proposal or for access to the properties,
books or records of the Company or any subsidiary by any person or entity that
informs the Board of Directors of the Company or such subsidiary that it is
considering making, or has made, a Company Takeover Proposal. Such notice to
Parent and Purchaser shall be made orally and in writing, and shall indicate the
identity of the person making the Company Takeover Proposal or intending to make
the Company Takeover Proposal or requesting non-public information or access to
the books and records of the Company, the terms of any such Company Takeover
Proposal or modification or amendment to a Company Takeover Proposal, and
whether the Company is providing or intends to provide the person making the
Company Takeover Proposal with access to information concerning the Company as
provided in SECTION 4.8(a). The Company shall also immediately notify Parent and
Purchaser, orally and in writing, if it enters into negotiations concerning any
Company Takeover Proposal.
(c) Except as set forth in this SECTION 4.8, neither the Board
of Directors of the Company nor any committee thereof shall (i) withdraw or
modify, or indicate publicly its intention to withdraw or modify, in a manner
adverse to Parent, the approval or recommendation by such Board of Directors or
such committee of the Offer or the Company Proposals, (ii) approve or recommend,
or indicate publicly its intention to approve or recommend, any Company Takeover
Proposal or (iii) cause the Company to enter into any letter of intent,
agreement in principle, acquisition agreement or other similar agreement (each,
a "COMPANY ACQUISITION AGREEMENT") related to any Company Takeover Proposal.
Notwithstanding the foregoing, in the event that prior to the Effective Time the
Board of Directors of the Company determines in good faith, with the advice of
outside counsel, that the failure to do so could reasonably be determined to be
a breach of its fiduciary duties to the Company's stockholders under applicable
law, the Board of Directors of the Company may (subject to this and the
following sentences) approve or recommend a Superior Proposal and, in connection
therewith, withdraw or modify its approval or recommendation of the Offer or the
Company Proposals and/or terminate this Agreement (and concurrently with or
after such
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termination, if it so chooses, cause the Company to enter into any Company
Acquisition Agreement with respect to any Superior Proposal), but only at a time
that is after the third business day following Parent's receipt of written
notice advising Parent that the Board of Directors of the Company has received a
Superior Proposal and, in the case of any previously received Superior Proposal
that has been materially modified or amended, such modification or amendment and
specifying the material terms and conditions of such Superior Proposal,
modification or amendment.
(d) Nothing contained in this SECTION 4.8 shall prohibit the
Company from taking and disclosing to its stockholders a position contemplated
by Rule 14e-2(a) promulgated under the Securities Exchange Act or from making
any disclosure to the Company's stockholders if, in the good faith judgment of
the Board of Directors of the Company, with the advice of outside counsel,
failure so to disclose could be determined to be a breach of its fiduciary
duties to the Company's stockholders under applicable law; PROVIDED, HOWEVER,
that neither the Company nor its Board of Directors nor any committee thereof
shall, except as permitted by SECTION 4.8(c), withdraw or modify, or indicate
publicly its intention to withdraw or modify, its position with respect to the
Offer or the Company Proposals or approve or recommend, or indicate publicly its
intention to approve or recommend, a Company Takeover Proposal.
(e) The Company shall advise its officers and directors and
any investment banker or attorney retained by the Company in connection with the
transactions contemplated by this Agreement of the restrictions set forth in
this SECTION 4.8.
(f) For so long as the this Agreement shall not have been
terminated in accordance with its terms, the Board of Directors of the Company
shall not redeem the Rights or waive or amend any provision of the Rights
Agreement, in any such case to permit or facilitate the consummation of any
Company Takeover Proposal or Alternative Transaction.
4.9 SEC AND STOCKHOLDER FILINGS. The Company shall send to
Parent a copy of all material public reports and materials as and when it sends
the same to its stockholders, the SEC or any state or foreign securities
commission.
4.10 TAKEOVER STATUTES. If any "fair price," "moratorium,"
"control share acquisition" or other similar anti-takeover statute or regulation
enacted under state or federal laws in the United States (each a "TAKEOVER
STATUTE"), including, without limitation, Section 203 of the Delaware Code, is
or may become applicable to the Offer or the Merger, the Company will use
reasonable best efforts to grant such approvals and take such actions as are
necessary so that the transactions contemplated by this Agreement and the
Company Proposals may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act so as to eliminate or minimize the effects
of any Takeover Statute on any of the transactions contemplated hereby.
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4.11 RIGHTS AGREEMENT. The Board of Directors of the Company
shall take all further action (in addition to that referred to in SECTION 2.33),
if any, necessary in order to render the Rights inapplicable to the Offer, the
Merger and the other transactions contemplated by this Agreement.
ARTICLE V
ADDITIONAL COVENANTS OF PURCHASER AND PARENT
Parent and Purchaser covenant and agree as follows:
5.1 REASONABLE BEST EFFORTS. Subject to the terms and
conditions herein provided, Parent and Purchaser agree to use reasonable best
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
as promptly as practicable the transactions contemplated by this Agreement,
including, but not limited to, (i) obtaining all Consents from Governmental
Authorities and other third parties required for the consummation of the Offer
and the Merger and the transactions contemplated thereby and (ii) timely making
all necessary filings under the HSR Act. Upon the terms and subject to the
conditions hereof, Parent and Purchaser agree to use reasonable best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary to satisfy the other conditions of the Closing set forth
herein.
5.2 PUBLIC ANNOUNCEMENTS. So long as this Agreement is in
effect, Parent and Purchaser shall not, and shall use reasonable best efforts to
cause their affiliates not to, issue or cause the publication of any press
release or any other announcement with respect to the Offer or the Merger or the
transactions contemplated hereby without the consent of the Company (such
consent not to be unreasonably withheld or delayed), except where such release
or announcement is required by applicable Law or pursuant to any applicable
listing agreement with, or rules or regulations of, any stock exchange on which
shares of Parent's capital stock are listed or the NASD, or other applicable
securities exchange, in which case Parent, prior to making such announcement,
will consult with the Company regarding the same.
5.3 COMPLIANCE. In consummating the transactions contemplated
hereby, Parent and Purchaser shall comply in all material respects with the
provisions of the Securities Exchange Act and the Securities Act and shall
comply, and cause their subsidiaries to comply or to be in compliance, in all
material respects, with all other applicable Laws.
5.4 EMPLOYEE BENEFIT PLANS. (a) As of the Effective Time,
Parent shall cause the Surviving Corporation to honor and satisfy all
obligations and liabilities with respect to the Employee Plans. Notwithstanding
the foregoing, the Surviving Corporation shall not be required to continue any
particular Employee Plan after the Effective Time, and any Employee Plan may be
amended or terminated in accordance with its terms and applicable Law. To the
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extent that any Employee Plan is terminated or amended after the Effective Time
so as to reduce the benefits that are then being provided with respect to
participants thereunder, Parent shall arrange for each individual who is then a
participant in such terminated or amended plan to participate in a comparable
Parent Benefit Plan ("PARENT BENEFIT PLAN") in accordance with the eligibility
criteria thereof, provided that (i) such participant shall receive full credit
for years of service with the Company or any of the Company Subsidiaries prior
to the Effective Time for all purposes for which such service was recognized
under the applicable Employee Plan, including, but not limited to, recognition
of service for eligibility, vesting (including acceleration thereof pursuant to
the terms of the applicable Employee Plan), entitlement to commence benefits
and, to the extent not duplicative of benefits received under such Employee
Plan, the amount of benefits, (ii) such participant shall participate in the
Parent Benefit Plans on terms no less favorable than those offered by Parent to
similarly situated employees of Parent, (iii) Parent shall cause any and all
pre-existing condition limitations (to the extent such limitations did not apply
to a pre-existing condition under the Employee Plans) and eligibility waiting
periods under any group health plans to be waived with respect to such
participant and his or her eligible dependents and (iv) Parent shall cause the
Parent Benefit Plans that are group welfare plans to provide such participant
with credit towards any applicable deductibles, co-payments and similar
exclusions for expenses incurred prior to the Effective Time.
(b) Parent and the Company hereby acknowledge that the
consummation of the Offer and the transactions contemplated under this Agreement
will be treated as a "Change in Control" for purposes of each of the applicable
Employee Plans, and each applicable employment, severance or similar agreement
applicable to any employee of the Company or any of the Company Subsidiaries,
listed in Section 5.4(b) of the Company Disclosure Letter (such Employee Plans
and agreements collectively, "CHANGE IN CONTROL AGREEMENTS") and agree to abide
by the provisions of any Change in Control Agreements which relate to a Change
in Control, including, but not limited to, the accelerated vesting and/or
payment of equity-based awards.
(c) The provisions of this SECTION 5.4 are not intended to and
do not create rights of third party beneficiaries.
5.5 INDEMNIFICATION. (a) From and after the Effective Time,
the Surviving Corporation shall indemnify and hold harmless all past and present
officers and directors (the "INDEMNIFIED PARTIES") of the Company and of the
Company Subsidiaries to the full extent such persons may be indemnified by the
Company pursuant to Delaware law, the Company's Certificate of Incorporation and
Bylaws, as each is in effect on the date of this Agreement, for acts and
omissions (x) arising out of or pertaining to the transactions contemplated by
this Agreement or arising out of the Offer Documents or (y) otherwise with
respect to any acts or omissions occurring or arising at or prior to the
Effective Time and shall advance reasonable litigation expenses incurred by such
persons in connection with defending any action arising out of such acts or
omissions, PROVIDED that such persons provide the requisite affirmations and
undertaking, as set forth in Section 145(e) of the Delaware Code.
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(b) In addition, Parent will provide, or cause the Surviving
Corporation to provide, for a period of not less than six years after the
Effective Time, the Company's current directors and officers an insurance and
indemnification policy that provides coverage for events occurring or arising at
or prior to the Effective Time (the "D&O INSURANCE") that is no less favorable
than the existing policy or, if substantially equivalent insurance coverage is
unavailable, the best available coverage; PROVIDED, HOWEVER, that Parent and the
Surviving Corporation shall not be required to pay an annual premium for the D&O
Insurance in excess of 300% of the annual premium currently paid by the Company
for such insurance, but in such case shall purchase as much such coverage as
possible for such amount.
(c) This SECTION 5.5 is intended to benefit the Indemnified
Parties and shall be binding on all successors and assigns of Parent, Purchaser,
the Company and the Surviving Corporation. Parent hereby guarantees the
performance by the Surviving Corporation of the indemnified obligations pursuant
to this SECTION 5.5, which guaranty is absolute and unconditional and shall not
be affected by any circumstance whatsoever, including the bankruptcy or
insolvency of the Surviving Corporation or any other person. The Indemnified
Parties shall be intended third-party beneficiaries of this SECTION 5.5.
5.6 VOTING OF SHARES. At any meeting of the Company's
stockholders held for the purpose of voting upon the Company Proposals, all of
the Shares then owned by Parent, Purchaser or any other subsidiaries of Parent
shall be voted in favor of the Company Proposals.
5.7 GUARANTEE OF PARENT. Parent hereby guarantees the payment
by Purchaser of the Common Per Share Amount, the Preferred Per Share Amount and
any other amounts payable by Purchaser pursuant to this Agreement and will cause
Purchaser to perform all of its other obligations under this Agreement in
accordance with their terms.
ARTICLE VI
MERGER CONDITIONS
The respective obligations of each party to effect the Merger
shall be subject to the fulfillment or waiver at or prior to the Effective Time
of the following conditions:
6.1 OFFER. The Offer shall have been consummated; provided
that this condition shall be deemed to have been satisfied with respect to the
obligation of Parent and Purchaser to effect the Merger if Parent fails to
accept for payment or pay for Common Shares pursuant to the Offer in violation
of the terms of the Offer or of this Agreement.
6.2 STOCKHOLDER APPROVAL. If required, the Company Proposals
shall have been
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approved at or prior to the Effective Time by the requisite vote
of the stockholders of the Company in accordance with the Delaware Code.
6.3 NO INJUNCTION OR ACTION. No order, statute, rule,
regulation, executive order, stay, decree, judgment or injunction shall have
been enacted, entered, promulgated or enforced by any court or other
Governmental Authority which prohibits or prevents the consummation of the
Merger which has not been vacated, dismissed or withdrawn prior to the Effective
Time. The Company and Parent shall use all reasonable best efforts to have any
of the foregoing vacated, dismissed or withdrawn by the Effective Time.
6.4 GOVERNMENTAL APPROVALS. All Consents of any Governmental
Authority required for the consummation of the Merger and the transactions
contemplated by this Agreement shall have been obtained, except for those
Consents the failure to obtain which will not have a material adverse effect on
the business, assets, condition (financial or other), liabilities or results of
operations of the Surviving Corporation and its subsidiaries taken as a whole.
ARTICLE VII
TERMINATION AND ABANDONMENT
7.1 TERMINATION. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after approval of the
stockholders of the Company described herein:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if any Governmental
Authority shall have issued an order, decree or ruling or taken any
other action permanently enjoining, restraining or otherwise
prohibiting the consummation of the transactions contemplated by this
Agreement and such order, decree or ruling or other action shall have
become final and nonappealable;
(c) by Parent if
(i) the Company shall have breached or failed to perform in
any material respect any of its covenants or other agreements contained
in this Agreement, which breach or failure to perform is incapable of
being cured or has not been cured within five (5) days after the giving
of written notice thereof to the Company (but not later than the
expiration of the twenty (20) business day period provided for the
Offer under SECTION 1.1(b) hereof);
(ii) any representation or warranty of the Company shall not
have been true and
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correct in all material respects when made;
(iii) any representation or warranty of the Company shall
cease to be true and correct in all material respects at any later date
as if made on such date (other than representations and warranties made
as of a specified date) other than as a result of a breach or failure
to perform by the Company of any of its covenants or agreements under
this Agreement; PROVIDED, HOWEVER, that such representation or warranty
is incapable of being cured or has not been cured within five (5) days
after the giving of written notice thereof to the Company (but not
later than the expiration of the twenty (20) business day period
provided for the Offer under SECTION 1.1(b) hereof);
PROVIDED, HOWEVER, that the right to terminate this Agreement pursuant
to this SECTION 7.1(c) shall not be available to Parent if Purchaser or
any other affiliate of Parent shall acquire shares of Company Common
Stock pursuant to the Offer;
(d) by Parent if, whether or not permitted to do so by this
Agreement, (i) the Board of Directors of the Company or any committee
thereof shall have withdrawn or modified in a manner adverse to Parent
or Purchaser its approval or recommendation of the Offer or any of the
Company Proposals; (ii) the Board of Directors of the Company or any
committee thereof shall have approved or recommended to the
stockholders of the Company any Company Takeover Proposal or
Alternative Transaction; (iii) the Board of Directors of the Company or
any committee thereof shall have approved or recommended that the
stockholders of the Company tender their Shares in any tender or
exchange offer that is an Alternative Transaction; (iv) the Board of
Directors of the Company or any committee thereof shall have taken any
position or make any disclosures to the Company's stockholders
permitted pursuant to SECTION 4.8(e) which has the effect of any of the
foregoing; (v) the Board of Directors of the Company or any committee
thereof shall have resolved to take any of the foregoing actions or
(vi) the Board of Directors of the Company or any committee thereof
shall have redeemed the Rights, or waived or amended any provision of
the Rights Agreement, in any such case to permit or facilitate the
consummation of any Company Takeover Proposal or Alternative
Transaction;
(e) by either Parent or the Company if, as the result of the
failure of the Minimum Condition or any of the other conditions set
forth in Annex I hereto, the Offer shall have terminated or expired in
accordance with its terms without Purchaser having purchased any Shares
pursuant to the Offer, provided that if the failure to satisfy any
conditions set forth in Annex I shall be a basis for termination of
this Agreement under any other clause of this Section 7.1, a
termination pursuant to this clause (e) shall be deemed a termination
under such other clause;
(f) by either Parent or the Company if the Offer shall not
have been consummated on or before March 31, 1999, PROVIDED that the
right to terminate this
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Agreement pursuant to this SECTION 7.1(f) shall not be available to any
party whose failure to perform any of its obligations under this
Agreement results in the failure of the Offer to be consummated by such
time;
(g) by the Company if Parent or Purchaser shall have breached
or failed to perform in any material respect any of its
representations, warranties, covenants or other agreements contained in
this Agreement, which breach or failure to perform is incapable of
being cured or has not been cured within 5 days after the giving of
written notice thereof to Parent; or
(h) by the Company in accordance with SECTION 4.8(c) hereof;
PROVIDED, HOWEVER, that the right to terminate this Agreement pursuant
to this SECTION 7.1(h) shall not be available (x) if the Company has
breached in any material respect its obligations under SECTION 4.8
hereof, or (y) if the Company shall fail to pay when due the fees and
expenses contemplated by SECTION 8.7 hereof.
The party desiring to terminate this Agreement pursuant to the preceding
paragraphs shall give written notice of such termination to the other party in
accordance with SECTION 8.5 hereof.
7.2 EFFECT OF TERMINATION AND ABANDONMENT. In the event of
termination of this Agreement and the abandonment of the Offer or the Merger
pursuant to this ARTICLE VII, this Agreement (other than SECTIONS 7.2, 8.1, 8.3,
8.5, 8.6, 8.7, 8.8, 8.10, 8.11, 8.12, 8.14 and 8.15 hereof) shall become void
and of no effect with no liability on the part of any party hereto (or of any of
its directors, officers, employees, agents, legal or financial advisors or other
representatives); PROVIDED, HOWEVER, that no such termination shall relieve any
party hereto from any liability for any willful breach of this Agreement prior
to termination. If this Agreement is terminated as provided herein, each party
shall use all reasonable best efforts to redeliver all documents, work papers
and other material (including any copies thereof) of any other party relating to
the transactions contemplated hereby, whether obtained before or after the
execution hereof, to the party furnishing the same.
ARTICLE VIII
MISCELLANEOUS
8.1 CONFIDENTIALITY. (a) Unless (i) otherwise expressly
provided in this Agreement, (ii) required by applicable Law or any listing
agreement with, or the rules and regulations of, the AMEX or any other
applicable securities exchange or the NASD, (iii) necessary to secure any
required Consents as to which the other party has been advised or (iv) consented
to in writing by Parent and the Company, all information (whether oral or
written) and documents furnished in connection herewith together with analyses,
compilations, studies or other documents prepared by such party which contain or
otherwise reflect such information
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shall be kept strictly confidential by the Company, Parent, Purchaser and their
respective officers, directors, employees and agents. Prior to any disclosure
permitted pursuant to the preceding sentence, the party intending to make such
disclosure shall consult with the other party regarding the nature and extent of
the disclosure. Nothing contained herein shall preclude disclosures to the
extent necessary to comply with accounting, SEC and other disclosure obligations
imposed by applicable Law. In the event the transactions contemplated by this
Agreement are not consummated, each party shall return to the other any
documents furnished by the other and all copies thereof that any of them may
have made and will hold in confidence any information obtained from the other
party except to the extent (a) such party is required to disclose such
information by Law or such disclosure is necessary or desirable in connection
with the pursuit or defense of a claim, (b) such information was known by such
party prior to such disclosure (and PROVIDED that, except with respect to
information referred to in the following clause (c), such party shall have
advised the other party of such knowledge upon or promptly after its receipt of
such information) or was thereafter developed or obtained by such party
independent of such disclosure or (c) such information is or becomes generally
available to the public other than by breach of this SECTION 8.1 (or, to such
party's knowledge, breach of a confidentiality agreement with the other party).
Prior to any disclosure of information pursuant to the exception in clause (a)
of the preceding sentence, the party intending to disclose the same shall so
notify the party which provided the same in order that such party may seek a
protective order or other appropriate remedy should it choose to do so.
(b) The Parent and the Company further acknowledge that
certain of the business and activities of each of them is competitive with
business and activities of the other party, and each of them therefore agrees
that it will not use, or seek to obtain any competitive or other business
advantage as a result of, the information or documents so received by it in
connection herewith, such party acknowledging that such use would be unfair and
materially detrimental to the other party, PROVIDED that the provisions of this
SECTION 8.1(b) shall not apply to information referred to in clause (c) of
SECTION 8.1(a) hereof.
8.2 AMENDMENT AND MODIFICATION. This Agreement may be amended,
modified or supplemented only by a written agreement among the Company, Parent
and Purchaser.
8.3 WAIVER OF COMPLIANCE; CONSENTS. Any failure of the Company
on the one hand, or Parent and Purchaser on the other hand, to comply with any
obligation, covenant, agreement or condition herein may be waived by Parent on
the one hand, or the Company on the other hand, only by a written instrument
signed by the party granting such waiver, but such waiver or failure to insist
upon strict compliance with such obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. Whenever this Agreement requires or permits consent by or on
behalf of any party hereto, such consent shall be given in writing in a manner
consistent with the requirements for a waiver of compliance as set forth in this
SECTION 8.3.
8.4 SURVIVAL. The respective representations, warranties,
covenants and
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agreements of the Company and Parent contained herein or in any certificates or
other documents delivered prior to or at the Closing shall survive the execution
and delivery of this Agreement, notwithstanding any investigation made or
information obtained by the other party, but shall terminate at the Effective
Time, except for those contained in SECTIONS 1.7, 1.8, 1.9, 1.14, 5.4, 5.5, 5.7
and 8.8 hereof and this SECTION 8.4, which shall survive beyond the Effective
Time.
8.5 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given when delivered
in person, by facsimile, receipt confirmed, or on the next business day when
sent by overnight courier or on the second succeeding business day when sent by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
(i) if to the Company, to:
Alarmguard Holdings, Inc.
125 Frontage Road
Orange, CT 06477
Attention: Russell R. MacDonnell
Telecopy: (203) 795-9636
with a copy to:
Latham & Watkins
701 "B" Street, Suite 2100
San Diego, California 92101
Attention: David A. Hahn, Esq.
Telecopy: (619) 696-7419
Confirm: (619) 236-1234
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(ii) if to Parent or Purchaser, to:
Tyco International Ltd.
The Gibbons Building
10 Queen Street, Suite 301
Hamilton HM11 Bermuda
Attention: Secretary
Telecopy: (441) 295-9647
Confirm: (441) 292-8674
with a copy to:
Tyco International (US) Inc.
One Tyco Park
Exeter, New Hampshire 03833
Attention: Mark A Belnick, Esq.
Telecopy: (603) 778-7700
Confirm: (603) 778-9700
and to
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
Attention: Abbe L. Dienstag, Esq.
Telecopy: (212) 715-8000
Confirm: (212) 715-9100
8.6 BINDING EFFECT; ASSIGNMENT. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto prior to the Effective Time without the
prior written consent of the Company, in the case of a proposed assignment by
Parent or Purchaser, or by Parent, in the case of a proposed assignment by the
Company, except that Purchaser may assign its rights, interest and obligations
hereunder to any other wholly-owned direct or indirect subsidiary of Parent,
provided that the provisions of SECTION 5.7 hereof shall apply to such other
subsidiary.
8.7 EXPENSES. (a) Except as provided in SECTION 8.7(b) or
8.7(C) hereof, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such costs or expenses.
(b) The Company agrees that if this Agreement is terminated
pursuant to
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(i) SECTION 7.1(d);
(ii) SECTION 7.1(h); or
(iii) SECTION 7.1(e) OR 7.1(f) and, with respect to this
clause (iii), at the time of such termination any person, entity or
group (as defined in Section 13(d)(3) of the Securities Exchange Act)
(other than Parent or any of its affiliates or any person identified in
the Company's Proxy Statement dated April 30, 1998 and who has executed
the Preferred Stock Purchase Agreement, provided that such person has
not breached the terms of such Preferred Stock Purchase Agreement)
shall have become the beneficial owner of more than 15% of the
outstanding shares of Company Stock and such person, entity or group
(or any affiliate of such person, entity or group) thereafter (x) shall
make a Company Takeover Proposal and, in the case of a consensual
transaction with the Company, shall substantially have negotiated the
terms thereof, at any time on or prior to the date which is six months
after such termination of this Agreement, and (y) shall consummate such
Company Takeover Proposal at any time on or prior to the date which is
one year after termination of this Agreement, in the case of a
consensual transaction, or six months after termination of this
Agreement, in the case of a non-consensual transaction, in each case
with a value per share of Company Common Stock of at least $9.25 (with
appropriate adjustments for reclassifications of capital stock, stock
dividends, stock splits, reverse stock splits and similar events);
then the Company shall pay to Parent the sum of (a) $4.5 million. Any payment
required by this SECTION 8.7(b) shall be made as promptly as practicable but in
no event later than two business days following termination of this Agreement
pursuant to SECTION 7.1(d) OR 7.1(h) hereof, or, in the case of clause (iii) of
this SECTION 8.7(b), upon consummation of such Company Takeover Proposal, and
shall be made by wire transfer of immediately available funds to an account
designated by Parent.
(c) The Company further agrees that if this Agreement is
terminated pursuant to SECTION 7.1(c)(i) hereof,
(i) the Company will pay to Parent, as promptly as practicable
but in no event later than two business days following termination of
this Agreement, the amount of all documented and reasonable costs and
expenses incurred by Parent, Purchaser and their affiliates (including
but not limited to fees and expenses of counsel and accountants and
out-of-pocket expenses (but not fees) of financial advisors) in an
aggregate amount not to exceed $450,000 in connection with this
Agreement or the transactions contemplated hereby ("PARENT EXPENSES");
and
(ii) in the event that the Company consummates a Company
Takeover Proposal (whether or not solicited in violation of this
Agreement) which is publicly
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announced within one year from the date of termination of this
Agreement, the sum of $4.5 million, less the amount of any payment made
pursuant to clause (i) of this SECTION 8.7(c), which payment shall be
made not later than two business days following consummation of such
Company Takeover Proposal.
(d) The Company further agrees that if this Agreement is
terminated pursuant to SECTION 7.1(c)(ii) hereof, the Company will pay to
Parent, as promptly as practicable but in no event later than two business days
following termination of this Agreement, the Parent Expenses.
(e) The Company shall not be obligated to make any payments to
Parent pursuant to SECTION 8.7(b)(iii) or SECTION 8.7(c)(ii) if the Company
Takeover Proposal referenced therein is a transaction ("PERMITTED FINANCING") in
which the Company sells equity securities for gross proceeds not in excess of
$25,000,000; PROVIDED THAT the securities issued, or issuable upon exercise,
conversion or exchange of the securities issued, in such Permitted Financing
constitute or upon issuance would constitute less than forty (40%) percent of
the outstanding voting power of the Company after such issuance, exercise,
conversion or exchange.
8.8 GOVERNING LAW. This Agreement shall be deemed to be made
in, and in all respects shall be interpreted, construed and governed by and in
accordance with the laws of, the State of New York.
8.9 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.10 INTERPRETATION. The article and section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not in any way affect the meaning
or interpretation of this Agreement. As used in this Agreement, (i) the term
"PERSON" shall mean and include an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an association, an
unincorporated organization, a Governmental Authority and any other entity, (ii)
unless otherwise specified herein, the term "AFFILIATE," with respect to any
person, shall mean and include any person controlling, controlled by or under
common control with such person and (iii) the term "SUBSIDIARY" of any specified
person shall mean any corporation 50 percent or more of the outstanding voting
power of which, or any partnership, joint venture, limited liability company or
other entity 50 percent or more of the total equity interest of which, is
directly or indirectly owned by such specified person.
8.11 ENTIRE AGREEMENT. This Agreement and the documents or
instruments referred to herein including, but not limited to, the Annex(es)
attached hereto and the Company Disclosure Letter referred to herein, which
Annex(es) and Company Disclosure
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Letter are incorporated herein by reference, embody the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein. There are no restrictions, promises, representations, warranties,
covenants, or undertakings other than those expressly set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings among
the parties with respect to such subject matter. Notwithstanding the foregoing
provisions of this SECTION 8.11, the provisions of the letter agreement dated
November 2, 1998 between Tyco International (US) Inc. and Donaldson, Lufkin &
Jenrette Securities Corporation, as agent for the Company, shall remain in
effect in accordance with its terms.
8.12 SEVERABILITY. (a) In case any provision in this Agreement
shall be held invalid, illegal or unenforceable in a jurisdiction, such
provision shall be modified or deleted, as to the jurisdiction involved, only to
the extent necessary to render the same valid, legal and enforceable, and the
validity, legality and enforceability of the remaining provisions hereof shall
not in any way be affected or impaired thereby nor shall the validity, legality
or enforceability of such provision be affected thereby in any other
jurisdiction.
(b) Parent and the Company agree that the payments to Parent
provided in SECTION 8.7 are fair and reasonable in the circumstances,
considering not only the consideration payable to the holders of Shares in the
Offer and the Merger but also the outstanding funded indebtedness (including
capital leases) of the Company and the Company Subsidiaries and Parent's
anticipated costs, including lost opportunity costs, if the Offer and Merger are
not consummated. If a court of competent jurisdiction shall nonetheless, by a
final, non-appealable judgment, determine that the amount of such payments
exceed the maximum amount permitted by law, then the amount of such payments
shall be reduced to the maximum amount permitted by law in the circumstances, as
determined by such court of competent jurisdiction.
8.13 SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. Accordingly, the parties further agree that each party shall
be entitled to an injunction or restraining order to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, this being in
addition to any other right or remedy to which such party may be entitled under
this Agreement, at law or in equity.
8.14 THIRD PARTIES. Nothing contained in this Agreement or in
any instrument or document executed by any party in connection with the
transactions contemplated hereby shall create any rights in, or be deemed to
have been executed for the benefit of, any person that is not a party hereto or
thereto or a successor or permitted assign of such a party; PROVIDED HOWEVER,
that the parties hereto specifically acknowledge that the provisions of SECTION
5.5 hereof are intended to be for the benefit of, and shall be enforceable by,
the Indemnified Parties.
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8.15 DISCLOSURE LETTER. Parent acknowledges that the Company
Disclosure Letter (i) relates to certain matters concerning the disclosures
required and transactions contemplated by this Agreement, (ii) is qualified in
its entirety by reference to specific provisions of this Agreement, (iii) is not
intended to constitute and shall not be construed as indicating that any such
matter is required to be disclosed, nor shall such disclosure be construed as an
admission that such information is material with respect to the Company, except
to the extent required by this Agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Parent, Purchaser and the Company have
caused this Agreement to be signed and delivered by their respective duly
authorized officers as of the date first above written.
TYCO INTERNATIONAL LTD.
By: /s/ Mark A. Belnick
---------------------------------------------
Name: Mark A. Belnick
Title: Executive Vice President, Chief
Corporate Counsel
T16 ACQUISITION CORP.
By: /s/ Mark A. Belnick
---------------------------------------------
Name: Mark A. Belnick
Title: President
ALARMGUARD HOLDINGS, INC.
By: /s/ Russell R. MacDonnell
---------------------------------------------
Name: Russell R. MacDonnell
Title: Chairman, CEO
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ANNEX I
CONDITIONS TO THE OFFER. Notwithstanding any other provision
of the Offer, Purchaser shall not be required to accept for payment or, subject
to any applicable rules and regulations of the SEC, including Rule 14e-1(c)
promulgated under the Securities Exchange Act (relating to Purchaser's
obligation to pay for or return tendered Shares promptly after termination or
withdrawal of the Offer), pay for, and (subject to any such rules or
regulations) may delay the acceptance for payment of any tendered Shares and
(except as provided in this Agreement) amend or terminate the Offer as to any
Shares not then paid for if (i) the conditions that (1) there shall be validly
tendered and not withdrawn prior to the expiration of the Offer a number of
Common Shares which represents at least 51% of the total number of issued and
outstanding Common Shares and (2) the number of Common Shares tendered pursuant
to the Offer together with the Preferred Shares subject to the Preferred Stock
Purchase Agreement constitute at least 51% of the total voting power of the
Company on a fully diluted basis, shall not each have been satisfied (the
"MINIMUM CONDITION") or (ii) any applicable waiting period under the HSR Act
shall not have expired or been terminated prior to the expiration of the Offer
or (iii) at any time after the date of this Agreement and before the time of
payment for any such Common Shares (whether or not any Common Shares have
theretofore been accepted for payment or paid for pursuant to the Offer), any of
the following conditions exists:
(a) there shall be in effect an injunction or other order,
decree, judgment or ruling by a Governmental Authority of competent jurisdiction
or a Law shall have been promulgated, or enacted by a Governmental Authority of
competent jurisdiction which in any such case (i) restrains or prohibits the
making or consummation of the Offer or the consummation of the Merger or the
consummation of the purchase of the Company Preferred Stock pursuant to the
Preferred Stock Purchase Agreement, (ii) prohibits or restricts the ownership or
operation by Parent (or any of its affiliates or subsidiaries) of any portion of
the Company's business or assets, or Parent's business or assets relating to the
security services business, which is material to the security services business
of all such entities taken as a whole or which would substantially deprive
Parent and/or its affiliates or subsidiaries of the benefit of ownership of the
Company's business or assets, or compels Parent (or any of its affiliates or
subsidiaries) to dispose of or hold separate any portion of the Company's
business or assets, or Parent's business or assets relating to the security
services business, which is material to the security services business of all
such entities taken as a whole or which would substantially deprive Parent
and/or its affiliates or subsidiaries of the benefit of ownership of the
Company's business or assets, (iii) imposes material limitations on the ability
of Purchaser effectively to acquire or to hold or to exercise full rights of
ownership of the Shares, including, without limitation, the right to vote Shares
purchased by Purchaser pursuant to the Offer, the Merger or the Preferred Stock
Purchase Agreement on all matters properly presented to the stockholders of the
Company, or (iv) imposes any material limitations on the ability of Parent
and/or its affiliates or subsidiaries effectively to control in any material
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respect the business and operations of the Company, or (v) seeks to restrict any
future business activity by Parent (or any of its affiliates) relating to the
security services business, including, without limitation, by requiring the
prior consent of any person or entity (including any Governmental Authority) to
future transactions by Parent (or any of its affiliates); or
(b) there shall have been instituted, pending or threatened an
action by a Governmental Authority seeking to restrain or prohibit the making or
consummation of the Offer, the consummation of the Merger or the purchase of
Preferred Shares pursuant to the Preferred Stock Purchase Agreement or to impose
any other restriction, prohibition or limitation referred to in the foregoing
paragraph (a); or
(c) this Agreement shall have been terminated by the Company
or Parent in accordance with its terms; or
(d) there shall have occurred (i) any general suspension of,
or limitation on prices for, trading in the Common Shares on the AMEX, (ii) a
declaration of a banking moratorium or any general suspension of payments in
respect of banks in the United States or (iii) in the case of any of the
foregoing existing at the time of the execution of this Agreement, a material
acceleration or worsening thereof; or
(e) Parent and the Company shall have agreed that Purchaser
shall amend the Offer to terminate the Offer or postpone the payment for Common
Shares pursuant thereto; or
(f) any of the representations and warranties made by the
Company in the Merger Agreement shall not have been true and correct in all
material respects when made, or shall thereafter have ceased to be true and
correct in all material respects as if made as of such later date (other than
representations and warranties made as of a specified date), or the Company
shall not in all material respects have performed each obligation and agreement
and complied with each covenant to be performed and complied with by it under
this Agreement, PROVIDED, however, that such breach or failure to perform is
incapable of being cured or has not been cured within 5 days after the giving of
written notice thereof to the Company, PROVIDED, however, that no such 5-day
cure period shall require extension of the Offer beyond the twenty (20) business
days provided under SECTION 1.1(b) of the Agreement; or
(g) the Company's Board of Directors shall have modified or
amended its recommendation of the Offer in any manner adverse to Parent or shall
have withdrawn its recommendation of the Offer, or shall have recommended
acceptance of any Company Takeover Proposal or shall have resolved to do any of
the foregoing; or
(h) (i) any corporation, entity or "group" (as defined in
Section 13(d)(3) of the Securities Exchange Act) ("PERSON/GROUP"), other than
Parent and Purchaser and any person/group identified in the Company's Proxy
Statement dated April 30, 1998 and who has executed the Preferred Stock Purchase
Agreement, provided that such person/group has not
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breached the terms of such Preferred Stock Purchase Agreement, shall have
acquired beneficial ownership of more than 15% of the outstanding Shares, or
shall have been granted any options or rights, conditional or otherwise, to
acquire a total of more than 15% of the outstanding Shares and which, in each
case, does not tender the Common Shares beneficially owned by it in the Offer;
(ii) any new group shall have been formed which beneficially owns more than 15%
of the outstanding Shares and which does not tender the Common Shares
beneficially owned by it in the Offer; or (iii) any person/group (other than
Parent or one or more of its affiliates) shall have entered into an agreement in
principle or definitive agreement with the Company with respect to a tender or
exchange offer for any Shares or a merger, consolidation or other business
combination with or involving the Company; or
(i) any change, development, effect or circumstance shall have
occurred or be threatened that would reasonably be expected to have a Material
Adverse Effect with respect to the Company; or
(j) the Company shall commence a case under any chapter of
Title XI of the United States Code or any similar law or regulation; or a
petition under any chapter of Title XI of the United States Code or any similar
law or regulation is filed against the Company which is not dismissed within 2
business days; or
(k) a Distribution Date shall have occurred under the Rights
Agreement.
The foregoing conditions are for the sole benefit of Parent
and Purchaser and may be asserted by Parent or Purchaser regardless of the
circumstances giving rise to any such condition and may be waived by Parent or
Purchaser, in whole or in part, at any time and from time to time, in the sole
discretion of Parent. The failure by Parent or Purchaser at any time to exercise
any of the foregoing rights shall not be deemed a waiver of any right, the
waiver of such right with respect to any particular facts or circumstances shall
not be deemed a waiver with respect to any other facts or circumstances, and
each right shall be deemed an ongoing right which may be asserted at any time
and from time to time.
Should the Offer be terminated pursuant to the foregoing
provisions, all tendered Common Shares not theretofore accepted for payment
shall forthwith be returned to the tendering stockholders.
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<PAGE>
GLOSSARY OF DEFINED TERMS
<TABLE>
<CAPTION>
Section
TERM WHERE DEFINED
- ----- -------------
<S> <C>
"1997 Balance Sheet" 2.10
"Acquiring Person" 2.33
"Advance" 1.3
"Advance Director" 1.3
"affiliate" 8.10
"Agreement" the recitals
"Alternative Transaction" 4.8(a)
"AMEX" 2.5
"arranger liability" 2.23(b)
"Certificate of Merger" 1.4
"Change in Control Agreements" 5.4(b)
"Closing" 1.5
"Closing Date" 1.5
"Code" 2.15(a)
"Common Per Share Amount" the recitals
"Common Shares" the recitals
"Company" the recitals
"Company Acquisition Agreement" 4.8(c)
"Company Common Stock" the recitals
"Company Disclosure Letter" Article II
"Company Financial Statements" 2.8
"Company Intellectual Property Rights" 2.17
"Company Material Contracts" 2.14
"Company Options" 1.9(a)
"Company Permits" 2.12
"Company Preferred Stock" the recitals
"Company Proposals" 1.13(a)
"Company Securities Filings" 2.7
"Company Stock" the recitals
"Company Subsidiary" 2.1
"Company Takeover Proposal" 4.8(a)
"Company Warrants" 1.9(b)
"Consent" 2.5
"consenting corporation" 2.16(c)
"Credit Agreement" 2.21
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Section
TERM WHERE DEFINED
- ---- -------------
<S> <C>
"Current Preferred Director Condition" 1.3
"Current Preferred Holders" 1.3
"D&O Insurance" 5.5(b)
"Delaware Code" 1.4
"disqualified person" 5.4(a)
"Dissenting Shares" 1.7(a)
"Effective Time" 1.5
"Employee Plans" 2.15(a)
"Enforceability Exceptions" 2.4
"Environmental Claim" 2.23(e)(i)
"Environmental Laws" 2.23(e)(i)
"ERISA" 2.15(a)
"ERISA Affiliate" 2.15(a)
"excess parachute payments" 2.16(c)
"Exchange Agent" 1.8(a)
"Fairness Advisor" 1.2(a)
"Fairness Opinion" 1.2(a)
"Governmental Authority" 2.5
"group" paragraph (h) of Annex I
"HSR Act" 2.5
"Indemnified Parties" 5.5(a)
"Independent Directors" 1.3
"IRS" 2.15(b)
"ISO" 2.15(c)
"Law" 2.6
"leased employees" 2.15(b)
"Lehman Warrants" 1.9(b)
"Liens" 2.21
"Litigation" 2.13
"Majority of Current Preferred" 1.3
"Material Adverse Effect" 1.17
"Materials of Environmental Concern" 2.23(e)(iii)
"Merger" the recitals
"Minimum Condition" the introductory paragraph
of Annex I
"multiemployer plan" 2.15(b)
"NASD" 4.2
"Offer" the recitals
"Offer Documents" 1.1(c)
</TABLE>
G2
<PAGE>
<TABLE>
<CAPTION>
Section
TERM WHERE DEFINED
- ---- -------------
<S> <C>
"Offer to Purchase" 1.1(c)
"Parent" the recitals
"Parent Benefit Plan" 5.4(a)
"Parent Expenses" 8.7(c)(i)
"Parent Information" 3.5
"party in interest" 2.15(b)
"Patricof Warrants" 1.9(b)
"Permitted Financing" 8.7(e)
"Per Share Amount" the recitals
"person" 8.10
"person/group" paragraph (h) of Annex I
"Preferred Per Share Amount" the recitals
"Preferred Shares" the recitals
"Preferred Stock Purchase Agreement" the recitals
"Proxy Statement" 1.13(a)
"Purchaser" the recitals
"Rights" the recitals
"Rights Agreement" the recitals
"SEC" 1.1(b)
"Securities Act" 2.7
"Securities Exchange Act" 1.1(a)
"Shares" the recitals
"Schedule 14D-1" 1.1(c)
"Schedule 14D-9" 1.2(b)
"Standard Form Service Contract" 2.34
"Subordinated Debt Warrants" 1.9(b)
"subsidiary" 8.10
"Superior Proposal" 4.8(a)
"Surviving Corporation" 1.4
"Surviving Corporation Common Stock" 1.6(d)
"Takeover Statute" 4.10
"Tax" 2.16(b)
"Tax-exempt use property" 2.16(c)
"Tax Return" 2.16(b)
</TABLE>
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EXHIBIT 3
PREFERRED STOCK PURCHASE AGREEMENT
PREFERRED STOCK PURCHASE AGREEMENT, (this "AGREEMENT") dated
as of January 8, 1999, by and among T16 Acquisition Corp. ("BUYER"), a Delaware
corporation and an indirect, wholly-owned subsidiary of Tyco International Ltd.,
a Bermuda company ("TYCO"), the persons listed on SCHEDULE I hereto (such
persons being herein referred to individually as a "SELLER," and, collectively,
as "SELLERS"), American Stock Transfer & Trust Company, as escrow agent
("AGENT") and, solely with respect to SUBSECTIONS 11(d) and (f), Alarmguard
Holdings, Inc., a Delaware corporation ("ISSUER").
W I T N E S S E T H:
WHEREAS, Sellers are the registered and beneficial owners of
issued and outstanding shares of Series A Preferred Stock (the "SERIES A
PREFERRED STOCK") and Series B Preferred Stock (the "SERIES B PREFERRED STOCK"
and, together with the Series A Preferred Stock, the "PREFERRED STOCK") of
Issuer, in such respective series and amounts as are set forth in SCHEDULE I and
on the signature pages hereto; and
WHEREAS, Buyer, Tyco and Issuer have entered into an Agreement
and Plan of Merger, dated as of January 8, 1999, a copy of which is annexed
hereto as ANNEX A (the "MERGER AGREEMENT"), pursuant to which Buyer will
commence an offer (the "OFFER") to acquire all of the outstanding shares of
common stock, par value $0.0001 per share, of Issuer (the "COMMON STOCK"), and,
following the consummation of the Offer and subject to applicable securities
laws and the Delaware General Corporation Law, Buyer will be merged with and
into Issuer (the "MERGER"), and Issuer will become an indirect, wholly-owned
subsidiary of Tyco; and
WHEREAS, subject to and upon consummation of the Offer, each
Seller desires to sell to Buyer, and Buyer desires to purchase from each Seller
all right, title and interest of such Seller in and to such Seller's Preferred
Stock free and clear of all liens, claims, charges or encumbrances of any kind
(all such right, title and interest being collectively referred to herein as the
"ASSIGNED RIGHTS").
NOW, THEREFORE, in consideration of the premises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
<PAGE>
Section 1. DELIVERY OF CERTIFICATES. Prior to the execution
and delivery of this Agreement, each Seller has delivered to Agent, with copies
to Buyer, the original certificates evidencing such Seller's Preferred Stock,
together with, in each case, stock powers duly endorsed in blank, accompanied by
such power-of-attorneys, certified board of directors resolutions or other
documentation as may be required for the registration of transfer to Buyer of
such Preferred Stock pursuant to the terms and conditions of this Agreement (all
such certificates, powers, powers of attorney, certified board resolutions and
other documents being referred to as the "PREFERRED STOCK DOCUMENTATION"), to be
held by Agent in escrow in accordance with the terms of this Agreement.
Signatures on the stock powers shall be guaranteed by a firm that is a
participant in the Security Transfer Agents Medallion Program or the Stock
Exchange Medallion Program.
Section 2. SALE AND PURCHASE OF PREFERRED STOCK. (a) Within
one (1) business day following the date on which Buyer first makes payment for
shares of Common Stock that Buyer has accepted for payment pursuant to the
Offer, Buyer shall pay to each Seller the purchase price of $1,400 per share of
Preferred Stock together with accrued and unpaid dividends to and including the
date of the Effective Time (as defined below) delivered in accordance with
SECTION 1 hereof by such Seller to Agent (the "PURCHASE PRICE") by wire transfer
of immediately available funds to the account designated by such Seller on its
respective signature page hereto. Upon payment of the Purchase Price to each
Seller, such Seller shall irrevocably sell, transfer, grant and convey
(collectively, "TRANSFER") to Buyer, without representation or warranty except
as provided in this Agreement, and Buyer shall purchase, the Assigned Rights of
such Seller (the time of such transfer and purchase of the Assigned Rights of a
Seller as aforesaid is referred to as the "EFFECTIVE TIME" with respect to such
Seller). Promptly upon delivery by Buyer to Agent of written evidence,
consisting of a Federal Reserve Wire Network Reference Number, the time
processed and the value date, of payment of the Purchase Price to a Seller,
Agent shall release and deliver to Buyer the Preferred Stock Documentation of
such Seller held by Agent.
(b) If (v) Buyer or its affiliate shall not publicly announce
the commencement of the Offer within seven (7) business days from the date of
this Agreement, or (w) Buyer or its affiliate or Issuer shall publicly announce
that the Merger Agreement has been terminated in accordance with its terms, or
(x) Buyer or its affiliate shall publicly announce that the Offer has expired
without Buyer having purchased any shares of Common Stock thereunder or (y)
Buyer shall publicly announce that it has increased the per share price payable
to the holders of Common Stock in the Offer and the Merger to an amount in
excess of $9.25 and such announcement shall not state that the holders of at
least 75% of the outstanding shares of Preferred Stock have consented to such
increase or (z) Buyer shall not furnish to Agent evidence of payment of the
Purchase Price to any Seller or Sellers on or before March 31, 1999, then, in
the case of clauses (v), (w), (x) and (y), Agent shall promptly thereafter
return the Preferred Stock Documentation to all Sellers or, in the case of
clause (z), Agent shall promptly thereafter return to the affected Seller(s),
their respective Preferred Stock Documentation. (Any event referred to in the
preceding sentence is hereinafter referred to as a "TERMINATION EVENT," except
that any event referred to in clause (z) shall be deemed to be a Termination
Event only with respect to the affected Sellers(s).) Nothing in this SUBSECTION
2(b) or elsewhere in this
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<PAGE>
Agreement shall relieve Buyer of its obligation to purchase and pay for the
shares of Preferred Stock in accordance with SUBSECTION 2(a) if Buyer has
accepted shares of Common Stock for payment pursuant to the Offer.
(c) Upon delivery of all of the Preferred Stock Documentation
to Buyer and/or each Seller as provided in SUBSECTIONS 2(a) or 2(b), Agent shall
have no further duties or obligations under this Agreement.
Section 3. SELLERS' REPRESENTATIONS. Each Seller, severally
and not jointly, hereby represents and warrants to Buyer and its successors and
assigns, as of the date hereof, and as of the Effective Time with respect to
such Seller, that:
(a) POWER AND AUTHORITY. Such Seller has full power and
authority to assign its Assigned Rights and to enter into and perform this
Agreement. This Agreement (i) has been duly authorized, executed and delivered
by such Seller and (ii) is (subject to the application of bankruptcy, insolvency
or receivership laws to such Seller and equitable principles generally) legal,
valid and binding and enforceable against such Seller in accordance with its
terms;
(b) TITLE. Such Seller is the sole legal and beneficial owner
of the Assigned Rights and has good title thereto, free and clear of all liens,
claims, charges and encumbrances of any kind and at the Effective Time will
transfer to Buyer such good title, free and clear of any liens, claims, charges
and encumbrances of any kind;
(c) NO OTHER CONSENT. No consent, approval, waiver,
authorization, notice, declaration or filing ("CONSENT") is required to be
received by such Seller from or made by such Seller with any governmental or
regulatory authority, agency, department, board, commission or instrumentality
or any court, tribunal or arbitrator and any self-regulatory organization
(collectively, "GOVERNMENTAL AUTHORITY"), or any other person, in connection
with the execution or delivery by such Seller of this Agreement or the transfer
by such Seller of such Seller's Assigned Rights pursuant to this Agreement other
than such Consents that have heretofore been made or obtained;
(d) NO VIOLATIONS. Such Seller's execution and delivery of
this Agreement, the consummation by such Seller of the transactions contemplated
hereby and compliance by such Seller with any of the provisions hereof will not
(i) conflict with or result in any breach of any provision of the Certificate of
Incorporation, Bylaws or other charter document of such Seller, (ii) result in a
violation or breach of, or constitute (with or without notice or lapse of time
or both) a default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of, any material
contract, agreement, note, indenture, mortgage, lease, license or other
arrangement or understanding to which such Seller is a party or by which such
Seller or any of its assets are bound, (iii) result in the creation or
imposition of any lien or encumbrance of any kind upon the Assigned Rights of
such Seller, or (iv) violate any applicable provision of any statute, law, rule
or regulation or any order, decision, injunction, judgment, award or decree to
which such Seller or its assets or properties are subject;
3
<PAGE>
(e) LITIGATION. There is no suit, action or proceeding pending
or, to the knowledge of such Seller, threatened, nor is there any judgment,
decree, injunction, rule or order of any Governmental Authority against such
Seller or with respect to its Assigned Rights which, individually or in the
aggregate, would reasonably be expected adversely to affect such Seller's
transfer of its Assigned Rights pursuant to this Agreement or otherwise to
affect its ability to perform its obligations under this Agreement;
(f) SOPHISTICATED SELLER. (i) Such Seller is a sophisticated
seller with respect to its Assigned Rights, and has adequate information
concerning the business and financial condition of Issuer to make an informed
decision regarding the sale of its Assigned Rights and has independently and
without reliance upon Buyer and based on such information as such Seller has
deemed appropriate, made its own analysis and decision to sell its Assigned
Rights and to enter into this Agreement; (ii) Buyer has not given any investment
advice or rendered any opinion as to whether the sale of the Assigned Rights is
prudent; and (iii) such Seller acknowledges that if the Effective Time with
respect to such Seller shall occur, the transfer of the Assigned Rights to Buyer
hereunder shall be irrevocable and without any recourse to Buyer except with
respect to breaches of representations, warranties and covenants expressly set
forth in this Agreement, and pursuant to the indemnities contained herein;
(g) BUYER'S ACCESS TO INFORMATION. Such Seller acknowledges
that Buyer and Buyer's affiliates may have received material non-public
information concerning Issuer (the "BUYER UNDISCLOSED INFORMATION") in the
course of its due diligence investigation of Issuer conducted in connection with
the negotiation of the Merger Agreement. Such Seller acknowledges that the Buyer
Undisclosed Information may have caused Buyer to enter into this Agreement to
purchase the Assigned Rights and, if disclosed, could have a material affect on
such Seller's decision to transfer the Assigned Rights;
(h) INSOLVENCY. Such Seller is not insolvent or otherwise in
any condition that would entitle any creditor of such Seller, any person acting
or purporting to act under authority of any legislation pertaining to bankruptcy
or creditors' rights or any banking authority, to require that such Seller
divest itself of the purchase price in respect of the assignment hereunder;
(i) ACCREDITED INVESTOR. Such Seller is an "accredited
investor" as that term is defined in Rule 501 ("RULE 501") of Regulation D
promulgated under the United States Securities Act of 1933, as amended,
(together with the rules and regulations promulgated thereunder, the "SECURITIES
ACT");
(j) NO PRIOR ASSIGNMENT. Such Seller has made no prior
transfer of its Assigned Rights or of any interest therein;
(k) UNPAID OBLIGATIONS. There is no payment obligation of any
kind (whether fixed, contingent, conditional or otherwise) in respect of its
Assigned Rights that such Seller is or shall be required to pay or otherwise
perform that such Seller has not paid or otherwise
4
<PAGE>
performed in full; and
(l) NO BROKER OR FINDER. Such Seller has not engaged,
consented to or authorized any broker, finder or intermediary to act on its
behalf, directly or indirectly, as a broker, finder or intermediary in
connection with the transactions contemplated by this Agreement other than
Donaldson, Lufkin & Jenrette Securities Corp.
Section 4. BUYER'S REPRESENTATIONS. Buyer hereby represents
and warrants to each Seller and such Seller's successors and assigns, as of the
date hereof, and as of the Effective Time with respect to such Seller that:
(a) POWER AND AUTHORITY. Buyer has full power and authority to
purchase such Seller's Assigned Rights and to enter into and perform this
Agreement. This Agreement (i) has been duly authorized, executed and delivered
by Buyer (ii) is (subject to the application of bankruptcy, insolvency or
receivership laws to Buyer and equitable principles generally) legal, valid and
binding and enforceable against Buyer in accordance with its terms;
(b) NO OTHER CONSENTS. No Consent is required to be received
by Buyer from or made by Buyer with any Governmental Authority or any other
person in connection with the execution or delivery by Buyer of this Agreement
or the purchase by Buyer of such Seller's Assigned Rights pursuant to this
Agreement other than such Consents that have heretofore been obtained or made or
will be obtained or made prior to the Effective Time;
(c) NO VIOLATIONS. Buyer's execution and delivery of this
Agreement, the consummation by Buyer of the transactions contemplated hereby and
compliance by Buyer with any of the provisions hereof will not (i) conflict with
or result in any breach of any provision of the Certificate of Incorporation,
Bylaws or other charter document of Buyer, (ii) result in a violation or breach
of, or constitute (with or without notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation or acceleration) under
any of the terms, conditions or provisions of, any material contract, agreement,
note, indenture, mortgage, lease, license or other arrangement or understanding
to which Buyer is a party or by which Buyer or any of its assets or property is
subject, (iii) result in the creation or imposition of any material lien or
encumbrance of any kind upon any of the assets of Buyer or any subsidiary of
Buyer or (iv) violate any applicable provision of any statute, law, rule or
regulation or any order, decision, injunction, judgment, award or decree to
which Buyer or its assets or properties are subject;
(d) LITIGATION. There is no suit, action or proceeding,
pending or, to the knowledge of Buyer, threatened, nor is there any judgment,
decree, injunction, rule or order of any Governmental Authority against Buyer or
any of its affiliates which, individually or in the aggregate, would reasonably
be expected adversely to affect Buyer's ability to perform its obligations under
this Agreement.
(e) SOPHISTICATED BUYER. (i) Buyer is a sophisticated buyer
with respect to the Assigned Rights, and has adequate information concerning the
business and financial condition
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<PAGE>
of Issuer to make an informed decision regarding the purchase of the Assigned
Rights and has independently and without reliance upon such Seller and based on
such information as Buyer has deemed appropriate, made its own analysis and
decision to acquire the Assigned Rights and to enter into this Agreement; (ii)
such Seller has not given any investment advice or rendered any opinion as to
whether the purchase of the Assigned Rights is prudent; and (iii) Buyer
acknowledges that if the Effective Time with respect to such Seller shall occur,
the transfer of the Assigned Rights by such Seller hereunder is irrevocable and
without any recourse to such Seller except with respect to breaches of
representations, warranties and covenants expressly set forth in this Agreement,
and pursuant to the indemnities contained herein;
(f) SELLER'S ACCESS TO INFORMATION. Buyer acknowledges that
such Seller may possess material non-public information concerning Issuer (the
"SELLER UNDISCLOSED INFORMATION") by virtue of such Seller's relationship to
Issuer. Buyer acknowledges that the Seller Undisclosed Information may have
caused such Seller to enter into this Agreement to transfer the Assigned Rights
and, if disclosed, could have a material affect on Buyer's decision to purchase
the Assigned Rights;
(g) BUSINESS ACTIVITIES. Buyer is a newly formed Delaware
corporation and has conducted no business, except such business activities as
are contemplated by or incident to the performance of Buyer's obligations under
the Merger Agreement, the Offer and this Agreement;
(h) ACCREDITED INVESTOR; RESALE. Buyer, together with its
affiliates, is an "accredited investor" within the meaning of Rule 501. Buyer
acknowledges that the Assigned Rights are not being acquired with a view to
resale that would violate any applicable securities law;
(i) NO BROKER OR FINDER. Buyer has not engaged, consented to
or authorized any broker, finder or intermediary to act on its behalf, directly
or indirectly, as a broker, finder or intermediary in connection with the
transactions contemplated by this Agreement.
(j) FINANCING ARRANGEMENTS. Buyer and Tyco (including for this
purpose one or more of its wholly-owned subsidiaries) have funds available to
them sufficient to enable Buyer to purchase such Seller's Assigned Rights in
accordance with the terms of this Agreement.
Section 5. COVENANTS OF SELLERS. Each Seller, severally and
not jointly, covenants and agrees that unless a Termination Event shall have
occurred:
(a) AGREEMENT TO VOTE SHARES. At every meeting of the
stockholders or of the holders of any class or series of stock of Issuer called
with respect to any of the following, and at every adjournment thereof, and on
every action or approval by written consent of the stockholders or of the
holders of any class or series of stock of Issuer with respect to any of the
following, such Seller shall cast any votes that it may have at the time against
(x) approval of any Company Takeover Proposal (as defined in the Merger
Agreement), (y) any merger
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(including, without limitation, an Alternative Transaction (as defined in the
Merger Agreement)), consolidation, sale of assets requiring stockholder approval
or the approval of the holders of any class or series of stock, reorganization
or recapitalization of Issuer, with any other person other than Buyer or its
affiliates, and (z) any liquidation or winding up of Issuer (each of the
foregoing is hereinafter referred to as an "OPPOSING PROPOSAL");
(b) AGREEMENT NOT TO SOLICIT. Such Seller will not, and will
not permit any entity under its control to: (1) solicit proxies or become a
"participant" in a "solicitation" (as such terms are defined in Regulation 14A
under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT")) with
respect to an Opposing Proposal or otherwise encourage or assist any person in
taking or planning any action that would constitute an Opposing Proposal; or (2)
initiate a vote or action by written consent of Issuer's stockholders or of the
holders of any class or series of stock with respect to an Opposing Proposal;
(c) AGREEMENT NOT TO TRANSFER SHARES. Such Seller shall not
effect a transfer or any pledge or other encumbrance of any of its Assigned
Rights to or in favor of any person, other than to an affiliate of such Seller
who shall have agreed in a writing, in form and substance acceptable to Buyer in
its sole discretion, for the benefit of and delivered to Buyer, to be bound by
all provisions of this Agreement applicable to such Seller.
(d) TENDER OF COMMON STOCK. Such Seller agrees to tender all
shares of Common Stock now owned or hereafter acquired by such Seller in the
Offer.
Section 6. COVENANT OF BUYER. Buyer covenants and agrees that
Buyer or its affiliate shall make a prompt public announcement of: (i) the
Merger Agreement is terminated in accordance with its terms; or (ii) the Offer
expires without Buyer having purchased any shares of Common Stock thereunder; or
(iii) the consideration payable to the holders of the Common Stock in the Offer
and the Merger has been increased to an amount in excess of $9.25.
Section 7. NO OTHER REPRESENTATIONS. Each Seller and Buyer
acknowledge and represent and warrant to each other that no party has made any
representation or warranty, whether express or implied, of any kind or character
except as expressly set forth or implied in this Agreement.
Section 8. PAYMENT AND DELIVERY BY SELLERS. Each Seller,
severally and not jointly, agrees to cause any distributions with respect to
Preferred Stock ("DISTRIBUTIONS") owned by such Seller paid or delivered after
the Effective Time to be paid or delivered directly to Buyer. In the event that
a Seller nevertheless receives any such Distributions after the Effective Time
with respect to such Seller, (i) such Seller agrees to accept the same as agent
on behalf of and for the sole benefit of Buyer, and to pay or deliver the same
forthwith to Buyer (free of any withholding, set-off or deduction of any kind)
in the same form received, with the endorsement of such Seller, without
recourse, when necessary or appropriate; and (ii) no Seller shall have any
legal, equitable or beneficial interest in such Distributions.
7
<PAGE>
Section 9. INDEMNITIES. (a) Each Seller, severally and not
jointly, agrees to indemnify, defend and hold Buyer and its officers, directors,
employees, agents and controlling persons and their successors and assigns
(collectively, the "BUYER INDEMNITEES") harmless from and against any and all
expenses, losses, claims, judgments, damages, liabilities or obligations
(collectively, "LIABILITIES") which are incurred by the Buyer Indemnitees or any
of them, including without limitation reasonable attorneys' fees and expenses,
caused by, or in any way resulting from or relating to such Seller's breach of
any of the representations, warranties, covenants or agreements of such Seller
set forth in this Agreement.
(b) Buyer agrees to indemnify, defend and hold each Seller and
such Seller's officers, directors, employees, agents and controlling persons and
their successors and assigns (collectively, the "SELLER INDEMNITEES") harmless
from and against any and all Liabilities which are incurred by or threatened
against the Seller Indemnitees or any of them, including without limitation
reasonable attorneys' fees and expenses, caused by, or in any way resulting from
or relating to Buyer's breach of any of the representations, warranties,
covenants or agreements of Buyer set forth in this Agreement.
Section 10. FILINGS AND FURTHER ASSURANCES. From and after the
Effective Time, each Seller agrees to take such other reasonable steps as may be
requested by Buyer to effect the transfer of the Assigned Rights of such Seller
to Buyer. Each party further agrees to execute and deliver, or to cause to be
executed and delivered, all such instruments (including all necessary
endorsements) and to take all such action as any other party may reasonably
request in order to effectuate the intent and purposes, and to carry out the
terms, of this Agreement.
Section 11. CERTAIN AGENT MATTERS. (a) Agent shall receive,
hold and distribute the Preferred Stock Documentation in accordance with
SECTIONS 1 and 2.
(b) Agent shall be entitled to rely, and shall be protected in
acting in reliance, upon any instructions and directions furnished pursuant to
and in accordance with this Agreement.
(c) Agent shall be entitled to treat as genuine, and as the
document it purports to be, any letter, paper, notice or other document
furnished to it by Buyer or any Seller and believed by Agent to be genuine and
to have been signed and presented by the proper party or parties, without being
required to determine the authenticity or correctness of any fact stated
therein, the propriety or validity thereof, or the authority or authorization of
the party or parties making and/or delivering the same to do so.
(d) Buyer and Issuer, jointly and severally, agree to pay
Agent upon demand all reasonable expenses incurred by Agent in connection with
its duties hereunder, including any reasonable attorneys fees or other legal
costs, expenses and disbursements.
(e) Neither Agent nor any of its directors, officers,
partners, employees, controlling persons or agents, direct or indirect, shall be
liable to Buyer or any Seller or any other person or entity for or in respect to
any loss, claim, damage, or liability resulting from, or
8
<PAGE>
arising out of, any action taken or omitted by Agent in connection with this
Agreement, except for any loss, claim, damage or liability which shall finally
be adjudicated to be the result of gross negligence or willful bad faith on the
part of Agent or any such director, officer, partner, employee, controlling
person or agent.
(f) Buyer and Issuer, jointly and severally, covenant and
agree to reimburse, indemnify and hold harmless Agent from and against any
and all claims, actions, judgments, damages, losses, liabilities, costs,
transfer or other taxes, and expenses (including without limitation
reasonable attorneys' fees and expenses) incurred or suffered by Agent, or to
which Agent may become subject and not resulting from any negligence, bad
faith or willful misconduct on Agent's part, arising out of or incident to
this Agreement or the administration of Agent's duties hereunder, or arising
out of or incident to Agent's compliance with the instructions set forth
herein or with any instructions delivered to Agent pursuant hereto, or as a
result of Agent defending itself against any claim or liability resulting
from Agent's actions as Agent, including any claim against Agent by any
Seller, which covenant and agreement shall survive the termination hereof.
Agent hereby represents that Agent will notify each of Buyer and Issuer by
letter, or facsimile confirmed by letter, of any receipt by Agent of a
written assertion of a claim against Agent, or any action commenced against
Agent, within ten (10) business days after Agent's receipt of written notice
of such assertion or Agent's having been served with the summons or other
first legal process giving information as to the nature and basis of any such
action. However, Agent's failure to so notify Buyer and Issuer shall not
operate in any manner whatsoever to relieve Buyer and Agent from any
liability which they may have on account of this SUBSECTION 11(f) if no
prejudice occurs. At their election, Buyer and/or Issuer may assume the
conduct of Agent's defense in any such action or claim at their joint cost
and expense. In the event that Buyer and/or Issuer elect to assume the
defense of any such action or claim and confirm to Agent in writing that the
indemnity provided for in this SUBSECTION 11(f) applies to such action or
claim, neither Buyer nor Issuer shall be liable for the fees and expenses of
any counsel thereafter retained by Agent.
(g) This Agreement sets forth exclusively the duties and
obligations of Agent with respect to any and all matters pertinent to its acting
as such hereunder. Agent shall not be obligated to refer to, and shall not be
bound by, any other document or agreement.
Section 12. MISCELLANEOUS. (a) COSTS AND FEES. Except as
otherwise expressly provided for herein, each party to this Agreement shall bear
its own costs and expenses, including, but not limited to, attorneys' fees and
expenses, in connection with the transactions contemplated hereby.
(b) INTEGRATION. This Agreement constitutes the complete
agreement of the parties hereto with respect to the subject matters referred to
herein and supersedes all prior or contemporaneous negotiations, promises,
covenants, agreements or representations of every nature whatsoever with respect
thereto, all of which have become merged and finally integrated into this
Agreement. Notwithstanding the foregoing, the confidentiality letters between
Issuer and each Seller shall survive the execution and delivery of this
Agreement.
9
<PAGE>
(c) AMENDMENT. This Agreement cannot be amended, modified or
supplemented except by an instrument in writing executed by the parties hereto
that are to be bound thereby. Furthermore, this Agreement cannot be amended to
increase the purchase price payable to any Seller to greater than $1,400 per
share of Preferred Stock together with accrued and unpaid dividends to and
including the date of the Effective Time without such increased purchase price
being offered to each Seller.
(d) NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given when delivered
in person, by facsimile, receipt confirmed, or on the next business day when
sent by overnight courier or on the third succeeding business day when sent by
registered or certified mail (postage prepaid, return receipt requested) to
Agent or Buyer at the following addresses or to any Seller at the address set
forth on such Seller's signature page hereto (or at such other address for a
party as shall be specified by like notice):
(i) if to Agent, to:
American Stock Transfer Company
6201 15th Avenue
Brooklyn, NY 11219
Attention: Barry Rosenthal
Telecopy: (718) 259-1144
Confirm: (718) 921-8380
with a copy to:
American Stock Transfer Company
6201 15th Avenue
Brooklyn, NY 11219
Attention: Herbert Lemmer
Telecopy: (718) 331-1852
Confirm: (718) 921-8209
(ii) if to Buyer, to:
c/o Tyco International (US) Inc.
One Tyco Park
Exeter, New Hampshire 03833
Attention: Mark A Belnick, Esq.
Telecopy: (603) 778-7700
Confirm: (603) 778-9700
with a copy to
Kramer Levin Naftalis & Frankel LLP
10
<PAGE>
919 Third Avenue
New York, New York 10022
Attention: Abbe L. Dienstag, Esq.
Telecopy: (212) 715-8000
Confirm: (212) 715-9100.
(e) CHOICE OF LAW, CHOICE OF FORUM. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without regard to any conflicts of laws provisions thereof. Each party to this
Agreement hereby irrevocably consents to the jurisdiction of the United States
Court for the Southern District of New York and the courts of the State of New
York located in the City of New York (collectively, the "COURTS") in any action
to enforce, interpret or construe any provision of this Agreement or of any
other agreement or document delivered in connection with this Agreement, and
also hereby irrevocably waives any defense of improper venue, forum non
conveniens or lack of personal jurisdiction to any such action brought in those
Courts. Each party further irrevocably agrees that any action to enforce,
interpret or construe any provision of this Agreement will be brought only in
such Courts. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(f) SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable harm would occur in the event that any of the provisions of this
Agreement were not performed in accordance with its specific terms or were
otherwise breached. Accordingly the parties further agree that each party shall
be entitled to injunctions or restraining orders to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any of
the Courts, this being in addition to any other remedy to which they are
entitled at law or in equity.
(g) COUNTERPARTS. This Agreement may be executed in
counterparts, each of which when so executed shall be an original, but all such
counterparts shall together constitute but one and the same instrument.
(h) BUSINESS DAY. The term "BUSINESS DAY" means any day other
than a day on which the commercial banking institutions in the City of New York,
Borough of Manhattan are authorized or required by law to remain closed.
(i) BINDING EFFECT; ASSIGNMENT. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Nothing, including
without limitation the delivery of the Preferred Stock Documentation to Buyer,
Seller or Agent in accordance with SECTIONS 1 or 2, shall relieve any party from
any liability for such party's willful breach of this Agreement or under the
indemnification provisions of SECTION 9. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any Seller prior
to the Effective Time without the prior written consent of Buyer. Buyer may
assign its rights, interest and obligations hereunder to any other wholly-owned
direct or indirect subsidiary of Tyco, provided
11
<PAGE>
that the provisions of the Guarantee immediately following the signature pages
hereto shall apply to such other subsidiary.
(j) THIRD PARTIES. Nothing contained in this Agreement or in
any instrument or document executed by any party in connection with the
transactions contemplated hereby shall create any rights in, or be deemed to
have been executed for the benefit of, any person that is not a party hereto or
thereto or a successor or permitted assign of such a party; PROVIDED HOWEVER,
that (i) the parties hereto specifically acknowledge that the provisions of
SECTION 9 hereof are intended to be for the benefit of, and shall be enforceable
by, the Buyer Indemnitees and the Seller Indemnitees and (ii) Tyco shall be
deemed a third party beneficiary of this Agreement with respect to the rights of
Buyer.
Section 13. CONSENT. Each Seller irrevocably consents to any
necessary amendment, modification and/or waiver of (x) Section 8.1 of the
Preferred Stock Purchase Agreement, dated as of February 2, 1998 (the "INITIAL
PURCHASE AGREEMENT"), to provide that neither this Agreement or the Merger
Agreement, nor the transactions contemplated hereby or thereby, shall be deemed
to violate or impair the ability of Issuer to perform its obligations under any
provision of the Initial Purchase Agreement and (y) Section 4H of the
Certificate of Designations of the Preferred Stock to provide that in no event
shall the amount payable to the holder of any share of Preferred Stock as a
result of the consummation of the Offer or the merger contemplated by the Merger
Agreement be other than $1,400 per share of Preferred Stock together with
accrued and unpaid dividends to and including the date of the Effective Time.
Such consent shall be effective immediately prior to the Effective Time. Each
Seller's consent contained in this SECTION 13 shall be void and of no effect if
a Termination Event shall occur with respect to such Seller without such
Seller's Assigned Rights being transferred to Buyer.
Section 14. EFFECTIVENESS. This Agreement shall not be
effective unless it is executed by Buyer and by the holders of not less than
seventy-five percent (75%) in principal amount of the Preferred Stock and the
Guarantee annexed hereto is executed by Tyco.
12
<PAGE>
[SIGNATURE PAGES AND GUARANTEE FOLLOW]
13
<PAGE>
IN WITNESS WHEREOF, the parties have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
stated above.
T16 ACQUISITION CORP.
By: /s/ Mark A. Belnick
----------------------------------
Name: Mark A. Belnick
Title: President
ALARMGUARD HOLDINGS, INC.
signing solely with respect to
SUBSECTIONS 11(d) and (f)
By: /s/ Russell R. MacDonnell
----------------------------------
Name: Russell R. MacDonnell
Title: Chairman, CEO
[SIGNATURE PAGES OF SELLERS AND GUARANTEE FOLLOW]
14
<PAGE>
SIGNATURE PAGE OF SELLER
TO
PREFERRED STOCK PURCHASE AGREEMENT
[NAME OF SELLER]
By:
-------------------------------
Name:
Title:
Number of shares of
Series A Preferred Stock:
---------------------------
Number of shares of
Series B Preferred Stock:
---------------------------
Wire Payment Instructions:
Bank
-------------------------
ABA No.
-------------------------
Account No.
-------------------------
Account Name
-------------------------
Address for Notices:
-------------------------
-------------------------
-------------------------
Facsimile No.:
---------------------
Confirm No.:
---------------------
Attention:
---------------------
with a copy to:
-------------------------
-------------------------
-------------------------
Facsimile No.:
---------------------
Confirm No.:
---------------------
Attention:
---------------------
15
<PAGE>
GUARANTEE
Tyco International Ltd., a Bermuda company, hereby guarantees the full and
timely performance by Buyer of each and every obligation of Buyer or any
permitted assignee of Buyer under the foregoing Agreement. This is a guaranty of
payment and performance, and not of collection, and Tyco International Ltd.
acknowledges and agrees that this guarantee is unconditional, and no release or
extinguishment of the obligations or liabilities of Buyer or its permitted
assignee under this Agreement, whether by reason of bankruptcy or otherwise,
shall affect the continuing validity and enforceability of this guarantee.
The provisions of Section 11 of the Agreement shall apply to this Guarantee
mutatis mutandum, except that the address for notices and other communications
to Tyco International Ltd. is:
Tyco International Ltd.
The Gibbons Building
10 Queen Street, Suite 301
Hamilton HM11 Bermuda
Attention: Secretary
Telecopy: (441) 295-9647
Confirm: (441) 292-8674
TYCO INTERNATIONAL LTD.
By: /s/ Mark A. Belnick
---------------------------
Name: Mark A. Belnick
Title: Chief Corporate Counsel
G-1
<PAGE>
SCHEDULE I *
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
SELLER SHARES OF SERIES A SHARES OF SERIES B PURCHASE PRICE
PREFERRED STOCK PREFERRED STOCK
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ziff Asset Manage- 7,250 $10,150,000.00
ment, L.P.
- --------------------------------------------------------------------------------------------
Canaan Equity L.P. 5,000 7,000,000.00
- --------------------------------------------------------------------------------------------
BF Partners 400 560,000.00
- --------------------------------------------------------------------------------------------
Paul Finkelstein 100 140,000.00
- --------------------------------------------------------------------------------------------
David Heidecorn 75 105,000.00
- --------------------------------------------------------------------------------------------
Russell MacDonnell 125 175,000.00
- --------------------------------------------------------------------------------------------
Exeter Capital 2,500 3,500,000.00
Partners IV, L.P.
- --------------------------------------------------------------------------------------------
Aetna Life Insurance 5,000 7,000,000.00
Company
- --------------------------------------------------------------------------------------------
Advance Capital 1,726 2,416,400.00
Offshore Partners
- --------------------------------------------------------------------------------------------
Advance Capital 5,524 7,733,600.00
Partners, L.P.
- --------------------------------------------------------------------------------------------
Elliott Associates, 2,000 2,800,000.00
L.P.
- --------------------------------------------------------------------------------------------
OZ Master Fund, Ltd. 2,000 2,800,000.00
- --------------------------------------------------------------------------------------------
Lehman Brothers 5,000 7,000,000.00
Capital Partners III,
L.P.
- --------------------------------------------------------------------------------------------
IBJ Schroder Bank & 200 280,000.00
Trust Company, NY
- --------------------------------------------------------------------------------------------
Granite Properties 1,500 2,100,000.00
Management Corp.
- --------------------------------------------------------------------------------------------
Westgate 2,000 2,800,00.00
International, L.P.
- --------------------------------------------------------------------------------------------
Credit Suisse 200 280,000.00
- --------------------------------------------------------------------------------------------
Kenneth Gross 100 140,000.00
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
</TABLE>
* Purchase price does not include accrued and unpaid dividends.
<PAGE>
Exhibit 4
[ALARMGUARD HOLDINGS, INC. LETTERHEAD]
January 15, 1999
Dear Stockholder:
We are pleased to inform you that on January 8, 1999, Alarmguard Holdings,
Inc. (the "Company") entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Tyco International Ltd. ("Tyco") and its subsidiary T16
Acquisition Corp. ("Purchaser"), which provides for the acquisition of the
Company by Tyco. Under the terms of the Merger Agreement, Purchaser today
commenced a tender offer (the "Offer") to purchase all of the Company's
outstanding shares of common stock at a price of $9.25 per share in cash. In
addition, all of the holders of the preferred stock of the Company have entered
into a Preferred Stock Purchase Agreement (the "Stock Purchase Agreement") with
Purchaser, which provides that such holders will sell their shares of preferred
stock to Purchaser at a price of $1,400 per share in cash, plus accrued and
unpaid dividends, upon consummation of the Offer (the "Purchase").
Following the successful completion of the Offer and the Purchase, Purchaser
will be merged with the Company (the "Merger"), and all shares of common stock
not purchased in the Offer will receive in the Merger the same $9.25 per share
in cash. Completion of the Offer, the Purchase and the Merger are subject to
antitrust approvals and other customary conditions.
THE COMPANY'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT, THE STOCK PURCHASE AGREEMENT, THE OFFER, THE PURCHASE AND THE MERGER
AND DETERMINED THAT THE TERMS OF THE OFFER, THE PURCHASE AND THE MERGER ARE FAIR
TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS. ACCORDINGLY,
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU ACCEPT THE OFFER AND TENDER ALL OF
YOUR SHARES OF COMMON STOCK PURSUANT TO THE OFFER.
In arriving at its recommendation, the Company's Board of Directors gave
careful consideration to a number of factors which are described in the enclosed
Schedule 14D-9, including the opinion of the Company's financial advisor,
Donaldson, Lufkin & Jenrette Securities Corporation, that the aggregate
consideration to be received by the holders of the Company's stock pursuant to
the Merger Agreement and the Stock Purchase Agreement is fair to such
stockholders from a financial point of view.
Additional information with respect to the Offer, the Purchase and the
Merger is contained in the enclosed Schedule 14D-9, and we urge you to consider
this information carefully.
On behalf of the management and directors of the Company, we thank you for
the support you have given the Company.
Sincerely yours,
/s/ Russell R. MacDonnell
Russell R. MacDonnell
Chairman, Chief Executive Officer and
President
<PAGE>
TYCO INTERNATIONAL'S ADT UNIT TO ACQUIRE
ALARMGUARD HOLDINGS, INC.
IMMEDIATELY ACCRETIVE ACQUISITION PROVIDES STRONG
HIGH-END RESIDENTIAL ALARM PRESENCE
Hamilton, Bermuda and Orange, CT, January 11, 1999 - Tyco International Ltd.
(NYSE-TYC, LSE-TYI, BSX-TYC) (Tyco), a diversified manufacturing and service
company, and Alarmguard Holdings, Inc. (AMEX-AGD) (Alarmguard), a provider of
electronic security services, announced today that they have entered into a
definitive Merger Agreement. Under the Agreement, a subsidiary of Tyco will
acquire all of the outstanding shares of Alarmguard stock. Tyco will shortly
commence a tender offer to purchase all of Alarmguard's common shares for
$9.25 per share in cash. The tender offer will be followed by a merger in
which each of the remaining common shares of Alarmguard will be exchanged for
$9.25 in cash. The Tyco subsidiary has also entered into an agreement to
purchase substantially all of Alarmguard's preferred stock. The purchase of
the preferred stock is contingent upon the purchase of the common shares in
the tender offer.
The offer will be made pursuant to definitive offering documents to be filed
with the Securities and Exchange Commission. The offer is conditioned on the
tender of a majority of the outstanding shares of common stock, as well as
certain other conditions, including the receipt of necessary government
approvals.
"Alarmguard is an excellent addition to our ADT Security business," said L.
Dennis Kozlowski, Tyco's Chairman and Chief Executive Officer. "In addition
to securing our position in the Northeast and Mid-Atlantic states, where
Alarmguard has built a very strong and loyal customer base, we expect to
create significant value by taking Alarmguard's local expertise in the
high-end residential market and applying it to our national franchise. The
transaction will have an immediate positive impact on earnings per share."
Tyco recently acquired Holmes Protection and Wells Fargo Alarm, and the
acquisition of the security operations of Entergy is pending. ADT Security is
the largest provider of electronic security services in the U. S.
Alarmguard sells and installs burglar and fire systems and provides security
monitoring services and security system repair and maintenance services to
homeowners and businesses.
Tyco International Ltd., a diversified manufacturing and service company, is
the world's largest manufacturer and installer of fire protection systems,
the largest provider of electronic security services, the largest
manufacturer of
<PAGE>
flow control valves, and has strong leadership positions in disposable
medical products, plastics and adhesives, electrical and electronic
components and underwater telecommunications systems. The company operates in
more than 80 countries around the world and has expected fiscal 1999 revenues
in excess of $17 billion.
FORWARD LOOKING INFORMATION
Certain statements in this release are "forward looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. All
forward looking statements involve risks and uncertainties. In particular,
any statements contained herein regarding the consummation and benefits of
future acquisitions, as well as expectations with respect to future sales,
operating efficiencies and product expansion, are subject to known and
unknown risks, uncertainties and contingencies, many of which are beyond the
control of the Company, which may cause actual results, performance or
achievements to differ materially from anticipated results, performance or
achievements. Factors that might affect such forward looking statements
include, among other things, overall economic and business conditions, the
demand for the Company's goods and services, competitive factors in the
industries in which the Company competes, changes in government regulation;
changes in tax requirements (including tax rate changes, new tax laws and
revised tax law interpretations); interest rate fluctuations and other
capital market conditions, including foreign currency rate fluctuations;
economic and political conditions in international markets, including
governmental changes and restrictions on the ability to transfer capital
across borders; the ability to achieve anticipated synergies and other cost
savings in connection with acquisitions; the timing, impact and other
uncertainties of future acquisitions; and the Company's ability and its
customers' and suppliers' ability to replace, modify or upgrade computer
programs in order to adequately address the year 2000 issue.
<PAGE>
EXHIBIT 6
[DONALDSON, LUFKIN & JENRETTE LETTERHEAD]
January 8, 1999
Board of Directors
Alarmguard Holdings, Inc.
125 Frontage Road
Orange, CT 06477
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to the stockholders of Alarmguard Holdings, Inc. (the "Company") of the
aggregate consideration to be received by such stockholders as contemplated by
the terms of the Agreement and Plan of Merger, dated as of January 8, 1999 (the
"Agreement"), by and among the Company, Tyco International, Ltd. ("Tyco") and
T16 Acquisition Corp. ("Purchaser"), a wholly owned subsidiary of Tyco, pursuant
to which Purchaser will be merged with and into the Company (the "Merger").
Pursuant to the Agreement, Tyco will commence a tender offer (the "Tender
Offer") for any and all outstanding shares of the Company's common stock, par
value $.0001 per share ("Company Common Stock") at a cash price of $9.25 per
share or such higher price as may be paid in the Tender Offer (the "Offer
Price"). The Tender Offer is to be followed by the Merger in which the shares of
all holders of Company Common Stock who did not tender would be converted into
the right to receive the Offer Price. In addition, pursuant to the Preferred
Stock Purchase Agreement dated as of January 8, 1999 by and among Purchaser, the
persons listed thereon and American Stock Transfer and Trust Company, as escrow
agent, the holders of each issued and outstanding share of Series A Preferred
Stock, par value $.0001 per share ("Series A Preferred Stock"), and Series B
Preferred Stock, par value $.0001 per share ("Series B Preferred Stock" and,
together with the Series A Preferred Stock, will receive $1,400 per share of
Preferred Stock.
In arriving at our opinion, we have reviewed the Agreement and the Preferred
Stock Purchase Agreement. We also have reviewed financial and other information
that was publicly available or furnished to us by the Company including
information provided during discussions with management. Included in the
information provided during discussions with management was certain financial
projections of the Company for the period beginning December 31, 1998 and ending
December 31, 2002 prepared by the management of the Company. In addition, we
have compared certain financial and securities data of the Company with various
other companies whose securities are traded in public markets, reviewed the
historical stock prices and trading volumes of Company Common Stock, reviewed
prices and premiums paid in certain other business combinations and conducted
such other financial studies, analyses and investigations as we deemed
appropriate for purposes of this opinion.
In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
us from public sources, that was provided to us by the Company and Tyco and
their respective representatives, or that was otherwise reviewed by us. With
respect to the financial projections supplied to us, we have assumed that they
have been reasonably prepared on the basis reflecting the currently available
estimates and judgments of the management of the Company as to the future
operating and financial performance of the Company. We have not assumed any
responsibility for making an independent evaluation of any assets or liabilities
or for making any independent verification of any of the information reviewed by
us.
<PAGE>
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
development may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. Our opinion does not address the relative
merits of the Tender Offer or the Merger and the other business strategies being
considered by the Company's Board of Directors, nor does it address the Board's
decision to proceed with the Tender Offer or the Merger. Our opinion neither
constitutes (i) a recommendation to any stockholder as to whether such
stockholder should tender into the Tender Offer or vote on the proposed Merger
nor (ii) a judgment as to the appropriate allocation of consideration between
holders of Company Common Stock and Preferred Stock.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. DLJ has performed investment
banking and other services for Tyco and its affiliates in the past and has been
compensated for such services.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the aggregate consideration to be received by the holders of
Company Stock pursuant to the Agreement and the Preferred Stock Purchase
Agreement is fair to such stockholders from a financial point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Nella Domenici
