1
SERIES B PREFERRED STOCK
PURCHASE AGREEMENT
DATED JULY 11, 1995
BY AND AMONG CENTENNIAL SECURITY, INC.
and
CENTENNIAL FUND IV, L.P.
CHEMICAL VENTURE CAPITAL ASSOCIATES
XXXXXXX VENTURE PARTNERS IV--DIRECT FUND, X.X.
XXXXXXX & CO.
and
MASADA SECURITY, INC.
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TABLE OF CONTENTS
Page
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1. Authorization and Closing . . . . . . . . . . . . . . . . . . . . . . . . 1
1A. Authorization of the Series B Preferred Stock . . . . . . . 1
1B. Purchase and Sale of the Series B Preferred Stock . . . . . 1
1C. The Closing . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Conditions of the Purchasers' Obligation at the Closing . . . . . . . . . 2
2A. Representations and Warranties; Covenants . . . . . . . . . 2
2B. Amendment to Certificate of Incorporation . . . . . . . . . 2
2C. Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2D. Blue Sky Clearance . . . . . . . . . . . . . . . . . . . . . 2
2E. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2F. Registration Agreement . . . . . . . . . . . . . . . . . . . 2
2G. Stockholders Agreement . . . . . . . . . . . . . . . . . . . 2
2H. Conversion of Class B Common Stock . . . . . . . . . . . . . 2
2I. Collateral Assignment and Pledge Agreement . . . . . . . . . 3
2J. Due Diligence . . . . . . . . . . . . . . . . . . . . . . . 3
2K. Opinion of the Company's Counsel . . . . . . . . . . . . . . 3
2L. Closing Documents . . . . . . . . . . . . . . . . . . . . . 3
2M. Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 4
2N. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3A. Financial Statements and Other Information . . . . . . . . . 4
3B. Inspection of Property . . . . . . . . . . . . . . . . . . . 8
3C. Attendance at Board Meetings . . . . . . . . . . . . . . . . 8
3D. Restrictions . . . . . . . . . . . . . . . . . . . . . . . . 8
3E. Compliance with Agreements . . . . . . . . . . . . . . . . 11
3F. Current Public Information . . . . . . . . . . . . . . . . 11
3G. Affirmative Covenants . . . . . . . . . . . . . . . . . . 12
3H. Termination of Covenants . . . . . . . . . . . . . . . . . 13
4. Transfer of Restricted Securities . . . . . . . . . . . . . . . . . . . 13
4A. General Provisions . . . . . . . . . . . . . . . . . . . . 13
4B. Opinion Delivery . . . . . . . . . . . . . . . . . . . . . 13
4C. Rule 144A . . . . . . . . . . . . . . . . . . . . . . . . 13
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4D. Legend Removal . . . . . . . . . . . . . . . . . . . . . . 13
5. Representations and Warranties of the Company . . . . . . . . . . . . . 14
5A. Organization and Corporate Power . . . . . . . . . . . . . 14
5B. Capital Stock and Related Matters . . . . . . . . . . . . 14
5C. Subsidiaries; Investments . . . . . . . . . . . . . . . . 15
5D. Authorization; No Breach . . . . . . . . . . . . . . . . . 15
5E. Financial Statements . . . . . . . . . . . . . . . . . . . 16
5F. Absence of Undisclosed Liabilities . . . . . . . . . . . . 16
5G. No Material Adverse Change . . . . . . . . . . . . . . . . 16
5H. Governmental Consent, etc . . . . . . . . . . . . . . . . 16
5I. Absence of Certain Developments . . . . . . . . . . . . . 17
5J. Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5K. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . 18
5L. Contracts and Commitments . . . . . . . . . . . . . . . . 19
5M. Customers and Suppliers . . . . . . . . . . . . . . . . . 21
5N. Intellectual Property Rights . . . . . . . . . . . . . . . 21
5O. Litigation, etc. . . . . . . . . . . . . . . . . . . . . . 22
5P. Brokerage . . . . . . . . . . . . . . . . . . . . . . . . 22
5Q. Insurance . . . . . . . . . . . . . . . . . . . . . . . . 23
5R. Employees . . . . . . . . . . . . . . . . . . . . . . . . 23
5S. Compliance with Laws . . . . . . . . . . . . . . . . . . . 24
5T. Small Business Matters . . . . . . . . . . . . . . . . . . 24
5U. Affiliated Transactions . . . . . . . . . . . . . . . . . 24
5V. Investment in United States Real Property Interests . . . 25
5W. Unrelated Business Taxable Income . . . . . . . . . . . . 25
5X. Qualified Small Business . . . . . . . . . . . . . . . . . 25
5Y. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . 25
5Z. Closing Date . . . . . . . . . . . . . . . . . . . . . . . 26
6. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7A. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 30
7B. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . 31
7C. Purchasers' Representations and Warranties . . . . . . . . 31
7D. Preferred Stock Redemption . . . . . . . . . . . . . . . . 33
7E. Common Stock Put . . . . . . . . . . . . . . . . . . . . . 34
7F. SBIC Regulatory Provisions . . . . . . . . . . . . . . . . 36
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7G. Regulatory Compliance Cooperation . . . . . . . . . . . . 38
7H. Amendment of the 1994 Purchase Agreement and
the Masada Purchase Agreement . . . . . . . . . . . . . . 39
7I. Consent to Amendments . . . . . . . . . . . . . . . . . . 39
7J. Survival of Representations and Warranties . . . . . . . . 39
7K. Successors and Assigns . . . . . . . . . . . . . . . . . . 39
7L. Severability . . . . . . . . . . . . . . . . . . . . . . . 39
7M. Counterparts . . . . . . . . . . . . . . . . . . . . . . . 40
7N. Descriptive Headings; Interpretation . . . . . . . . . . . 40
7O. Governing Law . . . . . . . . . . . . . . . . . . . . . . 40
7P. Notices . . . . . . . . . . . . . . . . . . . . . . . . . 40
7Q. Understanding Among the Purchasers . . . . . . . . . . . . 40
7R. No Strict Construction . . . . . . . . . . . . . . . . . . 40
7S. Indemnification . . . . . . . . . . . . . . . . . . . . . 40
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SERIES B PREFERRED STOCK
PURCHASE AGREEMENT
THIS AGREEMENT is made as of July 11, 1995, by and among
Centennial Security, Inc., a Delaware corporation (the "Company"), Centennial
Fund IV, L.P., a Delaware limited partnership ("Centennial"), Chemical Venture
Capital Associates, a California limited partnership ("Chemical"), Xxxxxxx
Venture Partners IV--Direct Fund, L.P., a Delaware limited partnership
("Xxxxxxx"), Larimer & Co., a Delaware corporation ("Larimer"), and Masada
Security, Inc., a Delaware corporation ("Masada") (Xxxxxxx and Chemical being
referred to herein as the "New Investors" and Xxxxxxx, Chemical, Centennial,
Larimer and Masada being referred to herein collectively as the "Purchasers").
Capitalized terms used herein and not defined elsewhere herein are defined in
Section 6 hereof.
Section 1. Authorization and Closing.
1A. Authorization of the Series B Preferred Stock. The
Company shall authorize the issuance and sale to the Purchasers of 438,049
shares of its Series B Convertible Preferred Stock, par value $.001 per share
(the "Series B Preferred Stock"), having the rights and preferences set forth
in Exhibit A hereto. The Series B Preferred Stock is convertible into shares
of the Company's Common Stock, par value $.001 per share (the "Common Stock").
1B. Purchase and Sale of the Series B Preferred Stock.
Subject to the terms and conditions set forth herein, at the Closing, the
Company shall issue and sell to each Purchaser, and each Purchaser shall
purchase and acquire from the Company, the number of shares of Series B
Preferred Stock set forth opposite such Purchaser's name on the Purchasers
Schedule attached hereto at a price of $27.50 per share. The sale of Series B
Preferred Stock to each Purchaser shall constitute a separate sale hereunder.
1C. The Closing. The closing of the purchase and sale of
the Series B Preferred Stock (the "Closing") shall take place at the offices of
Xxxxxxxx & Xxxxx, 000 Xxxx Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000, at 10:00
a.m. on July 11, 1995, or at such other place or on such other date as may be
mutually agreeable to the Company and the Purchasers. At the Closing, the
Company shall deliver to the Purchasers stock certificates evidencing the
Series B Preferred Stock to be purchased by the Purchasers, registered in each
Purchaser's or its nominee's name, upon payment of the purchase price thereof
by wire transfer of immediately available funds to an account designated by the
Company, in the amount set forth opposite such Purchaser's name on the
Purchasers Schedule attached hereto.
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Section 2. Conditions of the Purchasers' Obligation at the
Closing. The obligation of each Purchaser to purchase and pay for the Series B
Preferred Stock at the Closing is subject to the satisfaction as of the Closing
of the following conditions:
2A. Representations and Warranties; Covenants. The
representations and warranties contained in Section 5 hereof shall be true and
correct in all material respects at and as of the Closing as though then made,
except to the extent of changes caused by the transactions expressly
contemplated herein, and the Company shall have performed in all material
respects all of the covenants required to be performed by it hereunder prior to
the Closing.
2B. Amendment to Certificate of Incorporation. The
Company's Certificate of Incorporation (the "Certificate of Incorporation")
shall have been amended to include the provisions set forth in Exhibit A hereto
(the "Charter Amendment"), shall be in full force and effect under the laws of
the State of Delaware as of the Closing as so amended and shall not have been
further amended or modified.
2C. Bylaws. The Company's bylaws as in effect on the
date hereof shall be in full force and effect as of the Closing and shall not
have been amended or modified.
2D. Blue Sky Clearance. The Company shall have made all
filings under applicable state securities laws, if any, necessary to consummate
the issuance of the Series B Preferred Stock pursuant to this Agreement in
compliance with such laws.
2E. Expenses. At the Closing, the Company shall have
reimbursed the Purchasers for the Purchasers' Expenses (to the extent then
known) as provided in paragraph 7A hereof.
2F. Registration Agreement. The Company and the
Purchasers shall have entered into a Registration Agreement (the "Registration
Agreement") substantially in the form of Exhibit B attached hereto, and the
Registration Agreement shall be in full force and effect as of the Closing.
2G. Stockholders Agreement. The Company and the
Purchasers shall have entered into a Stockholders Agreement (the "Stockholders
Agreement") substantially in the form of Exhibit C attached hereto, and the
Stockholders Agreement shall be in full force and effect as of the Closing.
2H. Conversion of Class B Common Stock. All of the Class
B Common Stock of the Company, par value $.001 per share, shall be converted
into shares of Common Stock at or prior to the Closing.
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2I. Collateral Assignment and Pledge Agreement. At or
prior to the Closing, Xxxxxx X. Xxxxxx and the Company shall have entered into
the Collateral Assignment and Pledge Agreement contemplated by the Promissory
Note dated as of May 31, 1995 issued by Xxxxxx X. Xxxxxx to the Company.
2J. Due Diligence. Each of the Purchasers shall be
satisfied with the results of its and its representatives' due diligence
investigation and evaluation of the Company.
2K. Opinion of the Company's Counsel. Each Purchaser
shall have received from Xxxxxxxx Xxxxxxxxx, P.C., counsel for the Company, an
opinion with respect to the matters set forth in Exhibit D attached hereto,
which shall be addressed to each Purchaser, dated the date of the Closing and
in form and substance reasonably satisfactory to each Purchaser.
2L. Closing Documents. The Company shall have delivered
the following documents to the Purchasers:
(i) an Officer's Certificate, dated the date of the
Closing, stating that the conditions specified in paragraphs 2A
through 2I, inclusive, and this paragraph 2L have been fully
satisfied;
(ii) copies certified by an officer of the Company of the
resolutions duly adopted by the Company's board of directors
authorizing and approving the execution, delivery and performance of
this Agreement and each of the other agreements contemplated hereby,
the Charter Amendment and the filing of the Charter Amendment with the
Delaware Secretary of State, the reservation for issuance upon
conversion of the Preferred Stock of an aggregate of 529,049 shares of
Common Stock, the issuance and sale of the Series B Preferred Stock,
and the consummation of all other transactions contemplated by this
Agreement;
(iii) copies certified by an officer of the Company of the
resolutions of the Company's stockholders authorizing and approving
the Charter Amendment and the filing of the Charter Amendment with the
Delaware Secretary of State;
(iv) copies of the Certificate of Incorporation, the
Charter Amendment (as filed with the Delaware Secretary of State) and
the Company's bylaws, each as in effect at the Closing;
(v) copies certified by an officer of the Company of any
governmental consents, approvals and filings (if any) required in
connection with the consummation of the transactions hereunder
(including, without limitation, all blue sky law filings);
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(vi) for the Purchasers which are SBICs, duly completed
and executed XXX Xxxxx 000, 000 xxx 0000 (Xxxx X) together with a
five-year business plan showing the Company's financial projections
(including balance sheets and income and cash flows statements) for
such five-year period, a written statement from the Company regarding
its intended use of proceeds from the financing and a list after
giving effect to the transactions contemplated by this Agreement of
(a) the name of each of the Company's directors, (b) the name and
title of each of the Company's officers and (c) the name of each of
the Company's stockholders setting forth the number and class of
shares held; and
(vii) such other documents relating to the transactions
contemplated by this Agreement as any Purchaser or its special counsel
may reasonably request.
2M. Proceedings. All corporate and other proceedings
taken or required to be taken by the Company in connection with the
transactions contemplated hereby to be consummated at or prior to the Closing
and all documents incident thereto shall be reasonably satisfactory in form and
substance to the Purchaser and its counsel.
2N. Waiver. Any condition specified in this Section 2
may be waived by the Purchasers; provided that no such waiver shall be
effective against any Purchaser unless it is set forth in a writing executed by
such Purchaser.
Section 3. Covenants.
2A. Financial Statements and Other Information. The
Company shall deliver to each Purchaser and each Series A Purchaser (other than
Xxxxxx X. Xxxxxx) (so long as such Person holds any Underlying Common Stock),
to each other holder of at least 10% of the Underlying Common Stock then in
existence and to Xxxxxx X. Xxxxxx (so long as he holds at least 10,000 shares
of Series A Underlying Common Stock) (such Purchaser or other holder or Xxxxxx
X. Xxxxxx (so long as he holds at least 10,000 shares of Series A Underlying
Common Stock) being referred to herein as a "Qualified Holder"):
(i) as soon as available but in any event within 30 days
after the end of each monthly accounting period in each fiscal year
(except for the last month of the Company's fiscal year), unaudited
consolidating and consolidated statements of income and cash flows of
the Company and its Subsidiaries for such monthly period and for the
period from the beginning of the fiscal year to the end of such
monthly period, and unaudited consolidating and consolidated balance
sheets of the Company and its Subsidiaries as of the end of such
monthly period, setting forth in each case comparisons to the
Company's annual budget and to the corresponding period in the
preceding fiscal year, and all such statements shall be prepared in
accordance with generally accepted accounting principles (absent note
disclosures), consistently applied and shall be certified by the
Company's Chief Financial Officer (or, if the Company has
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no Chief Financial Officer or another person performing the functions
of the Chief Financial Officer, then certified by the Company's
President);
(ii) as soon as available but in any event within 30 days
after the end of each fiscal quarter of the Company (except the last
quarter of the Company's fiscal year), quarterly unaudited
consolidating and consolidated statements of income and cash flows of
the Company and its Subsidiaries, and quarterly unaudited
consolidating and consolidated balance sheets of the Company and its
Subsidiaries, setting forth in each case comparisons to the Company's
annual budget and to the corresponding period in the preceding fiscal
year, and all such statements shall be prepared in accordance with
generally accepted accounting principles (absent note disclosures),
consistently applied and shall be certified by the Company's Chief
Financial Officer (or, if the Company has no Chief Financial Officer
or another person performing the functions of the Chief Financial
Officer, then certified by the Company's President);
(iii) accompanying the financial statements referred to in
subparagraphs (i) and (ii), an Officer's Certificate stating that
there is no Event of Noncompliance in existence and that neither the
Company nor any of its Subsidiaries is in default under any of its
other material agreements or, if any Event of Noncompliance or any
such default exists, specifying the nature and period of existence
thereof and what actions the Company and its Subsidiaries have taken
and propose to take with respect thereto;
(iv) within 90 days after the end of each fiscal year,
consolidating and consolidated statements of income and cash flows of
the Company and its Subsidiaries for such fiscal year, and
consolidating and consolidated balance sheets of the Company and its
Subsidiaries as of the end of such fiscal year, setting forth in each
case comparisons to the Company's annual budget and to the preceding
fiscal year, all prepared in accordance with generally accepted
accounting principles, consistently applied, and accompanied by (a)
with respect to the consolidated portions of such statements, an
opinion containing no exceptions or qualifications (except for
qualifications regarding specified contingent liabilities or any
"going concern" qualifications related solely to the possible
accounting treatment of the Series A Preferred Stock or the Series B
Preferred Stock as debt rather than equity) of an independent
accounting firm of recognized national standing acceptable to the
holders of a majority of the Underlying Common Stock then in
existence, (b) a certificate from such accounting firm, addressed to
the Company's board of directors, stating that in the course of its
examination nothing came to its attention that caused it to believe
that there was an Event of Noncompliance in existence or that there
was any other default by the Company or any Subsidiary in the
fulfillment of or compliance with any of the terms, covenants,
provisions or conditions of any other material agreement to which the
Company or any Subsidiary is a party or, if such accountants have
reason to believe any Event of Noncompliance or other default by the
Company or any Subsidiary exists, a
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certificate specifying the nature and period of existence thereof, and
(c) a copy of such firm's annual management letter to the board of
directors;
(v) promptly upon receipt thereof, any additional
reports, management letters or other detailed information concerning
significant aspects of the Company's operations or financial affairs
given to the Company by its independent accountants (and not otherwise
contained in other materials provided hereunder);
(vi) as soon as practicable and in any event no later than
30 days after the close of each fiscal year of the Company, a monthly
operating and capital expenditure budget for the Company and its
Subsidiaries for the next immediate fiscal year, a five-year strategic
business plan for the subsequent five fiscal years of the Company and
promptly upon preparation thereof any other significant budgets and
plans prepared by the Company and any revisions of such budgets and
plans, and within 30 days after any monthly period in which there is a
material adverse deviation from the monthly operating and capital
expenditure budget, a statement explaining the deviation and what
actions the Company has taken and proposes to take with respect
thereto;
(vii) promptly (but in any event within five business days)
after the discovery or receipt of notice of any Event of
Noncompliance, any default under any material agreement to which it or
any of its Subsidiaries is a party or any other material adverse
change, event or circumstance affecting the Company or any Subsidiary
(including, without limitation, the filing of any material litigation
against the Company or any Subsidiary or the existence of any dispute
with any Person which involves a reasonable likelihood of such
litigation being commenced), an Officer's Certificate specifying the
nature and period of existence thereof and what actions the Company
and its Subsidiaries have taken and propose to take with respect
thereto;
(viii) within ten days after transmission thereof, copies of
all financial statements, proxy statements, material reports and any
other material general written communications which the Company sends
to its stockholders and copies of all registration statements and all
regular, special or periodic reports which it files, or any of its
officers or directors file with respect to the Company, with the
Securities and Exchange Commission or with any securities exchange on
which any of its securities are then listed, and copies of all press
releases and other statements made available generally by the Company
to the public concerning material developments in the Company's and
its Subsidiaries' businesses; and
(ix) with reasonable promptness, such other information
and financial data concerning the Company and its Subsidiaries as any
Person entitled to receive information under this paragraph 3A may
reasonably request.
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Each of the financial statements referred to in subparagraphs (i), (ii) and (iv)
shall be true and correct in all material respects as of the dates and for the
periods stated therein, subject in the case of the unaudited financial
statements to changes resulting from normal year-end adjustments.
Notwithstanding the foregoing, the provisions of this
paragraph 3A shall cease to be effective so long as the Company (a) is subject
to the periodic reporting requirements of the Securities Exchange Act and
continues to comply with such requirements and (b) promptly provides to each
Person otherwise entitled to receive information pursuant to this paragraph 3A
all reports and other materials filed by the Company with the Securities and
Exchange Commission pursuant to the periodic reporting requirements of the
Securities Exchange Act; provided that so long as any shares of Preferred Stock
remain outstanding, within 30 days after the end of each of the Company's
fiscal quarters, the Company shall continue to deliver to each Qualified Holder
the information specified in subparagraph 3A(iii); and provided further that so
long as any shares of Underlying Common Stock remain in existence, the Company
shall continue to deliver to each Qualified Holder, the information specified
in subparagraphs 3A(iv)(b), 3A(vii) and 3A(ix).
Except as otherwise required by law or judicial order or
decree or by any governmental agency or authority, each Person entitled to
receive information regarding the Company and its Subsidiaries under paragraph
3A, 3B or 3C shall use its best efforts to maintain the confidentiality of all
nonpublic information obtained by it hereunder which the Company has reasonably
designated as proprietary or confidential in nature; provided that each such
Person may disclose such information (a) in connection with the proposed sale
or transfer of any Underlying Common Stock if the proposed transferee agrees in
writing to be bound by the confidentiality provisions hereof and (b) to the
extent such Person which is a partnership or other venture capital fund
desires, according to its policies as in effect from time to time, to disclose
summary or financial information about the Company to investors in and other
partners of such Person as part of such Person's regular communication process
with its investors and partners.
For purposes of paragraphs 3A and 3C hereof, the terms
"Purchaser" and "Series A Purchaser" shall include any partner of a Purchaser
or Series A Purchaser who received shares of Underlying Common Stock pursuant
to a distribution from or a liquidation of such Purchaser.
For purposes of this Agreement and the Registration Agreement,
all holdings of Underlying Common Stock by Persons who are Affiliates of each
other shall be aggregated for purposes of meeting any threshold tests under
this Agreement and Registration Agreement. "Affiliate" means any Person which
controls, is controlled by or is under common control with another Person and
Persons which have received distributions of securities from a partnership
holding such securities.
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3B. Inspection of Property. The Company shall permit any
representatives designated by any Qualified Holder, upon reasonable notice and
during normal business hours, to (i) visit and inspect any of the properties of
the Company and its Subsidiaries, (ii) examine the corporate and financial
records of the Company and its Subsidiaries and make copies thereof or extracts
therefrom and (iii) discuss the affairs, finances and accounts of any such
corporations with the directors, officers, key employees and independent
accountants of the Company and its Subsidiaries. The presentation of an
executed copy of this Agreement by any Purchaser or any such holder of Series B
Preferred Stock or Series B Underlying Common Stock, or an executed copy of the
1994 Purchase Agreement by any holder of Series A Underlying Common Stock, to
the Company's independent accountants shall constitute the Company's permission
to its independent accountants to participate in discussions with such Persons.
3C. Attendance at Board Meetings. The Company shall give
each Purchaser and Series A Purchaser (so long as such Person holds at least
10% of the Underlying Common Stock then in existence) and Xxxxxx X. Xxxxxx (so
long as he holds at least 10,000 shares of Series A Underlying Common Stock)
written notice of each meeting of its board of directors and each committee
thereof at the same time and in the same manner as notice is given to the
directors (which notice shall be confirmed in writing to each such Person), and
the Company shall permit a representative of each such Person to attend as an
observer all meetings of its board of directors and all committees thereof.
Each representative shall be entitled to receive all written materials and
other information (including, without limitation, copies of meeting minutes)
given to directors in connection with such meetings at the same time such
materials and information are given to the directors. If the Company proposes
to take any action by written consent in lieu of a meeting of its board of
directors or of any committee thereof, the Company shall use reasonable efforts
to give written notice thereof to each such Person prior to the effective date
of such consent describing the nature and substance of such action and in any
event shall give prompt written notice thereof after the effective date of such
consent. All the rights of the Purchasers and Series A Purchasers under this
paragraph 3C shall be given to any transferee of such Purchasers and Series A
Purchasers who receives Underlying Common Stock if such transferee provides to
the Company a written opinion of counsel that such transferee is required to
have such rights under ERISA (as defined in paragraph 5R(a) below).
3D. Restrictions. Subject to paragraph 3H below and
except as set forth on the attached Restrictions Schedule, so long as any of
the Underlying Common Stock remains in existence, the Company shall not,
without the prior written consent of the Required Holders:
(i) directly or indirectly declare or pay any
dividends or make any distributions upon or with respect to any of its
capital stock or other equity securities other than the Series B
Preferred Stock and the Series A Preferred Stock pursuant to
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the terms of the Charter Amendment, except for dividends payable in
shares of Common Stock issued upon the outstanding shares of Common
Stock;
(ii) directly or indirectly redeem, purchase or
otherwise acquire, or permit any Subsidiary to redeem, purchase or
otherwise acquire, any of the Company's or any Subsidiary's capital
stock or other equity securities (including, without limitation,
warrants, options and other rights to acquire such capital stock or
other equity securities) other than the Series B Preferred Stock or
the Series A Preferred Stock pursuant to the terms of the Charter
Amendment;
(iii) except as expressly contemplated by this
Agreement, authorize, issue or enter into any agreement providing for
the issuance (contingent or otherwise) of, (a) any notes or debt
securities containing equity features (including, without limitation,
any notes or debt securities convertible into or exchangeable for
capital stock or other equity securities, issued in connection with
the issuance of capital stock or other equity securities or containing
profit participation features, but excluding any senior or
subordinated debt on market terms with equity rights attached that are
the equivalent for all such debt in the aggregate of not more than 5%
of the outstanding Common Stock of the Company) or (b) any capital
stock or other equity securities (or any securities convertible into
or exchangeable for any capital stock or other equity securities)
which are senior to or on a parity with the Series B Preferred Stock
or the Series A Preferred Stock with respect to the payment of
dividends, redemptions or distributions upon liquidation or otherwise;
(iv) make, or permit any Subsidiary to make, any
loans or advances to, guarantees for the benefit of, or, except as
permitted under clause (viii) of this paragraph 3D, Investments in,
any Person (other than the Company or a Wholly-Owned Subsidiary
established under the laws of a jurisdiction of the United States or
any of its territorial possessions), except for (a) reasonable
advances to employees in the ordinary course of business, (b)
acquisitions permitted pursuant to subparagraph (viii) below and (c)
Investments having a stated maturity no greater than one year from the
date the Company makes such Investment in (1) obligations of the
United States government or any agency thereof or obligations
guaranteed by the United States government, (2) certificates of
deposit of commercial banks having combined capital and surplus of at
least $50 million or (3) commercial paper with a rating of at least
"Prime-1" by Xxxxx'x Investors Service, Inc.;
(v) merge or consolidate with any Person or,
except as permitted by subparagraph (viii) below, permit any
Subsidiary to merge or consolidate with any Person (other than a
Wholly-Owned Subsidiary) (it being understood that this subparagraph
(v) shall not apply to a purchase of stock by the Company of any other
Person which is not followed or accompanied by a merger or
consolidation of such person into or with the Company);
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14
(vi) sell, lease or otherwise dispose of, or
permit any Subsidiary to sell, lease or otherwise dispose of, more
than 10% of the consolidated assets of the Company and its
Subsidiaries (computed on the basis of book value, determined in
accordance with generally accepted accounting principles consistently
applied, or fair market value, determined by the Company's board of
directors in its reasonable good faith judgment) in any transaction or
series of related transactions (other than sales of inventory in the
ordinary course of business) or sell or permanently dispose of any of
its or any Subsidiary's Intellectual Property Rights (other than any
sale to a Wholly-Owned Subsidiary);
(vii) liquidate, dissolve or effect a
recapitalization or reorganization in any form of transaction
(including, without limitation, any reorganization into a limited
liability company, a partnership or any other non-corporate entity
which is treated as a partnership for federal income tax purposes);
(viii) acquire, or permit any Subsidiary to acquire,
any interest in any company or business (whether by a purchase of
assets, purchase of stock, merger or otherwise), or enter into any
joint venture, involving an aggregate consideration (including,
without limitation, the assumption of liabilities whether direct or
indirect) exceeding $5,000,000 in any one transaction or series of
related transactions;
(ix) enter into, or permit any Subsidiary to enter
into, the ownership, active management or operation of any business
other than the commercial and residential security monitoring business
and related businesses;
(x) become subject to or permit any of its
Subsidiaries to become subject to (including, without limitation, by
way of amendment to or modification of) any agreement or instrument
which by its terms would (under any circumstances) restrict (a) the
right of any Subsidiary to make loans or advances or pay dividends to,
transfer property to, or repay any Indebtedness owed to, the Company
or another Subsidiary or (b) the Company's right to perform the
provisions of this Agreement, the Registration Agreement, the
Certificate of Incorporation, the Charter Amendment or the Company's
bylaws (including, without limitation, provisions relating to the
declaration and payment of dividends on, the making of redemptions of
and conversions of the Series B Preferred Stock and the Series A
Preferred Stock);
(xi) except as expressly contemplated by this
Agreement, make any amendment to the Certificate of Incorporation, the
Charter Amendment or the Company's bylaws, or file any resolution of
the board of directors with the Delaware Secretary of State containing
any provisions, which would increase the number of authorized shares
of the Series B Preferred Stock or the Series A Preferred Stock or
adversely affect or otherwise impair the rights or the relative
preferences and priorities of the holders of the Series B Preferred
Stock, the Series A Preferred Stock or the
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15
Underlying Common Stock under this Agreement, the Certificate of
Incorporation, the Charter Amendment, the Company's bylaws or the
Registration Agreement;
(xii) enter into, amend, modify or supplement, or
permit any Subsidiary to enter into, amend, modify or supplement, any
agreement, transaction, commitment or arrangement with any of its or
any Subsidiary's officers, directors or employees or with any
individual related by blood, marriage or adoption to any such
individual or with any entity in which any such Person or individual
owns a beneficial interest, except for customary employment
arrangements and benefit programs on reasonable terms and except as
otherwise expressly contemplated by this Agreement;
(xiii) establish or acquire (a) any Subsidiaries
other than Wholly-Owned Subsidiaries or (b) any Subsidiaries organized
outside of the United States and its territorial possessions;
(xiv) change its fiscal year;
(xv) increase the authorized size of its board of
directors above 9 members or decrease the authorized size of its board
of directors below 9 members; or
(xvi) issue or sell any shares of the capital
stock, or rights to acquire shares of the capital stock, of any
Subsidiary to any Person other than the Company or a Wholly-Owned
Subsidiary.
3E. Compliance with Agreements. The Company shall
perform and observe all of its obligations to each holder of the Series B
Preferred Stock and the Series A Preferred Stock and all of its obligations to
each holder of the Underlying Common Stock set forth in the Certificate of
Incorporation, the Charter Amendment and the Company's bylaws and all of its
obligations to each holder of Registrable Securities set forth in the
Registration Agreement.
3F. Current Public Information. At all times after the
Company has filed a registration statement with the Securities and Exchange
Commission pursuant to the requirements of either the Securities Act or the
Securities Exchange Act, the Company shall file all reports required to be
filed by it under the Securities Act and the Securities Exchange Act and the
rules and regulations adopted by the Securities and Exchange Commission
thereunder and shall take such further action as any holder or holders of
Restricted Securities may reasonably request, all to the extent required to
enable such holders to sell Restricted Securities pursuant to (i) Rule 144
adopted by the Securities and Exchange Commission under the Securities Act (as
such rule may be amended from time to time) or any similar rule or regulation
hereafter adopted by the Securities and Exchange Commission or (ii) a
registration statement on Form S-2 or S-3 or any similar registration form
hereafter adopted by the
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16
Securities and Exchange Commission. Upon request, the Company shall
deliver to any holder of Restricted Securities a written statement as
to whether it has complied with such requirements.
3G. Affirmative Covenants. So long as any of the
Underlying Common Stock remains in existence the Company shall, and shall cause
each Subsidiary to use its best efforts, to:
(i) cause to be done all things necessary to maintain,
preserve and renew its corporate existence and all material licenses,
authorizations and permits necessary to the conduct of its business;
(ii) maintain and keep its properties in good repair,
working order and condition, and from time to time make all necessary
repairs, renewals and replacements, so that its businesses may be
properly conducted at all times;
(iii) pay and discharge when payable all taxes, assessments
and governmental charges imposed upon its properties or upon the
income or profits therefrom (in each case before the same becomes
delinquent and before penalties accrue thereon) and all claims for
labor, materials or supplies to the extent to which the failure to pay
or discharge such obligations would reasonably be expected to have a
material adverse effect upon the financial condition of the Company
and its Subsidiaries taken as a whole, unless and to the extent that
the same are being contested in good faith and by appropriate
proceedings and adequate reserves (as determined in accordance with
generally accepted accounting principles, consistently applied) have
been established on its books with respect thereto;
(iv) comply with all other material obligations which it
incurs pursuant to any contract or agreement as such obligations
become due to the extent to which the failure to so comply would
reasonably be expected to have a material adverse effect upon the
financial condition of the Company and its Subsidiaries taken as a
whole, unless and to the extent that the same are being contested in
good faith and by appropriate proceedings and adequate reserves (as
determined in accordance with generally accepted accounting
principles, consistently applied) have been established on its books
with respect thereto;
(v) comply with all applicable laws, rules and
regulations of all governmental authorities, the violation of which
would reasonably be expected to have a material adverse effect upon
the financial condition of the Company and its Subsidiaries taken as a
whole; and
(vi) maintain proper books of record and account which
fairly present its financial condition and results of operations and
make provisions on its financial
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17
statements for all such proper reserves as in each case are required
in accordance with generally accepted accounting principles,
consistently applied.
3H. Termination of Covenants. Notwithstanding any other
provisions in this Section 3, the provisions of paragraphs 3D (other than
clause 3D(x)(b)) and 3G (other than clauses 3G(v) and 3G (vi)) shall terminate
upon the last to occur of (i) the conversion of at least 90% of the shares of
the Series B Preferred Stock issued hereunder, (ii) the conversion of at least
90% of the shares of the Series A Preferred Stock issued under the 1994
Purchase Agreement or (iii) the consummation of a Qualified Public Offering.
Section 4. Transfer of Restricted Securities.
4A. General Provisions. Restricted Securities are
transferable only pursuant to (i) public offerings registered under the
Securities Act, (ii) Rule 144 or Rule 144A of the Securities and Exchange
Commission (or any similar rule or rules then in force) if such rule is
available and (iii) subject to the conditions specified in paragraph 4B below,
any other legally available means of transfer.
4B. Opinion Delivery. In connection with the transfer of
any Restricted Securities (other than a transfer described in paragraph 4A(i)
or (ii) above), the holder thereof shall deliver written notice to the Company
describing in reasonable detail the transfer or proposed transfer, together
with an opinion of Xxxxxxxx & Xxxxx or other counsel which (to the Company's
reasonable satisfaction) is knowledgeable in securities law matters to the
effect that such transfer of Restricted Securities may be effected without
registration of such Restricted Securities under the Securities Act. In
addition, if the holder of the Restricted Securities deliver to the Company an
opinion of Xxxxxxxx & Xxxxx or such other counsel that no subsequent transfer
of such Restricted Securities shall require registration under the Securities
Act, the Company shall promptly upon such contemplated transfer deliver new
certificates for such Restricted Securities which do not bear the Securities
Act legend set forth in paragraph 7C. If the Company is not required to
deliver new certificates for such Restricted Securities not bearing such
legend, the holder thereof shall not transfer the same until the prospective
transferee has confirmed to the Company in writing its agreement to be bound by
the conditions contained in this paragraph and paragraph 7C.
4C. Rule 144A. Upon the request of any Purchaser, the
Company shall promptly supply to such Purchaser or its prospective transferees
all information regarding the Company required to be delivered in connection
with a transfer pursuant to Rule 144A of the Securities and Exchange
Commission.
4D. Legend Removal. If any Restricted Securities become
eligible for sale pursuant to Rule 144(k), the Company shall, upon the request
of the holder of such Restricted Securities, remove the legend set forth in
paragraph 7C from the certificates for such Restricted Securities.
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Section 5. Representations and Warranties of the Company. As
a material inducement to the Purchasers to enter into this Agreement and
purchase the Series B Preferred Stock, the Company hereby represents and
warrants that:
5A. Organization and Corporate Power. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of Delaware and, except as set forth on the attached Organization
Schedule, is qualified to do business in every jurisdiction in which the
character of the Company's properties or the nature of the Company's activities
requires it to be so qualified. The Company has all requisite corporate power
and authority and all licenses, permits and authorizations necessary to own and
operate its properties, to carry on its businesses as now conducted and
presently proposed to be conducted and to carry out the transactions
contemplated by this Agreement. The copies of the Company's charter documents
and bylaws which have been furnished to the Purchasers' counsel reflect all
amendments made thereto at any time prior to the date of this Agreement and are
correct and complete. The Company is not in default under or in violation of
any provision of its charter documents or bylaws.
5B. Capital Stock and Related Matters.
(i) As of the Closing and immediately thereafter, the
authorized capital stock of the Company shall consist of those shares
of capital stock of the Company set forth on the attached Capital
Stock Schedule. Except as set forth on the attached Capital Stock
Schedule, as of the Closing, the Company shall not have outstanding
any stock or securities convertible or exchangeable for any shares of
its capital stock or containing any profit participation features, nor
shall it have outstanding any rights or options to subscribe for or to
purchase its capital stock or any stock or securities convertible into
or exchangeable for its capital stock or any stock appreciation rights
or phantom stock plans, except as set forth in this Agreement and as
disclosed to the Purchasers prior to the date of this Agreement.
Except as set forth on the attached Capital Stock Schedule, as of the
Closing, the Company shall not be subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire
any shares of its capital stock or any warrants, options or other
rights to acquire its capital stock. As of the Closing, all of the
outstanding shares of the Company's capital stock shall be validly
issued, fully paid and nonassessable.
(ii) Except as set forth on the attached Capital Stock
Schedule, there are no statutory or contractual stockholders
preemptive rights or rights of refusal with respect to (a) the
issuance of the Series B Preferred Stock hereunder or the issuance of
the Common Stock upon conversion of the Series B Preferred Stock,
except those as have been waived by the Persons possessing such rights
and (b) except as set forth in the Stockholders Agreement, the
issuance of any other equity securities by the Company or any
Subsidiary. The Company has not violated any applicable federal or
state securities laws in connection with the offer, sale or issuance
of any of its capital stock,
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19
and the offer, sale and issuance of the Series B Preferred Stock
hereunder do not require registration under the Securities Act or any
applicable state securities laws. Except as set forth on the attached
Capital Stock Schedule, to the best of the Company's knowledge, there
are no agreements between the Company's stockholders with respect to
the voting or transfer of the Company's capital stock or with respect
to any other aspect of the Company's affairs, except as contemplated
by this Agreement and the Stockholders Agreement.
5C. Subsidiaries; Investments. The attached Subsidiary
Schedule correctly sets forth the name of each Subsidiary, the jurisdiction of
its incorporation and the Persons owning the outstanding capital stock of such
Subsidiary. Each Subsidiary is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, possesses all
requisite corporate power and authority and all material licenses, permits and
authorizations necessary to own its properties and to carry on its Business and
is qualified to do business in every jurisdiction in which its ownership of
property or the conduct of business requires it to qualify. All of the
outstanding shares of capital stock of each Subsidiary are validly issued, full
paid and nonassessable, and all such shares are owned by the Company or another
Subsidiary free and clear of any Lien and not subject to any option or right to
purchase any such shares. Except as set forth on the Subsidiary Schedule,
neither the Company nor any Subsidiary owns or holds the right to acquire any
shares of stock or any other security or interest in any other Person. Each
representation and warranty with respect to the "Company" contained in this
Section 5 (other than the representations and warranties contained in
xxxxxxxxxx 0X, 0X(x) and 5E) is also true and correct with respect to each
Subsidiary listed on the attached Subsidiary Schedule.
5D. Authorization; No Breach. The execution, delivery
and performance of this Agreement, the Registration Agreement and all other
agreements contemplated hereby and thereby to which the Company is a party,
have been duly authorized by the Company. This Agreement, the Registration
Agreement and all other agreements contemplated hereby and thereby each
constitutes a valid and binding obligation of the Company, enforceable in
accordance with its terms, subject to applicable laws of bankruptcy, insolvency
and similar laws affecting creditors' rights and the application of general
rules of equity. The execution and delivery by the Company of this Agreement,
the Registration Agreement and all other agreements contemplated hereby and
thereby to which the Company is a party, the offering, sale and issuance of the
Series B Preferred Stock hereunder, and the fulfillment of and compliance with
the respective terms hereof and thereof by the Company, do not and shall not
(i) conflict with or result in a breach of the terms, conditions or provisions
of, (ii) constitute a default under, (iii) result in the creation of any lien,
security interest, charge or encumbrance upon the Company's capital stock or
assets pursuant to, (iv) give any third party the right to modify, terminate or
accelerate any obligation under, (v) result in a violation of, or (vi) require
any authorization, consent, approval, exemption or other action by or notice to
any court or administrative or governmental body pursuant to, the charter or
bylaws of the Company, or, any law, statute, rule or regulation to which the
Company is subject, or
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20
any commitment, understanding, agreement, instrument, order, judgment or decree
to which the Company is subject.
5E. Financial Statements. Attached hereto as the
Financial Statements Schedule are the following financial statements:
(i) the unaudited consolidated balance sheets of
the Company as of December 31, 1994, and the related statements of
income and cash flows (or the equivalent) for the period from the
inception of the Company until December 31, 1994; and
(ii) the unaudited consolidated balance sheet of
the Company as of May 31, 1995 (the "Latest Balance Sheet"), and the
related statements of income and cash flows (or the equivalent) for
the 5-month period then ended.
Each of the foregoing financial statements is accurate and complete in all
material respects, is consistent with the books and records of the Company
(which, in turn, are accurate and complete in all material respects) and has
been prepared in accordance with generally accepted accounting principles
(absent note disclosures), consistently applied.
5F. Absence of Undisclosed Liabilities. Except as set
forth on the attached Liabilities Schedule, the Company does not have any
obligation or liability (whether accrued, absolute, contingent, unliquidated or
otherwise, whether or not known to the Company, whether due or to become due
and regardless of when asserted) arising out of transactions entered into at or
prior to the Closing, or any action or inaction at or prior to the Closing, or
any state of facts existing at or prior to the Closing other than: (i)
liabilities set forth on the Latest Balance Sheet (including any notes
thereto), (ii) liabilities and obligations which have arisen after the date of
the Latest Balance Sheet in the ordinary course of business (none of which is a
liability resulting from breach of contract, breach of warranty, tort,
infringement, claim or lawsuit) and (iii) other liabilities and obligations
expressly disclosed in the other Schedules to this Agreement.
5G. No Material Adverse Change. Since the date of the
Latest Balance Sheet, there has been no material adverse change in the
financial condition, operating results, assets, operations, business prospects,
employee relations or customer or supplier relations of the Company.
5H. Governmental Consent, etc. No permit, consent,
approval or authorization of, or declaration to or filing with, any
governmental authority is required in connection with the execution, delivery
and performance by the Company of this Agreement or the other agreements
contemplated hereby, or the consummation by the Company of any other
transactions contemplated hereby or thereby, except as expressly contemplated
herein or in the exhibits hereto.
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21
5I. Absence of Certain Developments. Except as expressly
contemplated by this Agreement or as set forth on the attached Developments
Schedule, since the date of the Latest Balance Sheet, the Company has not:
(i) issued any notes, bonds or other debt securities or
any capital stock or other equity securities or any securities
convertible, exchangeable or exercisable into any capital stock or
other equity securities;
(ii) borrowed any amount or incurred or become subject to
any liabilities, except current liabilities incurred in the ordinary
course of business and liabilities under contracts entered into in the
ordinary course of business;
(iii) discharged or satisfied any Lien or paid any
obligation or liability, other than current liabilities paid in the
ordinary course of business;
(iv) declared or made any payment or distribution of cash
or other property to its stockholders with respect to its capital
stock or other equity securities or purchased or redeemed any shares
of its capital stock or other equity securities (including, without
limitation, any warrants, options or other rights to acquire its
capital stock or other equity securities);
(v) mortgaged or pledged any of its properties or assets
or subjected them to any Lien, except Liens for current property taxes
not yet due and payable;
(vi) sold, assigned or transferred any of its tangible
assets, except in the ordinary course of business, or canceled any
debts or claims;
(vii) sold, assigned or transferred any patents or patent
applications, trademarks, service marks, trade names, corporate names,
copyrights or copyright registrations, trade secrets or other
intangible assets, or disclosed any proprietary confidential
information to any Person;
(viii) suffered any extraordinary losses or waived any
material rights, whether or not in the ordinary course of business or
consistent with past practice;
(ix) made capital expenditures or commitments therefor
that aggregate in excess of $10,000;
(x) made any loans or advances to, guarantees for the
benefit of, or any Investments in, any Persons in excess of $5,000 in
the aggregate;
(xi) made any charitable contributions or pledges in
excess of $1,000 in the aggregate;
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(xii) suffered any damage, destruction or casualty loss
exceeding in the aggregate $5,000, whether or not covered by
insurance;
(xiii) made any Investment in or taken steps to incorporate
any Subsidiary; or
(xiv) entered into any other transaction other than in the
ordinary course of business or entered into any other material
transaction, whether or not in the ordinary course of business.
5J. Assets. Except as set forth on the attached Assets
Schedule, the Company has good and marketable title to, or a valid leasehold
interest in, the material properties and assets used by it, located on its
premises or shown on the Latest Balance Sheet or acquired thereafter, free and
clear of all Liens, except for properties and assets disposed of in the
ordinary course of business since the date of the Latest Balance Sheet and
except for Liens disclosed on the Latest Balance Sheet (including any notes
thereto) and Liens for current property taxes not yet due and payable. Except
as described on the Assets Schedule, the Company's buildings, equipment and
other tangible assets are in good operating condition in all material respects
and are fit for use in the ordinary course of business. The Company owns or
has a valid leasehold interest in, all assets necessary for the conduct of its
business as presently conducted and as presently proposed to be conducted.
5K. Tax Matters. Except as set forth on the attached
Taxes Schedule: the Company has filed all Tax Returns which it is required to
file under applicable laws and regulations; all such Tax Returns are complete
and correct in all material respects and have been prepared in compliance with
all applicable laws and regulations in all material respects; the Company in
all material respects has paid all Taxes due and owing by it (whether or not
such Taxes are required to be shown on a Tax Return) and has withheld and paid
over to the appropriate taxing authority all Taxes which it is required to
withhold from amounts paid or owing to any employee, stockholder, creditor or
other third party; the Company has not waived any statute of limitations with
respect to any Taxes or agreed to any extension of time with respect to any Tax
assessment or deficiency; the accrual for Taxes on the Latest Balance Sheet
would be adequate to pay all Tax liabilities of the Company if its current tax
year were treated as ending on the date of the Latest Balance Sheet (excluding
any amount recorded which is attributable solely to timing differences between
book and Tax income); since the date of the Latest Balance Sheet, the Company
has not incurred any liability for Taxes other than in the ordinary course of
business; the assessment of any additional Taxes for periods for which Tax
Returns have been filed by the Company shall not exceed the recorded liability
therefor on the Latest Balance Sheet (excluding any amount recorded which is
attributable solely to timing differences between book and Tax income); the
federal income Tax Returns of the Company have been audited and closed for all
tax years through 1995; no foreign, federal, state or local tax audits or
administrative or judicial proceedings are pending or being conducted with
respect to the Company, no information related to Tax matters has been
requested by any foreign, federal, state or local taxing authority and no
written notice
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23
indicating an intent to open an audit or other review has been received by the
Company from any foreign, federal, state or local taxing authority; and there
are no material unresolved questions or claims concerning the Company's Tax
liability.
5L. Contracts and Commitments.
(i) Except as expressly contemplated by this Agreement or
as set forth on the attached Contracts Schedule, as of the Closing, the Company
is not a party to any written or oral:
(a) pension, profit sharing, stock option,
employee stock purchase or other plan or arrangement
(excluding, for purposes of this subparagraph (a) only, any
employment compensation arrangements of the type described in
subparagraph (b) below, whether or not providing annual
compensation in excess of $100,000) providing for deferred or
other compensation to employees or any other employee benefit
plan or arrangement, or any contract with any labor union, or
any severance agreements;
(b) contract for the employment of any officer,
individual employee or other Person on a full-time, part-time,
consulting or other basis providing annual compensation in
excess of $100,000 or contract relating to loans to officers,
directors or affiliates;
(c) contract under which the Company has advanced
or loaned any other Person amounts in the aggregate exceeding
$5,000;
(d) agreement or indenture relating to the
borrowing of money or the mortgaging, pledging or otherwise
placing a lien on any material asset or material group of
assets of the Company;
(e) guarantee of any obligation in excess of
$10,000;
(f) lease or agreement under which the Company is
lessee of or holds or operates any property, real or personal,
owned by any other party, except for any lease of real or
personal property under which the aggregate annual rental
payments do not exceed $50,000;
(g) lease or agreement under which the Company is
lessor of or permits any third party to hold or operate any
property, real or personal, owned or controlled by the Company
(other than any leases of security alarm monitoring equipment
to customers of the Company pursuant to written agreements or
contracts);
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24
(h) assignment, license, indemnification or
agreement with respect to any intangible property (including,
without limitation, any patent, trademark, trade name,
copyright, know-how, trade secret or confidential
information);
(i) warranty agreement with respect to its
services rendered or its products sold or leased (other than
any installation warranty agreements entered into in
connection with the installation of security alarm monitoring
systems);
(j) agreement under which it has granted any
Person any registration rights (including piggyback rights);
(k) sales, distribution or franchise agreement;
(l) material agreement with a term of more than
six months which is not terminable by the Company or any
Subsidiary upon less than 30 days notice without penalty;
(m) contract or agreement prohibiting it from
freely engaging in any business or competing anywhere in the
world; or
(n) contract, agreement or other arrangement with
any officer, director, employee or Affiliate, or any Affiliate
of any officer, director or employee (other than any
contracts, agreements or arrangements covered by clause (b)
above or entered into in the ordinary course of business
consistent with past practice);
(o) any other agreement which is material to its
operations and business prospects or involves a consideration
in excess of $100,000 annually.
(ii) Except as set forth on the attached Contracts
Schedule, all of the contracts, agreements and instruments set forth on the
attached Contracts Schedule are valid, binding and enforceable against the
Company in accordance with their respective terms. Except as set forth on the
attached Contracts Schedule, the Company has performed all obligations required
to be performed by it under the contracts, agreements and instruments listed on
the attached Contracts Schedule and is not in default under or in breach of nor
in receipt of any claim of default or breach under any contract, agreement or
instrument to which the Company is subject; no event has occurred which with
the passage of time or the giving of notice or both would result in a default,
breach or event of noncompliance under any contract, agreement or instrument to
which the Company is subject; and the Company has no present expectation or
intention of not fully performing all such obligations; the Company has no
knowledge of any breach or anticipated breach by the other parties to any
contract or commitment to which it is a party.
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25
(iii) The Purchasers have been supplied with a true
and correct copy of each of the written contracts and an accurate
description of the oral contracts which are referred to on the
Contracts Schedule, together with all amendments, waivers or other
changes thereto.
5M. Customers and Suppliers.
(i) The attached Customer Schedule lists the 10 largest
customers of the Company based on recurring monthly revenues and sets forth
opposite the name of each such customer the percentage of consolidated net
sales attributable to such customer. The Customer Schedule also lists any
additional current customers which the Company anticipates shall be among the
10 largest customers for the current fiscal year.
(ii) Since the date of the Latest Balance Sheet, no
material supplier of the Company has indicated that it shall stop, or
materially decrease the rate of, supplying materials, products or services to
the Company, and no customer listed on the Customer Schedule has indicated
that it shall stop, or materially decrease the rate of, buying materials,
products or services from the Company.
5N. Intellectual Property Rights.
(i) The attached Intellectual Property Schedule contains
a complete and accurate list of all (a) patented or registered Intellectual
Property Rights owned or used by the Company, (b) pending patent applications
and applications for registrations of other Intellectual Property Rights filed
by the Company, (c) unregistered trade names and corporate names owned or used
by the Company and (d) unregistered trademarks, service marks, copyrights, mask
works and computer software owned or used by the Company. The Intellectual
Property Schedule also contains a complete and accurate list of all licenses
and other rights granted by the Company to any third party with respect to any
Intellectual Property Rights and all licenses and other rights granted by any
third party to the Company with respect to any Intellectual Property Rights, in
each case identifying the subject Intellectual Property Rights. Except as set
forth on the Intellectual Property Schedule, the Company owns all right, title
and interest to, or has the right to use pursuant to a valid license, all
Intellectual Property Rights necessary for the operation of its business as
presently conducted and as presently proposed to be conducted, free and clear
of all Liens. Except as set forth on the Intellectual Property Schedule, the
loss or expiration of any Intellectual Property Right or related group of
Intellectual Property Rights owned or used by the Company has not had and would
not reasonably be expected to have a material adverse effect on the conduct of
the Company's business, and no such loss or expiration is threatened, pending
or reasonably foreseeable. The Company has taken all necessary and desirable
actions to maintain and protect the Intellectual Property Rights which it owns.
To the best of the Company's knowledge, the owners of any Intellectual Property
Rights licensed to the Company have taken all necessary and desirable actions
to maintain and protect the Intellectual Property Rights which are subject to
such licenses.
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(ii) Except as set forth on the Intellectual Property
Schedule, (a) the Company owns all right, title and interest in and to all of
the Intellectual Property Rights listed on such Schedule, free and clear of all
Liens, (b) there have been no claims made against the Company asserting the
invalidity, misuse or unenforceability of any of such Intellectual Property
Rights, and, to the best of the Company's knowledge, there are no grounds for
the same, (c) the Company has not received any notices of, and is not aware of
any facts which indicate a likelihood of, any infringement or misappropriation
by, or conflict with, any third party with respect to such Intellectual
Property Rights (including, without limitation, any demand or request that the
Company license any rights from a third party), (d) the conduct of the
Company's business has not infringed, misappropriated or conflicted with and
does not infringe, misappropriate or conflict with any Intellectual Property
Rights of other Persons, nor would any future conduct as presently contemplated
infringe, misappropriate or conflict with any Intellectual Property Rights of
other Persons and (e) to the best of the Company's knowledge, the Intellectual
Property Rights owned by or licensed to the Company have not been infringed,
misappropriated or conflicted by other Persons. The transactions contemplated
by this Agreement shall have no material adverse effect on the Company's
right, title and interest in and to the Intellectual Property Rights listed on
the Intellectual Property Schedule.
5O. Litigation, etc. There are no actions, suits,
proceedings, orders, investigations or claims pending or, to the best of the
Company's knowledge, threatened against or affecting the Company (or to the
best of the Company's knowledge, pending or threatened against or affecting any
of the officers, directors or employees of the Company with respect to its
business or proposed business activities) at law or in equity, or before or by
any governmental department, commission, board, bureau, agency or
instrumentality (including, without limitation, any actions, suit, proceedings
or investigations with respect to the transactions contemplated by this
Agreement); the Company is not subject to any arbitration proceedings under
collective bargaining agreements or otherwise or, to the best of the Company's
knowledge, any governmental investigations or inquiries (including inquiries as
to the qualification to hold or receive any license or permit); and, to the
best of the Company's knowledge, there is no basis for any of the foregoing.
The Company is not subject to any judgment, order or decree of any court or
other governmental agency. Except as set forth on the attached Litigation
Schedule, the Company has not received any opinion or memorandum or legal
advice from legal counsel to the effect that it is exposed, from a legal
standpoint, to any liability or disadvantage which may be material to, and has
arisen in connection with or from, its business, operations, assets or
properties.
5P. Brokerage. There are no claims for brokerage
commissions, finders' fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement binding upon the Company. The Company shall pay, and hold each
Purchaser harmless against, any liability, loss or expense (including, without
limitation, reasonable attorneys' fees and out-of-pocket expenses) arising in
connection with any such claim.
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5Q. Insurance. The attached Insurance Schedule contains
a description of each insurance policy maintained by the Company with respect
to its properties, assets and businesses, and each such policy is in full force
and effect as of the Closing. The Company is not in default with respect to
its obligations under any insurance policy maintained by it. The insurance
coverage of the Company is customary for corporations of similar size engaged
in similar lines of business.
5R. Employees. The Company is not aware that any
executive or key employee of the Company or any group of employees of the
Company has any plans to terminate employment with the Company. The Company
has complied in all material respects with all laws relating to the employment
of labor, including provisions thereof relating to wages, hours, equal
opportunity, collective bargaining and the payment of social security and other
taxes, and the Company is not aware that it has any material labor relations
problems (including any union organization activities, threatened or actual
strikes or work stoppages or material grievances). Neither the Company, nor,
to the best of the Company's knowledge, any of their employees is subject to
any noncompete, nondisclosure, confidentiality, employment, consulting or
similar agreements relating to, affecting or in conflict with the present or
proposed business activities of the Company, except for agreements between the
Company and its present and former employees and consultants. Except as set
forth on the attached Employees Schedule:
(a) The Company does not have any obligation to
contribute to (or any other liability, including current or potential
withdrawal liability, with respect to) any "multiemployer plan" (as defined in
Section 3(37) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")).
(b) The Company does not maintain or have any obligation
to contribute to (or any other liability with respect to) any plan or
arrangement whether or not terminated, which provides medical, health, life
insurance or other welfare-type benefits for current or future retired or
terminated employees (except for limited continued medical benefit coverage
required to be provided under Section 4980B of the IRC or as required under
applicable state law).
(c) The Company does not maintain, contribute to or have
any liability under (or with respect to) any employee plan which is a
tax-qualified "defined benefit plan" (as defined in Section 3(35) of ERISA),
whether or not terminated.
(d) The Company does not maintain, contribute to or have
any liability under (or with respect to) any employee plan which is a
tax-qualified "defined contribution plan" (as defined in Section 3(34) of
ERISA), whether or not terminated.
(e) The Company does not maintain, contribute to or have
any liability under (or with respect to) any plan or arrangement providing
benefits to current or former
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employees, including any bonus plan, plan for deferred compensation, employee
health or other welfare benefit plan or other arrangement, whether or not
terminated. Such plans and other arrangements are referred to as the "Other
Plans."
(f) With respect to the Other Plans, all required or
recommended (in accordance with historical practices) payments, premiums,
contributions, reimbursements or accruals for all periods ending prior to or as
of the Closing shall have been made or properly accrued on the Latest Balance
Sheet. None of the Other Plans has any material unfunded liabilities which are
not reflected on the Latest Balance Sheet.
5S. Compliance with Laws. Except as set forth on the
attached Compliance Schedule, the Company has not violated any law or any
governmental regulation or requirement which violation would reasonably be
expected to have a material adverse effect upon the financial condition,
operating results, assets, operations, business prospects employee relations or
customer or supplier relations of the Company and the Company has not received
notice of any such violation. The Company is not subject to any clean up
liability, or has reason to believe it may become subject to any clean up
liability, under any federal, state or local environmental law, rule or
regulation.
5T. Small Business Matters. The Company, together with
its "affiliates" (as that term is defined in Title 13, Code of Federal
Regulations, Section 121.401), is a "small business concern" within the meaning
of the Small Business Investment Act of 1958 and the regulations thereunder,
including Title 13, Code of Federal Regulations, Section 121.802. The
information regarding the Company and its affiliates set forth in the Small
Business Administration Form 480, Form 652 and Part A of Form 1031 delivered at
the Closing is accurate and complete. Copies of such forms shall have been
completed and executed by the Company and delivered to each Purchaser at the
Closing together with a written statement of the Company regarding its planned
use of the proceeds from the sale of the Series B Preferred Stock. Neither the
Company nor any Subsidiary presently engages in, and it shall not hereafter
engage in, any activities, nor shall the Company or any Subsidiary use directly
or indirectly the proceeds from the sale of the Series B Preferred Stock
hereunder for any purpose, for which a Small Business Investment Company is
prohibited from providing funds by the Small Business Investment Act of 1958
and the regulations thereunder (including Title 13, Code of Federal
Regulations, Section 107.804 and Section 107.901).
5U. Affiliated Transactions. Except as set forth on the
attached Affiliated Transactions Schedule, no officer, director, employee,
stockholder or Affiliate of the Company or any Subsidiary or any individual
related by blood, marriage or adoption to any such individual or any entity in
which any such Person or individual owns any beneficial interest, is a party to
any material agreement, contract, commitment or transaction with the Company or
any Subsidiary or has any material interest in any material property used by
the Company or any Subsidiary.
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0X. Xxxxxxxxxx xx Xxxxxx Xxxxxx Real Property Interests.
The Company represents and warrants that its capital stock does not constitute
a United States real property interest as that term is defined in Section
897(c)(1)(A)(ii) of the IRC. The preceding representation is based on a
determination by the Company that the Company is not and has not been a United
States real property holding corporation (as that term is defined in Section
897(c)(2) of the IRC and in Section 1.897-2(b) of the Treasury Regulations
issued thereunder) during the five (5)-year period preceding the date hereof.
The Company has no current plans or intentions which would cause the Company to
become a United States real property holding company, and the Company has filed
with the IRS all statements, if any, with its United States income tax returns
which are required under Section 1.897-2(h) of the Treasury Regulations. The
Company shall use its best efforts to ensure that it does not at any time in
the future become a United States real property holding corporation. If at any
time in the future the Company should become a United States real property
holding corporation, the Company shall, as promptly as possible, notify the
Purchasers of such change in status.
5W. Unrelated Business Taxable Income. The Company
represents and warrants that any gross income derived by the Purchasers from
the Company shall be in the form of dividends, interest, capital gains and
losses from the disposition of property, and rents and royalties, but only such
rents and royalties as are excluded pursuant to IRC Sections 512(b)(2) and
512(b)(3), respectively, in calculating unrelated business taxable income and
only such dividends, interest, capital gains and losses, and rents and
royalties that are not included under Section 512(b)(4) of the IRC in
calculating unrelated business taxable income.
5X. Qualified Small Business. The Company represents and
warrants that to the best of its knowledge it qualifies as a "Qualified Small
Business" as defined in Section 1202(d) of the IRC and covenants that so long
as its shares are held by the Purchasers (or a transferee in whose hands the
shares are eligible to qualify as Qualified Small Business Stock as defined in
Section 1202(c) or the IRC), it will use its reasonable best efforts to cause
the shares to qualify as Qualified Small Business Stock.
5Y. Disclosure. Neither this Agreement nor any of the
exhibits, schedules, attachments, written statements, documents, certificates
or other items prepared or supplied to any Purchaser by or on behalf of the
Company with respect to the transactions contemplated hereby contain any untrue
statement of a material fact or omit a material fact necessary to make each
statement contained herein or therein not misleading; provided that with
respect to the financial projections furnished to the Purchasers by the
Company, the Company represents and warrants only that such projections were
based upon assumptions reasonably believed by the Company to be reasonable and
fair as of the date the projections were prepared in the context of the
Company's history and current and reasonably foreseeable business conditions.
There is no fact which the Company has not disclosed to the Purchasers in
writing and of which any of its officers, directors or executive employees is
aware (other than general economic conditions) and which has had or would
reasonably be expected to have a material adverse effect upon the existing or
expected financial condition, operating
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30
results, assets, customer or supplier relations, employee relations or business
prospects of the Company and its Subsidiaries taken as a whole.
5Z. Closing Date. The representations and warranties of
the Company contained in this Section 5 and elsewhere in this Agreement and all
information contained in any exhibit, schedule or attachment hereto or in any
writing delivered by, or on behalf of, the Company to the Purchasers shall be
true and correct in all material respects on the date of the Closing as though
then made, except as affected by the transactions expressly contemplated by
this Agreement.
Section 6. Definitions. For the purposes of this Agreement,
the following terms have the meanings set forth below:
"1994 Purchase Agreement" means the Series A Preferred Stock
Purchase Agreement dated December 30, 1994, and amended as of March 1, 1995, by
and among the Company, Centennial, Larimer and Xxxxxx X. Xxxxxx, as in effect
on the date hereof.
"Affiliate" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership of
voting securities, contract or otherwise, and any such Person's general or
limited partner.
"Centennial Stock" means the Series B Underlying Common Stock
initially purchased by Centennial and Larimer pursuant to this Agreement.
"Chemical Stock" means the Series B Underlying Common Stock
initially purchased by Chemical pursuant to this Agreement.
"Xxxxxxx Stock" means the Series B Underlying Common Stock
initially purchased by Xxxxxxx pursuant to this Agreement.
"Indebtedness" means all indebtedness for borrowed money
(including purchase money obligations) maturing one year or more from the date
of creation or incurrence thereof or renewable or extendible at the option of
the debtor to a date one year or more from the date of creation or incurrence
thereof, all indebtedness under revolving credit arrangements extending over a
year or more, all capitalized lease obligations and all guarantees of any of
the foregoing.
"Intellectual Property Rights" means all (i) patents, patent
applications, patent disclosures and inventions, (ii) trademarks, service
marks, trade dress, trade names, logos and corporate names and registrations
and applications for registration thereof together with all of the goodwill
associated therewith, (iii) copyrights (registered or unregistered) and
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31
copyrightable works and registrations and applications for registration
thereof, (iv) mask works and registrations and applications for registration
thereof, (v) computer software, data, data bases and documentation thereof,
(vi) trade secrets and other confidential information (including, without
limitation, ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, manufacturing
and production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial and marketing plans and customer and supplier
lists and information), (vii) other intellectual property rights and (viii)
copies and tangible embodiments thereof (in whatever form or medium).
"Investment" as applied to any Person means (i) any direct or
indirect purchase or other acquisition by such Person of any notes,
obligations, instruments, stock, securities or ownership interest (including
partnership interests and joint venture interests) of any other Person and (ii)
any capital contribution by such Person to any other Person.
"IRC" means the Internal Revenue Code of 1986, as amended,
and any reference to any particular IRC section shall be interpreted to include
any revision of or successor to that section regardless of how numbered or
classified.
"IRS" means the United States Internal Revenue Service.
"Liens" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement or lease in the nature
thereof), any sale of receivables with recourse against the Company, any
Subsidiary or any Affiliate, any filing or agreement to file a financing
statement as debtor under the Uniform Commercial Code or any similar statute
other than to reflect ownership by a third party of property leased to the
Company or any Subsidiaries under a lease which is not in the nature of a
conditional sale or title retention agreement, or any subordination arrangement
in favor of another Person (other than any subordination arising in the
ordinary course of business).
"Masada Purchase Agreement" means the Stock Purchase
Agreement, dated June 10, 1994 and amended as of June 23, 1995, among the
Company and Masada, as in effect on the date hereof.
"Masada Stock" means the Series B Underlying Common Stock
initially purchased by Masada pursuant to this Agreement.
"Officer's Certificate" means a certificate signed by the
Company's president or other executive officer, stating that (i) the officer
signing such certificate has made or has caused to be made such investigations
as are necessary in order to permit him to verify the accuracy of the
information set forth in such certificate and (ii) to the best of such
officer's
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32
knowledge, such certificate does not misstate any material fact and does not
omit to state any fact necessary to make the certificate not misleading.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Preferred Stock" means the Series A Preferred Stock and the
Series B Preferred Stock.
"Qualified Public Offering" means the sale in an underwritten
public offering registered under the Securities Act of 1933, as amended, of
shares of the Company's Common Stock having an aggregate offering value of at
least $15 million and a price per share paid by the public for such Common
Stock of at least 300% of the Conversion Price (as defined in the Charter
Amendment) of the Series B Preferred Stock in effect immediately prior to the
closing of the sale of such shares pursuant to such public offering.
"Required Holders" means at least three out of the following
four persons or groups of persons: (a) the holders of a majority of the
Centennial Stock, (b) the holders of a majority of the Chemical Stock, (c) the
holders of a majority of the Xxxxxxx Stock, and (d) the holders of a majority
of the Masada Stock.
"Restricted Securities" means (i) the Series B Preferred Stock
issued hereunder, and (ii) any securities issued with respect to or upon
conversion of the Series B Preferred Stock referred to in (i) above by way of a
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization, or in
connection with the conversion of such Series B Preferred Stock. As to any
particular Restricted Securities, such securities shall cease to be Restricted
Securities when they have (a) been effectively registered under the Securities
Act and disposed of in accordance with the registration statement covering
them, (b) become eligible for sale pursuant to Rule 144(k) (or any similar
provision then in force) under the Securities Act or (c) been otherwise
transferred and new certificates for them not bearing the Securities Act legend
set forth in paragraph 7B have been delivered by the Company in accordance with
paragraph 4(ii). Whenever any particular securities cease to be Restricted
Securities, the holder thereof shall be entitled to receive from the Company,
without expense, new securities of like tenor not bearing a Securities Act
legend of the character set forth in paragraph 7B.
"SBA" means the United States Small Business Administration,
and any successor agency performing the functions thereof.
"SBIC" means a small business investment company licensed
under the SBIC Act.
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33
"SBIC Act" means the Small Business Investment Act of 1958, as
amended.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal law then in force.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended, or any similar federal law then in force.
"Securities and Exchange Commission" includes any governmental
body or agency succeeding to the functions thereof.
"Series A Preferred Stock" means the Company's Series A
Convertible Preferred Stock, par value $.001 per share.
"Series A Purchaser" means any original purchaser under the
1994 Purchase Agreement.
"Series A Underlying Common Stock" means (i) the Common Stock
issued or issuable upon conversion of the Series A Preferred Stock issued
pursuant to the 1994 Purchase Agreement, (ii) any Common Stock issued or
issuable upon the exercise of a Contingent Warrant (as defined in paragraph
7F(vi) below) and (iii) any Common Stock issued or issuable with respect to the
securities referred to in clauses (i) and (ii) above by way of stock dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization. For purposes of this Agreement,
any Person who holds Series A Preferred Stock shall be deemed to be the holder
of the Series A Underlying Common Stock obtainable upon conversion of the
Series A Preferred Stock in connection with the transfer thereof or otherwise
regardless of any restriction or limitation on the conversion of the Series A
Preferred Stock. As to any particular shares of Series A Underlying Common
Stock, such shares shall cease to be Series A Underlying Common Stock when they
have been (a) effectively registered under the Securities Act and disposed of
in accordance with the registration statement covering them or (b) distributed
to the public through a broker, dealer or market maker pursuant to Rule 144
under the Securities Act (or any similar provision then in force).
"Series B Underlying Common Stock" means (i) the Common Stock
issued or issuable upon conversion of the Series B Preferred Stock issued
pursuant hereto, (ii) any Common Stock issued or issuable upon exercise of a
Contingent Warrant (as defined in paragraph 7F(vi) below) and (iii) any Common
Stock issued or issuable with respect to the securities referred to in clauses
(i) and (ii) above by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization. For purposes of this Agreement, any Person who holds Series B
Preferred Stock shall be deemed to be the holder of the Series B Underlying
Common Stock obtainable upon conversion of the Series B Preferred Stock in
connection with the transfer thereof or
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34
otherwise regardless of any restriction or limitation on the conversion of the
Series B Preferred Stock. As to any particular shares of Series B Underlying
Common Stock, such shares shall cease to be Series B Underlying Common Stock
when they have been (a) effectively registered under the Securities Act and
disposed of in accordance with the registration statement covering them or (b)
distributed to the public through a broker, dealer or market maker pursuant to
Rule 144 under the Securities Act (or any similar provision then in force).
"Subsidiary" means any corporation of which the securities
having a majority of the ordinary voting power in electing the board of
directors are, at the time as of which any determination is being made, owned
by the Company either directly or through one or more Subsidiaries.
"Tax" or "Taxes" means federal, state, county, local, foreign
or other income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility, environmental, communications, real or
personal property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or
add-on minimum, estimated and other taxes of any kind whatsoever (including,
without limitation, deficiencies, penalties, additions to tax, and interest
attributable thereto) whether disputed or not.
"Tax Return" means any return, information report or filing
with respect to Taxes, including any schedules attached thereto and including
any amendment thereof.
"Treasury Regulations" means the United States Treasury
Regulations promulgated under the IRC, and any reference to any particular
Treasury Regulation section shall be interpreted to include any final or
temporary revision of or successor to that section regardless of how numbered
or classified.
"Underlying Common Stock" means the Series A Underlying
Common Stock and the Series B Underlying Common Stock.
"Wholly-Owned Subsidiary" means, with respect to any Person,
a Subsidiary of which all of the outstanding capital stock or other ownership
interests are owned by such Person or another Wholly-Owned Subsidiary of such
Person.
Section 7. Miscellaneous.
7A. Expenses. The Company shall pay, and hold each
Purchaser and all holders of Series B Preferred Stock and Series B Underlying
Common Stock harmless against liability for the payment of, (i) the fees and
expenses incurred (including the reasonable fees and expenses of one special
counsel for the Purchasers) in connection with the negotiation and execution of
this Agreement and the consummation of the transactions contemplated by this
Agreement which shall be payable at the Closing or, if the Closing does not
occur, payable
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xxxx xxxxxx, (xx) the reasonable fees and expenses incurred with respect to any
amendments or waivers (whether or not the same become effective) under or in
respect of this Agreement, the agreements contemplated hereby, the Certificate
of Incorporation, the Charter Amendment and the Company's bylaws (iii) stamp
and other taxes which may be payable in respect of the execution and delivery
of this Agreement or the issuance, delivery or acquisition of any shares of
Series B Preferred Stock or any shares of Common Stock issuable upon conversion
of Series B Preferred Stock, (iv) the reasonable fees and expenses incurred
with respect to the enforcement of the rights granted under this Agreement, the
agreements contemplated hereby, the Certificate of Incorporation, the Charter
Amendment and the Company's bylaws, (v) the reasonable fees and expenses
incurred by each such Person in any filing with any governmental agency with
respect to its investment in the Company or in any other filing with any
governmental agency with respect to the Company which mentions such Person, and
(vi) the reasonable fees and expenses incurred by any such Person in connection
with any transaction, claim (other than a claim by such Person against the
Company) or event which such Person believes affects the Company and as to
which such Person seeks advice of counsel (collectively, the "Purchasers'
Expenses").
7B. Remedies. The Company and the Purchasers shall be
entitled to enforce any rights under any provision of this Agreement
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
7C. Purchasers' Representations and Warranties. Each
Purchaser severally represents and warrants that:
(i) Such Purchaser is acquiring the Series B
Preferred Stock purchased hereunder or acquired pursuant hereto for
its own account with the present intention of holding such securities
for purposes of investment, and that it has no intention of selling
such securities in a public distribution in violation of the federal
securities laws or any applicable state securities laws; provided that
nothing contained herein shall prevent the Purchaser and subsequent
holders of Series B Preferred Stock from transferring such securities
in compliance with the provisions of paragraph 4 hereof. The
Purchaser understands that the Series B Preferred Stock has not been
registered under the Securities Act by reason of its issuance by the
Company in a transaction exempt from the registration requirements of
the Act. Each certificate for Series B Preferred Stock shall be
imprinted with a legend in substantially the following form:
"The securities represented by this certificate were
originally issued on July 11, 1995, and have not been
registered under the Securities Act of 1933, as amended. The
transfer of the securities represented by this certificate is
subject to the conditions specified in the Purchase Agreement,
dated as of July 11, 1995, between the issuer (the "Company")
and certain investors, and the Company reserves the
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36
right to refuse the transfer of such securities until such
conditions have been fulfilled with respect to such transfer.
The securities represented by this certificate are also
subject to certain restrictions on transfer and other matters
set forth in the Company's Certificate of Incorporation. A
copy of all such conditions and other matters shall be
furnished by the Company to the holder hereof upon written
request and without charge."
(ii) Such Purchaser recognizes that investing in
the Series B Preferred Stock involves a high degree of risk, and is in
a financial position to hold the Series B Preferred Stock indefinitely
and is able to bear the economic risk and withstand a complete loss of
its investment in the Series B Preferred Stock; the Purchaser
understands that it may incur a complete loss of its investment in the
Series B Preferred Stock.
(iii) Such Purchaser is a sophisticated investor
and is capable of evaluating the merits and risks of investing in the
Company given its stage of development.
(iv) Such Purchaser has had an opportunity to
discuss the Company's business, management and financial affairs with
the Company's management, has been given full and complete access to
information concerning the Company, and has utilized such access to
its satisfaction for the purpose of obtaining information or verifying
information and has had the opportunity to inspect the Company's
facilities.
(v) Such Purchaser has had the opportunity to ask
questions of, and receive answers from, the management of the Company
(and any person acting on its behalf) concerning the Series B
Preferred Stock and the terms and conditions of this Agreement and the
agreements and transactions contemplated hereby, and to obtain any
additional information as the Purchaser may have requested in making
its investment decision.
(vi) Such Purchaser is an "accredited investor,"
as defined by Regulation D promulgated under the Securities Act.
(vii) Such Purchaser has the power (corporate or
otherwise) and requisite authority, and has taken all action
(corporate or otherwise) necessary, to execute, deliver and perform
this Agreement and all other agreements contemplated hereby and
thereby to which the Purchaser is a party and to subscribe for and
purchase the Series B Preferred Stock.
(viii) Such Purchaser has total assets of at least
$5,000,000 and net worth of at least $1,000,000; other than Masada,
such Purchaser is in the business of
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37
providing venture capital financing and its principal purpose is
investing in securities issued by other entities; and, other than
Masada, such Purchaser has one or more individual partners, managers,
and/or employees who regularly make investment decisions on behalf of
such Purchaser, and such individual(s), as a result of education
and/or experience, is highly sophisticated with respect to investments
in securities.
(ix) Each of this Agreement and all other
agreements contemplated hereby and thereby to which the Purchaser is a
party, upon execution by such Purchaser, will be duly authorized,
executed and delivered by the Purchaser, and will be the legal and
binding obligation of the Purchaser, enforceable in accordance with
its terms, subject to applicable laws of bankruptcy, insolvency and
similar laws affecting creditors' rights and the application of
general rules of equity.
(x) The execution and delivery by such Purchaser
of this Agreement and all other agreements contemplated hereby and
thereby and the fulfillment of and compliance with the respective
terms hereof and thereof, do not and shall not (i) violate any
constitution, statute, regulation, rule, injunction, judgement, order,
decree, ruling, or other restriction of any government, governmental
agency, or court to which the Purchaser is subject, or any provision
of the Purchaser's charter or bylaws or other internal governing
documents or (ii) conflict with, result in a breach of, or constitute
a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any
notice under, any agreement, contract, lease, permit, license,
instrument, or any other arrangement to which the Purchaser is a party
or by which it is bound or to which its assets are subject. No
notice, consent, filing, authorization or approval of any government
or governmental agency is required for the Purchaser to consummate the
transactions contemplated hereby.
7D. Preferred Stock Redemption.
(i) At any time after the sixth anniversary of
the date hereof, and prior to the consummation of a Qualified Public
Offering, each holder of Preferred Stock (for purposes of this Section
7D only, a "Redeeming Holder") shall have the right to require the
Company to repurchase all or any portion of the Preferred Stock then
held by such Redeeming Holder at $27.50 per share (the "Series B
Redemption Price"), if Series B Preferred Stock is to be repurchased,
or $20.00 per share (the "Series A Redemption Price"), if Series A
Preferred Stock is to be repurchased (the "Redemption"), by delivering
a written notice to the Company specifying the number of shares to be
purchased (the "Redemption Notice"); provided that the Redemption
shall not be authorized unless at such time at least two out of the
following three persons or groups of persons have agreed to require
the Company to repurchase all or any portion of their shares of
Preferred Stock as provided herein (or, pursuant to paragraph 7E
below, to repurchase all or any portion of their shares of Underlying
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38
Common Stock): (a) the holders of a majority of the Centennial Stock,
(b) the holders of a majority of the Chemical Stock and (c) the
holders of a majority of the Xxxxxxx Stock. Upon authorization by the
such persons or groups of persons, the Company shall notify in writing
all Redeeming Holders of the receipt of such authorization and shall
allow all such Redeeming Holders to submit a Redemption Notice within
15 days after the delivery by the Company of such written notice to
the Redeeming Holders.
(ii) Within thirty days after the delivery of
written notice by the Company to all Redeeming Holders, and subject to
the provisions hereof, the Company shall purchase and the Redeeming
Holders shall sell the number of such Redeeming Holders' shares of
Preferred Stock specified in the Redemption Notice at a mutually
agreeable time and place (the "Redemption Closing").
(iii) At the Redemption Closing, the Redeeming
Holders shall deliver to the Company certificates representing the
Redeeming Holders' shares of Preferred Stock to be repurchased by the
Company, and the Company shall deliver to such Redeeming Holders the
Series B Redemption Price or the Series A Redemption Price, as
provided hereunder, by cashier's or certified check payable to such
Redeeming Holders or by wire transfer of immediately available funds
to an account or accounts designated by such Redeeming Holders. If
the certificates delivered by any Redeeming Holder represent greater
than the number of shares of Preferred Stock to be repurchased, the
Company shall issue a new certificate to such Redeeming Holder
representing that number of shares of Preferred Stock not repurchased
by the Company.
(iv) If the Company in good faith is unable to
honor the Redemption because it cannot obtain sufficient financing or
because of restrictions contained in the Company's debt documents, the
Company shall use its best efforts to take all such actions as are
necessary to honor the Redemption, including the refinancing of the
Company's debt or the sale of the Company.
7E. Common Stock Put.
(i) At any time after the sixth anniversary of
the date hereof, if there has not been consummated a Qualified Public
Offering, each holder of Underlying Common Stock (for purposes of this
Section 7E only, a "Putting Holder") shall have the right to require
the Company to repurchase all or any portion of the Underlying Common
Stock then held by such Putting Holder at the Put Price (the "Put") by
delivering a written notice to the Company specifying the number of
shares to be purchased (the "Put Notice"); provided that the Put shall
not be authorized unless at such time at least two out of the
following three persons or groups of persons have agreed to put all or
any portion of their shares of Underlying Common Stock to the Company
as provided herein: (a) the holders of a majority of the Centennial
Stock,
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39
(b) the holders of a majority of the Chemical Stock and (c) the
holders of a majority of the Xxxxxxx Stock. Upon authorization by
such persons or groups of persons, the Company shall notify in writing
all Putting Holders of the receipt of such authorization and shall
allow all such Putting Holders to submit a Put Notice within 15 days
after the delivery by the Company of such written notice to the
Putting Holders.
(ii) After the expiration of such 15-day period,
the Company and the Putting Holders shall in good faith promptly
determine the Put Price, as provided hereunder, and subject to the
provisions hereof within ten days after the determination of the Put
Price, the Company shall purchase and the Putting Holders shall sell
the number of such Putting Holders' shares of Underlying Common Stock
specified in the Put Notice at a mutually agreeable time and place
(the "Put Closing"). Any Putting Holder may withdraw from any
exercise of the Put by delivering written notice to the Company within
five business days after the Put Price has been determined and the
Putting Holders have been notified of such determination.
(iii) At the Put Closing, the Putting Holders shall
deliver to the Company share certificates of Common Stock or Preferred
Stock representing the number of shares of Underlying Common Stock to
be repurchased by the Company, and the Company shall deliver to such
Putting Holders the Put Price, by cashier's or certified check payable
to such Putting Holders or by wire transfer of immediately available
funds to an account or accounts designated by such Putting Holders.
If the certificates delivered by any Putting Holder represent greater
than the number of shares of Underlying Common Stock to be
repurchased, the Company shall issue a new certificate to such Putting
Holder representing shares of the same class or series as those
represented by the surrendered certificates for the number of shares
of Underlying Common Stock not repurchased by the Company.
(iv) The "Put Price" shall mean the product of (A)
the Market Value of the Company, multiplied by (B) a fraction, the
numerator of which shall be the number of the Putting Holder's shares
of Underlying Common Stock and Common Stock to be repurchased and the
denominator of which shall be the total number of shares of Underlying
Common Stock then outstanding on a fully-diluted basis, excluding from
such denominator any warrants, convertible securities or other rights
to acquire equity securities of the Company where the exercise or
conversion price per share thereof exceeds the Put Price per share.
In calculating the Put Price, all accounting determinations shall be
made in accordance with generally accepted accounting principles
consistently applied.
(v) "Market Value" means the fair market value of
the Company's entire common equity determined on a going concern basis
as between a willing buyer and a willing seller and taking into
account all relevant factors determinative of value. Unless otherwise
agreed by the Company and the Putting Holders, Market Value shall
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40
be determined by an investment banking firm reasonably acceptable to
the Company and the Putting Holders, which firm shall submit to the
Company and the Putting Holders a written report setting forth such
determination. If the parties are unable to agree on an investment
banking firm within 15 days after delivery of a Put Notice, a firm
shall be selected by lot from the top-tier New York-based investment
banking firms, after the Company and the Putting Holders have each
eliminated one such firm. Such selected firm shall determine Market
Value within 30 days after such selection by lot and shall promptly
deliver written notice of Market Value to the Putting Holders and the
Company after its determination. The determination of such firm shall
be final and binding upon all parties, except that after the
determination of Market Value following the exercise of the Put, the
Putting Holders may rescind their exercise of such Put. The expenses
of the selected investment banking firm shall be borne by the Company;
provided that any SBIC Holder who has elected to put its shares of
Underlying Common Stock shall pay a portion of such expenses equal to
the product of (a) 50% of the total amount of such expenses and (b) a
fraction, the numerator of which shall be the number of such SBIC
Holder's shares of Underlying Common Stock being repurchased and the
denominator of which shall be the total number of shares of Underlying
Common Stock being repurchased.
(vi) If the Company in good faith is unable to
honor the Put because it cannot obtain sufficient financing or because
of restrictions contained in the Company's debt documents, the Company
shall use its best efforts to take all such actions as are necessary
to honor the Put, including the refinancing of the Company's debt or
the sale of the Company.
7F. SBIC Regulatory Provisions.
(i) The Company shall notify each holder of Underlying
Common Stock which is an SBIC (an "SBIC Holder") as soon as practicable (and,
in any event, not later than 15 days) prior to taking any action after which
the number of record holders of the Company's voting stock would be increased
from fewer than 50 to 50 or more, and the Company shall notify each SBIC Holder
of any other action or occurrence after which the number of record holders of
the Company's voting stock was increased (or would increase) from fewer than 50
to 50 or more, as soon as practicable after the Company becomes aware that such
other action or occurrence has occurred or is proposed to occur. Upon the
occurrence of any such event or transaction, the Company shall enter into a
Plan of Divestiture with each SBIC Holder as required by the SBIC Regulations.
(ii) Within 75 days after the Closing, the Company shall
deliver to each SBIC Holder a written statement certified by the Company's
president or chief financial officer describing in reasonable detail the use of
the proceeds of the Financing hereunder by the Company and its Subsidiaries.
In addition to any other rights granted hereunder, the Company shall grant each
SBIC Holder and the United States Small Business Administration
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41
(the "SBA") access to the Company's records for the purpose of verifying the
use of such proceeds.
(iii) Upon the occurrence of a Regulatory Violation or in
the event that any SBIC Holder determines in its reasonable good faith judgment
that a Regulatory Violation has occurred, in addition to any other rights and
remedies to which it may be entitled as a holder of Series B Preferred Stock or
Underlying Common Stock (whether under this Agreement, the Certificate of
Incorporation or otherwise), each SBIC Holder shall have the right to demand
the immediate repurchase of all of the outstanding shares of Series B Preferred
Stock and Underlying Common Stock owned by such SBIC Holder at a price per
share equal to the purchase price paid for such stock hereunder, plus all
Accrued Dividends (as defined in the Charter Amendment) thereon, by delivering
written notice of such demand to the Company. The Company shall pay the
purchase price for such stock by a cashier's or certified check or by wire
transfer of immediately available funds to each SBIC Holder demanding
repurchase within 30 days after the Company's receipt of the demand notice, and
upon such payment, each such SBIC Holder shall deliver the certificates
evidencing the Series B Preferred Stock and Underlying Common Stock to be
repurchased duly endorsed for transfer or accompanied by duly executed forms of
assignment.
(iv) Promptly after the end of each fiscal year (but in
any event prior to February 28 of each year), the Company shall deliver to each
SBIC Holder a written assessment of the economic impact of each SBIC Holder's
investment in the Company, specifying the full-time equivalent jobs created or
retained in connection with the investment, the impact of the investment on the
businesses of the Company in terms of expanded revenue and taxes and other
economic benefits resulting from the investment (including, but not limited to,
technology development or commercialization, minority business development,
urban or rural business development and expansion of exports).
(v) For purposes of this paragraph, "Regulatory
Violation" means, with respect to any SBIC Holder providing Financing under
this Agreement, (a) a diversion of the proceeds of such Financing from the
reported use thereof on the use of proceeds statement delivered by the Company
at the Closing, if such diversion was effected without obtaining the prior
written consent of each SBIC Holder (which may be withheld in its sole
discretion) or (b) a change in the principal business activity of the Company
and its Subsidiaries to an ineligible business activity (within the meaning of
the SBIC Regulations) if such change occurs within one year after the date of
the initial Financing hereunder; "SBIC Regulations" means the Small Business
Investment Act of 1958 and the regulations issued thereunder as set forth in 13
CFR Section 107 and Section 121, as amended; and the term "Financing" shall
have the meaning set forth in the SBIC Regulations.
(vi) Notwithstanding anything to the contrary herein, at
any time after the Closing, the Company shall have the right to repurchase from
any SBIC Holder all but not less than all of the Preferred Stock then held by
such SBIC Holder at a price equal to 110% of the
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42
Series B Redemption Price or the Series A Redemption Price, as applicable,
provided that the Company issues to each such SBIC Holder on or before the time
of such repurchase a warrant (the "Contingent Warrant") exercisable for the
number of shares of Common Stock into which the Preferred Stock held by such
SBIC is then convertible, with an initial exercise price per share of Common
Stock equal to the then applicable Conversion Price (as defined in the Charter
Amendment), with anti-dilutive rights identical to those of the Preferred Stock
being repurchased and having such other terms and provisions as are reasonably
acceptable to such SBIC Holder.
(vii) Notwithstanding anything to the contrary above, the
Company shall not be able to exercise it rights to repurchase all of the
Preferred Stock held by any SBIC Holder unless it has obtained the prior
written consent of the holders of at least 80% of the Preferred Stock not held
by SBIC Holders.
7G. Regulatory Compliance Cooperation.
(i) In the event that any SBIC Holder determines that it
has a Regulatory Problem (as defined below), such SBIC Holder shall have the
right to transfer its Series B Preferred Stock without regard to any
restrictions on transfer set forth in this Agreement or the Stockholders
Agreement other than the securities law restrictions set forth in Section 5
hereof (provided that the transferee agrees to become a party to this
Agreement), and the Company shall take all such actions as are reasonably
requested by such SBIC Holder in order to (a) effectuate and facilitate any
transfer by such SBIC Holder of any securities of the Company then held by such
SBIC Holder to any Person designated by such SBIC Holder, (b) permit such SBIC
Holder (or any of its Affiliate) to exchange all or any portion of the Common
Stock then held by it on a share-for-share basis for shares of a class of
nonvoting common stock of the Company, which nonvoting common stock shall be
identical in all respects to such Common Stock, except that such common stock
shall be nonvoting and shall be convertible into Common Stock on such terms as
are requested by such SBIC Holder in light of regulatory considerations then
prevailing, (c) continue and preserve the respective allocation of the voting
interests with respect to the Company arising out of the SBIC's ownership of
voting securities and/or provided for in the Stockholders Agreement before the
transfers and amendments referred to above (including entering into such
additional agreements as are requested such SBIC Holder to permit any Person(s)
designated by such SBIC Holder to exercise any voting power which is
relinquished by such SBIC Holder and (d) amend this Agreement, the Certificate
of Incorporation, the Charter Amendment and other related agreements to
effectuate and reflect the foregoing. The parties to this Agreement agree to
vote their securities in favor of such amendments and actions.
(ii) For purposes of this Agreement, a "Regulatory
Problem" means any set of facts or circumstances wherein it has been asserted
by any governmental regulatory agency (or any SBIC Holder believes that there
is a substantial risk of such assertion) that such SBIC
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43
Holder and its Affiliates are not entitled to hold, or exercise any significant
right with respect to, the Series B Preferred Stock or the Underlying Common
Stock.
7H. Amendment of the 1994 Purchase Agreement and the
Masada Purchase Agreement. Effective as of the Closing hereunder, the 1994
Purchase Agreement shall be amended by deleting paragraph 3 thereof in its
entirety, and the Masada Purchase Agreement shall be amended by deleting
paragraphs 3A through 3F thereof in their entirety.
7I. Consent to Amendments. Except as otherwise expressly
provided herein, the provisions of this Agreement may be amended and the
Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, if, but only if, the Company has
obtained the written consent of the Required Holders; provided that (a) each of
the definitions of the "Centennial Stock", the "Chemical Stock", the "Xxxxxxx
Stock" and the "Masada Stock", respectively, may only be amended upon the prior
written consent of the holders of a majority of the applicable class of stock
then in existence; (b) the definition of "Series A Underlying Common Stock" may
only be amended upon the prior written consent of at least 90% of the holders
of the Series A Preferred Stock then in existence; and (c) the definition of
"Series B Underlying Common Stock" may only be amended upon the prior written
consent of at least 90% of the holders of the Series B Preferred Stock then in
existence. No other course of dealing between the Company and the holder of
any Series B Preferred Stock, Series A Preferred Stock or Underlying Common
Stock or any delay in exercising any rights hereunder or under the Certificate
of Incorporation or the Charter Amendment shall operate as a waiver of any
rights of any such holders. For purposes of this Agreement, shares of Series B
Preferred Stock, Series A Preferred Stock or Underlying Common Stock held by
the Company or any Subsidiaries shall not be deemed to be outstanding.
7J. Survival of Representations and Warranties. All
representations and warranties contained herein or made in writing by any party
in connection herewith shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby for
twelve months from the date hereof, regardless of any investigation made by the
Purchasers or the Company or on any parties' behalf.
7K. Successors and Assigns. Except as otherwise
expressly provided herein, all covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not.
7L. Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
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44
7M. Counterparts. This Agreement may be executed
simultaneously in separate counterparts, any one of which need not contain the
signatures of more than one party, but all such counterparts taken together
shall constitute one and the same Agreement.
7N. Descriptive Headings; Interpretation. The
descriptive captions and headings of this Agreement and the Schedules attached
hereto are inserted for convenience only and do not constitute a Section of
this Agreement. The use of the word "including" in this Agreement shall be by
way of example rather than by limitation.
7O. Governing Law. The corporate law of Delaware shall
govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity and
interpretation of this Agreement and the exhibits and schedule hereto shall be
governed by the internal law, and not the law of conflicts, of Delaware.
7P. Notices. All notices, demands or other
communications to be given or delivered under or by reason of the provisions of
this Agreement shall be in writing and shall be deemed to have been given when
delivered personally to the recipient, sent to the recipient by reputable
express courier service (charges prepaid) or mailed to the recipient by
certified or registered mail, return receipt requested and postage prepaid.
Such notices, demands and other communications shall be sent to the Company and
the Purchasers at the addresses set forth on the attached Notices Schedule or
to such other address or to the attention of such other person as the recipient
party has specified by prior written notice to the sending party.
7Q. Understanding Among the Purchasers. The
determination of each Purchaser to purchase the Series B Preferred Stock
pursuant to this Agreement has been made by such Purchaser independent of any
other Purchaser and independent of any statements or opinions as to the
advisability of such purchase or as to the properties, business, prospects or
condition (financial or otherwise) of the Company and its Subsidiaries which
may have been made or given by any other Purchaser or by any agent or employee
of any other Purchaser. In addition, it is acknowledged by each of the other
Purchasers that no other Purchaser has acted as an agent of such Purchaser in
connection with making its investment hereunder and that no other person shall
be acting as an agent of such Purchaser in connection with monitoring its
investment hereunder.
7R. No Strict Construction. The parties hereto have
participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto, and
no presumption or burden of proof shall arise favoring or disfavoring any party
by virtue of the authorship of any of the provisions of this Agreement.
7S. Indemnification. In consideration of each
Purchaser's execution and delivery of this Agreement and acquiring the Series B
Preferred Stock hereunder and in
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45
addition to all of the Company's other obligations under this Agreement, the
Company shall defend, protect, indemnify and hold harmless each Purchaser and
each other holder of Series B Preferred Stock and all of their officers,
directors, employees and agents (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by the Indemnitees or any of them as a
result of, or arising out of, or relating to (a) any transaction financed or to
be financed in whole or in part, directly or indirectly, with the proceeds of
the issuance of the Preferred Stock or (b) the execution, delivery, performance
or enforcement of this Agreement and any other instrument, document or
agreement executed pursuant hereto by any of the Indemnitees , except for any
such Indemnified Liabilities arising on account of the particular Indemnitee's
gross negligence or willful misconduct. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law.
* * * * * * *
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46
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first written above.
THE COMPANY CENTENNIAL SECURITY, INC.
/s/ Xxxxxx X. Xxxxxx
-------------------------------------------------
By: Xxxxxx X. Xxxxxx
Its: President and Chief Operating Officer
THE PURCHASERS CENTENNIAL FUND IV, L.P.
By: Centennial Holdings IV, L.P.,
its General Partner
By: /s/ Xxxxx X. Xxxx, Xx.
------------------------------------------
Xxxxx X. Xxxx, Xx.
General Partner
CHEMICAL VENTURE CAPITAL ASSOCIATES
By: Chemical Venture Partners
Its: General Partner
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------------
Its: General Partner
XXXXXXX VENTURE PARTNERS IV--DIRECT FUND, L.P.
By: Back Bay Partners XII L.P.
By: Xxxxxxx Venture Partners, Inc.
By: /s/ Xxxxxxx X. Xxxxxxxx
------------------------------------------
authorized officer
LARIMER & CO.
By: /s/ Xxxxx X. Xxxx, Xx.
------------------------------------------
Its: Executive Vice President
------------------------------------------
MASADA SECURITY, INC.
By: /s/ Xxxxx X. Xxxxxx
------------------------------------------
Its: Vice President
------------------------------------------
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47
Schedules
Purchasers Schedule
Restrictions Schedule
Organization Schedule
Capital Stock Schedule
Subsidiary Schedule
Financial Statements Schedule
Liabilities Schedule
Developments Schedule
Assets Schedule
Taxes Schedule
Contracts Schedule
Customer Schedule
Intellectual Property Schedule
Litigation Schedule
Insurance Schedule
Employees Schedule
Compliance Schedule
Affiliated Transactions Schedule
Notices Schedule
