<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_____________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) November 25, 1997
SECURITY ASSOCIATES INTERNATIONAL, INC.
---------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 0-20870 87-0467198
----------------------------------------------------------------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
2101 S. Arlington Heights Road, Suite 100, Arlington Heights, IL 60005-4142
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (847) 956-8650
-----------------
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On November 25, 1997 Security Associates International, Inc. ("SAI")
purchased all of the outstanding capital stock of Telecommunications Associates
Group, Inc., an Ohio corporation ("TAG") from TAG's sole shareholder, Mr.
Robert Ambros.
The purchase price, which was arrived at in arm's length negotiations
between the parties, was $5,000,000 which was paid in cash at the closing, plus
the assumption of TAG's liabilities. $4,800,000 of the purchase price was
financed from SAI's general corporate funds and $200,000 was financed by
drawing on SAI's existing credit facility with FINOVA Capital Corporation. In
addition, $385,309 drawn under the FINOVA credit facility was used to repay
pre-existing bank debt of TAG. The acquisition will be accounted for under the
purchase method for financial reporting purposes.
TAG is a third-party alarm monitoring company serving approximately
100,000 alarm monitoring subscribers and over 500 independent alarm dealers
from central monitoring stations located in Cleveland, Ohio and Austin, Texas.
The acquisition will allow SAI to offer central monitoring services from a
broader geographical base.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of businesses acquired.
(b) Pro forma financial information.
It is impractical to provide the required financial statements and pro
forma financial information as of this date. The required financial statements
and pro forma financial information will be filed as a Form 8-K/A with the
Commission as soon as practicable, but not later than February 8, 1998, as
required.
(c) Exhibits
2.1 Stock Purchase Agreement between Security Associates International,
Inc. as Purchaser and Robert Ambros as Seller, Dated November 24, 1997.
Schedules to the above agreement have been omitted but will be
furnished to the Commission upon request.
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SECURITY ASSOCIATES INTERNATIONAL, INC.
/s/ Daniel S. Zittnan
Date: December 10, 1997 ---------------------------------------
Daniel S. Zittnan
Vice President, Chief Financial Officer
EXHIBIT INDEX
EXHIBIT DESCRIPTION PAGE NO.
NUMBER
2.1 Stock Purchase Agreement between Security Associates International,
Inc. as Purchaser and Robert Ambros as Seller, Dated November 24, 1997.
<PAGE> 1
STOCK PURCHASE AGREEMENT
Between
SECURITY ASSOCIATES INTERNATIONAL, INC.
as
PURCHASER
and
ROBERT AMBROS
as
SELLER
Dated November 24, 1997
------------------------
<PAGE> 2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of November 24, 1997, is entered
into by and between Security Associates International, Inc. ("Purchaser") and
Robert Ambros ("Seller").
RECITALS
WHEREAS, the Seller owns all of the presently issued and outstanding
shares of capital stock of Telecommunications Associates Group, Inc., d/b/a
Emergency Response Center or ERC (the "Company") an Ohio corporation, and
WHEREAS, the Seller desires to sell to Purchaser, and Purchaser desires to
purchase from the Seller, all of the issued and outstanding shares of capital
stock of the Company (collectively the "Shares") for the consideration
described in this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants set
forth herein and other good and valuable consideration, the parties hereto, on
the basis of, and in reliance upon, the representations, warranties, covenants,
obligations and agreements set forth in this Agreement, and upon the terms and
subject to the conditions contained herein, hereby agree as follows:
ARTICLE I
DEFINITIONS
The following terms shall have the meanings assigned below when used in this
Agreement:
1.1. "Account" means any agreement pursuant to which the Company provides
monitoring of security alarm systems on a remote basis ("Monitoring Services").
1.2 "Closing" means the purchase and sale of the Shares hereunder;
1.3 "Closing Date" means November 25, 1997 or at such other time and
date to which the parties may agree in writing;
1.4 "Closing Date Balance Sheet" means the document delivered on the
Closing Date showing the assets and liabilities of the Company as of the
Closing Date.
1.5 "Dealer" means any individual or entity, other than the Company, who
has contracted to provide Monitoring Services to a Subscriber;
<PAGE> 3
1.6 "Owned Account" means an Account owned by the Company pursuant to
which the Company provides Monitoring Services to a Subscriber;
1.7. "Response" means Response Ability Systems, Inc., a Pennsylvania
corporation.
1.8 "RMR" means the monthly gross revenue earned by the Company in
consideration for Monitoring Services provided by the Company;
1.9 "SAI" means Security Associates International, Inc.;
1.10 "Subscriber" means any individual or entity who has contracted to
obtain Monitoring Services for a security alarm system installed on the
premises of that individual or entity;
1.11 "Third Party Account" means an Account owned by a Dealer pursuant to
which the Company provides Monitoring Services to a Subscriber;
1.12 "UVS" means United Video Security, Inc. a New Jersey corporation.
1.13 any representation or warranty made "to the knowledge" of a party
means that the party is making the representation on the basis of the actual
knowledge of the party or, in the case of a corporation, its officers and
directors, in either event, after due inquiry; and
1.14 "including" shall indicate examples of a foregoing general
statement and is not a limitation on that general statement.
2
<PAGE> 4
ARTICLE II
PURCHASE AND SALE OF THE SHARES
Purchaser and Seller hereby agree as follows:
2.1. Purchase and Sale of the Shares. Seller hereby agrees to sell,
transfer and deliver to Purchaser, and Purchaser hereby agrees to purchase and
acquire from Seller, at the Closing, the Shares, free from any charge, lien,
encumbrance or adverse claim of any kind whatsoever.
2.2 Consideration for Shares. Purchaser shall deliver to the Seller at
the Closing, in exchange, and as consideration for, the Shares (i) five
million dollars ($5,000,000) in immediately available funds by means of
cashiers' checks or wire transfer of federal funds to accounts designated by
Seller, in accordance with the wire transfer instructions to be provided by
Seller and (ii) releases executed by the lenders under the loans and payoff of
the car leases set forth on Schedule 2.2 (which schedule shall include the
payoff amount of each scheduled loan as of the Closing Date), in favor of
Seller discharging him from liability thereunder or payment in full of all such
loans and obligations (collectively, the "Consideration").
2.3 Certain Adjustments After Closing. Within thirty (30) days after the
closing Date Seller shall deliver to Purchaser the Closing Date Balance Sheet.
Sixty (60) days after receiving the Closing Date Balance Sheet, Purchaser shall
compare the Company's liabilities as set forth on the Closing Date Balance
Sheet, deducting those associated with the Company's bank loans and car leases
set forth on Schedule 2.2 with those set forth in the August Financial
Statement. If the liabilities as so adjusted set forth on the Closing Date
Balance Sheet exceed those set forth in the August Financial Statement by more
than $100,000, then the Seller shall promptly pay to Purchaser the amount of
the excess liabilities (in excess of the $100,000). Purchaser shall have the
right to dispute the Closing Date Balance Sheet and Seller shall have the right
to dispute the calculation made by Purchaser; however, in the event the parties
cannot reach a resolution, then the exclusive remedy shall be to submit the
dispute to binding arbitration pursuant to the Rules of the American
Arbitration Association and the laws of the state of Illinois.
3
<PAGE> 5
ARTICLE III
REPRESENTATIONS, WARRANTIES, AND
ACKNOWLEDGEMENTS OF THE SELLER
The Seller hereby represents, warrants, and acknowledges that:
3.1. Organization and Standing; Certificate of Incorporation and By-laws.
The Company is a corporation duly organized and validly existing under, and by
virtue of, the laws of the State of Ohio and is in good standing under such
laws. The Company has requisite corporate power and authority to own and
operate its properties and assets, and to carry on its business as presently
conducted and as proposed to be conducted. The Company is duly qualified or
licensed and in good standing as a foreign corporation in each jurisdiction
where the character of its properties or the nature of the activities conducted
by it makes such qualification or licensing necessary, each of which is listed
on Schedule 3.1. The Company does business under the names Emergency Response
Center, Emergency Response Center, Inc., E.R.C., and E.R.C. Network and does
not conduct any business, and is not commonly known by any other names, other
than as set forth on Schedule 3.1. The Company has complied with all laws
requiring the registration or other recording of such names in each
jurisdiction in which the Company does business. The copies of the Company's
Articles of Incorporation and By-laws attached as Exhibit A are true, correct
and complete and contain all amendments through the Closing Date.
3.2. Power and Authority. Seller has and will have at the Closing Date
all requisite legal power and authority to execute and deliver this Agreement,
to sell the Shares and to carry out and perform his obligations under the terms
of this Agreement.
3.3. Subsidiaries. Other than as set forth on Schedule 3.3, the Company
has no subsidiaries or affiliated companies and does not otherwise own or
control, directly or indirectly, any equity interest in any corporation,
association or business entity. As used herein, a "subsidiary" is any
corporation, limited liability company, partnership, or other business entity
with respect to which the Company owns any equity interest, and includes any
subsidiary of a subsidiary.
3.4. Central Stations. The Company owns and operates two central
monitoring stations from which it monitors security systems pursuant to the
Accounts ("Central Stations") These consist of: (i) a Central Station known as
"ERC Cleveland" or "ERC East" and located at 1514 East 191st Street, Cleveland,
Ohio; and, (ii) a Central Station known as "ERC Austin" or "ERC Southwest" and
located at 6448 Highway 290, Suite 102, Austin, Texas.
3.5. Capitalization. The authorized capital stock of the Company will
consist, immediately prior to the Closing, of 491 shares of common stock, $200
par value (the "Common Stock"), of which 491 of such shares are issued and
outstanding, and are owned, beneficially and of record, only by the Seller.
All such outstanding shares have been duly authorized and validly issued, and
are fully paid and nonassessable. There are no options, warrants, conversion
rights,
4
<PAGE> 6
rights of exchange or other rights, plans, agreements or commitments of any
nature whatsoever (including, without limitation, conversion or preemptive
rights) providing for the purchase, issuance or sale of any shares of the
Company's capital stock or any securities convertible into or exchangeable for
any shares of the Company's stock. All outstanding securities of the Company
were issued in compliance with applicable Federal and state securities laws.
There will be, as of the Closing Date, no other holders of Common Stock or
outstanding options, warrants or other rights, commitments or arrangements,
written or oral, to which the Company is a party or by which it is bound, to
purchase or otherwise acquire any shares of Common Stock or any security
directly or indirectly convertible into or exchangeable or exercisable for
Common Stock.
3.6. Ownership of Stock; Authorization. The Seller is the lawful owner of
the Shares, free and clear of all liens, encumbrances, restrictions and claims
of every kind. The Seller has all requisite power and authority to execute,
deliver and perform this Agreement, and this Agreement has been duly executed
and delivered by the Seller, and constitutes a legal, valid and binding
obligation of the Seller. The Shares are fully paid and nonassessable and have
the rights set forth in the Certificate of Incorporation and the By-laws of the
Company. No further approval or authorization of the stockholders or the
directors of the Company or of any governmental authority or agency is required
for the sale of the Shares as contemplated by this Agreement. Except as set
forth in Schedule 3.6 attached hereto, the Company does not require any
consent, approval, authorization or order of, or declaration, filing or
registration with, any court or governmental or regulatory agency or board in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
3.7. Company's Financial Statements; August Financial Statement. The
Seller has delivered to Purchaser the Company's combined unaudited annual
balance sheets, income statements and statements of cash flow, for each of the
three year periods ending December 31, 1996 ("Company Financial Statements")
and unaudited balance sheets, income statements and statements of cash flow for
the eight month period ending August 31, 1997 ("August Financial Statement").
The Company Financial Statements and the August Financial Statement are
attached as Exhibit B. The Company Financial Statements and the August
Financial Statement are complete and correct in all material respects, do not
contain any information which is false or misleading in any material respect
and have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated,
except that the unaudited financial statements do not contain footnotes. The
Company Financial Statements and the August Financial Statement fairly and
accurately set out and describe the financial condition and operating results
of the Company as of the dates, and during the periods, indicated therein.
Since August 31, 1997, there has not been any material adverse change, or any
event or condition which could reasonable be expected to result in any material
adverse change, in the financial condition, results or operations, business or
prospects of the Company.
3.8. Absence of Changes. Except as set forth in 3.8 attached hereto,
since December 31, 1996: (a) neither the Company nor any of its subsidiaries
has entered into any agreement or transaction which was not in the ordinary
course of business; (b) there has been no damage to, destruction of or loss of
physical property (whether or not covered by insurance) adversely affecting
the business or operations of the Company or any of its subsidiaries;
5
<PAGE> 7
(c) neither the Company nor any of its subsidiaries have declared or paid any
dividend or made any distribution (in cash, securities or other property) on
its stock, or redeemed, purchased or otherwise acquired any of its stock; (d)
neither the Company nor any subsidiary has increased the compensation of any of
its respective officers, or the rate of pay of its employees as a group, except
as part of regular compensation increases in the ordinary course of business;
and the Company does not know of the impending resignation or termination of
employment of any key officer or employee of the Company or any of its
subsidiaries that if consummated would have a materially adverse effect on its
business (e) there has been no labor dispute involving the Company, any
subsidiary or their respective employees and none is pending or, to the best of
the Company's knowledge, threatened; (f) there has not been any change in the
contingent obligations of the Company or any subsidiary, by way of guaranty,
endorsement, indemnity, warranty or otherwise; (g) there have not been any
loans made by the Company or any subsidiary to any of its employees, officers
or directors other than travel advances and office advances made in the
ordinary course of business; (h) neither the Company nor any subsidiary has
borrowed any amount or incurred or become subject to any liabilities (absolute
or contingent), except non-material expenses incurred in the ordinary course of
business; (i) neither the Company nor any subsidiary has paid any obligations
or liabilities, other than current liabilities paid in the ordinary course of
business; (j) neither the Company nor any subsidiary has mortgaged, pledged or
subjected to any lien, charge or any other encumbrance, any of its properties
or assets; (k) neither the Company nor any subsidiary has sold, assigned or
transferred any of its assets other than in the ordinary course of business;
(l) neither the Company nor any subsidiary has made any capital expenditures or
commitments therefor; and (m) to the best knowledge of the Company, there has
been no other event or condition of any character pertaining to and materially
adversely affecting the assets or business of the Company or any subsidiary.
3.9. Material Liabilities and Indebtedness. Schedule 3.9 contains a true
and complete list of each and every liability of the Company, including but not
limited to each and every agreement or other instrument under or pursuant to
which the Company has outstanding indebtedness. The Seller has furnished
Purchaser with true and correct copies of each such agreement and instrument,
including all amendments through the date of this Agreement. The Company is
not in default in any material respect under any of its agreements or evidences
of indebtedness. Except as disclosed on Schedule 3.9 attached hereto, neither
the Company nor any subsidiary has any material liabilities or obligations,
absolute or contingent (individually or in the aggregate), except the
liabilities and obligations set forth in the Company Financial Statements and
the August Financial Statement.
3.10. Material Contracts. Schedule 3.10 contains a true and complete list
of each and every contract of the Company pursuant to which the Company is
obligated to pay more than $1,000 or pursuant to which the Company is obligated
to provide services with a value in excess of $1,000 ("Material Contract")
other than monitoring contracts listed in Schedule 3.16, and the leases set
forth in Schedules 3.11(a) and 3.11(b). To the best of the Seller's knowledge,
no party (including the Company) to any Material Contract is in default in any
material respect under that contract. Except as set forth on Schedule 3.10,
neither the Company nor any subsidiary is a party to any Material Contract.
6
<PAGE> 8
3.11. Leases. Schedule 3.11(a) is a true and complete list of all real
estate leases of the Company and sets forth a brief summary of the principal
terms. Schedule 3.11(b) is a true and complete list of every lease for
personal property and sets forth a brief summary of the principal terms of each
such lease. True and complete copies of all such leases have been supplied to
the Company, including all amendments thereto. Neither the Company nor any
other party is in default under the terms of any such lease.
3.12. Title to Properties and Assets; Liens, etc. The Company has good
and marketable title to its properties and assets, and has good title to all
its leasehold interests, in each case subject to no mortgage, pledge, lien,
lease, encumbrance or charge, other than (i) the lien for current taxes not yet
due and payable; and (ii) possible minor liens and encumbrances which do not in
any case materially detract from the value of the property subject thereto or
materially impair the operations of the Company, and which have not arisen
otherwise than in the ordinary course of business. The Company owns or leases
all such properties as are necessary to its operations as now conducted and
such properties are in good operating condition and repair, reasonable wear and
tear excepted. Schedule 3.12 is a complete and accurate listing of all the
Company's assets, including without limitation all equipment used in the
Company's business and all liens against those assets. All real and tangible
personal property of the Company, including machinery, equipment and fixtures
currently used by the Company in the operation of its business is, and at the
time of Closing will be, in good operating condition and repair, ordinary wear
and tear excepted.
3.13. Telephone Lines. Schedule 3.13 contains a true and complete list of
(i) each telephone line being used in the operations of the Company; (ii) the
name of the owner of the line if other than the Company, and (iii) the specific
use to which each line is put. Where the use of a line is dedicated to a
particular Dealer or other entity, Schedule 3.13 also sets forth a brief
description of the agreement for dedication of that line. Except as disclosed
on Schedule 3.13, the Company has the exclusive right to use all the telephone
lines. Except those disclosed on Schedule 3.13, there are no charges
associated with the telephone lines. Following the Closing the Company will
retain all of its right, title, interest in and its right to use as currently
used all of the telephone lines.
3.14. Compliance with Other Instruments, None Burdensome, etc. The
Company and its subsidiaries are not in violation of any term of their
respective Certificates of Incorporation or By-laws, or other organizational
documents, or, in any material respect, of any term or provision of any
mortgage, indebtedness, indenture, contract, agreement, instrument, judgment or
decree, and are not in violation of any order, statute, rule or regulation
applicable to the Company. The execution, delivery and performance of and
compliance with this Agreement (i) have not resulted and will not result in any
violation of, or conflict with, or constitute a default under, the Certificate
of Incorporation or By-laws of the Company, (ii) have not resulted and will not
result in the creation of, any mortgage, pledge, lien, encumbrance or charge
upon any of the properties or assets of the Company , (iii) have not resulted
and will not result in the loss of any license, permit certificate, legal
privilege or legal right enjoyed or possessed by the Company; (iv) do not and
will not give any party to any agreement to which the Company is a party a
right of termination; or (v) do not and will not require the consent of any
other person or entity under
7
<PAGE> 9
any agreement, indenture, mortgage, document or other instrument or undertaking
by which the Seller or the Company is bound or to which any of their properties
are subject.
3.15. Intangible Assets. The Company (i) owns or has the right to use
and following the Closing, the Company will continue to own and have the right
to use, free and clear of all liens, claims and restrictions, all trademarks,
service marks, trade names, copyrights, software, permits and licenses
("Intangible Assets") used in the conduct of its business as now conducted or
as proposed to be conducted without infringing upon or otherwise acting
adversely to the right or claimed right of any person under or with respect to
any of the foregoing. Schedule 3.15 is a true and complete list of the
Company's trademarks, service marks, trade names, copyrights, permits and
licenses, and the owner(s), licensors, grantors and licensee(s) thereof.
Copies of all permits and licenses used in the conduct of the Company's
business are contained in Exhibit C. Seller will effect the transfer of all
such Intangible Assets as may be necessary for the continued operation of the
Company's business. Following the Closing, Purchaser will be able to continue
to operate the business of the Company without obtaining any additional permits
or licenses. Except as disclosed on Schedule 3.15, the Company is not
obligated or under any liability whatsoever to make any payments by way of
royalties, fees or otherwise to any owner of, licensor of, or other claimant
to, any trademark, trade name, copyright, software or other Intangible Asset,
with respect to the use thereof or in connection with the conduct of its
business or otherwise. The Company has not granted any licenses with respect
to their business. The business of the Company does not, and will not cause
the Company to, violate any patent, trademark, service mark, trade name, trade
secret, copyright, license or proprietary interest of any other person. The
Company possesses and after the closing will continue to possess ownership of
or licenses to utilize all proprietary technology necessary for the conduct of
its business as presently conducted. The Company is not in default under any
agreement governing its use of any Intangible Asset or of any license or
permit.
3.16. Accounts; Receivables. Schedule 3.16 consists of the following:
(a) a true and complete list of the Company's Owned Accounts, and a complete
and accurate list of (i) the RMR due under each such Owned Account; (ii) the
agings of the amounts receivable under each such Owned Account; and (iii) the
Company's method of billing such Account, if other than monthly; (b) a true
and complete list of the Company's Third Party Accounts, and a complete and
accurate list of (i) the RMR due from each Dealer under each such Account; (ii)
the agings of the amounts receivable from each Dealer under each such Account;
and (iii) the Company's method of billing such Account, if other than monthly;
and (c) a true and complete statement of (i) the number of Accounts being
monitored pursuant the Company's agreements with UVS and Response; (ii) the
agings of the amounts receivable under such agreements; and (iii) the Company's
method of billing under each such agreement, if other than monthly. Except as
disclosed in Schedule 3.16, all of the Accounts described therein are billed
monthly and there are no pre-billed Accounts. On the Closing Date, there will
be no less than 47,939 Third Party Accounts with RMR totaling no less than
$235,000; and 1,962 Owned Accounts with RMR totaling no less than $32,000. The
Accounts referred to herein arose in bona-fide arms length transactions in the
normal course of business and such Accounts are valid and binding obligations
of the Dealers with whom the Company has contracted and the recipients of
Monitoring Services under such Accounts without counterclaims, set-offs or
other defenses thereto, and the Seller has
8
<PAGE> 10
no basis to believe that such Accounts are not, at the time of Closing,
collectible consistent with the Company's historical collection experience.
Seller has no basis to believe that any Account will not continue in existence
after the Closing Date.
3.17 Accounts; Billing Practices. Exhibit D contains a copy of each
standard form contract that the Company uses for (i) Owned Accounts; (ii) Third
Party Account; and (iii) its agreements with UVS and Response. Except as
disclosed on Schedule 3.17 there are no Accounts with terms that deviate from
the terms of the standard form contract provided in Exhibit D as applicable to
that type of Account.
3.18. Litigation, etc. There are no actions, suits, proceedings or
investigations pending or, to the best knowledge of the Seller, threatened
against Seller or the Company or their respective properties before any court,
arbitration panel or governmental agency (nor, to the best of the Seller's
knowledge, is there any reasonable basis therefor), nor is there any judgment,
decree, injunction, rule or order of any court, governmental department,
commission, agency, instrumentality or arbitrator outstanding against the
Seller, Company, its assets or the Shares, except as described on Schedule
3.18.
3.19. Employees. Except as disclosed on Schedule 3.19(a), neither Seller
or any officer, director, employee or stockholder of the Company, or any member
of their immediate families, is, directly or indirectly, interested in any
contract with the Company, including but not limited to any agreement, written
or unwritten, for employment or consulting, or any lease for real or personal
property. No officer of the Company is a party to or bound by any agreement,
contract or commitment, or subject to any restrictions (including
confidentiality or non-compete restrictions) in connection with any previous or
current employment of any such person, which adversely affects, or in the
future may adversely affect, the business, or the proposed business of the
Company. The Company is not a guarantor or indemnitor of any indebtedness of
any other person, firm or corporation, except as disclosed on Schedule 3.19(b).
3.20. Governmental Consent, etc. No consent, approval or authorization of
(or designation, declaration or filing with) any governmental agency on the
part of the Company is required in connection with the valid execution and
delivery of this Agreement, or the offer or sale of the Shares.
3.21. Offering. The offer and sale of the Shares constitute a transaction
exempt from the registration requirements of Section 5 of the Securities Act.
3.22. Brokers or Finders; Other Offers. Neither the Seller nor the
Company has dealt with any broker or finder, or has incurred, or will incur,
directly or indirectly, as a result of any action taken by the Seller or the
Company, any liability for brokerage or finders' fees or agents' commissions or
any similar charges in connection with the transactions contemplated by this
Agreement.
3.23. Tax Matters. The Seller and the Company: (i) have timely filed all
tax returns that are required to have been filed with all appropriate federal,
state, county and local
9
<PAGE> 11
governmental agencies that relate to the Company or with respect to which the
Company is liable or otherwise in any way subject, (and all such returns fairly
reflect the Company's operations for tax purposes), and all taxes, fees,
assessments and governmental charges of any nature ("Taxes") shown by such
returns to be due and payable have been paid, except for those amounts set
forth on Schedule 3.23 as being contested in good faith and for which
appropriate amounts have been reserved in accordance with generally accepted
accounting principles; (ii) have timely paid all Taxes owed by them which they
obligated to withhold from amounts owing to any employee (including without
limitation social security taxes), creditor or third party (other than Taxes
the validity of which are being contested in good faith by appropriate
proceedings) and (iii) have not waived any statute of limitations with respect
to taxes or agreed to any extension of time with respect to a tax assessment or
deficiency. The assessment of any additional Taxes for periods for which
returns have been filed is not expected to exceed the recorded liability
therefor, and there are no material unresolved questions or claims concerning
the Company's tax liability. Neither the Company's nor any subsidiary's tax
returns have been reviewed or audited by any federal, state, local or county
taxing authority. To the best of the Seller's knowledge, there is no pending
dispute with any taxing authority relating to any of said returns which, if
determined adversely to the Company or its subsidiaries, would result in the
assertion by any taxing authority of any valid deficiency for Taxes. The
Company's August Financial Statement and the Closing Date Balance Sheet will
accurately reflect all of the Company's liability for Taxes as of their
respective dates.
3.24. Insurance. The Company and its subsidiaries have valid workers'
compensation, fire, casualty, liability, and errors and omissions insurance
policies, in such amounts and with such coverage as are carried by similar
companies in the Company's industry, in each case with reputable insurers.
Seller has provided to Purchaser true and complete copies of all such policies.
The Company is not in default with respect to any provision contained in any
such policy and has not failed to give any notice or present any claim under
any such policy in due and timely fashion. The Company will not be placed in
default, and its coverage will not be canceled, as a result of the transactions
contemplated by this Agreement. There are no outstanding unpaid claims under
any such policy. The Company has not received notice of, nor has it knowledge
of, any inaccuracy in any application for such policies, any failure to pay
premiums when due or any similar state of facts that might form the basis for
termination of any such insurance. The Company has not canceled or terminated
any insurance policy, nor has any insurance company canceled or terminated any
insurance policy of the Company. All such policies can be canceled on 30 days
notice without penalty to the Company.
3.25. Only Common Voting Stock Will Be Outstanding. The only issued and
outstanding shares of capital stock of the Company at Closing will be the
Shares.
3.26. Pension Plans. Schedule 3.26 is a true and complete list of each
pension, health, retirement, profit sharing, bonus, stock purchase, stock
option, severance or similar employee benefit plan of the Company ("Plans"),
whether of a legally binding nature or in the nature of informal
understandings. Exhibit E contains a copy of each such written Plan. The
Company has the right to terminate any such Plan on reasonable notice without
penalty. The Company does not currently have, nor has it incurred any liability
under Title IV of the Employee Retirement Income Security Act, as amended
("ERISA"), nor has any Affiliate as defined in
10
<PAGE> 12
ERISA, with respect to any Plan, and neither the Company nor any Affiliate has
ever incurred any obligation to contribute to a "multiemployer plan," as
defined in ERISA.
3.27. Powers of Attorney; Bank Accounts. Schedule 3.27 hereto lists (i)
the names and addresses of all persons holding a power of attorney on behalf of
the Company and (ii) the names and addresses of all banks or other financial
institutions in which the Company has an account, deposit, or safe-deposit box,
the account numbers, and the names of all persons authorized to draw on these
accounts or deposits or to have access to those boxes.
3.28. Directors, Officers and Employees. Schedule 3.28 hereto sets forth
the names of each director, officer and employee of the Company and states, if
applicable, the rate of compensation payable to each. Exhibit F contains a
copy of each written employment agreement with any such director, officer or
employee.
3.29. Environmental and Safety Regulations. The Company is in compliance
with all federal, state and local environmental laws, rules, regulations,
standards and requirements, including, without limitation, those respecting the
generation, handling, storage and disposition of hazardous materials, and
Seller knows of no violation or violations by the Company, any subsidiary, or
their respective employees or agents, of any environmental or safety regulation
that would have an adverse effect on the business, properties, prospects or
financial condition of the Company.
3.30 Representations and Warranties True on Closing Date. The
representations and warranties made by the Seller herein, and all statements
made in any exhibit, schedule or certificate furnished pursuant to their
Agreement, do not contain, and on the Closing Date will not contain, any untrue
statement of a material fact, or omit to state any material fact required to be
stated therein, or necessary in order to make the statements made, in light of
the circumstances under which they were made, not misleading. Seller has
disclosed to Purchaser or all material facts concerning the Company necessary
for Purchaser to accurately evaluate its investment in the Company.
11
<PAGE> 13
ARTICLE IV
REPRESENTATIONS, WARRANTIES, AND
ACKNOWLEDGEMENTS OF PURCHASER
The Purchaser hereby represents, warrants, and acknowledges to the Seller
that:
4.1. Incorporation. Purchaser has been duly incorporated and is validly
existing and in good standing under the laws of the State of Delaware. The
Purchaser has requisite corporate power and authority to own and operate its
properties and assets, and to carry on its business as presently conducted and
as proposed to be conducted. The Purchaser has furnished the Company with
copies of its Articles of Incorporation and By-Laws, as amended, and
Purchaser's Financial Statements, as defined in Section 3.9 of this Agreement.
Said copies are true, correct and complete and contain all amendments through
the Closing Date and Purchaser's Financial Statements accurately describe the
financial condition of the Purchaser as of the date thereof, and in all
material respects as of the Closing Date.
4.2. Power and Authority. The Purchaser will have at the Closing Date all
requisite power and authority to execute and deliver this Agreement, to
purchase the Shares and to carry out and perform its obligations under the
terms of this Agreement.
4.3. Authorization. All action on the part of the Purchaser necessary for
the authorization, execution, delivery and performance of this Agreement by the
Purchaser, the purchase of the Shares, and the performance of all of the
Purchaser's obligations hereunder has been taken or will be taken prior to the
Closing. This Agreement, when executed and delivered by the Purchaser, shall
constitute a valid and binding obligation of the Purchaser, enforceable in
accordance with its terms.
4.5. Representations and Warranties True on Closing Date. The
representations and warranties made by the Purchaser herein, and all statements
made in any exhibit, schedule or certificate furnished pursuant to their
Agreement, do not contain, and on the Closing Date will not contain, any untrue
statement of a material fact, or omit to state any material fact required to be
stated therein, or necessary in order to make the statements made, in light of
the circumstances under which they were made, not misleading.
12
<PAGE> 14
ARTICLE V
COVENANTS OF SELLER
5.1. Maintenance of Business. From the date hereof until the Closing
Date, the Seller shall cause the Company to carry on and preserve the business,
goodwill and the relationships of the Company with Dealers, Subscribers,
suppliers, employees, agents and others in substantially the same manner as
they have been prior to the date hereof.
5.2. Absence of Certain Changes. From the date hereof until the Closing
Date, except as expressly permitted or contemplated hereby, the Seller shall
not cause the Company to, and the Seller shall not, on behalf of the Company,
without Purchaser's prior express written consent:
(a) incur any additional indebtedness for money borrowed, or guarantee
any indebtedness or obligation of any other party;
(b) issue any capital stock or securities convertible into capital
stock or grant or issue any options, warrants or rights to subscribe for its
capital stock or securities convertible into its capital stock;
(c) enter into, amend or terminate any agreement or arrangement, other
than in the ordinary course of business; provided, that Seller shall notify
Purchaser prior to entering into, amending or terminating any material
agreement or arrangement in the ordinary course of business;
(d) increase the compensation payable or to become payable to any of
its officers, employees or agents, or adopt or amend any employee benefit
plan;
(e) acquire or dispose of any properties or assets used in its
business except in the ordinary course of business;
(f) permit any change in its business or the manner in which its books
and records are maintained;
(g) create or suffer to be imposed any lien, mortgage, security
interest or other charge on or against its properties or assets; or
(h) engage in any activities or transactions outside the ordinary
course of its business as conducted at the date hereof.
5.3 Necessary Consents. Prior to the Closing, the Seller will obtain
written consents and take such other actions as may be necessary or appropriate
to allow the consummation of the transactions contemplated hereby and to allow
the continuation of the Company's business by Purchaser after the Closing,
including, any required by the respective
13
<PAGE> 15
leases, and obtaining the consent of the lessors of the premises located at
1514 E. 191st Street, Cleveland, Ohio and 6448 Highway 290, Suite 102, Austin,
Texas
5.4. Access to Information. The Seller shall cause the Company to give
Purchaser and its accountants, legal counsel and other representatives full
access, during normal business hours throughout the period prior to the
Closing, to all of the properties, books, contracts, commitments and records
relating to the business, assets and liabilities of the Company, and will
furnish Purchaser, its accountants, legal counsel and other representatives
during such period all such information concerning its affairs as Purchaser may
reasonably request; provided, that any furnishing of such information or any
investigation by Purchaser shall not affect the Purchaser's right to rely on
the representations, warranties and covenants made by the Seller in this
Agreement.
5.5. Cooperation with Audit. From the date hereof through completion of
their audit, the Seller shall cooperate completely with Purchaser's financial
officers and auditors in their completion of an audit of the Company and its
operations for the period commencing January 1, 1997 through the Date of
Closing. Seller and Seller's accountants and advisors will promptly provide to
Purchaser and its financial officers and auditors all information and access to
all records requested to complete their audit.
5.6. Certain Defaults; Litigation. The Seller will give prompt notice to
Purchaser of:
(a) any default by the Seller or the Company, or any other party,
subsequent to the date of this Agreement and prior to the Closing under any
instrument or agreement to which the Company is a party or by which it is
bound, which default could, if not remedied, result in any adverse change in
the financial condition, business or prospects of the Company or which would
render incorrect any representation or warranty made herein, and
(b) any suit, action, proceeding or investigation instituted or
threatened against or affecting the Seller or Company subsequent to the date of
this Agreement and prior to the Closing.
5.7. Other Negotiations. From the date hereof until the termination of
this Agreement, the Seller will not, and the Seller will cause the Company and
its officers and directors not to, initiate discussions or negotiate, or
authorize any person or entity to discuss or negotiate on behalf of the Seller
or the Company, with any other party, or entertain or consider any inquiries or
proposals received from any other party, concerning the possible disposition of
the Company's business, assets or capital stock.
5.8. Acquisition Financing. The Seller will, and will cause the Company
to, reasonably cooperate with Purchaser in (i) negotiating all of the
documentation to be entered into by the Company, the Seller, Purchaser,
Purchaser's lenders, and any other party in connection with obtaining financing
for the acquisition of the Shares, and (ii) closing the transactions
contemplated thereby.
14
<PAGE> 16
5.9. Noncompetition and Nonsolicitation. From the date hereof until the
third (3rd) anniversary of the Closing Date, Seller will not:
(a) enter into competition with Purchaser by establishing a remote
alarm system monitoring center providing monitoring services to within twenty
five (25) miles of any location where Purchaser or any subsidiary of Purchaser
provides such services;
(b) provide, or solicit any Dealer or Subscriber for the purposes of
providing, any services similar to those provided by the Company, either by
Seller or by any other person or entity other than Purchaser or a subsidiary of
Purchaser;
(c) reveal the customer list of the Company to any person;
(d) employ any employee of Purchaser or its subsidiaries, or any of the
employees of the Company or solicit or encourage any such employee to terminate
his or her employment with any of the foregoing; or
(e) take any other action which is intended to, or which would
reasonably be expected to:
(1) adversely affect Purchaser's interest in any Account;
(2) adversely affect Purchaser's contractual relationship
with Response, UVS or any Dealer or Subscriber; or
(3) discourage Response, UVS or any Dealer, Subscriber or
supplier from continuing its business relationship with
Purchaser or the Company after the Closing Date on the same
terms as were maintained with Seller.
For purposes of this paragraph 5.9, the term "Seller" shall also include any
corporation, partnership or other business entity in which Seller now or in the
future owns directly or indirectly a controlling equity interest, and the
spouse, children, brothers and/or sisters of Seller. Notwithstanding any other
provision of this Agreement, Seller agrees that money damages would not be a
sufficient remedy for breach of this Section 5.9 and that the Purchaser shall
be entitled to specific performance, injunctive relief or other equitable
relief as a remedy for breach of this Section 5.9.
5.10. Reasonable Efforts. The Seller will use his reasonable efforts to
cause all conditions to Closing to be satisfied.
15
<PAGE> 17
ARTICLE VI
COVENANTS OF PURCHASER
6.1. Necessary Consents. Prior to the Closing, Purchaser will obtain such
consents and take such other actions as may be necessary or appropriate to
allow the consummation of the transactions contemplated hereby, including
obtaining any necessary consent from FINOVA Capital Corporation.
6.2. Employee Compensation. After the Closing Date, the yearly salaries
of the following employees will be: Robert Ambros - $75,000; Jim Osborne -
$75,000; Sandy Burnett - $46,800, and Mark Burnett - $45,000. In
consideration for Purchaser's agreement to cause the Company to continue to
employ Jim Osborne, Sandy Burnett and Mark Burnett at the foregoing salaries,
they agree to be bound, for a period of three (3) years after the termination
of their employment by the Company, to the provisions of Section 5.9 of this
Agreement to the same extent as Seller, as demonstrated by their signatures on
the signature page of this Agreement.
6.3. Reasonable Efforts. Purchaser will use its reasonable efforts to
cause all conditions to the Closing to be satisfied.
16
<PAGE> 18
ARTICLE VII
PURCHASER'S CONDITIONS FOR CLOSING
The Purchaser's obligations to consummate the transactions contemplated by
this Agreement is subject to the fulfillment, on or before the Closing, of all
the following conditions, unless waived in writing by Purchaser:
7.1. Representations True. The representations and warranties of Seller
set forth in Article III shall be true and correct when made and shall be true
and correct on the Closing Date;
7.2. Covenants Performed. Seller shall have performed or complied, and
shall have caused the Company to perform and comply, with all of the terms,
covenants and conditions of this Agreement to be performed or complied with by
Seller and the Company at or prior to the Closing Date.
7.3. No Violations; No Actions. Consummation of the transactions
contemplated by this Agreement shall not violate any order, decree or judgment
of any court or governmental body having competent jurisdiction and no action
or proceeding shall have been instituted by any person or entity or threatened
by any governmental agency which, in either such case, in the reasonable
judgment of Purchaser, has a probability of resulting in an order judgment or
decree restraining, prohibiting or rendering unlawful the consummation of the
transactions contemplated by this Agreement.
7.4. No Material Adverse Change. During the period commencing on the date
of execution of this Agreement to the Closing Date, there shall not have been
any material adverse change in the condition (financial or other), liabilities,
business or prospects of the Company.
7.5. Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be in form and substance
satisfactory to Purchaser, and Purchaser shall have received all such
counterpart originals or certified or other copies of such documents as it may
reasonably request.
7.6. Delivery of Documents. Purchaser shall have received all documents
and other items to be delivered by Seller under Section 9.2.
17
<PAGE> 19
7.7. Resignation of Directors and Certain Officers. Purchaser shall have
received the written resignation of Robert Ambros the sole Officer and Director
of the Company, effective on the Closing Date, as well as the written
resignation of prior officer and director Joan Ambros.
7.8. Schedules. The Seller shall have completed and attached hereto all
Schedules required by this Agreement, and all such Schedules shall have been
acceptable to Purchaser, in its sole discretion.
7.9. Required Consents. All statutory and regulatory consents and
approvals which are required under the laws or regulations of the United States
and any other authority shall have been obtained; and all other necessary
consents and approvals of third parties, including FINOVA Capital Corporation
and the lessors of the premises located at 1514 E. 191st Street, Cleveland,
Ohio and 6448 Highway 290, Suite 102, Austin, Texas, to the transactions
contemplated hereby and to the continued uninterrupted operation of the
business of the Company shall have been obtained.
7.10. Officer's and Other Certificates. The Seller shall have delivered
to the Purchaser the following:
(a) an officer's certificate, dated the Closing Date, stating that the
conditions specified in this Article VII have been fulfilled on or prior to the
Closing Date; and
(b) incumbency certificates for the officers of the Company executing
this Agreement and any documents delivered in connection with this Agreement;
(c) a certificate of the Company's Secretary, certifying as true,
accurate, and complete the Articles of Incorporation and Bylaws of the Company
attached as Exhibit A.
18
<PAGE> 20
ARTICLE VIII
SELLER'S CONDITIONS FOR CLOSING
The obligation of the Seller to consummate the transactions contemplated
by this Agreement are subject to the fulfillment, on or before the date of
Closing, of all the following conditions, unless waived in writing by the
Seller:
8.1. Representations True. The representations and warranties of
Purchaser set forth in Article IV shall be true and correct when made and true
and correct on the Closing Date.
8.2. Covenants Performed. Purchaser shall have performed or complied with
all of the terms, covenants and conditions of this Agreement to be performed or
complied with by Purchaser on or before the Closing Date.
8.3. No Violations; No Actions. Consummation of the transactions
contemplated by this Agreement shall not violate any order, decree or judgment
of any court or governmental body having competent jurisdiction and no action
or proceeding shall have been instituted by any person or entity or threatened
by any governmental agency which, in either such case, in the reasonable
judgment of Seller, has a probability of resulting in an order judgment or
decree restraining, prohibiting or rendering unlawful the consummation of the
transactions contemplated by this Agreement.
8.4. Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be in form and substance
satisfactory to Seller, and Seller shall have received all such counterpart
originals or certified or other copies of such documents as he may reasonably
request.
8.5. Delivery of Documents. Seller shall have received all documents and
other items to be delivered by Purchaser under Section 9.3.
8.6. Required Consents. All statutory and regulatory consents and
approvals which are required under the laws or regulations of the United States
and any other authority shall have been obtained; and all other necessary
consents and approvals of third parties or Sellers of the Purchaser to the
transactions contemplated hereby shall have been obtained.
19
<PAGE> 21
ARTICLE IX
CLOSING
9.1. Time and Place. The Closing shall occur at the offices of Purchaser
at 9:00 a.m. on the Closing Date, but shall be effective as of 12:01 a.m. on
the Closing Date.
9.2. Deliveries of the Seller. At the Closing, the Seller will execute
and deliver or cause to be executed and delivered to Purchaser:
(a) Stock Certificates. A certificate representing the Shares, issued
in such name or names as may be designated by Purchaser; as well as all
canceled certificates with respect to previous ownership by any other person or
entity.
(b) Corporate Documents. The Articles of Incorporation of the Company,
certified by the secretary of the Company as true and correct, and the By-Laws
of the Company, certified by the secretary of the Company as in effect at the
Closing;
(c) Certificate of Good Standing. Long-form Certificates of Good
Standing, dated not more than five days prior to the Closing Date, with respect
to the Company, issued by the Secretary of State of Ohio and by the Secretary
of State of each foreign jurisdiction in which the company is qualified to do
business;
(d) Resolutions. A copy of the resolution of the Board of Directors of
the Company, certified by the secretary of the Company as having been duly and
validly adopted and being in full force and effect, authorizing execution and
delivery of this Agreement and performance of the transactions contemplated
hereby by the Company.
(e) Books and Records. All corporate records of the Company,
including without limitation, all of the minute books, stock ledgers, books of
account, all contracts, leases, permits, licenses, all records with respect to
Accounts and all similar corporate records of the Company.
(f) Lien Searches. Such Uniform Commercial Code lien searches,
releases and such other instruments showing that there were no financing
statements, judgments, taxes or other liens outstanding against the Company or
any of its assets as of the Closing Date or a date that is not more than 15
days prior to the Closing Date (except for liens listed on Schedule 3.12) and
showing that there were no financing statements, judgments, taxes or other
liens outstanding against Seller which would result in a lien, charge or
encumbrance upon the Shares. Purchaser shall accept, and Seller approves, for
Seller's delivery pursuant to this subsection (f) the lien searches performed
by Purchaser and delivered to Seller prior to Closing.
(g) Consents. Evidence that all consents, approvals, or
authorizations of or notifications to any third parties (including governmental
agencies), if any, required to sell and assign the Shares and to consummate the
transactions contemplated hereby and to continue to
20
<PAGE> 22
operate the business of the Company without interruption have been obtained,
including without limitation, the consents of the lessors of the premises
located at 1514 E. 191st Street, Cleveland, Ohio and 6448 Highway 290, Suite
102, Austin, Texas.
(h) Resignation of Directors and Officers of the Company. The written
resignation of Robert Ambros, Sole Officer and Director of the Company,
effective on the Closing Date.
(i) Seller's Certificate. The certificates from the Seller, dated the
Closing Date, required pursuant to Section 7.10 of this Agreement;
(j) Substitute Signature Cards. Substitute Signature cards for each
bank account listed on Schedule providing for signing authority in the
individual designated by Purchaser;
(k) Other Documents. Such other documents and instruments as
Purchaser, its Lender, and their counsel reasonably shall deem necessary to
consummate the transactions contemplated hereby.
All documents delivered to Purchaser shall be in form and substance
reasonably satisfactory to its counsel.
9.3. Deliveries of Purchaser. At the Closing, Purchaser will execute and
deliver or cause to be executed and delivered to the Seller simultaneously with
delivery of the items referred to in Section 9.2 above:
(a) Payment of the Consideration. Bank wire transfers as provided in
Section 2.2;
(b) Releases. Evidence of the releases of the obligations of Seller
as provided in Section 2.2 (ii), or payment of the loans and leases set forth
on Schedule 2.2;
(c) Resolutions. A copy of the resolution of the Board of Directors
of Purchaser, certified by the secretary thereof as having been duly and
validly adopted and being in full force and effect, authorizing execution and
delivery of this Agreement and performance of the transactions contemplated
hereby by Purchaser;
(d) Corporate Documents. The Articles of Incorporation of Purchaser,
certified by the Secretary of State of Delaware as of a date not more than
five days prior to the Closing Date, and the By-Laws of Purchaser, certified
in each case by the secretary of Purchaser as in effect at the Closing;
(e) Consents. Evidence that any and all consents, approvals, or
authorizations of or notifications to any third parties, including FINOVA
Capital Corporation, required to consummate the transactions contemplated
hereby, have been obtained by Purchaser;
21
<PAGE> 23
(f) Officer's Certificate. A certificate from an officer of
Purchaser, dated the Closing Date, confirm the satisfaction of the conditions
required pursuant to 8.1 and 8.2;
(g) Other Documents. Such other documents and instruments as the
Seller or his counsel reasonably shall deem necessary to consummate the
transactions contemplated hereby.
All documents delivered to Seller shall be in form and substance
reasonably satisfactory to its counsel.
22
<PAGE> 24
ARTICLE X
INDEMNIFICATION
10.1. Indemnification.
(a) Seller will indemnify and hold harmless the Purchaser, and each
partner, officer and director of the Purchaser, against any losses, claims,
damages or liabilities, joint or several, (hereafter "Loss") to which the
Purchaser or any partner, officer, or director becomes subject in connection
with:
(i) finders' fees or brokerage commissions incurred or
alleged to have been incurred by Seller or the Company
with respect to the transactions contemplated by this
Agreement;
(ii) any liability of Seller or the Company not disclosed on
Schedules 3.9, 3.10, 3.11, 3.12 or 3.13 prior to the
Closing Date, or not included in the August Financial
Statement and for which an adjustment has not been made
pursuant to Section 2.3.;
(iii) any misrepresentation of fact, or failure to disclose
a material fact, by Seller or the Company.
(iv) any breach of any representation or warranty by Seller
contained herein or in any document delivered hereunder;
(v) any breach of any covenant or agreement by Seller or
the Company contained herein or in any document
delivered hereunder, to be performed prior to or after
the Closing Date;
(b) Purchaser will indemnify and hold harmless the Seller, and each
partner, officer and director of the Purchaser, against any Loss to which the
Seller or any partner, officer, or director becomes subject in connection
with:
(i) finders' fees or brokerage commissions incurred or
alleged to have been incurred by Purchaser with respect
to the purchase transaction;
(ii) any misrepresentation of fact, or failure to disclose
a material fact, by Purchaser.
(iii) any breach of any representation or warranty by
Purchaser contained herein or in any document delivered
hereunder;
23
<PAGE> 25
(iv) any breach of any covenant or agreement by Purchaser
contained herein or in any document delivered
hereunder, to be performed prior to or after the
Closing Date;
(c) Such indemnification shall include any and all actions, suits,
proceedings, demands, assessments or judgments, costs and expenses incidental
to any of the foregoing matters set forth in Section 10.1(a) and (b).
10.2. Indemnification Procedures. For the purposes of this Section 10.2,
the term "Indemnitee" shall refer to the person or persons entitled, or
claiming to be entitled, to be indemnified, pursuant to the provisions of
Section 10.1. The term "Indemnitor" shall refer to the person or persons
having the obligation to indemnify pursuant to such provisions.
(a) Notice. An Indemnitee shall promptly give the Indemnitor written
notice of any matter which an Indemnitee has determined has given or could give
rise to a right of indemnification under this Agreement, stating the amount of
the loss, if known, and method of computation thereof, all with reasonable
particularity and containing a reference to the provisions of this Agreement in
respect of which such right of indemnification is claimed or arises. If an
Indemnitee shall receive notice of any claim by a third party which is or may
be subject to indemnification (a "Third Party Claim"), the Indemnitee shall
give the Indemnitor prompt written notice of such Third Party Claim and shall
permit the Indemnitor, at its option, to participate in the defense of such
Third Party Claim by counsel of its own choice and at its expense. If,
however, the Indemnitor acknowledges in writing its obligation to indemnify the
Indemnitee hereunder against all losses that may result from such Third Party
Claim (subject to the limitations set forth herein), then the Indemnitor shall
be entitled, at its option, to assume and control the defense of such Third
Party Claim at its expense and through counsel of its choice, provided however,
that Indemnitor shall have the right to approve in its sole reasonable
discretion the choice of counsel. In the event the Indemnitor exercises its
right to undertake the defense of any such Third Party Claim, the Indemnitee
shall co-operate with the Indemnitor in such defense and make available to the
Indemnitor, at the Indemnitor's expense, all witnesses, pertinent records,
materials and information in its possession or under its control relating
thereto as is reasonably required by the Indemnitor. Similarly, in the event
the Indemnitee is, directly or indirectly, conducting the defense against any
such Third Party Claim, the Indemnitor shall co-operate with the Indemnitee in
such defense and make available to it all such witnesses, records, materials
and information in its possession or under its control relating thereto as is
reasonably required by the Indemnitee. No such Third Party Claim may be
settled by the Indemnitor without the written consent of the Indemnitee, unless
the settlement involves only the payment of money by the Indemnitor. Similarly,
no Third Party Claim which is being defended in good faith by the Indemnitor
shall be settled by the Indemnitee without the written consent of the
Indemnitor.
24
<PAGE> 26
(b) Calculation of Losses. Losses shall be determined after taking
into account any insurance proceeds received by an Indemnitee or its affiliates
from a non-affiliated insurance company on account of such losses (after taking
into account any costs incurred in obtaining such proceeds and any increase,
determined in the reasonable judgment of the Indemnitee and confirmed by
insurance company, in insurance premiums as a result of a claim with respect to
such proceeds).
25
<PAGE> 27
ARTICLE XI
MISCELLANEOUS
11.1. Survival. The representations, warranties, covenants and
indemnification obligations contained in this Agreement and their respective
obligations to be performed under the terms hereof at, prior to or after the
Closing hereunder, shall not expire with, or be terminated or extinguished by,
such Closing, but shall survive the Closing and any investigation made at any
time by or on behalf of a party, for a period of 5 years following the Closing.
11.2. Further Assurances. At the request of a party to this Agreement, and
without further consideration, the other party agrees to execute such documents
and instruments and to do such further acts as may be necessary or desirable to
effectuate the transactions contemplated hereby.
11.3. Governing Law. This agreement shall be governed by, and construed
and enforced in accordance with, the internal laws of the state of Ohio without
giving any effect to principles of conflicts of laws. The Seller agrees that
he will not assert against any partner, officer, director, employee or agent of
the Purchaser or any of its affiliates, any claim it may have under this
Agreement by reason of any failure or alleged failure by the Purchaser to meet
its obligations hereunder. The parties hereto agree and intend that the proper
and exclusive forum for the litigation of any disputes or controversies arising
out of, or related to, this Agreement shall be the courts of the State of Ohio
for the County of Cuyahoga and of any Federal Court located in such County.
The Seller agrees that he will not commence or move to transfer any action or
proceeding, arising out of or relating to this Agreement, in or to any court
other than one located in the County of Cuyahoga in the State of Ohio. The
Seller irrevocably consents to the service of process of any of the aforesaid
courts in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to the Seller at the address
provided herein, such service to become effective 30 days after such mailing.
Nothing contained in this Section shall affect the right of the Purchaser to
serve process in any other manner permitted by law. In the event the Seller
should commence or maintain any action arising out of or related to this
Agreement in a forum other than the courts located in the State of Ohio, County
of Cuyahoga, the Purchaser shall be entitled to request the dismissal of such
action, and the Seller stipulates that such action shall be dismissed. The
parties agree that prior to instituting any suit, they will attempt to resolve
any dispute by negotiating in good faith with each other for a period of thirty
(30) days.
11.4. Successors and Assigns. This Agreement shall be binding on, and
inure to the benefit of, the parties to it and their respective heirs, legal
representatives, successors, and assigns.
11.5. Each Party to Bear Own Costs. The Seller and Purchaser shall each
bear its own legal and other expenses incurred on its behalf with respect to
the preparation of this Agreement, any related documents and the transactions
contemplated hereby.
26
<PAGE> 28
11.6. Entire Agreement; Amendment. This Agreement and the other documents
delivered pursuant hereto at the Closing constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged
or terminated other than by a written instrument signed by the party against
whom enforcement of any such amendment, waiver, discharge or termination is
sought.
11.7. Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by
messenger, addressed:
To Seller at:
with a copy to:
To Purchaser at: Security Associates International, Inc.
2101 South Arlington Heights Road
Arlington Heights, Illinois 60005-4142
ATTN: PRESIDENT
Any party may change his or its address for purposes of this paragraph by
giving notice of the new address to the other party in the manner set forth
above.
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or
seventy-two (72) hours after the same has been deposited in a regularly
maintained receptacle for the deposit of the United States mail, addressed and
mailed as aforesaid.
11.8. Delays or Omissions. Except as expressly provided herein, no delay
or omission to exercise any right, power or remedy accruing to any party, upon
any breach or default under this Agreement, shall impair any such right, power
or remedy of such party nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach
or default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any holder of any provisions or
conditions of this agreement, must be in writing and shall be effective
27
<PAGE> 29
only to the extent specifically set forth in such writing. All remedies,
either under this Agreement or by law or otherwise afforded to any holder,
shall be cumulative and not alternative.
11.9. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
11.10. Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective
if it materially changes the economic benefit of this Agreement to any party.
11.11. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
11.12. Waiver of Jury Trial. Seller hereby expressly waives any right he
may have to a jury trial in any suit, action or proceeding existing under or
relating to this Agreement, any stock, promissory notes or other securities
received pursuant to this Agreement or any of the other documents executed and
delivered in connection with this Agreement.
28
<PAGE> 30
11.13. Incorporation by Reference. The Schedules, Exhibits, certificates
and other documents attached hereto or referred to herein are deemed to be a
part of this Agreement and are incorporated herein by this reference.
The foregoing Agreement is hereby executed as of the date first above written.
ATTEST: PURCHASER
/S/ James S. Brannen
By:
---------------------------
As Its President
ATTEST: SELLER
/S/ Robert Ambros
By:
---------------------------
Robert Ambros
The undersigned individuals each agree to be bound by the provisions of
Section 5.9 of this Agreement to the same extent as Seller in exchange for
Purchaser's agreement to employ them at the salaries set forth in section 6.2
above.
JIM OSBORNE SANDY BURNETT MARK BURNETT
/S/ Jim Osborne /S/ Sandy Burnett /S/ Mark Burnett
_____________________ _____________________ _____________________
ATTEST:
29
