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As filed with the Securities and Exchange Commission on August 15, 1997
Registration No. 333-_______
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
Registration Statement
Under
The Securities Act of 1933
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HOLMES PROTECTION GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1070719
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
440 Ninth Avenue
New York, New York 10001-1695
(212) 760-0630
(Address, including zip code, and telephone
number, including area code, of registrant's
principal executive offices)
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GEORGE V. FLAGG
President and Chief Executive Officer
Holmes Protection Group, Inc.
440 Ninth Avenue
New York, New York 10001-1695
(212) 760-0630
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
Copies to:
JEFFREY W. RUBIN, ESQ.
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
(212) 661-6500
Approximate date of proposed sale to the public: From time to time after the
effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than offered only in connection with dividend or interest
reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(C) under
the Securities Act, check the following box and list the Securities Act
registration Statement number of the earlier effective registration statement
for the same offering. [ ].
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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Title of each class of Amount to be Proposed maximum Proposed maximum Amount of
securities to be registered registered offering price per share aggregate offering price registration fee
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<S> <C> <C> <C> <C>
Common Stock, par value $.01
per share 4,442,975(1) $16.75 $74,419,831 (2) $22,551.46
====================================================================================================================================
</TABLE>
(1) Includes 1,055,413 shares of Common Stock issuable upon exercise of certain
Warrants held by Warrant Holders and 24,810 shares of Common Stock issuable
upon conversion of certain outstanding convertible promissory Notes. This
Registration Statement covers, in addition, such indeterminable number of
shares of Common Stock as may be issued on the exercise of the Warrants or
the conversion of the Notes by reason of adjustment of their respective
exercise or conversion prices upon certain contingencies. Since such
additional Common Stock, if issued, will be issued for no additional
consideration, no registration fee is required.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(C) under the Securities Act of 1933, as amended, on the basis
of high and low prices of the registrant's Common Stock on the Nasdaq
National Market(R) on August 12, 1997.
-----------------------------------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
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<PAGE>
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
PROSPECTUS Subject to Completion, dated August 15, 1997
4,442,975 Shares
HOLMES PROTECTION GROUP, INC.
Common Stock
This Prospectus relates to the public offering that may be made from time
to time of up to 4,442,975 shares (the "Shares") of common stock, par value $.01
per share (the "Common Stock"), of Holmes Protection Group, Inc., a Delaware
corporation (the "Company" or "Holmes") by, or for the accounts of, the holders
thereof (the "Selling Security Holders"). The Shares include 1,055,413 shares of
Common Stock which the Company may issue to certain Selling Security Holders
upon the exercise of certain warrants (the "Warrants") and 24,562 shares of
Common Stock which the Company may issue to certain Selling Security Holders
upon the conversion of certain subordinated convertible debentures (the
"Notes"). See "Selling Security Holders."
The Shares, the Warrants and the Notes were issued by the Company in
transactions exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act"), and applicable state securities laws. Of the
Shares, (i) 1,588,105 were issued by the Company in 1992 to seven U.S. insurance
companies and other institutions (the "Institutions"); (ii) 203,033 are issuable
upon exercise of Warrants held by the Institutions (the "Institution Warrants")
at an exercise price of $10.17 per share; (iii) 1,515,886 were issued by the
Company in 1994 to HP Partners L.P., a Delaware limited partnership (the
"Investor"); (iv) 685,714 are issuable upon exercise of Warrants held by the
Investor (the "Investor Warrants") at an exercise price of $4.58 per share;
(v)166,666 are issuable upon exercise of Warrants held by Merita Bank Ltd. and
Bank of Boston Connecticut (the "New Bank Warrants") at an exercise price of
$9.75 per share; (vi) 96,529 were issued in connection with the acquisition of
an alarm monitoring company based in Stanton, California; (vii) 46,346 were
issued in 1997 in connection with the acquisition of alarm operations facilities
based in Tampa, Florida; (viii) 51,298 were issued in 1997 in connection with
the acquisition of the assets of an alarm sales, installation and servicing
company in Nashville, Tenessee; (ix) 156,297 were issued in 1997 in connection
with the acquisition of an alarm sales, installation and servicing company in
San Ramon, California; and (x) 24,562 are issuable upon the conversion of the
Notes issued in August 1997 in conjunction with the acquisition of an alarm
sales, installation and servicing company in April 1997.
The Common Stock is quoted on the Nasdaq National Market(R) (the "Nasdaq
National Market") under the symbol "HLMS." The closing sales price for the
Common Stock on August 12, 1997 was $17.25 per share. There is no active public
market for the Warrants.
THE COMMON STOCK OFFERED HEREBY INVOLVES A SUBSTANTIAL DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The Shares may be sold from time to time by the Selling Security Holders
or their transferees. No underwriting arrangements have been entered into by the
Selling Security Holders as of the date hereof. The distribution of the Shares
by the Selling Security Holders may be effected in one or more transactions that
may take place in the over-the-counter market, including ordinary broker's
transactions, privately negotiated transactions, or through sales to one or more
dealers for resale of such Shares as principals, at prevailing market prices at
the time of sale, prices related to such prevailing market prices, or negotiated
prices. Underwriting discounts and usual and customary or specifically
negotiated brokerage fees or commissions will be paid by the Selling Security
Holders in connection with sales of the Shares. See "Plan of Distribution."
The Company will not receive any proceeds from the sale of the Shares. By
agreement with the Selling Security Holders, the Company will pay all of the
expenses incident to the registration of the Shares under the Securities Act
(other than agent's or underwriter's commissions and discounts), estimated to be
approximately $77,551.
The Selling Security Holders, and any broker-dealers, agents, or
underwriters through whom the Shares are sold, may be deemed "underwriters"
within the meaning of the Securities Act with respect to securities offered by
them, and any profits realized or commissions received by them may be deemed
underwriting compensation.
The date of this Prospectus is August , 1997
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), 450 Fifth Street, N.W., Washington, D.C. 20549, a Registration
Statement (the "Registration Statement") under the Securities Act with respect
to the offering and sale from time to time of the Shares and Warrants. This
Prospectus does not contain all the information set forth in the Registration
Statement and the exhibits thereto, as permitted by the rules and regulations of
the Commission. For further information, reference is made to the Registration
Statement and to the exhibits filed therewith. Statements contained in this
Prospectus as to the contents of any contract or other document which has been
filed or incorporated by reference as an exhibit to the Registration Statement
are qualified in their entirety by reference to such exhibits for a complete
statement of their terms and conditions. Additionally, the Company is subject to
the informational requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and, in accordance therewith, files reports, proxy
statements, and other information statements with the Commission. Copies of such
materials may be inspected without charge at the offices of the Commission, and
copies of all or any part thereof may be obtained from the Commission's web site
at "http://www.sec.gov" and at prescribed rates from the Commission's public
reference facilities at 450 Fifth Street, N.W., Washington D.C. 20549 or at the
regional offices of the Commission located at 7 World Trade Center, New York,
New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661,
upon payment of the fees prescribed by the Commission. In addition, the Common
Stock is quoted on the Nasdaq National Market. Reports and other information
concerning the Company may be inspected at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Incorporated herein by reference and made a part of this Prospectus are
the following: (1) the Company's Annual Report on Form 10-K, for the fiscal year
ended December 31, 1996; (2) the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997; (3) the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1997; and (4) the description of the Common
Stock, which is registered under Section 12 of the Exchange Act, contained in
the Company's Registration Statement on Form 10, as amended, originally filed
with the Commission on July 12, 1994. All documents subsequently filed by the
Company with the Commission pursuant to Section 13(a), 13(c), 14, or 15(d) of
the Exchange Act after the date of this Prospectus and prior to the termination
of the offering made hereby will be deemed to be incorporated by reference into
this Prospectus and to be a part hereof from the respective dates of filing of
such documents. Any statement contained in any document incorporated by
reference shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus. All information appearing in this
Prospectus is qualified in its entirety by the information and financial
statements (including notes thereto) appearing in the documents incorporated
herein by reference, except to the extent set forth in the immediately preceding
statement. See "Special Note Regarding Forward-Looking Statements."
The Company will provide without charge to each person who receives a
prospectus, upon written or oral request of such person, a copy of the
information that is incorporated by reference herein (not including exhibits to
the information that is incorporated by reference herein). Requests for such
information should be directed to: Holmes Protection Group, Inc., 440 Ninth
Avenue, New York, New York 10001-1695; Attention: Secretary. The Company's
telephone number is: (212) 760-0630.
2
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements included or incorporated by reference into this
Prospectus constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. All such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the Company,
or industry results, to be materially different from any future results,
performance, or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the following: general economic
and business conditions; cancellation rates of subscribers; competitive factors
in the industry, including additional competition from existing competitors or
future entrants to the industry; social and economic conditions; local, state
and federal regulations; changes in business strategy or development plans; the
Company's indebtedness; availability, terms and deployment of capital;
availability of qualified personnel; and other factors referenced in this
Prospectus and in the Company's filings with the Commission.
3
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THE COMPANY
The following summary is qualified in its entirety by reference to the
more detailed information and the financial statements and the related notes
appearing elsewhere in this Prospectus or incorporated herein by reference.
Except as otherwise indicated, information in this Prospectus reflects a 14 for
1 reverse split of the outstanding shares of Common Stock effected in March
1995. As used in this Prospectus, the term "Company" means, unless the context
requires otherwise, the Company and its subsidiaries. Each prospective investor
is urged to read this Prospectus in its entirety. Investment in the securities
offered hereby involves a high degree of risk. See "Risk Factors."
Holmes Protection Group, Inc. (the "Company" or "Holmes") provides
security alarm monitoring services and designs, sells, installs and services
electronic security systems for commercial and mid- to high-end residential
subscribers. These systems include event detection devices, surveillance
equipment and access control devices which restrict access to specified areas.
The Company currently provides its services in New York, New Jersey,
Pennsylvania, Texas, Tennessee, California, Massachusetts and Florida, and
conducts its operations primarily through 20 branch offices, ten National
Account sales offices, eight central monitoring stations and 76 independent
alarm service dealers and franchisees. According to the latest available survey,
published in May 1997, the Company was the eleventh largest provider of
electronic security services in the United States in terms of total 1996
revenues.
Following an internal management transition and reorganization in 1995,
the Company, in 1996, engaged the services of several former senior executives
of The National Guardian Corporation, a large national electronic security alarm
services company which was acquired by Ameritech Monitoring Services, Inc., in
October 1995. Among the executives hired by the Company was George V. Flagg, the
Company's President and Chief Executive Officer, who served as the President and
Chief Executive Officer of National Guardian from 1986 to 1995. Under the
direction of the Company's new management team, the Company is implementing a
business strategy involving a combination of strategic acquisitions and internal
growth. In regard to strategic acquisitions, the Company intends to pursue both
(I) fold-in acquisitions, which consist of businesses or portfolios of alarm
monitoring accounts that can be readily combined with the Company's existing
branch offices and management structure and (ii) new market acquisitions, which
consist of companies in the electronic security services industry located
outside the Company's current geographic market. In regard to its internal
growth strategy, the Company intends to capitalize on public recognition of the
historic Holmes brand name (which has been utilized in the security services
industry since 1858) in connection with (i) expanding its security services
product offerings, including the HolmesNet system for wireless data
communications; (ii) strengthening its national accounts program; (iii)
increasing its sales and marketing efforts; and (iv) expanding its dealer
operations.
The Company's revenues consist primarily of recurring payments under
written contracts for security alarm monitoring activities and associated
services, which represented approximately 70% of total revenues in 1996. The
Company monitors digital alarm signals arising from various activities,
including burglaries, fires and other events, through security systems installed
at subscribers' premises. These signals are received and processed at the
Company's relevant central monitoring station. In order to reduce overall
manpower requirements, achieve economies of scale and other cost efficiencies,
and enhance the quality of service being provided, the Company consolidated its
central monitoring stations in the Northeast into one facility located in
Edison, New Jersey, with monitoring capacity of approximately 60,000 accounts.
In addition, the Company has acquired several businesses with central monitoring
stations with the capacity to process approximately 60,000 additional accounts.
An additional 21% of the Company's total revenues in 1996 was comprised of
direct sales and installation of security equipment. The balance of the
Company's revenues in 1996 was derived from (I) jewelry vault rentals, (ii)
insured parcel delivery services for the jewelry trade and (iii) royalty fees
and product sales relating to its franchise and dealer operations.
Approximately 80% of the Company's business is derived from commercial
customers, including financial institutions, jewelry and fine art dealers,
corporate headquarters, manufacturers, distribution facilities and health care
and education facilities. The Company's residential business focuses principally
on mid- to high-end customers.
Electronic security services is a consolidating but still a highly
fragmented industry, consisting of a large number of local and regional
companies and several integrated national companies. The fragmented nature of
the industry can be attributed to the low capital requirements associated with
performing basic installation and maintenance of electronic security systems.
However, the business of a full service, integrated electronic security services
company providing central station monitoring services is capital intensive, and
the Company believes that the high fixed costs of establishing both central
monitoring stations and full service operations contribute to the small number
of national competitors. The low marginal cost of monitoring additional
customers has been one of the principal factors leading full service, integrated
electronic security services companies to seek acquisitions of other electronic
security businesses to consolidate into their existing operations. The principal
focus of the Company's business strategy is to pursue acquisitions in this
environment.
4
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RISK FACTORS
In addition to the other information contained in this Prospectus, the
following risk factors should be considered carefully before purchasing the
Common Stock offered hereby. This Prospectus contains forward-looking statements
within the meaning of the Securities Act and the Exchange Act. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any future
results, performance, or achievements expressed or implied by such
forward-looking statements. See "Special Note Regarding Forward-Looking
Statements." Such factors include, among others, the risk factors set forth
below.
Recent Net Losses and Accumulated Deficit
The Company incurred a net loss in 1996 and 1995 of $2,452,000 and
$1,197,000, respectively. The losses reflect non-recurring charges of $700,000
and $2,074,000 in 1996 and 1995, respectively and the cumulative effect of the
change in the method of accounting for non-refundable payments received from
customers for company-owned systems resulting in a net credit after tax of
$2,477,000 in 1995. The Company had net income of $404,000 in 1994. At December
31, 1996, the Company had an accumulated deficit of $72,829,000 up from
$70,188,000 at December 31, 1995 and a working capital deficit of $2,171,000
down from $5,246,000 at December 31, 1995. The Company incurred a net loss for
the six months ended June 30, 1997 and 1996 of $3,749,000 and $736,000
respectively. The loss in 1997 reflects a non-recurring charge of $1,500,000
related to the termination of its outsourcing agreement with PrimiTech.
Geographic Concentration
The Company's existing subscriber base is geographically concentrated
predominantly in New York, New Jersey and Pennsylvania. Accordingly, the
performance of the Company may be adversely affected by regional or local
economic conditions.
The Company may from time to time make acquisitions in regions outside of
its current operating area. The acquisition of companies in other regions, or in
metropolitan areas in which the Company does not currently have subscribers,
requires an investment by the Company. In order for the Company to expand
successfully into a new area, the Company must acquire companies with a
sufficient number and density of subscriber accounts in such area to support the
investment. There can be no assurance that the Company will find such
opportunities or that an expansion into new geographic areas will generate
operating profits.
Risk Related to Growth Through Acquisitions
One of the Company's primary strategies is to increase its revenues and
the markets it serves through the acquisition of other companies in the
electronic security services industry and portfolios of alarm monitoring
accounts. There can be no assurance that the Company will be able to acquire or
profitably manage suitable acquisition candidates or successfully integrate such
businesses into its operations without substantial costs, delays or other
problems. In addition, there can be no assurance that any businesses acquired
will be profitable at the time of their acquisition or will achieve sales and
profitability that justify the investment therein or that the Company will be
able to realize expected operating and economic efficiencies following such
acquisitions. Acquisitions may involve a number of special risks, including
adverse effects on the Company's reported operating results, diversion of
management's attention, increased burdens on the Company's management resources
and financial controls, dependence on retention and hiring of key personnel,
risks associated with unanticipated problems or legal liabilities, and
amortization of acquired intangible assets, some or all of which could have a
material adverse effect on the Company's operations and financial performance.
Customer Cancellation Rates
The Company is heavily dependent on its recurring monitoring and service
revenues. Given the relatively fixed nature of monitoring and service expenses,
increases and decreases in monitoring and service revenues have a significant
impact on the Company's profitability. Substantially all of the Company's
monitoring and service revenues are derived from recurring charges to
subscribers for the provision of various services. Although no single subscriber
represents more than one-half of one percent of the Company's recurring revenue
base, the Company is vulnerable to subscribers canceling their contracts. In
recent years, lost recurring revenues from such cancellations have exceeded the
new recurring revenues added by the Company's sales efforts. However, the
Company's cancellation rate (as defined in detail below), representing lost
recurring revenues from cancellations as a percentage of gross recurring
revenues, decreased significantly from 15.2% in 1991 to 10.8% in 1996. Although
the Company's rate of subscriber cancellations has been substantially reduced
since 1991, there can be no assurance that this rate may not increase in the
future for a variety of reasons associated with general economic conditions,
market competition and the level of customer satisfaction with the Company's
services.
5
<PAGE>
As described herein, the "cancellation rate" means the gross recurring
revenues lost through cancellation in a given period; less those recurring
revenues derived from subscribers who cancel their service with the Company in
order to move and then contract for the Company's services at their new
premises; and less those recurring revenues derived from new subscribers who
occupy a vacant premises where the Company has an existing company-owned system
and who contract for the Company's services using that equipment; divided by the
gross recurring revenues in force at the beginning of the period, annualized and
expressed as a percentage.
Competition
The electronic security services industry is highly competitive and
fragmented. The Company competes with national and regional companies, as well
as smaller local companies, in all of its operations. Furthermore, new
competitors are continuing to enter the industry and the Company may encounter
additional competition from such future industry entrants. Subject to regulatory
compliance, certain companies engaged in the telephone and cable business are
competing in the electronic security services industry and other such companies
may, in the future, enter the industry. Certain of the Company's current
competitors have, and new competitors may have, substantially greater financial
resources than the Company.
Significant Ownership of Common Stock by Certain Stockholders
The Company believes that at August 12, 1997, the Institutions owned
approximately 23.7% (26.1% including the Institution Warrants) of the Company's
outstanding shares of Common Stock. Pursuant to the Exchange Agreement, dated as
of December 18, 1991, which agreement was amended as of January 31, 1992, May
24, 1992 and June 30, 1992 (the "Exchange Agreement"), between the Institutions
and the Company, the Institutions are currently entitled to nominate two
directors (the "Institution-Nominees") to the Company's Board of Directors (the
"Board") based on their ownership of Common Stock. At August 12, 1997, the
Investor owned approximately 24.0% (31.4% including the Investor Warrants) of
the Company's outstanding shares of Common Stock. Pursuant to the Investment
Agreement, dated as of June 29, 1994, between the Investor and the Company (the
"Investment Agreement"), the number of directors the Investor is currently
entitled to nominate to the Board (the "Investor-Nominees") is three. The size
of the Board is currently fixed at nine members; however, there exists one
vacant seat on the Board. As of a result of these separate agreements with the
Company, the Institution-Nominees and the Investor-Nominees constitute a
majority of the Company's directors and are therefore currently in a position to
control the Company.
Liability for Employee Acts and Defective Equipment
The nature of the security services provided by the Company potentially
exposes it to greater risk of liability claims for employee acts or omissions or
system failure than may be inherent in many other service businesses. Although
(I) substantially all of the Company's customers have subscriber agreements
which contain provisions for limited liability and predetermined liquidated
damages and (ii) the Company carries insurance which it believes provides
adequate coverage for businesses of the Company's type, there can be no
assurance that such existing arrangements will prevent the Company from being
adversely affected as a result of damages arising from the acts of its
employees, defective equipment or because some jurisdictions prohibit or
restrict limitations on liabilities and liquidated damages. In addition, certain
of the Company's insurance policies and the laws of some states may limit or
prohibit insurance coverage for punitive damages and for certain other kinds of
damages arising from employee misconduct.
Possible Effects of Government Regulations
The Company's operations are subject to a variety of federal, state,
county and municipal laws, regulations and licensing requirements. Many of the
states in which Holmes operates, as well as certain local authorities, require
Holmes to obtain licenses or permits to conduct a security alarm services
business. Certain governmental entities also require persons engaged in the
security alarm services business to be licensed and to meet certain standards in
the selection and training of employees and in the conduct of business. The loss
of such licenses, or the imposition of conditions on the granting or retention
of such licenses, could have a material adverse effect on the Company. The
Company believes that it holds the required licenses and is in substantial
compliance with all licensing and regulatory requirements in each jurisdiction
in which it operates.
Dependence upon Senior Management
The success of the Company's business is dependent upon the active
participation of the executive officers of the Company, most of whom have only
recently been employed by the Company. In the event that the services of certain
of such officers are lost for any reason, the Company's business may be
materially and adversely affected.
6
<PAGE>
Possible Anti-takeover Effects of Delaware Law
The Company is subject to the provisions of Section 203 of the General
Corporation Law of Delaware. In general, Section 203 prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person becomes an interested stockholder, unless the
business combination is approved in a prescribed manner or unless the interested
stockholder acquires at least 85% of the corporation's voting stock (excluding
shares held by certain designated stockholders) in the transaction in which it
becomes an interested stockholder. A "business combination" includes mergers,
asset sales, and other transactions resulting in a financial benefit to the
interested stockholder. Subject to certain exceptions, an "interested
stockholder" is a person who, together with affiliates and associates, owns, or
within the previous three years did own, 15% or more of the corporation's voting
stock. This provision of the Delaware law could delay and make more difficult a
business combination even if the business combination could be beneficial, in
the short term, to the interests of the stockholders. This provision of the
Delaware law could also limit the price certain investors might be willing to
pay in the future for shares of Common Stock.
Classified Board of Directors; No Stockholder Action by Written Consent;
Supermajority Voting
Certain provisions of the Restated Certificate of Incorporation could
have an anti-takeover effect by making it more difficult to acquire the Company
by means of (I) a tender offer, a proxy contest or otherwise and (ii) the
removal of incumbent officers and directors. These provisions are expected to
discourage certain types of coercive takeover practices and inadequate takeover
bids and to encourage persons seeking to acquire control of the Company to
negotiate first with the Company. However, these provisions could also delay,
deter or prevent a tender offer or takeover attempt that a stockholder might
consider in its best interest, including those attempts that might result in a
premium over the market price for the shares held by the Company's stockholders.
The Company's Restated Certificate of Incorporation and By-Laws provide
for the division of the Board into three classes of directors serving staggered
three-year terms. The By-Laws provide that the size of the Board shall be nine,
provided that the Board, by vote of three-quarters of the directors then in
office, may increase or decrease the number of directors in any class. The
classified board provision may prevent any party who acquires control of a
majority of the outstanding voting stock of the Company from obtaining control
of the Board until the second annual stockholders meeting following the date the
acquiror obtains the controlling interest.
The Restated Certificate of Incorporation of the Company also provides
that stockholder action can be taken only at an annual or special meeting of
stockholders and cannot be taken by written consent in lieu of meeting.
Additionally, the Restated Certificate of Incorporation requires an affirmative
vote of three-quarters of the Company's voting power (unless three-quarters of
the total number of directors then in office shall have approved the amendment)
to amend the provisions of the Restated Certificate of Incorporation with
respect to the number and classification of the Board, stockholder action
without written consent, director liability, indemnification and amendments to
the Restated Certificate of Incorporation.
Possible Adverse Effect of "False Alarms" Ordinances
According to an article published in American City and Country Magazine
in 1996, police officers respond to more than 13.7 million alarm activations
annually. Approximately 94% to 98% of these activations are false alarms.
Concern has arisen in certain municipalities about this high incidence of false
alarms.
A number of local governmental authorities have considered or adopted
various measures aimed at reducing the number of false alarms. Such measures
include (I) subjecting alarm monitoring companies to fines or penalties for
transmitting false alarms, (ii) licensing individual alarm systems and the
revocation of such licenses following a specified number of false alarms, (iii)
imposing fines on alarm subscribers for false alarms, (iv) imposing limitations
on the number of times the police will respond to alarms at a particular
location after a specified number of false alarms and (v) requiring further
verification of an alarm signal before the police will respond. Enactment of
such measures could adversely affect the Company's future business and
operations.
Possible Volatility of Stock Price
The stock market has from time to time experienced extreme price and
volume fluctuations that have been unrelated to the operating performance of
particular companies. The market price of the Company's Common Stock may be
significantly affected by quarterly variations in the Company's operating
results, changes in financial estimates by securities analysts or failure by the
Company to meet such estimates, litigation involving the Company, general trends
in the security alarm industry, actions by governmental agencies, national
economic and stock market conditions, industry reports and other factors, many
of which are beyond the control of the Company.
7
<PAGE>
Shares Eligible for Future Sale; Registration Rights
As of August 12, 1997, the Company had 6,315,791 shares of Common Stock
outstanding. In addition, 888,747 shares of Common Stock are reserved for
issuance upon the exercise of outstanding Investor Warrants and Institution
Warrants, 166,666 shares of Common Stock are reserved for issuance upon exercise
of outstanding warrants issued to Merita Bank Ltd. and Bank of Boston
Connecticut (the "New Bank Warrants"), 1,904,948 shares of Common Stock are
reserved for issuance upon exercise of outstanding options, including 165,429
shares of Common Stock which are reserved for issuance upon exercise of options
which have been granted under the Company's 1992 Directors' Option Plan, 6,643
shares of Common Stock which are reserved for issuance upon exercise of options
which have been granted under the Holmes Protection Group, Inc. Amended and
Restated Senior Executives' Option Plan (the "1994 Plan,"), 1,017,750 shares of
Common Stock which are reserved for issuance upon exercise of options which have
been granted under Holmes Protection Group, Inc. 1996 Stock Incentive Plan (the
"1996 Plan"), 773,250 shares of Common Stock which are reserved for issuance
upon exercise of options which may be granted pursuant to the 1996 Plan, and
24,562 shares of Common Stock are reserved for issuance upon the conversion of
the Notes. Currently, substantially all of the shares of Common Stock
outstanding are freely tradeable, except for (i) any such shares held at any
time by an "affiliate" of the Company, as such term is defined under Rule 144
promulgated under the Securities Act ("Rule 144") and (ii) certain shares
subject to the Registration Rights Agreements described below. The possibility
that substantial amounts of Common Stock may be sold in the public market could
have a material adverse effect on prevailing market prices of the Common Stock
and could impair the Company's ability to raise capital or make acquisitions
through the sale of its equity securities.
Pursuant to the terms of their respective registration rights agreements,
the Investor and each Institution have been granted certain registration rights
with respect to their shares of Common Stock presently held or shares of Common
Stock issuable upon exercise of their warrants. Similarly, pursuant to the terms
of their respective registration rights agreements, each of Merita Bank Ltd. and
Bank of Boston Connecticut have been granted certain registration rights with
respect to shares of Common Stock issuable upon exercise of the New Bank
Warrants. Finally, in connection with an acquisition that the Company made in
1996, the Company issued restricted shares of Common Stock and entered into
substantially similar registration rights agreements with each of the various
parties that acquired such restricted shares of Common Stock with respect
thereto. The Company may experience added costs and complexity in the event such
registration rights are exercised. In addition, the exercise of such rights
could have an adverse effect on the market price of the Common Stock.
8
<PAGE>
USE OF PROCEEDS
The net proceeds from the exercise of the Warrants are estimated to be
$6,828,379. The Company is unable to predict the time, if ever, when the
Warrants will be exercised. Accordingly, it is expected that the net proceeds
from the sale of the Common Stock underlying the Warrants will be used by the
Company for general corporate purposes. The Company will not receive any
proceeds from the sale of the Shares or the conversion of the Notes by the
Selling Security Holders.
SELLING SECURITY HOLDERS
The following table sets forth the ownership of the Common Stock by the
Selling Security Holders as of the date such information was provided to the
Company. Since the dates such information was provided to the Company, such
information may have changed. Any or all of the Shares listed below may be
offered for sale by the Selling Security Holders from time to time and,
therefore, no estimate can be given as to the number of Shares that will be held
by the Selling Security Holders upon termination of this offering. Except as
otherwise indicated, the Selling Security Holders listed in the table have sole
voting and investment powers with respect to the Shares indicated.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK NUMBER OF
NAME OF SELLING OWNED BEFORE THE SHARES
SECURITY HOLDER OFFERING (1) OFFERED
- --------------- -------- -------
<S> <C> <C>
HP Partners L.P. (1).............................. 2,201,600 (2) 2,201,600
John Hancock Mutual Life Insurance
Company .......................................... 549,282 (3) 549,282
The Mutual Life Insurance Company
of New York .................................... 399,905 (4) 348,066 (5)
John Hancock Variable Life
Insurance Company................................. 90,312 (3) 90,312
MONY Life Insurance Company
of America........................................ 399,905 (4) 51,839
Phoenix Home Life Mutual Insurance
Company........................................... 207,941 (6) 207,941
Allmerica Financial Life Insurance &
Annuity Company................................... 170,149 (7) 170,149
First Allmerica Financial Life Insurance
Company........................................... 41,362 (8) 41,362
Crown Life Insurance Company...................... 111,217 (9) 111,217
MBL Life Assurance Corporation.................... 129,509 (10) 129,509
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES OF NUMBER OF
NAME OF SELLING COMMON STOCK OWNED SHARES
SECURITY HOLDER BEFORE THE OFFERING (1) OFFERED
=========================================================================================================
<S> <C> <C>
Merita Bank Ltd................................. 100,000(11) 100,000
Bank of Boston Connecticut...................... 66,666(12) 66,666
Stephen R. Crain and Neeta Ambe-Crain.......... 10,522 10,522
Milind K. Ambe.................................. 3,156 3,156
Richard S. Flagg................................ 3,682 3,682
Sheila Gaikar................................... 789 789
Suresh R. Nayak and Rekha S. Nayak.............. 2,631 2,631
Livanios J. Pilitsis............................ 28,462 28,462
Nicholas Thanos................................. 895 895
Kishore S. Ambe and Leela K. Ambe, as
Trustees for Kishore Ambe, M.D., Inc.
Pension Trust................................... 30,346 30,346
Surekha Mishal.................................. 11,837 11,837
Nancy A. Taylor................................. 1,579 1,579
John Eugene..................................... 1,315 1,315
Agha M.A. Khan, Sr.............................. 1,315 1,315
Michael Fletcher................................ 46,346 46,346
George A. Brown, Jr. and Leean L. Brown......... 62,519 62,519
Thomas J. Taylor and Sue H. Taylor.............. 62,519 62,519
George M. Keefe and Julianne M. Keefe........... 31,259 31,259
Robert L. Saunders ............................. 12,281(13) 12,281
John L. Carmody................................. 12,281(13) 12,281
The Binkley Company, Inc. f/k/a D & H
Electronics, Inc................................ 51,298 51,298
</TABLE>
(1) Messrs. Hauser, Mitchell (both of whom are directors of the Company) and
Spier (a former director of the Company) are stockholders and directors of
the general partner of HP Partners L.P. and are also limited partners of HP
Partners L.P. In addition, Messrs. Hauser, Mitchell and Spier are the sole
stockholders of the special limited partner of HP Partners L.P. which is
entitled to various rights relating to 685,714 of the HP Partners L.P.'s
Warrants. Pursuant to HP Partners L.P.'s partnership agreement, Mr. Lyons
(a director of the Company) has an arrangement to participate in any
economic benefit which Mr. Spier obtains as a result of Mr.
Spier's shareholding interest in such general partner.
10
<PAGE>
(2) Includes 685,714 shares of Common Stock issuable upon the exercise of
Warrants held by HP Partners L.P. at a current exercise price of $4.58 per
share.
(3) Includes shares of Common Stock issuable upon the exercise of Warrants at a
current exercise price of $10.16 per share, as follows: John Hancock Mutual
Life Insurance Company and affiliates: 61,742 owned by John Hancock Mutual
Life Insurance Company and 10,151 owned by John Hancock Variable Life
Insurance Company
(4) Includes 96,040 shares of Common Stock owned by the Mutual Life Insurance
Company of New York (which includes 39,126 shares of Common Stock issuable
upon the exercise of Warrants at a current exercise price of $10.16 per
share); 252,026 shares owned by GIPEN & Co. and 51,839 owned by MONY Life
Insurance Company of America (which includes 5,827 shares of Common Stock
issuable upon the exercise of Warrants at a current exercise price of
$10.16).
(5) Includes the 96,040 shares owned by the Mutual Life Insurance Company of
New York and 252,026 shares owned by GIPEN & Co.
(6) Includes 23,775 shares of Common Stock issuable upon the exercise of
Warrants at $10.16 per share.
(7) Includes 19,126 shares of Common Stock issuable upon the exercise of
Warrants at $10.16 per share.
(8) Includes 4,649 shares of Common Stock issuable upon the exercise of
Warrants at $10.16 per share.
(9) Includes 22,618 shares of Common Stock issuable upon the exercise of
Warrants at $10.16 per share.
(10) Includes 14,558 shares of Common Stock issuable upon the exercise of
Warrants at $10.16 per share.
(11) Represents 100,000 shares of Common Stock issuable upon exercise of
Warrants held by Merita Bank Ltd. at a current exercise price of $9.75 per
share.
(12) Represents 66,666 shares of Common Stock issuable upon exercise of Warrants
held by Bank of Boston Connecticut at a current exercise price of $9.75 per
share.
(13) Represents 12,281 shares of Common Stock issuable upon conversion of a
Note.
PLAN OF DISTRIBUTION
The Shares offered by this Prospectus may be sold from time to time by
the Selling Security Holders or by transferees thereof. No underwriting
arrangements have been entered into by the Selling Security Holders. The
distribution of the Shares by the Selling Security Holders may be effected in
one or more transactions that may take place in the over-the-counter market,
including ordinary broker's transactions, privately negotiated transactions, or
through sales to one or more dealers for resale of such shares as principals, at
prevailing market prices at the time of sale, prices related to prevailing
market prices, or negotiated prices. Underwriter's discounts and usual and
customary or specifically negotiated brokerage fees or commissions may be paid
by a Selling Security Holder in connection with sales of the Shares. To the
extent required, the number of Shares to be sold, the name of the Selling
Security Holder, the purchase price, the name of any agent or broker and any
applicable commissions, discounts or other compensation to such agents or
brokers with respect to a particular offering will be set forth in a Prospectus
Supplement.
11
<PAGE>
In order to comply with certain state securities laws, if applicable, the
Shares will be sold in such jurisdictions only through registered or licensed
brokers or dealers. In certain states, the Shares or Warrants may not be sold
unless such Shares or Warrants have been registered or qualified for sale in
such state or an exemption from registration or qualification is available and
is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the Shares may not simultaneously engage in
market-making activities with respect to such Shares for a period of one or five
business days prior to the commencement of such distribution. In addition to,
and without limiting, the foregoing, each of the Selling Security Holders and
any other person participating in a distribution will be subject to the
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including, without limitation, Regulation M, which provisions may
limit the timing of purchases and sales of any of the Shares by the Selling
Security Holders or any such other person. All of the foregoing may affect the
marketability of the Shares.
Pursuant to the Warrants and certain Registration Rights Agreements, the
Company will pay all the fees and expenses incident to the registration of the
Shares (other than underwriting discounts and commissions, if any, and the
Selling Security Holders' counsel fees and expenses, if any).
In addition, the Company has agreed to indemnify the Selling Security
Holders against certain liabilities, including liabilities under the Securities
Act. Furthermore, each Selling Security Holder has agreed to indemnify the
Company against certain liabilities, including liabilities under the Securities
Act. Such agreements also provide for rights of contribution if such
indemnification is not available.
LEGAL MATTERS
The validity of the Shares has been passed upon for the Company by
Dennis M. Stern, Esq., general counsel to the Company.
EXPERTS
The financial statements and schedule of the Company as of December 31,
1996 and 1995 and for each of the three years in the period ended December 31,
1996 included in this Prospectus and elsewhere in the Registration Statement, of
which this Prospectus forms a part, or incorporated by reference hereto, have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said report.
Reference is made to said report, which includes an explanatory paragraph with
respect to the change in the Company's revenue recognition policy of accounting
for non-refundable payments received from customers upon completion of
installation of Company owned systems, effective as of January 1, 1995, as
discussed in Note 4 to the consolidated financial statements.
12
<PAGE>
<TABLE>
<CAPTION>
============================================================ =========================================
<S> <C>
No dealer, salesman, or any other person has been authorized 4,442,975 Shares
to give any information or to make any representation not
contained in this Prospectus in connection with the offering
made hereby, and, if given or made, such information or ------------------
representation must not be relied upon as having been
authorized by the Company. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer HOLMES
to buy, any of the securities offered hereby in any PROTECTION
jurisdiction to any person to whom it is unlawful to make GROUP INC.
such an offer or solicitation in such jurisdiction. Neither
the delivery of this Prospectus nor any sale made hereunder
shall under any circumstances create any implication that
there has been no change in the affairs of the Company since
the date hereof or that the information contained herein is
correct as of any time subsequent to the dates as of which
such information is furnished.
-------------------- Common Stock
TABLE OF CONTENTS
Page
Available Information................................. 2
Incorporation of Certain Documents by
Reference............................................. 2 -------------------
Special Note Regarding Forward-Looking
Statements............................................ 3 PROSPECTUS
The Company.............................................. 4
Risk Factors............................................. 5 -------------------
Use of Proceeds........................................... 9
Selling Security Holders.................................. 9
Plan of Distribution..................................... 11
Legal Matters............................................ 12
Experts.................................................. 12 AUGUST __, 1997
============================================================ =========================================
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table is an itemization of all expenses (subject
to future contingencies) incurred or expected to be incurred by the Company in
connection with the issuance and distribution of the securities being offered
hereby (items marked with an asterisk (*) represent estimated expenses). The
Company has agreed to pay all the costs and expenses of this offering.
SEC Registration Fee ................................ $22,551.46
Legal Fees and Expenses.............................. 50,000.00*
Accounting Fees and Expenses......................... 2,000.00*
Miscellaneous........................................ 3,000.00*
----------
Total................................................ 77,551.46
==========
* Estimate
Item 15. Indemnification of Officers and Directors
Delaware General Corporation Law (the DGCL), Section 102(b)(7), enables a
corporation in its original certificate of incorporation, or an amendment
thereto validly approved by stockholders, to eliminate or limit personal
liability of members of its Board for violations of a directors fiduciary duty
of care. However, the elimination of limitation shall not apply where there has
been a breach of the duty of loyalty, failure to act in good faith, intentional
misconduct or a knowing violation of a law, the payment of a dividend or
approval of a stock repurchase which is deemed illegal or an improper personal
benefit is obtained. The Company's Restated Certificate of Incorporation
eliminates the liability of directors to the extent permitted by Section
102(b)(7) of the DGCL.
Reference is made to Section 145 of the DGCL which provides that a
corporation may indemnify directors and officers as well as other employees and
individuals against expenses (including attorneys' fees), judgement, fines and
amounts paid in settlement in connection with specified actions, suits or
proceedings, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation (a "derivative action"));
if they acted in good faith and in a manner they reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe their conduct
was unlawful. A similar standard is applicable in the case of derivative
actions, except that indemnification only extends to expenses (including
attorneys' fees) incurred in connection with defense or settlement of such
action, and the statute requires court approval before there can be any
indemnification where the person seeking indemnification has been found liable
to the corporation. The statute provided that it is not exclusive of other
indemnification that may be granted by a corporation's charter, by-laws,
disinterested director vote, stockholder vote, agreement or otherwise. The
Restated Certificate of Incorporation of the Company provides for such
indemnification of its directors and officers as permitted by Delaware law.
Reference is made to Article Eleventh of the Restated Certificate of
Incorporation of the Company for certain indemnification rights of officers and
directors of the Company.
II-I
<PAGE>
Item 16. Exhibits
(a) The following exhibits are filed herewith:
4.1 Restated Certificate of Incorporation, as amended.(1)
4.2 Amended and Restated Bylaws of Company.(3)
4.3 Specimen of Common Stock Certificate.(3)
4.4 Investor Warrant.(4)
4.5 Form of Institution Warrant.(2)
4.6 New Bank Warrant.(4)
4.7 Registration Rights Agreement between Investor and the Company, dated
August 1, 1994(2)
4.8 Form of Registration Rights Agreement with Institutions.(2)
4.9 Registration Rights Agreement between New Banks and the Company, dated as
of August 1, 1994.(4)
4.10 Form of Registration Rights Agreement with each of The Binkley Company,
Inc., Michael Fletcher, Mr. and Mrs. Taylor, Mr. and Mrs. Brown and Mr. and
Mrs. Keefe*
4.11 Form of Note*
5.1 Opinion of Dennis M. Stern, Esq., as to the legality of shares being
registered.*
23.1 Consent of Arthur Andersen, LLP.*
23.2 Consent of Dennis M. Stern, Esq. (contained in opinion filed as
Exhibit 5.1).
24.1 Power of Attorney (contained on signature page).*
- ----------------
* Filed herewith.
(1) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31,1996.
(2) Incorporated by reference to Amendment No. 1 to the Company's Registration
Statement on Form 10/A, dated October 13, 1994.
(3) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994.
(4) Incorporated by reference to Amendment No. 1 to the Company's Registration
Statement on Form S-1, dated September 25, 1996.
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high and of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be treated as a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To file a post-effective amendment to remove from registration any of the
securities being registered which remain unsold at the termination of the
offering.
II-II
<PAGE>
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of the registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-III
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in New York, New York on August 15, 1997.
HOLMES PROTECTION GROUP, INC.
By: /s/ George V. Flagg
-------------------------------------
George V. Flagg
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints George V. Flagg and Lawrence R. Irving,
or either of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place, and
stead, in any and all capacities, to sign any and all pre- or post-effective
amendments to this Registration Statement, and to file the same with all
exhibits thereto, and all documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agent, and
each of them, full power and authority to do and perform each and every act and
thing requisite or necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or either of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ George V. Flagg President, Chief Executive Officer and August 15, 1997
--------------------- Director (Principal Executive Officer)
George V. Flagg
/s/ Lawrence R. Irving (Principal Financial and Accounting August 15, 1997
---------------------- Officer) Vice President/Finance
Lawrence R. Irving
/s/ Pierre Besuchet Director August 15, 1997
---------------------
Pierre Besuchet
/s/ Daniel T. Carroll Director August 15, 1997
---------------------
Daniel T. Carroll
/s/ Lawrence R. Glenn Director August 15, 1997
---------------------
Lawrence R. Glenn
/s/ Mark S. Hauser Director August 15, 1997
--------------------
Mark S. Hauser
/s/ William P. Lyons Director, Chairman of the Board August 15, 1997
--------------------
William P. Lyons
</TABLE>
II-IV
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ David Jan Mitchell Director August 15, 1997
----------------------
David Jan Mitchell
/s/ Edward L. Palmer Director August 15, 1997
---------------------
Edward L. Palmer
</TABLE>
II-V
<PAGE>
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
- ----------- ------- ----
<S> <C> <C>
4.1 Restated Certificate of Incorporation, as amended.(1)
4.2 Amended and Restated Bylaws of Company.(3)
4.3 Specimen of Common Stock Certificate.(3)
4.4 Investor Warrant.(4)
4.5 Form of Institution Warrant.(2)
4.6 New Bank Warrant.(4)
4.7 Registration Rights Agreement between Investor and the Company, dated
August 1, 1994(2)
4.8 Form of Registration Rights Agreement with Institutions.(2)
4.9 Registration Rights Agreement between New Banks and the Company, dated as
of August 1, 1994.(4)
4.10 Form of Registration Rights Agreement with each of The Binkley Company,
Inc., Michael Fletcher, Mr. and Mrs. Taylor, Mr. and Mrs. Brown and Mr. and
Mrs. Keefe*
4.11 Form of Note*
5.1 Opinion of Dennis M. Stern, Esq., as to the legality of shares being
registered.*
23.1 Consent of Arthur Andersen, LLP.*
23.2 Consent of Dennis M. Stern, Esq. (contained in opinion filed as
Exhibit 5.1).
24.1 Power of Attorney (contained on signature page).*
</TABLE>
- -------------------
* Filed herewith.
(1) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31,1996.
(2) Incorporated by reference to Amendment No. 1 to the Company's Registration
Statement on Form 10/A, dated October 13, 1994.
(3) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994.
(4) Incorporated by reference to Amendment No. 1 to the Company's Registration
Statement on Form S-1, dated September 25, 1996.
II-VI
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of the ___ day of _____ 199_ by and between HOLMES PROTECTION
GROUP, INC., a Delaware corporation (the Company"), and ________________
(the "Holder").
RECITALS
A. The Holder and the Company are parties to an Agreement of Stock
Purchase of even date herewith relating to ____________________________________
(the "Purchase Agreement") by and between the Company and Holder pursuant to
which the Company has issued, or will issue, to Holder an aggregate number of
shares of common stock of the Company, par value $.01 per share ("Common Stock")
on the terms and conditions set forth in the Purchase Agreement.
B. The Company desires to grant to the Holder the registration rights
set forth herein with respect to the shares of Common Stock issued to the Holder
by the Company.
1. REGISTRATION RIGHTS.
1.1 Definitions. For purposes of this Section 1:
(a) Registration. The terms "register," "registered,"
and "registration" refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act of 1933, as amended
(the "Securities Act"), and the declaration or ordering of effectiveness of such
registration statement.
(b) Registrable Securities. The term "Registrable
Securities" means: the aggregate number of shares of Common Stock of the
Company issued or to be issued to Holder pursuant to the Purchase Agreements;
excluding in all cases, however, any Registrable Securities sold by a person in
a transaction in which rights under this Section 1 are not assigned in
accordance with this Agreement or any Registrable Securities which may be or are
sold to the public or which may be or are sold pursuant to Rule 144 promulgated
under the Securities Act.
(c) SEC. The term "SEC" or "Commission" means the
U.S. Securities and Exchange Commission.
1.2 Registrations.
(a) Piggyback Registration Rights. The Company shall
notify the Holder in writing at least thirty (30) days prior to filing any
registration statement under the Securities Act for purposes of effecting a
public offering of securities of the Company which is not
<PAGE>
an underwritten offering (including, but not limited to, registration statements
relating to secondary offerings of securities of the Company, but excluding
registration statements relating to an equity offering, if any, or to any
employee benefit plan or to any corporate reorganization, (collectively the
"Excluded Registrations") and will afford the Holder an opportunity to include
in such registration statement all or any part of the Registrable Securities
then held by the Holder. If the Holder desires to include in any such
registration statement all or any part of the Registrable Securities held by the
Holder, it shall, within twenty (20) days after receipt of the above-described
notice from the Company, so notify the Company in writing, and in such notice
shall inform the Company of the number of Registrable Securities the Holder
wishes to include in such registration statement. If the Holder decides not to
include all of its Registrable Securities in any registration statement
thereafter filed by the Company, the Holder shall nevertheless continue to have
the right to include any Registrable Securities in any subsequent registration
statement or registration statements as may be filed by the Company with respect
to offerings of its securities (other than with respect to Excluded
Registrations), all upon the terms and conditions set forth herein.
(b) Expenses. All expenses incurred in connection
with a registration pursuant to Section 1.2(a) including, without limitation all
federal and "blue sky" registration and qualification fees, printers' and
accounting fees, fees and disbursements of counsel for the Company and
reasonable fees and disbursements of counsel for the Holder, shall be borne by
the Company.
1.3 Obligations of the Company. Whenever required to include
in a registration any of the Registrable Securities held by the Holder under
this Agreement, the Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration
statement which shall include such Registrable Securities and use its best
efforts to cause such registration statement to become effective, and, upon the
request of the Holder, keep such registration statement effective for up to
ninety (90) days.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holder such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as the, Holder may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by the Holder that are included in such registration.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holder, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
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(e) Notify the Holder at any time when a prospectus
relating to such registration statement is required to be delivered under the
Securities Act or the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing.
(f) Furnish, at the request of the Holder, on the
date that the registration statement with respect to such securities becomes
effective, (i) an opinion, dated as of such date, of the counsel representing
the Company for the purposes of such registration, in form and substance as is
customarily given in non-underwritten public offerings and reasonably
satisfactory to the Holder, addressed to the Holder, and (ii) a "comfort" letter
dated as of such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants in non-underwritten public offerings and reasonably
satisfactory to the Holder, addressed to the Holder requesting registration of
Registrable Securities.
1.4 Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to Section 1.2 that
the Holder shall furnish to the Company such information regarding the Holder,
the Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to timely effect the registration of its
Registrable Securities.
1.5 Delay of Registration. The Holder shall not have any right
to obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.6 Indemnification. In the event any Registrable Securities
are included in a registration statement under Section. 1.2:
(a) By the Company. To the extent permitted by law,
the Company shall indemnify and hold harmless the Holder against any losses,
claims, damages, or liabilities to which the Holder may become subject under the
Securities Act, the Securities Exchange Act of 1934 (the "1934 Act") or other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively a "Violation"):
(i) any untrue statement or alleged untrue statement
of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto;
(ii) the omission or alleged omission to state
therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or
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<PAGE>
(iii) any violation or alleged violation by the
Company of the Securities Act, the 1934 Act, any federal or
state securities law or any rule or regulation promulgated
under the Securities Act, the 1934 Act or any federal or state
securities law in connection with the offering covered by such
registration statement;
and the Company will reimburse the Holder for any legal or other expenses
reasonably incurred by the Holder, as incurred, in connection with investigating
or defending any such loss, claim, damage, liability or action; provided
however, that the indemnity agreement contained in this subsection 1.6(a) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability
or action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by the Holder, including
without limitation, any information furnished by the Holder to the Company
pursuant to Section 1.4 hereof.
(b) By the Holder. To the extent permitted by law,
the Holder will indemnify and hold harmless the Company, each of its directors,
each of its officers who have signed the registration statement, and each
person, if any, who controls the Company within the meaning of the Securities
Act or the 1934 Act (collectively, "Company Indemnitees"), against any losses,
claims, damages or liabilities (joint or several) to which the Company or any
such Company Indemnitee may become subject under the Securities Act, the 1934
Act or other federal or state law, but only, insofar as such losses, claims,
damages or liabilities (or actions in respect thereto) arise out of or are based
upon any Violation, in each case, to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished by the Holder, and known by the Holder to be furnished,
expressly for use in connection with such registration, including without
limitation any information furnished by the Holder to the Company pursuant to
Section 1.4 hereof; and the Holder will reimburse any legal or other expenses
reasonably incurred by the Company or any such Company Indemnitee as incurred in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this subsection 1.6(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder which consent shall not be unreasonably
withheld; and provided further, that the total amounts payable in indemnity by
the Holder under this Section 1.6(b) in respect of any Violation shall not
exceed the net proceeds received by the Holder in the registered offering out of
which such Violation arises.
(c) Notice. Promptly after receipt by an indemnified
party under this Section 1.6 of notice of the commencement of any action
(including any governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under this Section
1.6, deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with counsel
mutually satisfactory to the parties; provided, however, that an indemnified
party shall have the right to retain its own counsel, with the fees and
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<PAGE>
expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential conflict of interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if prejudicial
to its ability to defend such action, shall relieve such indemnifying party of
any liability to the indemnified party under this Section 1.6, but the omission
so to deliver written notice to the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than under
this Section 1.6.
(d) Defect Eliminated in Final Prospectus. The
foregoing indemnity agreements of the Company and the Holder are subject to the
condition that, insofar as they relate to any Violation made in a preliminary
prospectus but eliminated or remedied in the amended prospectus on file with the
SEC at the time the registration statement in question becomes effective or the
amended prospectus filed with the SEC pursuant to SEC Rule 424(b) (the "Final
Prospectus"), such indemnity agreement shall not inure to the benefit of any
person if a copy of the Final Prospectus was furnished to the indemnified party
and was not furnished to the person asserting the loss, liability, claim or
damage at or prior to the time such action is required by the Securities Act.
(e) Survival. The obligations of the Company and the
Holder under this Section 1.6 shall survive the completion of any offering of
Registrable Securities in a registration statement, and otherwise.
1.7 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Registrable Securities to the public without
registration, the Company agrees to make and keep public information available,
as those terms are understood and defined in Rule 144 under the Securities Act,
and to use its best efforts to file with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the 1934 Act.
2. AMENDMENT AND OTHER PROVISIONS.
2.1 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed to
have been delivered when delivered personally (including by means of telex,
telecopier or telefax systems), or the day following delivery to a reputable
overnight courier service which guarantees delivery within 24 hours, charges
prepaid (or upon the date mailed, if sent certified mail, postage prepaid,
return receipt requested, and delivery is refused or returned as undeliverable)
to the parties to this Agreement as follows:
(a) if to the Company: Holmes Protection Group, Inc.
440 Ninth Avenue
Now York, NY 10001
Attn: George V. Flagg, President
5
<PAGE>
with a copy to: Dennis M. Stern, Esq.
Senior Vice President and General Counsel
Holmes Protection Group, Inc.
440 Ninth Avenue
New York, NY 10001-1695
(b) If to Holder:
with a copy to:
or at such other address as any party may designate by giving ten (10) days
advance written notice to the other party.
2.2 Entire Agreement. This Agreement constitutes and
contains the entire agreement and understanding of the parties with respect to
the subject matter hereof and supersedes any and all prior negotiations,
correspondence, agreements, understandings, duties or obligations between the
parties respecting the subject matter hereof.
2.3 Governing Law. This Agreement shall be governed
by and construed exclusively in accordance with the internal laws of the State
of New York without regard to any law relating to conflict of laws and choice of
law.
2.4 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, then such
provision(s) shall be excluded from this Agreement and the balance of this
Agreement shall be interpreted as if such provision(s) were so excluded and
shall be enforceable in accordance with its terms.
2.5 Third Parties. Nothing in this Agreement, express
or implied, is intended to confer upon any person, other than the parties hereto
and their successors and assigns, any rights or remedies under or by reason of
this Agreement.
2.6 Captions. The captions to sections of this
Agreement have been inserted for identification and reference purposes only and
shall not be used to construe or interpret this Agreement.
2.7 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
2.8 Costs And Attorneys' Fees. In the event that any
action, suit or other proceeding is instituted concerning or arising out of
this Agreement or any transaction
6
<PAGE>
contemplated hereunder, the prevailing party shall recover all of such party's
costs and attorneys' fees incurred in each such action, suit or other
proceeding, including any and all appeals or petitions therefrom.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
THE COMPANY: THE HOLDER:
HOLMES PROTECTION GROUP, INC.
By: /s/ George V. Flagg
-------------------------- -------------------------------
George V. Flagg
President
7
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THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER
ANY STATE SECURITIES LAWS (THE "ACTS") AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED EXCEPT (1) IN ACCORDANCE WITH THE TERMS OF THIS DEBENTURE AND (2)
PURSUANT TO A REGISTRATION STATEMENT EFFECTIVE UNDER THE ACTS OR AN OPINION OF
COUNSEL SATISFACTORY TO MAKER THAT THE TRANSFER OF THIS DEBENTURE IS EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE ACTS.
SUBORDINATED CONVERTIBLE DEBENTURE
$175,498.50 New York, New York
August 11, 1997
FOR VALUE RECEIVED, intending to be legally bound hereby, the
undersigned, HOLMES PROTECTION GROUP, INC., a Delaware corporation ("Maker"),
hereby promises to pay to _________________, an individual ("Holder"), ONE
HUNDRED SEVENTY FIVE THOUSAND FOUR HUNDRED NINETY EIGHT AND 50/100 DOLLARS (U.S.
$175,498.50), together with interest on the unpaid principal amount hereof from
April 25, 1997 until the maturity thereof (whether at stated maturity, by
acceleration or otherwise) at an interest rate of ten percent (10%) per annum
(based on a year of 365 days based upon actual days elapsed), on the earlier of
(a) August 26, 1997, at the election of the Stockholder, if by August 25, 1997,
Maker has not filed a registration statement (the "Registration Statement") on
Form S-3 which includes the Holmes Shares (as defined below) issuable to the
Stockholders upon conversion of this Subordinated Convertible Debenture, or (b)
on or at any time after October 1, 1997, at the election of the Stockholder, if
registration of the Holmes Shares has not become effective on or prior to
September 30, 1997 or if the Holmes Shares are not freely tradable on September
30, 1997.
All principal and interest shall be payable in lawful money of
the United States of America in immediately available funds to Holder in Erie,
Pennsylvania.
The unpaid principal and interest of this Debenture (a) shall
automatically be converted into 12,281 shares (the "Holmes Shares") of Maker's
Common Stock, par value $.01 ("Common Stock") on the date that the Registration
Statement becomes effective, or if the Holmes Shares are not freely tradable on
the NASDAQ National Market on such date, the date the Holmes Shares become
freely tradable on the NASDAQ National Market (the "Effective Date"), if the
Effective Date is on or before September 30, 1997 and (b) if the Effective Date
is after September 30, 1997, shall be convertible at the option of the Holder,
in whole, but not in part, upon surrender of this
<PAGE>
Debenture at the principal office of the Maker, into the Holmes Shares. As
promptly as practicable, and in any event within five (5) business days after
the Effective Date, if the Effective Date is on or prior to September 30, 1997,
or within five (5) business days after the surrender of this Debenture for
conversion, Maker shall deliver or cause to be delivered to Holder, certificates
representing the Holmes Shares into which the Debenture shall have been
converted. Notwithstanding the foregoing, Maker shall not be required to issue
the Holmes Shares upon surrender of this Debenture for conversion, and no
surrender of this Debenture shall be effective for that purpose, if additional
time is necessary to comply with applicable laws in Maker's reasonable
discretion; provided, however, that the conversion shall become effective
immediately upon compliance with such laws as if the conversion had been made
when this Debenture was initially surrendered. For purposes of this paragraph,
surrender of this Debenture shall be made by sending it to Maker by overnight
courier with written notice of Holder's intent to convert the Debenture into the
Holmes Shares, and the surrender date shall be deemed to be the day on which
this Debenture is placed with the overnight courier by Holder.
In case of any reclassification, capital reorganization or
other change of outstanding shares of Common Stock (other than as a result of an
issuance of Common Stock in accordance with new subscriptions for shares of
Common Stock) or in case of any consolidation or merger of Maker with or into
another corporation (other than a merger with a subsidiary in which merger Maker
is the continuing corporation and which does not result in a reclassification,
capital reorganization or other change of outstanding shares of Common Stock) or
in case of any sale or conveyance to another corporation of the property of
Maker as an entirety, or substantially as an entirety, Maker shall cause
effective provision to be made so that Holder shall have the right thereafter,
by converting this Debenture, to purchase the kind and amount of shares of stock
and other securities and property receivable upon such reclassification, capital
reorganization or other change, consolidation, merger, sale or conveyance. Any
such provision shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Debenture. The foregoing provisions of this paragraph shall similarly apply to
successive reclassifications, capital reorganizations and changes of shares of
Common Stock and to successive consolidations, mergers, sales and conveyances.
In the event Maker effects a subdivision or combination of its
outstanding Common Stock into a greater or lesser number of shares, then and in
each such event, the number of Holmes Shares shall be decreased or increased
proportionately, as the case may be.
In the event Maker shall, prior to the conversion or payment
in full of this Debenture, make or issue, or fix a record date for the
determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in additional shares of Common Stock, then the number
of Holmes Shares issuable hereunder shall be increased as of the time of such
issuance or record date, as applicable, to such amount as would result from
multiplying the number of Holmes Shares by a fraction (i) the numerator of which
shall be the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or record date, as applicable,
plus the number of shares of Common Stock issuable in payment of such dividend
or distribution, and (ii) the denominator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance or record date, as applicable; provided, however, that if a record
date for a dividend or distribution payable in Common Stock shall have been
fixed and such dividend or distribution is not fully paid on the date fixed
therefor, the number of Holmes Shares shall be recomputed accordingly as of the
date fixed therefor and thereafter the Holmes Shares shall be adjusted pursuant
to this paragraph as of the time of actual payment of such dividend or
distribution.
An Event of Default shall mean the occurrence or existence of
any one or more of the following events or conditions (whatever the reason
therefor and whether voluntary, involuntary or effected by operation of law):
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(i) Maker shall fail to pay any principal due under this
Debenture after such principal becomes due or to issue the Holmes Shares to
Holder at Holder's election in accordance with the terms hereof, provided,
however, that the failure of Maker to issue the Holmes Shares due to compliance
with applicable laws as provided above shall not be deemed to be an Event of
Default under this Debenture;
(ii) Maker shall fail to pay any interest due under this
Debenture within five (5) days after such interest or other amount becomes due
in accordance with the terms of this Debenture;
(iii) A proceeding shall have been instituted in a court
having jurisdiction in the premises seeking a decree or order for relief in
respect of Maker in an insolvency case under any applicable bankruptcy,
insolvency, reorganization or other similar law now or hereafter in effect, or a
receiver, liquidator, assignee, custodian, trustee, sequestrator, conservator
(or similar official) of Maker for any substantial part of its property, or for
the winding up or liquidation of its affairs and such proceeding shall remain
undismissed or unstayed and in effect for a period of 90 consecutive days or
such court shall enter a decree or order granting any of the relief sought in
such proceedings; or
(iv) Maker shall commence a voluntary case under any
applicable bankruptcy, insolvency, reorganization or other similar law now or
hereafter in effect, shall consent to the entry of an order for relief in an
involuntary case under any such law, or shall consent to the appointment or
taking possession by receiver, liquidator, assignee, custodian, trustee,
sequestrator, conservator (or other similar official) of itself or for any
substantial part of its property or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due, or shall take any action in furtherance of any of the foregoing.
If an Event of Default specified under clauses (i) or (ii)
shall occur and be continuing, Holder may, by written notice to Maker, declare
the unpaid principal amount then outstanding under this Debenture and all
interest accrued thereon, to be forthwith due and payable, and the same shall
thereupon become and be immediately due and payable to Holder without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived; and if an Event of Default specified under clauses
(iii) or (iv) above shall occur, the unpaid principal amount then outstanding
under this Debenture and all interest accrued thereon shall be immediately due
and payable, without protest, demand, or notice of any kind, all of which are
hereby expressly waived.
The payment of all indebtedness (including principal, interest
and any expense due with respect thereto) due pursuant to this Debenture is
subordinated to the prior payment in full of all indebtedness of Maker, whether
outstanding on the date hereof or thereafter created or incurred, which is for
money borrowed from, or guaranteed to, banks, trust companies, insurance
companies, or other institutional lenders, and renewals, extensions, refundings,
amendments or other modifications of any such indebtedness or guarantees,
including, without limitation, all indebtedness constituting obligations of
Maker to reimburse banks for amounts paid under letters of credit, supporting
notes or other similar obligations (herein the "Senior Indebtedness").
Without limiting the generality of any of the foregoing,
Senior Indebtedness includes all indebtedness and obligations of Maker under
that certain Amended and Restated Credit Agreement, dated as of December 31,
1996, as subsequently amended, by and among Merita Bank Ltd., Bank of Boston
Connecticut, Holmes Protection, Inc. and Maker, as such agreement may be
renewed, extended,
3
<PAGE>
amended or modified from time to time. If an event occurs and is continuing
which is a default or an event of default, or which with notice or lapse of time
or both would become a default or event of default, either in payment of
principal of, or interest on, Senior Indebtedness when due, or which under any
agreement relating to Senior Indebtedness would permit the holders thereof to
cause any part of such Senior Indebtedness to become due prior to its stated
maturity, whether by prepayment, acceleration or otherwise, or in the event of
any distribution of the assets of Maker upon any dissolution, winding up, total
liquidation or reorganization of Maker, no payments of any kind may be made by
Maker with respect to any indebtedness due under this Debenture unless all
amounts due on the Senior Indebtedness shall have been paid or provided for.
In the event any one or more of the provisions contained in
this Debenture shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not effect any other provision of this Debenture, and this Debenture shall
be construed as if such invalid, illegal or unenforceable provision had never
been contained herein.
Maker hereby represents and warrants to Holder that this
Debenture has been duly authorized, executed and delivered by Maker and
constitutes a legal, valid and binding obligation of Maker enforceable against
it in accordance with its terms, except as the enforceability thereof may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting the enforcement of creditors rights generally and the
possible unavailability of certain equitable remedies.
This Debenture may not be waived, changed, modified or
discharged orally, except by an agreement in writing signed by the party against
whom the enforcement of waiver, change, modification or discharge is sought.
All notices given to or made upon any party hereto shall be in
writing and shall be delivered or sent to the respective parties at the
addresses set forth in that certain Agreement of Stock Purchase by and among
Maker, John L. Carmody and Robert L. Saunders dated as of April 25, 1997. All
notices shall be effective (i) in the case of facsimile, when received; (ii) in
the case of hand-delivered notice, when hand-delivered; (iii) if given by
overnight courier, one (1) day after such communication is placed with the
overnight courier; and (iv) if given by mail, four (4) days after such
communication is deposited in the mails with first- class postage prepaid,
return receipt requested.
In the event such interest rate hereunder exceeds the maximum
permitted by law, then this Debenture shall automatically bear interest, in
accordance herewith at the maximum rate permitted by law.
This Debenture shall be binding upon, inure to the benefit of,
and be enforceable by Maker and Holder and their respective successors and
assigns, except that Maker shall not have the right to assign this Debenture or
its obligations hereunder without the prior written consent of Holder.
This Debenture shall be governed by the internal law of the
Commonwealth of Pennsylvania.
HOLMES PROTECTION GROUP, INC.
By:_________________________
Name:_______________________
Title:______________________
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Exhibit 5.1
DENNIS M. STERN, ESQ.
GENERAL COUNSEL
HOLMES PROTECTION GROUP, INC.
440 NINTH AVENUE
NEW YORK, NEW YORK 10001
August 15, 1997
Holmes Protection Group, Inc.
440 Ninth Avenue
New York, New York 10001
Re: Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
You have requested our opinion, as counsel for Holmes Protection
Group, Inc., a Delaware corporation (the "Company"), in connection with the
registration statement on Form S-3 (the "Registration Statement"), filed with
the Securities and Exchange Commission under the Securities Act of 1933 (the
"Act"). The Registration Statement relates to an offering by certain selling
stockholders named therein (the "Stockholders") from time to time of up to
4,442,975 shares (the "Shares") of common stock, par value $.01 per share, of
the Company (the "Common Stock"). Of such Shares, 1,055,413 shares are issuable
(the "Warrant Shares") upon the exercise of certain warrants (the "Warrants")
and 24,562 shares (the "Note Shares") are issuable upon the exercise of certain
convertible promissory notes (the "Notes").
We have examined such records and documents and made such examinations
of law as we have deemed relevant in connection with this opinion. We have
assumed that there will be no changes in applicable law between the date of this
opinion and the date the Shares proposed to be sold by the Stockholders pursuant
to the Registration Statement are actually sold. It is our opinion that (i) the
Warrant Shares have been duly authorized and, when issued and delivered upon
exercise of the Warrants in accordance with the terms of the Warrants, will be
validly issued, fully paid and non-assessable; (ii) the Note Shares have been
duly authorized and, when issued and delivered upon conversion of the Notes in
accordance with the terms of the Notes, will be validly issued, fully paid and
non-assessable; and (iii) the Shares (other than the Warrant Shares and the Note
Shares) have been duly authorized and validly issued and are fully-paid and
non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Registration Statement. In so doing, we do not admit that we are
in the category of persons whose consent is required under Section 7 of the Act
or the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
Very truly yours,
Dennis M. Stern
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated February 28, 1997
(except with respect to the matter discussed in Note 15, as to which the date is
March 12, 1997) included in Holmes Protection Group Inc.'s Form 10-K for the
year ended December 31, 1996 and to all references to our Firm included in this
registration statement on Form S-3 registering 4,442,975 shares of common stock.
/s/ Arthur Andersen, LLP
------------------------
ARTHUR ANDERSEN, LLP
New York, New York
August 15, 1997
