<PAGE> 1
SECURITY ASSOCIATES INTERNATIONAL, INC.
______________________
SUPPLEMENT NO. 2 DATED DECEMBER 15, 1997
TO PROSPECTUS DATED OCTOBER 20, 1997
On October 20, 1997, Security Associates International, Inc. (the
"Company") commenced its offering of an aggregate of 2,000,000 shares of common
stock, $.001 par value per share ("Common Stock") and warrants to purchase up
to 2,000,000 shares of Common Stock (the "Warrants"). The Company hereby
expands upon, amends, modifies and supersedes certain information contained in
its Prospectus dated October 20, 1997, as supplemented by Supplement No. 1
dated November 13, 1997 (the "Supplemented Prospectus"). This Supplement No. 2
must be read in conjunction with the Supplemented Prospectus. Unless otherwise
defined, capitalized terms used herein shall have the same meanings as in the
Supplemented Prospectus.
1. A new subsection under the caption "Business" entitled "Acquisition of
Telecommunications Associates Group, Inc." is hereby included in the
Supplemented Prospectus as follows:
"On November 25, 1997, the Company purchased all of the outstanding
capital stock of Telecommunications Associates Group, Inc., an Ohio
corporation ("TAG") from TAG's sole shareholder. TAG is a third-party
alarm monitoring company doing business under the name Emergency Response
Center ("ERC") which serves approximately 100,000 alarm monitoring
subscribers and over 500 independent alarm dealers from central
monitoring stations located in Cleveland, Ohio and Austin, Texas. 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 the Company's general corporate funds and $200,000 was
financed by drawing on the Company'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
accounting purposes. The acquisition will allow the Company to offer
central monitoring services from a broader geographical base."
2. A new paragraph under the caption "Management's Discussion and Analysis
of Financial Condition and Results of Operations-Amended and Restated Loan
Agreement with FINOVA Capital Corporation" is hereby included in the
Supplemented Prospectus as follows:
"On December 2, 1997, the Company's Loan Agreement with FINOVA Capital
Corporation was amended and restated. Pursuant to the Amended and
Restated Loan Agreement, the Company's Credit Facility with FINOVA was
increased to $30 million from $15 million."
All references in the Supplemented Prospectus to the maximum amount available
to the Company under the FINOVA Loan Agreement are amended accordingly.
3. A new paragraph under the caption "Certain Transactions" is hereby
included in the Supplemented Prospectus as follows:
"Since October 20, 1997, twelve holders of options and warrants,
including Messrs. Brannen, Davis and Rubin and TJS Partners, L.P., have
exercised options and warrants to acquire shares for an aggregate
exercise price of $4,891,910 as set forth below:
<PAGE> 2
<TABLE>
<CAPTION>
Aggregate Average per Share (1)
Name Exercise Date Number of Shares (1) Exercise Price Exercise Price
- ----------------------- ------------- ----------------- -------------------- ------------------
<S> <C> <C> <C> <C>
Sidney Dechter 10/22/97 25,000 $50,000 $2.00
Cheryl E. Grolle 10/22/97 250 $111 $0.44
Lorraine R. Small 10/22/97 250 $111 $0.44
Ronald I. Davis 10/26/97 278,308 $158,636 $0.57
James S. Brannen 10/26/97 278,308 $158,636 $0.57
Stephen Rubin 10/26/97 185,539 $105,757 $0.57
Brady E. Turner 10/27/97 12,500 $25,000 $2.00
Fred Figge 10/27/97 86,000 $45,580 $0.53
Infinity Partnership II 10/30/97 10,000 $20,000 $2.00
Irwin Jacobson 11/03/97 12,500 $7,125 $0.57
Mark Scharmann 11/06/97 12,500 $7,125 $0.57
TJS Partners, L.P.(2) 11/12/97 8,761.55(3) $563,829 $64.35(4)
TJS Partners, L.P.(5) 11/12/97 15,000(6) $3,750,000 $250.00(7)
</TABLE>
- ---------------------
1 All shares are Common Stock, unless otherwise noted with respect to
Convertible Preferred Stock. Each share of Convertible Preferred Stock is
convertible into 100 shares of the Common Stock of the Company at any time
at the option of the holder and under certain other circumstances.
2 Exercise of options to acquire 8,761.55 shares of Convertible Preferred
Stock of the Company.
3 Shares of Convertible Preferred Stock.
4 Average exercise price per share of Convertible Preferred Stock.
5 Exercise of warrants to acquire 15,000 shares of Convertible Preferred
Stock of the Company.
6 Shares of Convertible Preferred Stock.
7 Exercise price per share of Convertible Preferred Stock.
4. The section entitled "Principal and Selling Stockholders" is hereby
amended and included in the Supplemented Prospectus as follows:
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of Common Stock as of November 30, 1997 by: (i) each
person known by the Company to own beneficially more than five percent of the
outstanding shares of Common Stock; (ii) each of the Company's directors; (iii)
the Named Executive Officer; (iv) each Selling Stockholder; and (v) all
directors and executive officers of the Company as a group. The Company
believes that except as noted each person or entity named below has sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by such holder, subject to community property laws where
applicable.
<PAGE> 3
<TABLE>
<CAPTION>
NUMBER
OF SHARES
BENEFICIAL OWNERSHIP BEING BENEFICIAL OWNERSHIP
PRIOR TO OFFERING OFFERED AFTER OFFERING
---------------------------- --------- ----------------------------
NAME NUMBER OF SHARES PERCENT(1) NUMBER OF SHARES PERCENT(2)
<S> <C> <C> <C> <C> <C>
TJS Partners, L.P.(3)
52 Vanderbilt Avenue
New York, New York 10017....................... 6,423,443 55.74% 0 6,423,443 47.50%
Ronald I. Davis(4)
c/o Security Associates International, Inc.
2101 S. Arlington Heights Road
Arlington Heights, Illinois 60005.............. 938,422 8.10% 0 938,422 6.80%
James S. Brannen(5)
c/o Security Associates International, Inc.
2101 S. Arlington Heights Road
Arlington Heights, Illinois 60005.............. 538,616 4.67% 0 538,616 4.00%
Thomas J. Salvatore(6)
c/o TJS Partners, L.P.
52 Vanderbilt Avenue
New York, New York 10017....................... 6,423,443 55.74% 0 6,423,443 47.50%
Douglas Oberlander
10225 N. Knoxville Avenue
Peoria, Illinois 61615......................... 106,022 * 0 106,022 *
Robert Brown
IRA Account
3605 N. Robinwood Drive
Muncie, Indiana 47304.......................... 25,000 * 25,000 0 0
Bobbie Conrad
383 Adams Street
Glencoe, Illinois 60022........................ 20,000 * 20,000 0 0
Sidney Dechter
7406 Princeton Drive
Hanover Park, Illinois 60103................... 25,000(7) * 25,000 0 0
Anita M. Dalmar
2324 North East Regents Drive
Portland, Oregon 97212......................... 20,000 * 20,000 0 0
Robert H. Dilworth
Baker & McKenzie
815 Connecticut Avenue, N.W.
Washington, D.C. 20006-4078.................... 50,000 * 50,000 0 0
Fred Figge
221 S. Blackstone
LaGrange, Illinois 60525....................... 98,500(7) 1.2% 98,500 0 0
Dianne G. Freeman
P.O. Box 143
Sand Lake, New York 12153...................... 25,000 * 25,000 0 0
Phyllis Greinwald
14238 N. 2nd Street
Phoenix, Arizona 85023......................... 77,000 * 77,000 0 0
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
NUMBER
OF SHARES
BENEFICIAL OWNERSHIP BEING BENEFICIAL OWNERSHIP
PRIOR TO OFFERING OFFERED AFTER OFFERING
---------------------------- --------- ----------------------------
NAME NUMBER OF SHARES PERCENT(1) NUMBER OF SHARES PERCENT(2)
<S> <C> <C> <C> <C> <C>
Cheryl L. Grolle
W 564 Pell Lake Drive
Genoa City, Wisconsin 53128.................... 250 * 250 0 0
Raymond C. Hoven
3251 Midlane Dive
Wadsworth, Illinois 60083...................... 225,539(8) 1.96% 40,000 185,539 1.37%
Infinity Partnership II
4075 N. Victoria Drive
Hoffman Estates, Illinois 60195................ 10,000(7) * 10,000 0 0
Inversiones Alanje, C.A.
c/o Carlos Delgado
Apartado Postal 1286
Caracas, Venezuela 1010-A...................... 62,500 * 62,500 0 0
Inversiones Aparicio, C.A.
c/o Modesto Aparicio
Jet Cargo (M-571)
P.O. Box 020010
Miami, Florida 33102-0010...................... 120,000 1.04% 120,000 0 0
Inversiones Erlanger, C.A.
c/o Malcolm Caplan
M-287 Jet Cargo International
P.O. Box 020010
Miami, Florida 33102-0010...................... 100,000 * 100,000 0 0
Irwin Jacobson
1035 Carlyle Terrace
Highland Park, Illinois 60035.................. 123,000(9) 1.07% 12,500 110,500 *
Lee Jones
c/o Support Services Group
63 Calle de Industrias
Suite 550
San Clemente, California 92672................. 22,088 * 22,088 0 0
Metro Suburban Pediatrics
600 N. Court
Palatine, Illinois 60067....................... 12,500(7) * 12,500 0 0
Mark Scharmann
1661 Lakeview Circle
Ogden, Utah 84403.............................. 144,800(10) 1.26% 32,500 112,300 *
Bernard and Samuel Sered
4023 Suffield Court
Skokie, Illinois 60076......................... 17,801(11) * 12,500 5,301 *
Lorraine R. Small
453 Raintree Drive
Glen Ellyn, Illinois 60137..................... 250 * 250 0 0
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
NUMBER
OF SHARES
BENEFICIAL OWNERSHIP BEING BENEFICIAL OWNERSHIP
PRIOR TO OFFERING OFFERED AFTER OFFERING
---------------------------- --------- ----------------------------
NAME NUMBER OF SHARES PERCENT(1) NUMBER OF SHARES PERCENT(2)
<S> <C> <C> <C> <C> <C>
Brady E. Turner
P.O. Box 840
Brunswick, Georgia 31521 56,676(12) * 12,500 44,176 *
All Executive Officers and Directors as a group
(10 persons)(13)............................... 8,407,681 71.96% 0 8,407,681 61.44%
</TABLE>
(1) Applicable percentage of ownership as of November 30, 1997 is based upon
11,523,473 shares of Common Stock outstanding (including shares issuable upon
conversion of outstanding shares of Convertible Preferred Stock). Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission, and unless otherwise noted includes voting and investment
power with respect to the shares shown as beneficially owned.
(2) Applicable percentages of ownership are based on 13,523,473 shares of
Common Stock outstanding. Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission, and unless otherwise
noted includes voting and investment power with respect to the shares shown as
beneficially owned. Assumes all shares being registered for resale are sold.
(3) Consists of 64,234.43 shares of Convertible Preferred Stock. Each share of
Convertible Preferred Stock is convertible into and has the voting rights of
100 shares of Common Stock. TJS Partners is the only holder of Convertible
Preferred Stock. On November 12, 1997, 8,761.55 and 15,000 shares of
Convertible Preferred Stock were acquired upon the exercise of options and
warrants. See "Certain Transactions."
(4) Includes 530,114 shares previously owned by Mr. Davis and SAI Partners,
Inc., 278,308 shares acquired on October 26, 1997 upon the exercise of options
and warrants (see "Certain Transactions"), and 120,000 shares purchasable upon
the exercise of currently exercisable options and warrants. Excludes 225
shares owned by Beverly Davis, Mr. Davis' wife, 200 shares owned by Scott
Davis, Mr. Davis' son, 6,000 shares owned by Ethan Davis, 6,000 shares owned by
Benjamin Davis and 5,301 shares owned by Ann Davis, Mr. Davis' sister, as to
which Mr. Davis disclaims beneficial ownership.
(5) Includes 260,308 shares previously owned by Mr. Brannen and 278,308 shares
of Common Stock purchased on October 26, 1997 upon the exercise of options (see
"Certain Transactions"). Excludes 7,580 shares owned by Martha A. Brannen, Mr.
Brannen's wife, 6,000 shares owned by Craig Brannen, 6,000 shares owned by
Sarah B. Ozee and 6,000 shares owned by Peter Brannen, Mr. Brannen's children,
as to which Mr. Brannen disclaims beneficial ownership.
(6) Consists of 40,472.88 shares of Convertible Preferred Stock previously
owned by TJS Partners, L.P., Mr. Salvatore controls voting and disposition of
these shares through TJS Management, L.P., (of which he is the sole general
partner) which is the sole general partner of TJS Partners, L.P. On November
12, 1997, 8,761.55 and 15,000 shares of Convertible Preferred Stock were
acquired upon the exercise of options and warrants. See "Certain
Transactions."
(7) Includes only shares which were purchased between October 22, 1997 and
November 3, 1997 upon the exercise of options. All of such shares are being
registered for resale hereby.
<PAGE> 6
(8) Includes 185,539 shares owned by Mr. Hoven and 40,000 shares which may be
purchased pursuant to currently exercisable options. Only the 40,000 shares
subject to the options are being registered for resale hereby.
(9) Includes 110,500 shares previously owned by pension plans controlled by Mr.
Jacobson and 12,500 shares which were purchased on November 3, 1997 upon the
exercise of options. Only 12,500 shares so purchased are being registered for
resale hereby.
(10) Includes 112,300 shares previously owned by Mr. Scharmann, 12,500 shares
which were purchased on November 6, 1997 upon the exercise of options and
20,000 shares which may be purchased pursuant to currently exercisable options
issued to Mr. Scharmann and Troika Capital a corporation controlled by Mr.
Scharmann. Only the 12,500 purchased on November 6, 1997 and 20,000 shares
subject to the options are being registered for resale hereby.
(11) Includes 5,301 shares owned by Messrs. Sered and 12,500 shares which may
be purchased pursuant to currently exercisable options. Only the 12,500 shares
subject to the options are being registered for resale hereby.
(12) Includes 44,176 shares previously owned by Mr. Turner and 12,500 shares
which were purchased on October 27, 1997 upon the exercise of options. Only
the 12,500 shares so purchased are being registered for resale hereby.
(13) Includes 160,000 shares purchasable upon exercise of currently
exercisable options and warrants.
