THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER
ANY STATE SECURITIES LAWS (THE "ACTS") AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED EXCEPT (1) IN ACCORDANCE WITH THE TERMS OF THIS DEBENTURE AND (2)
PURSUANT TO A REGISTRATION STATEMENT EFFECTIVE UNDER THE ACTS OR AN OPINION OF
COUNSEL SATISFACTORY TO MAKER THAT THE TRANSFER OF THIS DEBENTURE IS EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE ACTS.
SUBORDINATED CONVERTIBLE DEBENTURE
$175,498.50 New York, New York
August 11, 1997
FOR VALUE RECEIVED, intending to be legally bound hereby, the
undersigned, HOLMES PROTECTION GROUP, INC., a Delaware corporation ("Maker"),
hereby promises to pay to _________________, an individual ("Holder"), ONE
HUNDRED SEVENTY FIVE THOUSAND FOUR HUNDRED NINETY EIGHT AND 50/100 DOLLARS (U.S.
$175,498.50), together with interest on the unpaid principal amount hereof from
April 25, 1997 until the maturity thereof (whether at stated maturity, by
acceleration or otherwise) at an interest rate of ten percent (10%) per annum
(based on a year of 365 days based upon actual days elapsed), on the earlier of
(a) August 26, 1997, at the election of the Stockholder, if by August 25, 1997,
Maker has not filed a registration statement (the "Registration Statement") on
Form S-3 which includes the Holmes Shares (as defined below) issuable to the
Stockholders upon conversion of this Subordinated Convertible Debenture, or (b)
on or at any time after October 1, 1997, at the election of the Stockholder, if
registration of the Holmes Shares has not become effective on or prior to
September 30, 1997 or if the Holmes Shares are not freely tradable on September
30, 1997.
All principal and interest shall be payable in lawful money of
the United States of America in immediately available funds to Holder in Erie,
Pennsylvania.
The unpaid principal and interest of this Debenture (a) shall
automatically be converted into 12,281 shares (the "Holmes Shares") of Maker's
Common Stock, par value $.01 ("Common Stock") on the date that the Registration
Statement becomes effective, or if the Holmes Shares are not freely tradable on
the NASDAQ National Market on such date, the date the Holmes Shares become
freely tradable on the NASDAQ National Market (the "Effective Date"), if the
Effective Date is on or before September 30, 1997 and (b) if the Effective Date
is after September 30, 1997, shall be convertible at the option of the Holder,
in whole, but not in part, upon surrender of this
Debenture at the principal office of the Maker, into the Holmes Shares. As
promptly as practicable, and in any event within five (5) business days after
the Effective Date, if the Effective Date is on or prior to September 30, 1997,
or within five (5) business days after the surrender of this Debenture for
conversion, Maker shall deliver or cause to be delivered to Holder, certificates
representing the Holmes Shares into which the Debenture shall have been
converted. Notwithstanding the foregoing, Maker shall not be required to issue
the Holmes Shares upon surrender of this Debenture for conversion, and no
surrender of this Debenture shall be effective for that purpose, if additional
time is necessary to comply with applicable laws in Maker's reasonable
discretion; provided, however, that the conversion shall become effective
immediately upon compliance with such laws as if the conversion had been made
when this Debenture was initially surrendered. For purposes of this paragraph,
surrender of this Debenture shall be made by sending it to Maker by overnight
courier with written notice of Holder's intent to convert the Debenture into the
Holmes Shares, and the surrender date shall be deemed to be the day on which
this Debenture is placed with the overnight courier by Holder.
In case of any reclassification, capital reorganization or
other change of outstanding shares of Common Stock (other than as a result of an
issuance of Common Stock in accordance with new subscriptions for shares of
Common Stock) or in case of any consolidation or merger of Maker with or into
another corporation (other than a merger with a subsidiary in which merger Maker
is the continuing corporation and which does not result in a reclassification,
capital reorganization or other change of outstanding shares of Common Stock) or
in case of any sale or conveyance to another corporation of the property of
Maker as an entirety, or substantially as an entirety, Maker shall cause
effective provision to be made so that Holder shall have the right thereafter,
by converting this Debenture, to purchase the kind and amount of shares of stock
and other securities and property receivable upon such reclassification, capital
reorganization or other change, consolidation, merger, sale or conveyance. Any
such provision shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Debenture. The foregoing provisions of this paragraph shall similarly apply to
successive reclassifications, capital reorganizations and changes of shares of
Common Stock and to successive consolidations, mergers, sales and conveyances.
In the event Maker effects a subdivision or combination of its
outstanding Common Stock into a greater or lesser number of shares, then and in
each such event, the number of Holmes Shares shall be decreased or increased
proportionately, as the case may be.
In the event Maker shall, prior to the conversion or payment
in full of this Debenture, make or issue, or fix a record date for the
determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in additional shares of Common Stock, then the number
of Holmes Shares issuable hereunder shall be increased as of the time of such
issuance or record date, as applicable, to such amount as would result from
multiplying the number of Holmes Shares by a fraction (i) the numerator of which
shall be the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or record date, as applicable,
plus the number of shares of Common Stock issuable in payment of such dividend
or distribution, and (ii) the denominator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance or record date, as applicable; provided, however, that if a record
date for a dividend or distribution payable in Common Stock shall have been
fixed and such dividend or distribution is not fully paid on the date fixed
therefor, the number of Holmes Shares shall be recomputed accordingly as of the
date fixed therefor and thereafter the Holmes Shares shall be adjusted pursuant
to this paragraph as of the time of actual payment of such dividend or
distribution.
An Event of Default shall mean the occurrence or existence of
any one or more of the following events or conditions (whatever the reason
therefor and whether voluntary, involuntary or effected by operation of law):
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(i) Maker shall fail to pay any principal due under this
Debenture after such principal becomes due or to issue the Holmes Shares to
Holder at Holder's election in accordance with the terms hereof, provided,
however, that the failure of Maker to issue the Holmes Shares due to compliance
with applicable laws as provided above shall not be deemed to be an Event of
Default under this Debenture;
(ii) Maker shall fail to pay any interest due under this
Debenture within five (5) days after such interest or other amount becomes due
in accordance with the terms of this Debenture;
(iii) A proceeding shall have been instituted in a court
having jurisdiction in the premises seeking a decree or order for relief in
respect of Maker in an insolvency case under any applicable bankruptcy,
insolvency, reorganization or other similar law now or hereafter in effect, or a
receiver, liquidator, assignee, custodian, trustee, sequestrator, conservator
(or similar official) of Maker for any substantial part of its property, or for
the winding up or liquidation of its affairs and such proceeding shall remain
undismissed or unstayed and in effect for a period of 90 consecutive days or
such court shall enter a decree or order granting any of the relief sought in
such proceedings; or
(iv) Maker shall commence a voluntary case under any
applicable bankruptcy, insolvency, reorganization or other similar law now or
hereafter in effect, shall consent to the entry of an order for relief in an
involuntary case under any such law, or shall consent to the appointment or
taking possession by receiver, liquidator, assignee, custodian, trustee,
sequestrator, conservator (or other similar official) of itself or for any
substantial part of its property or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due, or shall take any action in furtherance of any of the foregoing.
If an Event of Default specified under clauses (i) or (ii)
shall occur and be continuing, Holder may, by written notice to Maker, declare
the unpaid principal amount then outstanding under this Debenture and all
interest accrued thereon, to be forthwith due and payable, and the same shall
thereupon become and be immediately due and payable to Holder without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived; and if an Event of Default specified under clauses
(iii) or (iv) above shall occur, the unpaid principal amount then outstanding
under this Debenture and all interest accrued thereon shall be immediately due
and payable, without protest, demand, or notice of any kind, all of which are
hereby expressly waived.
The payment of all indebtedness (including principal, interest
and any expense due with respect thereto) due pursuant to this Debenture is
subordinated to the prior payment in full of all indebtedness of Maker, whether
outstanding on the date hereof or thereafter created or incurred, which is for
money borrowed from, or guaranteed to, banks, trust companies, insurance
companies, or other institutional lenders, and renewals, extensions, refundings,
amendments or other modifications of any such indebtedness or guarantees,
including, without limitation, all indebtedness constituting obligations of
Maker to reimburse banks for amounts paid under letters of credit, supporting
notes or other similar obligations (herein the "Senior Indebtedness").
Without limiting the generality of any of the foregoing,
Senior Indebtedness includes all indebtedness and obligations of Maker under
that certain Amended and Restated Credit Agreement, dated as of December 31,
1996, as subsequently amended, by and among Merita Bank Ltd., Bank of Boston
Connecticut, Holmes Protection, Inc. and Maker, as such agreement may be
renewed, extended,
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amended or modified from time to time. If an event occurs and is continuing
which is a default or an event of default, or which with notice or lapse of time
or both would become a default or event of default, either in payment of
principal of, or interest on, Senior Indebtedness when due, or which under any
agreement relating to Senior Indebtedness would permit the holders thereof to
cause any part of such Senior Indebtedness to become due prior to its stated
maturity, whether by prepayment, acceleration or otherwise, or in the event of
any distribution of the assets of Maker upon any dissolution, winding up, total
liquidation or reorganization of Maker, no payments of any kind may be made by
Maker with respect to any indebtedness due under this Debenture unless all
amounts due on the Senior Indebtedness shall have been paid or provided for.
In the event any one or more of the provisions contained in
this Debenture shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not effect any other provision of this Debenture, and this Debenture shall
be construed as if such invalid, illegal or unenforceable provision had never
been contained herein.
Maker hereby represents and warrants to Holder that this
Debenture has been duly authorized, executed and delivered by Maker and
constitutes a legal, valid and binding obligation of Maker enforceable against
it in accordance with its terms, except as the enforceability thereof may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting the enforcement of creditors rights generally and the
possible unavailability of certain equitable remedies.
This Debenture may not be waived, changed, modified or
discharged orally, except by an agreement in writing signed by the party against
whom the enforcement of waiver, change, modification or discharge is sought.
All notices given to or made upon any party hereto shall be in
writing and shall be delivered or sent to the respective parties at the
addresses set forth in that certain Agreement of Stock Purchase by and among
Maker, John L. Carmody and Robert L. Saunders dated as of April 25, 1997. All
notices shall be effective (i) in the case of facsimile, when received; (ii) in
the case of hand-delivered notice, when hand-delivered; (iii) if given by
overnight courier, one (1) day after such communication is placed with the
overnight courier; and (iv) if given by mail, four (4) days after such
communication is deposited in the mails with first- class postage prepaid,
return receipt requested.
In the event such interest rate hereunder exceeds the maximum
permitted by law, then this Debenture shall automatically bear interest, in
accordance herewith at the maximum rate permitted by law.
This Debenture shall be binding upon, inure to the benefit of,
and be enforceable by Maker and Holder and their respective successors and
assigns, except that Maker shall not have the right to assign this Debenture or
its obligations hereunder without the prior written consent of Holder.
This Debenture shall be governed by the internal law of the
Commonwealth of Pennsylvania.
HOLMES PROTECTION GROUP, INC.
By:_________________________
Name:_______________________
Title:______________________
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