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Exhibit 10.47
PLAN AND AGREEMENT OF MERGER
BETWEEN
SECURITY ASSOCIATES INTERNATIONAL, INC.,
KING CENTRAL ACQUISITION CORP.
KC ACQUISITION CORP.,
XX. XXXXXX FEW SR.
AND
XX. XXXXXXX XXXXXX
DATED: MAY 2, 2000
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PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREMENT OF MERGER (the "Agreement"), dated as of May 2,
2000, is entered into by and among Security Associates International, Inc, a
Delaware corporation (the "SAI"), King Central Acquisition Corp., a New Jersey
corporation ("King Acquisition"), KC Acquisition Corp., a New Jersey corporation
(the "Company"), Xx. Xxxxxx Few Sr. ("Few") and Xx. Xxxxxxx XxXxxx ("XxXxxx")
(Messrs. Few and XxXxxx are sometimes referred to herein individually as a
"Selling Shareholder" and collectively as the "Selling Shareholders").
RECITALS
WHEREAS, the board of directors of the Company, and the shareholders of
the Company (the "Shareholders"), have approved the transactions contemplated
hereby and have determined that it is advisable and in their respective best
interests to consummate the merger described in Article II (the "Merger') and
the other transactions contemplated herein; and
WHEREAS, the respective boards of directors of SAI and King Acquisition
have approved the transactions contemplated hereby, subject to the approval of
the shareholders of SAI, and have determined that it is advisable and in their
respective best interests to consummate the Merger and the other transactions
contemplated herein; and
WHEREAS, as a result of the Merger, King Acquisition will be merged
with and into the Company, all of the outstanding capital stock of the Company
will be converted into the right to receive a combination of cash and securities
of SAI, all of the outstanding capital stock of King Acquisition will be
converted into capital stock of the Company and the Company will be the
surviving corporation, all on the terms and subject to the conditions set forth
in this Agreement; and
WHEREAS, for Federal income tax purposes the Parties intend that the
Merger shall qualify as a tax-free reorganization within the meaning of Section
368(a) of the Code (as defined herein);
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, agree as follows:
ARTICLE 1
DEFINITIONS
The following terms shall have the meanings assigned below when used in
this Agreement:
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1.1 "Account" shall mean a written monitoring agreement pursuant to
which the Company or its Subsidiaries provides Monitoring Services to
Subscribers. All Accounts are "Dealer Owned Accounts," as defined below;
1.2 "Affiliate" shall mean, with respect to any particular Person, any
Person controlling, controlled by or under common control with such Person,
whether by ownership or control of voting securities, by contract or otherwise;
1.3 "Agreement" shall mean this Plan and Agreement of Merger;
1.4 "AMEX" shall mean the American Stock Exchange;
1.5 "Antenna" shall mean a radio antenna and antenna site used by the
Company or its Subsidiaries pursuant to an antenna site license agreement to
which the Company or its Subsidiaries is a party ("Antenna Lease");
1.6 "Acquisition Common" shall mean the common stock, $______ par
value, of King Acquisition;
1.7 "Assets" shall mean all of the assets (as defined under GAAP) of
the Company and its Subsidiaries, including, but not limited to, the assets
listed on Schedule 3.12(a);
1.8 "Billed Accounts" shall mean Dealer Owned Accounts for which the
Company or its Subsidiaries bills Subscribers on behalf of the Dealers which own
the Accounts;
1.9 "Central Stations" shall mean the central monitoring stations owned
and operated by the Company, or its Subsidiaries, which are located at the
locations set forth on Schedule 3.4;
1.10 "Closing" shall mean the consummation of the Merger;
1.11 "Closing Date" shall mean ______________ or such other time and
date upon which the conditions to closing referred to in Article IX of this
Agreement have been satisfied or waived by the Party authorized to do so as
provided in this Agreement and the Escrow Agreement;
1.12 "Closing Date Balance Sheet" shall mean the balance sheet,
prepared as provided in Section 3.7, delivered at the Closing showing the assets
and liabilities of the Company and its Subsidiaries as of the Escrow Closing
Date;
1.13 "Code" shall mean the Internal Revenue Code of 1986, as amended,
and any successor statute thereto, and the rules and any successor statute
thereto, and the rules and regulations issued and promulgated thereunder, as in
effect from time to time;
1.14 "Company" shall mean KC Acquisition Corp., a New Jersey
corporation;
1.15 "Company Common" shall mean the Common Stock, par value $ per
share, of the Company;
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1.16 "Company Financial Statements" shall mean audited financial
statements of the Company for each of the [two] years ended [December 31, 1999
and the financial statements of the Company for the ________ period ended
___________, 2000, all as more fully described in Section 3.7 of this Agreement.
The Company Financial Statements shall be attached to Schedule 3.7(a);
1.17 "Confidential Information" shall mean any and all oral, written,
electronic or other information designated as confidential or which ought to be
considered as confidential from its nature or from the circumstances surrounding
its disclosure, regardless of whether such information was disclosed before, on
or after the date of this Agreement, other than such information that (i) is
generally available or known by the public immediately prior to the time of
disclosure (except through the actions or inactions of the Person to whom
disclosure has been made) or (ii) has been acquired or developed independent
from the Person making the disclosure thereof.
1.18 "Contracts" shall mean Accounts, Dealer Monitoring Agreements, and
all agreements, contracts and arrangements described in items (d), (e), (f),
(g), (k), (m) and (n) of Section 3.12;
1.19 "Dealer" shall mean an individual or business entity that
contracts in writing to provide Monitoring Services to Subscribers, and who in
turn subcontracts the provision of the actual Monitoring Services from the
Company or its Subsidiaries;
1.20 "Dealer Monitoring Agreements" shall mean the written contracts
pursuant to which the Company or its Subsidiaries has contracted to provide
Monitoring Services to Dealer Owned Accounts;
1.21 "Dealer Owned Account" shall mean any Account owned by a Dealer;
1.22 "Effective Time" shall have the meaning assigned in Section 2.1;
1.23 "Employee Benefit Plan" shall mean any employee benefit plan
within the meaning of Section 3(3) of ERISA which is (i) maintained for
employees of the Company or any ERISA Affiliate or (ii) has at any time within
the preceding six years been maintained for the employees of the Company or any
current or former ERISA Affiliate.
1.24 "Environmental Laws" shall mean any and all federal, state and
local laws that relate to or impose liability or standards of conduct concerning
public or occupational health and safety or protection of the environment, as
now or hereafter in effect and as have been or hereafter may be amended or
re-authorized, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. Sec. 9601 et seq.), the
Hazardous Materials Transportation Act (42 U.S.C. Sec. 1802 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. Sec. 6901, et seq.), the
Federal Water Pollution Control Act (33 U.S.C. Sec. 1251 et seq. ), the Toxic
Substances Control Act (15 U.S.C. Sec. 2601 et seq.), the Clean Air Act (42
U.S.C. Sec. 7901 et seq.), the National Environmental Policy Act (42 U.S.C. Sec.
4231 et seq.), the Refuse Act (33 U.S.C. Sec. 407 et seq.), the Safe Drinking
Water Act (42 U.S.C. Sec. 300(f) et seq.), the Occupational Safety and Health
Act (29 U.S.C.
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Sec 651 et seq.), and all rules, regulations, codes, ordinances and guidance
documents promulgated or published thereunder, and the provisions of any
licenses, permits, orders and decrees issued pursuant to any of the foregoing.
1.25 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and any successor statute thereto, and the rules and
regulations issued and promulgated thereunder, as in effect from time to time.
1.26 "ERISA Affiliate" shall mean any Person who is a member of group
which is under common control with the Company, who together with the Company is
treated as a single employer within the meaning of Section 414(b), (c), and (m)
of the Code.
1.27 "Equipment" shall mean the tangible assets used or useful in
connection with the Monitoring Business or any other business conducted by the
Company, its direct or indirect Subsidiaries, including, but not limited to that
listed on Schedule 3.12(a);
1.28 "Equipment Lease" shall mean a lease pertaining to Equipment and
shall also include the Antenna Lease.
1.29 "Escrow Agent" shall mean ___________________________;
1.30 "Escrow Agreement" shall mean the Escrow Agreement to be entered
into among the Parties and the Escrow Agent pursuant to Section 9.2 which
provides, among other things, for the closing into, and release from escrow, of
the transactions contemplated by this Agreement on the terms and subject to the
conditions contained therein;
1.31 "Escrow Closing" shall mean the closing in escrow pursuant to the
Escrow Agreement as contemplated in Section 9.2 and in the Escrow Agreement.
1.32 "Escrow Closing Date" shall mean June 30, 2000 or such other time
and date upon which the conditions to closing in escrow referred to in Article
IX of this Agreement have been satisfied or waived by the Party authorized to do
so as provided in this Agreement;
1.33 "Excluded Assets" shall have the meaning assigned in Section
3.12(b);
1.34 "Form Contracts" shall have the meaning assigned in Section 3.13;
1.35 "GAAP" shall mean "Generally Accepted Accounting Principles" which
shall mean the accounting rules, principles and conventions adopted by the
American Institute of Certified Public Accountants and referred to by that name;
1.36 "Hazardous Materials" shall mean any hazardous, toxic, dangerous
or other waste, substance or material defined as such in, regulated by or for
the purposes of any Environmental Law.
1.37 "including" shall indicate examples of a foregoing general
statement and is not a limitation on that general statement.
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1.38 "Indemnitee" shall have the meaning assigned in Section 10.2;
1.39 "Indemnitor" shall have the meaning assigned in Section 10.2;
1.40 "Intellectual Property" shall mean all of the patents, trademarks,
trade names (including, but not limited to "King Central"), service marks, trade
secrets, designs, know-how, copyrights, computer programs and software and all
rights, licenses and contracts relating to any of the foregoing, and all other
proprietary rights and information of the Company and its Subsidiaries;
1.41 "Leasehold Property" shall mean any real estate which is the
subject of a Lease under which the Company or its Subsidiaries is or has been
the lessee.
1.42 "Liabilities" shall have the meaning assigned under GAAP.
1.43 "Letter of Intent" shall mean the letter of intent, dated as of
April [20], 2000, among XxxxxxxxXxxxxxx.xxx, Inc. ("SecurityVillage"), SAI, the
Company and TJS Partners, L.P. which provides, among other things for the Merger
and the other transactions contemplated in this Agreement;
1.44 "Material Contracts" shall have the meaning assigned in Section
3.10;
1.45 "Merger" shall have the meaning assigned in the first Recital;
1.46 "Minimum RMR" shall have the meaning assigned in Section 3.18(a)
1.47 "Monital Acquisition" shall mean the acquisition of Monital Signal
Corporation ("Monital") by the Company (either directly or through the
acquisition of Monital's parent) as further described in Section 1 of the Letter
of Intent;
1.48 "Monital Retail Account Transactions" shall mean the sale by
Monital of its retail accounts to Palisades Partners or its assignee for a
purchase price of $450,000, the application of the proceeds therefrom to
indebtedness of Monital to Shrewsbury Bank, the potential loan from Palisades
Partners or its assignee to Monital for the release of certain liens or
encumbrances on such retail accounts and the subsequent repayment of such loan
by SAI upon the closing of the Merger, all as contemplated in Section 2(d) of
the Letter of Intent;
1.49 "Monitoring Business" shall mean the business of providing
Monitoring Services;
1.50 "Monitoring Services" shall mean the provision of remote alarm
monitoring services to Subscribers, and all related security services, including
but not limited to, notification and dispatch of emergency personnel, supervised
openings and closings, closed circuit monitoring and any other security related
services;
1.51 "Multiemployer Plan" shall mean any multiemployer plan as defined
pursuant to Section 3(37) of ERISA to which the Company or any ERISA Affiliate
makes, or accrues an obligation to make, contributions, or has made, or has been
obligated to make, contributions within the preceding six (6) years;
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1.52 "Pension Plan" shall mean any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to the provisions of Part 3 of Title I of
ERISA, or Section 412 of the Code and which (i) is maintained for employees of
the Company, its direct or indirect Subsidiaries or any ERISA Affiliate, or (ii)
has at any time within the preceding six years been maintained for the employees
of the Company or any of its current or former ERISA Affiliates;
1.53 "Permits" shall mean all governmental licenses, registrations,
permits, approvals and applications therefor;
1.54 "Person" shall mean any individual, trust, corporation,
partnership, limited partnership, limited liability company or other business
association or entity, court, governmental body or governmental agency;
1.55 "Prebilled RMR" shall mean RMR billed by the Company or its
Subsidiaries to Dealers in advance for monitoring services to be performed
subsequent to the Closing Date;
1.56 "Real Estate Leases" shall have the meaning assigned in Section
3.11(a);
1.57 "Releasing Parties" shall have the meaning assigned in Section
5.15;
1.58 "Released Claims" shall have the meaning assigned in Section 5.15;
1.59 "Released Parties' shall have the meaning assigned in Section
5.15;
1.60 "RMR" shall mean the total regular recurring monthly amounts
payable by Dealers, as appropriate, for Monitoring Services. RMR shall exclude
any amounts due under Accounts with receivable balances over ninety (90) days
past due. RMR includes all service charges, including leased equipment revenue.
RMR does not include any amounts derived from:
(a) reimbursement for or payment of telephone line or
other utility charges associated with the
installation, monitoring, maintenance, or furnishing
of the alarm services;
(b) reimbursement or payments of false alarm assessments;
(c) reimbursement or payment of taxes, fees or other
charges imposed by any governmental authority or
utility relating to the furnishing of alarm services;
(d) reimbursement or payment for time and materials
charges that are receivable from any seller or
installer of monitoring equipment for services which
are not provided on a regular or recurring basis; or
(e) charges incurred in connection with the maintenance
of alarm systems or the underlying equipment.
1.61 "SAI" shall mean Security Associates International, Inc., a
Delaware corporation;
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1.62 "King Acquisition" shall mean King Acquisition Corp., a New Jersey
corporation;
1.63 "SAI Common" shall mean the common stock, $.0001 par value, of
SAI;
1.64 "SAI Financial Statements" shall have the meaning assigned in
Section 4.5;
1.65 "SAI indemnified Parties" shall have the meaning assigned in
Section 10.1(a);
1.66 "SAI Preferred" shall mean the Series ______ Convertible Preferred
Stock, par value $____________ per share of SAI;
1.67 "SAI SEC Reports" shall have the meaning assigned in Section 4.5;
1.68 "SAI/Xxxx XXX" shall mean the letter of intent, dated April 5,
2000, between SAI and the Selling Shareholders of the Company relating to the
acquisition of the Company by SAI and referred to in Section 3(c)(y) of the
Letter of Intent;
1.69 "SEC" shall mean the Securities Exchange Commission;
1.70 "Securities Act" shall mean the Securities Act of 1933, as
amended;
1.71 "Securities Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended;
1.72 "SecurityVillage" shall mean XxxxxxxxXxxxxxx.xxx, Inc., a Delaware
corporation;
1.73 "Shareholder Indemnified Parties" shall have the meaning assigned
in Section 10.1(b);
1.74 "Shareholders" shall have the meaning assigned in the first
Recital of this Agreement;
1.75 "Shares" shall mean all of the issued and outstanding capital
stock of the Company;
1.76 "Selling Shareholders" shall mean Xxxxxx Few, Sr. and Xxxxxxx
XxXxxx;
1.77 "Subscriber" shall mean any individual or entity who has
contracted to obtain remote security system monitoring services for a security
alarm system installed on the premises of that individual or entity;
1.78 "Subsidiary" shall have the meaning assigned in Section 3.3;
1.79 "SV/SAI Agreement" shall have the meaning assigned in Section 3 of
the Letter of Intent;
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1.80 "SV Option" means the option agreement dated__________________,
between the Company and SecurityVillage, pursuant to which SecurityVillage has
the option to acquire up to______ of Company Common;
1.81 "Taxes" shall have the meaning assigned in Section 3.23;
1.82 "Termination Event" shall mean (1) a "Reportable Event" described
in Section 4043 of ERISA and the regulations issued thereunder; or (ii) the
withdrawal of the Company or any ERISA Affiliate from a Pension Plan during a
plan year in which it was a "substantial employer" as defined in Section
4001(a)(2); or (iii) the termination of a Pension Plan, the filing of a notice
of intent to terminate a Pension Plan or the treatment of a Pension Plan
amendment as a termination under Section 4041 of ERISA; or (iv) the institution
of proceedings to terminate, or the appointment of a trustee with respect to,
any Pension Plan by the PBGC; or (v) any other event or condition which would
constitute grounds under Section 4042(a) of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan, or (vi) the partial or
complete withdrawal of the Company or any ERISA Affiliate from a Multiemployer
Plan or (vii) the imposition of a lien pursuant to Section 412 of the Code or
Section 302 of ERISA; or (viii) any event or condition which results in the
reorganization or insolvency of a Multiemployer Plan under Sections 4241 or 4245
of ERISA; or (ix) any event or condition which results in the termination of a
Multiemployer Plan under Section 4041A of ERISA or the institution by the PBGC
of proceedings to terminate a Multiemployer Plan under Section 4042 of ERISA.
1.83 "Third Party Claim" shall have the meaning assigned in Section
10.2(a);
ARTICLE 2
THE MERGER
In connection with the Merger, the respective boards of directors and
shareholders of King Acquisition and the Company have, by resolutions duly
adopted, approved the following provisions of this Article II as their "Plan of
Reorganization" within the meaning of applicable law:
2.1 Articles of Merger. Subject to the provisions of this Agreement,
Certificates of Merger executed on behalf of each of King Acquisition and the
Company and meeting the requirements of Section 14A:10-4.1 of the New Jersey
Business Corporation Law (the "Certificates of Merger"), shall be duly prepared,
executed and acknowledged by the Company, King Acquisition and such other
parties as may be appropriate, and thereafter the Certificates of Merger shall
be delivered to the Secretary of State of the state of New Jersey, as provided
under said Section 14A:10-4.1, for filing as soon as practicable on or after the
Closing. The Merger shall become effective on the date upon which the
Certificate of Merger is filed in accordance with applicable law (the "Effective
Time").
2.2 Closing. The Closing shall take place as provided in Article IX and
in the Escrow Agreement.
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2.3 Effects of the Merger.
(a) At the Effective Time, the separate corporate
existence of King Acquisition shall cease, King
Acquisition shall be merged with and into the Company
and the Company, as the surviving corporation in the
Merger (the "Surviving Corporation"), shall continue
its corporate existence under the laws of the state
of New Jersey under the name "King Central Corp."
(b) At and after the Effective Time, the Merger will have
the effects set forth Section 14A:10-6 of the New
Jersey Business Corporation Act.
2.4 Certificate of Incorporation and Bylaws. The Certificate of
Incorporation, as in effect immediately prior to the Effective Time, shall be
the Certificate of Incorporation of the Surviving Corporation immediately after
the Effective Time and shall thereafter continue to be its Certificate of
Incorporation until amended as provided therein and under applicable law.
2.5 Directors and Officers. The directors of King Acquisition holding
office immediately prior to the Effective Time shall be the directors of the
Surviving Corporation immediately after the Effective Time. The officers of King
Acquisition holding office immediately prior to the Effective Time shall be the
officers of the Surviving Corporation immediately after the Effective Time.
2.6 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of King Acquisition, the Company or
the holders of any of the following securities, the following securities will be
converted in the manner set forth below:
(a) Each share of Company Common which is issued and
outstanding immediately prior to the Effective Time
(other than treasury shares) shall be canceled and
extinguished and converted into and become a right to
receive (x) _____ shares of SAI Preferred [to have
$22.5 million liquidation value and be convertible
into 4.5 million shares of SAI Common], and (y)
$_______ ($5 million total); provided, however, that
if as the result of the conversion of any
Shareholder's Company Common upon consummation of the
Merger, a fractional interest in a share of SAI
Preferred would be deliverable under this Section
2.6.(a), in lieu of a fractional share being
delivered therefor, such fractional interest shall
automatically be converted into the right to receive
an amount in cash (without interest) equal to the
product of the average of the high and low sale
prices of ____ shares of Common as reported by the
AMEX on the trading day immediately prior to the
Effective Time, multiplied by the amount of such
fractional interest. No such holder will be entitled
to dividends, voting rights or any other rights as a
shareholder in respect of any fractional share.
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(b) The SV Option shall be canceled and extinguished and
converted and become a right to receive _______shares
of SAI Common (300,000 shares of SAI Common in the
aggregate).
(c) Each share of Acquisition Common issued and
outstanding immediately prior to the Effective Time
shall be converted into one validly issued, fully
paid and nonassessable share of Company Common.
2.7 Closing of Company Transfer Books. Immediately prior to the
Effective Time the stock transfer books of the Company shall be closed and no
transfer of shares of Company stock shall thereafter be made or recognized.
After the Effective Time valid certificates previously representing shares of
Company Common which are presented in accordance with this Agreement to the
Surviving Corporation shall be exchanged as provided in Section 2.8.
2.8 Exchange of Common Certificates. Each holder of a certificate or
certificates representing shares of Company Common issued and outstanding
immediately prior to the Effective Time shall at or as soon as practicable
following the Closing, surrender to SAI for exchange a certificate or
certificates, duly endorsed in blank or accompanied by duly executed stock
powers, representing the number of shares of Company Common held by such holder.
In exchange therefor, SAI shall (x) issue to such holder of Company Common a
certificate or certificates representing the number of shares of SAI Preferred
to be issued to such holder pursuant to Sections 2.6(a), and (y) the amount of
cash, if any, to be paid to be paid to such holder pursuant to Sections 2.6(a).
Surrendered certificates shall forthwith be canceled. At Closing,
SecurityVillage will surrender the original SV Option to SAI in exchange for the
SAI Common called for by Section 2.6(b). Until so surrendered and exchanged,
each such certificate (or the Option, as applicable) shall represent solely the
right to receive the consideration therefor provided in Sections 2.6(a) and
2.6(b), without interest, and SAI shall not be required to issue to such holder
the stock to which such holder otherwise would be entitled; provided, that
procedures allowing for payment against receipt of customary and appropriate
certifications and indemnities shall be provided with respect to lost or
destroyed certificates.
2.9 Rights of the Company Shareholders. From and after the Effective
Time, the holders of shares of Company Common issued and outstanding at the
Effective Time shall have no rights with respect to such shares other than to
surrender the certificate or certificates representing such shares pursuant to
Section 2.8.
2.10 Taking of Necessary Action; Further Action. SAI and King
Acquisition, on the one hand, and the Company and the Shareholders, on the other
hand, shall use reasonable efforts to take all such action (including action to
cause the satisfaction of the conditions to the Merger) as may be necessary or
appropriate in order to effectuate the Merger as promptly as possible. If, at
any time after the Effective Time, any further action is necessary or desirable
to vest the Surviving Corporation with full possession of all the rights,
privileges, immunities and franchises of the Company and Acquisition, the
officers of the Surviving Corporation are fully authorized in the name of either
the Company or Acquisition or otherwise to take, and shall take, all such
action.
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ARTICLE 3
REPRESENTATIONS WARRANTIES OF THE SELLING SHAREHOLDERS
The Selling Shareholders, jointly and severally, represent, warrant,
and acknowledge to SAI, King Acquisitions, and their respective successors and
assigns that on the date of execution of this Agreement, and at the Closing:
3.1 Organization and Standing; Certificate of Incorporation and
By-laws. The Company and each Subsidiary of the Company is a corporation duly
organized and validly existing under and by virtue of, the laws of the state of
its incorporation and is in good standing under such laws. The Company and each
Subsidiary of the Company has the 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 and each Subsidiary of
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 and its
Subsidiaries do business under the names listed on Schedule 3.1 and do not
conduct any business, and are not commonly known by any other names, other than
as set forth on Schedule 3.1. The Company and each Subsidiary of the Company has
complied with all laws requiring the registration or other recording of such
names in each jurisdiction in which the Company or such direct or indirect
Subsidiary does business. The certified copies of the Certificate or Articles of
Incorporation and By-laws of the Company and each of its Subsidiaries attached
to Schedule 3.1, are true, correct and complete and contain all amendments
through the date hereof.
3.2 Power and Authority. The Company, each of its Subsidiaries and the
Selling Shareholders have, and will have at the Closing, all requisite legal
power and authority to execute and deliver this Agreement, to consummate the
Merger and to carry out and perform their obligations under this Agreement. None
of the Company's shareholders has dissented from the transactions contemplated
by this Agreement and no shareholder of the Company has or will have dissenter's
rights as a result thereof. This Agreement has been duly executed and delivered
by the Company and each Selling Shareholder, and constitutes a legal, valid and
binding obligation of the Company and each Selling Shareholder, enforceable
against each in accordance with its terms. Attached to Schedule 3.2 are
certified copies of the resolutions of the Company authorizing the transactions
contemplated hereby, which have not been amended or revoked.
3.3 Subsidiaries. Except as disclosed 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, directly or indirectly, any equity interest, and includes any
Subsidiary of a Subsidiary.
3.4 Central Stations. The Company and its Subsidiaries own and operate
the Central Stations from which they monitor security systems pursuant to the
Accounts and the Dealer
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Monitoring Agreements. The Central Stations are located at the locations
described on Schedule 3.4.
3.5 Capitalization. The authorized capital stock of the Company
consists, and will consist at the Closing, of _____ shares of common stock, ___
par value per share, of which _____ shares are issued and outstanding, and all
of which are, and at the Closing will be, owned, beneficially and of record by
Few and XxXxxx as set forth on Schedule 3.5. All of such shares have been duly
authorized and validly issued and are fully paid and nonassessable. The
authorized, issued and outstanding capital stock of each Subsidiary of the
Company is, and at the Closing will be, as set forth on Schedule 3.5. All shares
of capital stock of each Subsidiary of the Company are, and at the Closing will
be, owned beneficially and of record by the Company or a Subsidiary of the
Company. Except for the SV Option and [except as described on Schedule 3.5],
there are no pre-emptive rights, options, warrants, conversion rights, rights of
exchange or other rights, plans or agreements of any nature whatsoever providing
for the purchase, issuance or sale of any capital stock of the Company or any
Subsidiary of the Company or of any securities convertible into or exchangeable
for any shares of the capital stock of the Company or any Subsidiary of the
Company. Except for the Letter of Intent, no shareholder of the Company or any
Subsidiary of the Company is party to any agreement or arrangement pursuant to
which it is obligated to dispose of any of the capital stock of the Company or
any Subsidiary of the Company to any party other than SAI in connection with the
Merger. Other than Messrs. Few and XxXxxx, there are no other holders of capital
stock of the Company. All securities of the Company and each Subsidiary of the
Company were issued and transferred in compliance with all applicable federal
and state securities laws and regulations. The Merger and the exchange of the
shares of Company Common involved therein as contemplated by this Agreement will
be in compliance with all applicable federal and state securities regulations.
3.6 Consents and Approvals. No approval or authorization of the
Shareholders or the directors of the Company or of any governmental authority or
agency or any other third party is required for the consummation by the Company
of the Merger or the other transactions contemplated by this Agreement, except
for those listed on Schedule 3.6, all of which have been obtained and copies of
which have been delivered to SAI. Except as contemplated by this Agreement, no
filing or registration with any court or governmental or regulatory agency or
board is required to be made on behalf of the Company or any Subsidiary of the
Company in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
3.7 Company Financial Statements; Closing Date Balance Sheet.
(a) The Company has delivered to SAI the Company
Financial Statements; and, prior to the Closing, the
Company will deliver to SAI the Closing Date Balance
Sheet. The Company Financial Statements are attached
to Schedule 3.7. The Company Financial Statements are
complete and correct in all material respects and do
not contain any information which is false or
misleading. The Closing Date Balance Sheet will be
complete and correct in all material respects and
will not contain any information which is false or
misleading. The Company Financial Statements have
been, and
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the Closing Balance Sheet will be, prepared in
accordance with GAAP, consistently applied throughout
the periods indicated, except for the absence of
footnotes and subject in the case of interim
financials, including the Closing Balance Sheet, to
the effect of normal year-end adjustments (which will
not be material). The Company Financial Statements
do, and the Closing Date Balance Sheet will, fairly
present the financial condition and operating results
of the Company and its Subsidiaries as of the dates,
and during the periods, indicated therein. Since
December 31, 1999, there has not been any material
adverse change, or any event or condition which could
reasonably be expected to result in any material
adverse change, in the financial condition, results
or operations, business, prospects or properties of
the Company or any of its Subsidiaries, the
Monitoring Business or any other business conducted
by the Company or any of its Subsidiaries (a
"Material Adverse Effect").
(b) The books and records of the Company and each of its
Subsidiaries are and have been properly prepared and
maintained in form and substance adequate for
preparing audited financial statements in accordance
with GAAP, and fairly and accurately reflect all of
the assets and liabilities of the Company, its
Subsidiaries and all contracts and transactions to
which the Company or its Subsidiaries is or was a
party or by which the Company, its Subsidiaries or
any of their respective businesses or assets is or
was affected. The corporate minute books of the
Company and each of its Subsidiaries, copies of which
have been made available to SAI, correctly reflect
all resolutions adopted and all other material
corporate actions taken at all meetings or through
consents of the directors (including committees
thereof) and the shareholders of the Company and each
of its Subsidiaries. The stock transfer books and
stock ledger of the Company and each of its
Subsidiaries are complete and correctly reflect all
issuances and transfers of the capital stock of the
Company and each of such Subsidiaries.
(c) At the Closing the Company will have a tax basis of
at least $18 million, calculated in accordance with
GAAP, in depreciable and/or amortizable assets for
federal income tax purposes.
3.8 Absence of Changes. Except for Monital Retail Accounts and except
as otherwise set forth in Schedule 3.8, since December 31, 1999:
(a) neither the Company nor any of its Subsidiaries has
entered into any material agreement or transaction
which was not in the ordinary course of business;
(b) there has been no material damage to, destruction of
or loss of physical property (whether or not covered
by insurance) or any other material adverse change in
the Company, its Subsidiaries, or their Assets, the
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Monitoring Business or any other business conducted
by the Company or any of its Subsidiaries;
(c) neither the Company nor any of its Subsidiaries has
declared or paid any dividend or made any
distribution (in cash, securities or other property)
on its capital stock, or redeemed, purchased or
otherwise acquired any of its capital stock;
(d) neither the Company nor any of its Subsidiaries has
increased the compensation of its officers, or the
rate of pay of its employees as a group; and there
are no impending resignations or terminations of any
officers or employees of the Company or any of its
Subsidiaries that would have an adverse effect on
their respective businesses;
(e) there has been no labor dispute involving the Company
or any of its Subsidiaries;
(f) there has not been any material change in the
contingent obligations of the Company or any of its
Subsidiaries by way of guaranty, endorsement,
indemnity, warranty or otherwise;
(g) there have not been any loans made by the Company or
any of Subsidiaries to any of their employees,
officers or directors;
(h) neither the Company nor any of its Subsidiaries 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 of its Subsidiaries has
paid any material obligations or liabilities, other
than current liabilities paid in the ordinary course
of business;
(j) neither the Company nor any of its Subsidiaries 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 of its Subsidiaries has
sold, assigned, transferred or leased any of its
assets other than in the ordinary course of business;
(l) neither the Company nor any of its Subsidiaries has
made any material capital expenditures or commitments
therefor;
(m) neither the Company nor any of its Subsidiaries has
changed its accounting methods or practices;
(n) there has been no other event or condition of any
character that has or can reasonably be expected to
result in a Material Adverse Effect;
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(o) neither the Company nor any of it Subsidiaries has
changed the pricing for its services or indicated
that reduced pricing for their services could be
expected; and
(p) neither the Company nor any of its Subsidiaries has
received, verbally or in writing, any notice of
intent to cancel or reduce use of its services by any
Dealer.
3.9 Liabilities and Indebtedness. Schedule 3.9 contains a true and
complete list of each and every Liability of the Company and each of its
Subsidiaries, including, but not limited to, all prebilled RMR and unearned
revenue and each and every agreement or other instrument under or pursuant to
which the Company or any of its Subsidiaries has outstanding indebtedness. The
Company has furnished SAI with true and correct copies of each such agreement
and instrument, including all amendments and copies of any guarantee security
agreements and/or financing statements executed by the Company or any of its
Subsidiaries relating to said agreements. Neither the Company nor any of its
Subsidiaries is in default in any material respect under any of its agreements
or evidences of indebtedness. Except as recorded on the face of the Closing
Balance Sheet or as disclosed on Schedule 3.9 attached hereto, the Company has
no material (individually or in the aggregate) Liabilities or obligations,
absolute or contingent.
3.10 Material Contracts. Schedule 3.10 contains a true, accurate and
complete list of each and every agreement, contract, arrangement or
understanding of the Company and each of its Subsidiaries pursuant to which the
Company or its Subsidiaries is obligated (or potentially obligated) to pay more
than $10,000 or pursuant to which the Company or any of its Subsidiaries is
obligated (or potentially obligated) to provide services with a value in excess
of $10,000 ("Material Contract"). No party (including the Company or any of its
Subsidiaries) to any Material Contract is in default in any material respect
thereunder. Except as set forth on Schedule 3.10, neither the Company nor any of
its Subsidiaries is a party to any Material Contract.
3.11 Leases.
(a) Schedule 3.11(a) contains a true and complete list of
all real estate leases of the Company and each of its
Subsidiaries (the "Real Estate Leases") and sets
forth a brief summary of the principal terms thereof.
True and complete copies of all such Real Estate
Leases have been supplied to SAI, including all
amendments thereto. SAI will be able to utilize all
of the Central Stations under such Real Estate Leases
for those facilities for the balance of the terms of
their respective leases, including any renewal terms.
Neither the Company nor any Shareholder has any
knowledge of any intention on the part of any lessor
to terminate any Real Estate Lease or raise the
rental rate or take any other action that might make
the continued use by the Company or any of its
Subsidiaries of any of the facilities housing the
Central Stations more onerous.
(b) Schedule 3.11(b) contains a true, accurate and
complete list of every equipment lease of the Company
and each of its Subsidiaries, including the Antenna
Lease ("Equipment Leases") and sets forth a brief
summary
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of the principal terms of each such lease. True,
accurate and complete copies of all such Equipment
Leases have been supplied to SAI, including all
amendments thereto. SAI will be able to utilize all
of the equipment leased under such Equipment Leases
for the balance of the terms of their respective
leases, including any renewal terms. Neither the
Company nor any Shareholder has any knowledge of any
intention on the part of any lessor to terminate any
Equipment Lease or raise the rental rate or take any
other action that might make the continued use by the
Company or any of its Subsidiaries of any of the
equipment leased thereunder more onerous.
(c) Neither the Company, its Subsidiaries nor any other
party is in default under the terms of any Real
Estate Lease or Equipment Lease. None of the Real
Estate Leases or Equipment Leases requires the
consent of the lessors thereunder to the transactions
contemplated by this Agreement. Consummation of the
transactions contemplated hereby will not result in
the cancellation of any of the Real Estate Leases or
Equipment Leases or the acceleration of the
obligations thereunder. The Company has obtained and
delivered to SAI all necessary landlord and other
lessor consents necessary for SAI operate the Central
Stations, and to assume the rights of the Company or
its Subsidiaries under the Real Estate Leases and the
Equipment Leases.
3.12 Title to Properties and Assets; Liens, etc. The Company or one of
its wholly-owned Subsidiaries 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 ("Lien"). The
Company or its Subsidiaries own or lease all such equipment and properties as
are necessary to the Monitoring Business and each other business conducted by
the Company or its Subsidiaries. Schedule 3.12(a) contains a complete and
accurate listing of the Assets of the Company and its Subsidiaries which consist
of:
(a) Cash and Securities;
(b) Bank Accounts;
(c) Contracts;
(d) Equipment;
(e) Intellectual property;
(f) Leasehold interests in Real Estate Leases and
Equipment Leases;
(g) The rights to the telephone lines used in the
Monitoring Business, all of which are listed on
Schedule 3.12(a);
(h) Accounts receivable;
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(i) Prepaid expenses and deposits;
(j) All books and records of the Company and each of its
Subsidiaries, including without limitation all
financial, accounting and personnel records, all
original Contracts, monitoring and service records,
lockout codes, computer codes, up and download codes
and information, and all other documentation
necessary or appropriate in order for SAI to operate
the Monitoring Business;
(k) All other contracts and commitments by which the
Company is bound;
(l) The goodwill of the Company;
(m) All contracts and policies of insurance; and
(n) All other assets and rights used in the operation of
the Monitoring Business, excepting only those listed
on Schedule 3.12(b) as "Excluded Assets".
All Equipment owned by the Company or any of its Subsidiaries is, and
at the Closing will be, in good operating condition and repair. All of the
Equipment is in compliance with all applicable statutes, rules, regulations and
ordinances.
Schedule 3.12(b) is a true and complete list of those assets formerly
owned by the Company or any of its Subsidiaries which have been distributed to
the shareholders of the Company or any of its Subsidiaries or entities
controlled by such shareholders at or prior to the Closing. Assets listed on
Schedule 3.12(b) which are to be distributed to the Selling Shareholders
immediately prior to the Closing, if any, shall be referred to herein as
"Excluded Assets." Except as disclosed on Schedule 3.12 or referred to
specifically in this Agreement, other than the Excluded Assets, no Asset of the
Company or any of its Subsidiaries has been disposed of since December 31, 1998,
other than in the ordinary course of business.
3.13 Form Contracts. Attached to Schedule 3.13 are the forms of
agreements the Company and its Subsidiaries use with Dealers and Subscribers to
document its arrangements for monitoring Dealer Owned Accounts (collectively,
the "Form Contracts"). The Form Contracts include all contracts currently in
use, and earlier forms of contracts that were used for agreements that are still
in effect. Neither the Company nor any of its Subsidiaries has entered into any
oral agreements with any Subscriber or Dealer. Except as disclosed on Schedule
3.13 there are no agreements with any Dealer or Subscriber materially varying
from the provisions of the Form Contracts. Neither the Company nor any of its
Subsidiaries provides monitoring to any Subscriber of a Dealer that has not
executed a written contract with that Dealer. The Company and each of its
Subsidiaries has delivered to SAI all of the Dealer Monitoring Agreements of the
Company and its Subsidiaries and copies of the form agreements used by the
respective Dealers for each Dealer Owned Account.
3.14 Telephone Lines. Schedule 3.14 contains a true, accurate and
complete list of (i) each telephone line being used in the operations of the
Company and its Subsidiaries; (ii) the
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name of the owner of the line if other than the Company or one of its
Subsidiaries, (iii) the name of the telephone service supplier for each line;
(iv) all charges associated with each line, including without limitation,
advertising and yellow pages charges, and (v) 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 3.14 also sets forth a brief description of the agreement
for dedication of that line. Except as disclosed on Schedule 3.14, the Company
and its Subsidiaries have the exclusive right to use all the telephone lines.
Except those disclosed on Schedule 3.14, there are no charges associated with
the telephone lines. Immediately following the Closing the Company and its
Subsidiaries will have all right, title, interest in and the right to use as
currently used all of said telephone lines. All of the contract rights and
outstanding obligations of the Company and its Subsidiaries with respect to any
and all Yellow Page listings and advertisements are set forth on Schedule 3.14.
The Company will provide SAI with the forms of any and all telephone agency and
supersession letters and will take such actions as are necessary for the
continuing right of the Company and its Subsidiaries to use of all such
telephone lines after the Closing.
3.15 Compliance with Other Instruments. Neither the Company nor any of
its Subsidiaries is in violation of any term of its respective Articles or
Certificate of Incorporation or By-laws, or of any term or provision of any
mortgage, indebtedness, indenture, contract, agreement, instrument, judgment or
decree applicable to the Company or such Subsidiary. 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 Articles or Certificate of Incorporation or By-laws of the Company or any of
its Subsidiaries or of the governing documents of any Selling Shareholder, (ii)
have not resulted, and will not result, in the creation of, any Lien upon any of
the properties or assets of the Company or its Subsidiaries or any Selling
Shareholder, (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 or any of its Subsidiaries; (iv) do not and will not
give any party to any agreement to which the Company or any of its Subsidiaries
is a party a right of termination; and (v) do not and will not require the
consent of any other person or entity under any agreement, indenture, mortgage,
lease or other instrument or undertaking by which the Company, any of its
Subsidiaries or any Selling Shareholder is bound or to which any of their
respective properties are subject. No Selling Shareholder is a party to, subject
to or bound by any agreement or any judgment, order, writ, prohibition,
injunction or decree of any court or other governmental body which would prevent
the execution or delivery of this Agreement by such Selling Shareholder, such
Selling Shareholder's approval of the Merger or the conversion of such
Shareholder's shares of Company Common pursuant to the Merger.
3.16 Compliance with Laws.
(a) The Company and each of its Subsidiaries has
complied, and is currently in compliance, with all
laws, rules, regulations, and orders applicable to
the operation of its remote alarm monitoring business
or any other business conducted by the Company or any
such Subsidiary. Neither the Company nor any of its
Subsidiaries has taken any action, or failed to take
any action which would in any way preclude or prevent
the Company or any such Subsidiary from continuing to
operate the Monitoring Business
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or any other business conducted by the Company or any
such Subsidiary following the Closing. The Company
and its Subsidiaries, and their respective employees,
have, and following the Closing, [assuming the
continued employment of _________________, who will
act as the qualifying license holder of the Company
and its Subsidiaries,] the Company, its Subsidiaries,
and their respective employees will continue to have,
all Permits necessary for the conduct of the
Monitoring Business (including, if required separate
licenses required for the monitoring of burglar alarm
systems, fire alarm systems and combined systems) and
any other business conducted by the Company or any
such Subsidiary in all jurisdictions in which the
Company or any such Subsidiary does business, and all
such Permits are currently in effect.
(b) No violations are, or have been, recorded in respect
of any such Permits and no proceedings are pending,
or threatened concerning revocation or limitation of
any such Permit. No such Permit will be revoked as a
result of the transactions contemplated by this
Agreement. Copies of all Permits used in the conduct
of the business of the Company and its Subsidiaries
are attached to Schedule 3.16.
(c) All of the Dealers for which the Company and its
Subsidiaries provide Monitoring Services are licensed
as installers of security systems by the appropriate
entities in the jurisdictions in which they conduct
business and neither the Company, its Subsidiaries or
any of their respective shareholders are aware of any
fact which could lead to the revocation or suspension
of any of such Dealer's licenses.
3.17 Intellectual Property. The Company and each of its Subsidiaries
owns or has the right to use, and following the Closing the Company and each of
its Subsidiaries will continue to own and have the right to use, free and clear
of all Liens, claims and restrictions, all Intellectual Property used in the
conduct of their respective businesses without infringing upon or otherwise
acting adversely to the right or claimed right of any person. Schedule 3.17
contains a true and complete list of the Intellectual Property of the Company,
its Subsidiaries and the owner(s), licensors, grantors and licensee(s) thereof.
Except as disclosed on Schedule 3.17, neither the Company nor any of its
Subsidiaries is, or following the Closing will be, obligated or under any
liability to make any payments for royalties, fees or otherwise to any owner of,
licensor of, or other claimant to, any Intellectual Property, with respect to
the use thereof or in connection with the conduct of its business or otherwise.
Neither the Company nor any of its Subsidiaries has granted any licenses
allowing third parties to use any of the Intellectual Property of the Company or
its Subsidiaries. The conduct of the Monitoring Business or any other business
conducted by the Company and its Subsidiaries does not, and will not, violate
the Intellectual Property or any other proprietary interest of any other Person.
The Company and its Subsidiaries possess, and after the Closing will possess,
ownership of or licenses to utilize all proprietary technology necessary for the
conduct of the Monitoring Business and any other business conducted by the
Company or its Subsidiaries. Neither the Company nor any of its Subsidiaries is
in default under any agreement governing its use of any Intellectual Property.
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3.18 Schedule 3.18 consists of the following:
(a) Schedule 3.18(a) is a true, accurate and complete
list of the Dealer Monitoring Agreements of the
Company, its direct and indirect Subsidiaries, and
sets forth completely and accurately, as of
________(i) the RMR due from each Dealer under each
such agreement; (ii) the agings of the amounts
receivable from each Dealer under each such
agreement; and (iii) the method of billing such
Dealers. At the Closing , there will be Dealer
Monitoring Agreements covering no less than _________
Accounts, with RMR payable to the Company, its direct
or indirect Subsidiaries of no less than
$_________("Minimum RMR").
(b) All Accounts listed on Schedule 3.18(a) are evidenced
by written contracts. The Accounts and Dealer
Monitoring Agreements arose in bona-fide arms length
transactions in the normal course of business and
such agreements are valid and binding obligations of
the Dealers and Subscribers that are parties thereto
without any counterclaims, set-offs or other defenses
thereto, and neither the Company, its Subsidiaries or
any selling Shareholder has any basis to believe that
the amounts payable under such Accounts and Dealer
Monitoring Agreements are not collectible. Neither
the Company nor any of its Subsidiaries has any basis
to believe that any Account or Dealer Monitoring
Agreement will not continue in existence after the
Closing.
3.19 Litigation, etc. There are no actions, suits, proceedings or
investigations pending or threatened against the Company, its Subsidiaries or
their respective properties before any court, arbitration panel or governmental
agency (nor 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
Company, its Subsidiaries or their respective assets or the Monitoring Business
or any other business conducted by the Company and its Subsidiaries, except as
described on Schedule 3.19. Schedule 3.19 also contains a true and complete list
of every incident for the last (5) five years in which a Subscriber or third
party asserted that it experienced a loss related to any failure or omission of
the Company, its Subsidiaries or their provision of Monitoring Services, a short
description of the claim and its current status or resolution.
3.20 Related Party Transactions. Except as disclosed on Schedule 3.20,
neither the Company, its Subsidiaries nor any shareholder, officer, director,
employee of the Company, its Subsidiaries, or any member of their immediate
families, is, directly or indirectly, interested in any contract with the
Company or its Subsidiaries, including but not limited to any agreement, written
or unwritten, for employment or consulting, or any lease for real or personal
property. No officer or employee of the Company or its Subsidiaries 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 of the
Company or any of its Subsidiaries. Neither the Company nor any of its
Subsidiaries is a
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guarantor or indemnitor of any indebtedness of any other person, firm or
corporation, except as disclosed on Schedule 3.20. All existing agreements
between each Shareholder and the Company or its Subsidiaries have been (or on or
prior to the Closing will be) terminated and, thereafter, except as contemplated
herein, such Shareholder will not be a party to, subject to or bound by any
agreement, commitment or understanding whatsoever between such Shareholder and
the Company.
3.21 Securities Law Compliance. The Merger and the exchange of the
securities involved therein constitutes a transaction exempt from the
registration requirements of the Securities Act, and the state securities laws
and regulations of the states of New Jersey and _____.
(a) Each of the Selling Shareholders understands and
agrees that: (i) the SAI Preferred to be issued
pursuant to the Merger has not been, and as of the
Effective Time will not be, registered under the
Securities Act or under any state securities laws;
(ii) the SAI Preferred is being offered and issued in
reliance upon Federal and state exemptions for
transactions not involving any public offering; (iii)
a "stop transfer" order will be placed against the
certificates representing shares of SAI Preferred
issued pursuant to the Merger; until such time as (A)
such SAI Preferred is registered under the Securities
Act or until SAI has received an opinion of counsel
satisfactory to it that a proposed transfer or sale
does not require registration or qualification under
applicable law, and (iv) until removed in accordance
with Section 5.16, the certificates representing the
shares of SAI Preferred and SAI Common issued in the
Merger will bear the legend set forth below:
The shares evidenced by this certificate
have not been registered under the
Securities Act of 1933, as amended, or any
applicable state securities laws. No
transfer or sale of these shares or any
interest therein may be made without such
registration and qualification unless the
issuer has received an opinion of counsel
satisfactory to it that a proposed transfer
or sale does not require registration or
qualification under applicable law.
(b) The Selling Shareholders each further represent that:
(i) he is acquiring the SAI Preferred to be acquired
him pursuant to the Merger solely for his own account
for investment purposes and not with a view to the
distribution thereof within the meaning of the
Securities Act; (ii) he is a sophisticated investor
with knowledge and experience in business and
financial matters and is an "accredited investor"
within the meaning of Rule 501 under the Securities
Act; (iii) he has had access to all SAI SEC Reports
filed by SAI during the current year and the year
preceding the current year, and has had the
opportunity to obtain additional information and ask
questions and receive answers as desired in order to
evaluate the
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merits and risks inherent in holding the SAI
Preferred; (iv) he has not been offered the SAI
Preferred by any form of general advertising or
general solicitation; and (v) he is able to bear the
economic risk and lack of liquidity inherent in
holding the SAI Preferred.
3.22 Brokers or Finders. Neither the Company, its Subsidiaries nor any
Shareholder has dealt with any broker or finder, and have not incurred, and will
not incur, directly or indirectly, as a result of any action taken by the
Company, its Subsidiaries or any Selling Shareholder, 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 Company and each of its Subsidiaries: (i) has
timely filed all income, sales and employment tax returns that are required to
have been filed with all appropriate federal, state, county and local
governmental agencies that relate to the Company or, its Subsidiaries or with
respect to which the Company or any of its Subsidiaries is liable or otherwise
in any way subject, including without limitation all tax returns due for the
period ending December 31, 1999, (and all such returns fairly reflect the
operations of the Company and its Subsidiaries 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 and are reflected on the Company's Financial
Statements, and will be reflected the Closing Date Balance Sheet, in accordance
with GAAP; (ii) has timely paid all Taxes owed by it or which it is obligated to
withhold from amounts owing to any employee (including without limitation social
security taxes), creditor or third party and (iii) has 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 will not exceed the
liability appearing on the Closing Date Balance Sheet therefor, and there are no
material unresolved questions or claims concerning the tax liability of the
Company, its Subsidiaries. The tax returns of the Company and its Subsidiaries
have not been reviewed or audited by any federal, state, local or county taxing
authority. There is no pending dispute with any taxing authority relating to any
of said tax returns. The Company's Financial Statements do, and the Closing Date
Balance Sheet will, accurately reflect all of the tax liability of the Company
and its Subsidiaries for Taxes as of their respective dates. All of the income,
sales and employment-related tax returns of the Company and its Subsidiaries for
the years 1997, 1998 and 1999 are attached to Schedule 3.23. The books of the
Company and its Subsidiaries will be closed as of the Closing Date in order to
properly determine the Taxes due for the period ending on the Closing Date. The
Selling Shareholders will fully cooperate with the Company and its Subsidiaries
in preparing their respective tax returns, including, but not limited to, those
for the stub period ending on the Closing Date.
3.24 Insurance. The Company and each of its Subsidiaries has valid
workers' compensation, fire, casualty, liability, and errors and omissions
policies, in such amounts and with such coverage as is reasonably related to the
foreseeable risks of the Company and its Subsidiaries, in each case with
reputable insurers. The Company has provided to SAI true, accurate and complete
copies of all such policies. All of the fire, casualty, liability and errors and
omissions policies of the Company and its Subsidiaries are "occurrence" policies
not "claims
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made" policies. Neither the Company nor any of its Subsidiaries is 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. Neither the Company nor any of its Subsidiaries will be placed in
default, and their 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. Neither the Company nor any of its Subsidiaries
has received notice of, nor have they 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 or rejection of any claim. Within three years prior to the Closing
Date, neither the Company nor any of its Subsidiaries has canceled or terminated
any insurance policy, nor has any insurance company canceled or terminated any
insurance policy of the Company or its Subsidiaries or rejected any claim under
such policy. All such policies will remain in full force and effect following
the Closing. Following the Closing, the Company and its Subsidiaries will be
able to cancel all such policies upon no more than thirty (30) days written
notice without payment of any additional premium or any penalty.
3.25 Pension Plans. Neither the Company nor any of its Subsidiaries
maintains or contributes to, or has any obligation under, or on the Closing Date
will maintain, contribute to, or have any obligation under, any Employee Benefit
Plan other than those identified on Schedule 3.25. The Company has provided SAI
with true, accurate and complete copies of all contracts, agreements, and
documents described in Exhibit 3.25.
(a) ERISA and Code Compliance and Liability. The Company
and each ERISA Affiliate is in compliance with all
applicable provisions of ERISA with respect to all
Employee Benefit Plans. Each Employee Benefit Plan
that is intended to be qualified under Section 401(a)
of the Code has been determined by the Internal
Revenue Service to be so qualified, and each trust
related to such plan has been determined to be exempt
under Section 501(a) of the Code. No material
liability has been incurred by the Company or any
ERISA Affiliate that remains unsatisfied for any
taxes or penalties with respect to any Employee
Benefit Plan or any Multiemployer Plan.
(b) Funding. No Pension Plan has been terminated, nor has
any accumulated funding deficiency (as defined in
Section 412 of the Code) occurred, nor has any
funding waiver from the Internal Revenue Service been
received or requested with respect to any Pension
Plan, nor has the Company or any ERISA Affiliate
failed to make any contributions or to pay and
amounts due and owing as required by Section 412 of
the Code, Section 302 of ERISA or the terms of any
Pension Plan prior to the due dates of such
contributions under Section 412 of the Code or
Section 302 of ERISA, nor has there been any event
requiring any disclosure under Section 4041[c][3][C],
4063(a) or 4068 of ERISA with respect to any Pension
Plan.
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(c) Prohibited Transactions and Payments. Neither the
Company nor any ERISA Affiliate has (i) engaged in a
non-exempt "prohibited transaction" as such term is
defined in Section 406 of ERISA or Section 4975 of
the Code; (ii) incurred any liability to the PBGC
which remains outstanding other than the payment of
premiums and there are no premium payments which are
due and unpaid; (iii) failed to make a required
contribution or payment to a Multiemployer Plan; or
(iv) failed to make a required installment or other
required payment under Section 412 of the code.
(d) No Termination Event. No Termination Event has
occurred or is reasonably expected to occur.
(e) ERISA Litigation. No material proceeding, claim,
lawsuit and/or investigation is existing or
threatened concerning or involving any (i) employee
welfare benefit plan (as defined in Section 3(1) of
ERISA) currently maintained or contributed to by the
Company or any of its Subsidiaries, (ii) Pension Plan
or (iii) Multiemployer Plan.
3.26 Directors, Officers and Employees.
(a) Directors, Officers and Employees. Schedule 3.26 sets
forth the names of each director, officer and
employee of the Company and each of its Subsidiaries
and states the rate of compensation payable to each.
Attached to Schedule 3.26 are copies of each written
employment agreement and noncompetition agreement
with such directors, officers and employees
(b) Labor Matters. Neither the Company nor any of its
Subsidiaries has been, or is, a party to any
collective bargaining agreement with any union
representing any of its employees. The Company and
each of its Subsidiaries has been, and is, in
compliance with all applicable laws, rules and
regulations relating to employment and employment
practices, immigration laws, terms and conditions of
employment, wages and hours. None of the employees of
the Company or its Subsidiaries is represented by a
labor union. There has not been, and there are not
presently, pending or threatened any unfair labor
practice or discrimination charges or complaints
against the Company or its Subsidiaries before the
National Labor Relations Board, the Equal Employment
Opportunity Commission or any similar national, state
or local body.
(c) Continued Service by Certain Employees. The employees
identified on Schedule 3.26 as key employees have
agreed to remain employed by SAI, the Company or its
Subsidiaries at their current compensation levels.
[____________]will continue to act as the Company's
qualifying license holder. The Selling Shareholders
agree to have each such employee execute a letter
agreement with SAI providing for the following:
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(i) Continued employment by SAI, the Company or
a Subsidiary of the Company;
(ii) Continued compensation at current levels;
and
(iii) Confidentiality and non-competition
undertakings.
3.27 Environmental and Safety Regulations. The Company and each of its
Subsidiaries is in compliance with all applicable Environmental Laws and no real
estate owned by the Company or its Subsidiaries or portion of the Leasehold
Property has been used as a land fill. There currently are not any Hazardous
Materials generated, manufactured, released, stored, buried or deposited over,
beneath, in or on (or used in the construction of or renovation of) the
Leasehold Property in violation of applicable Environmental Laws which could
have a material adverse effect on the business, operations, properties or
financial condition of the Company or its Subsidiaries.
3.28 UL Compliance and Compliance with Laws. The Central Stations are
certified by Underwriters Laboratories, Inc. ("U.L."). A copy of each U.L.
listing of the Central Stations is included in Exhibit 3.28. The Selling
Shareholders are not aware of any reason why the Central Stations would lose
their U.L. certifications. No Accounts require inspections to be or remain in
compliance with any governmental regulation, law or code, and all Accounts are
in compliance with any applicable code or regulation.
3.29 Ownership of Stock. The Selling Shareholders are the lawful
owners, both beneficially and of record, of the Shares, free and clear of all
liens, encumbrances, restrictions and claims of every kind. The Shares are fully
paid and non-assessable and have the rights set forth in the Company's Articles
or Certificate of Incorporation and Bylaws. Schedule 3.29 sets forth the Shares
owned by each Shareholder; and each Selling Shareholder has good and marketable
title to the Shares owned by such Selling Shareholder.
3.30 Proxy Statement. The information supplied by the Company for
inclusion in the SAI Proxy Statement shall not, on the date the Proxy Statement
is first mailed to the stockholders of SAI at the time of the Stockholders'
Meeting and at the Effective Time, contain any statement which, at such time and
in light of the circumstances under which it was made, is false or misleading
with respect to any material fact, or omit to state any material fact necessary
in order to make the statements made in the Proxy Statement not false or
misleading. If at any time prior to the Effective Time any event relating to SAI
or any of its Affiliates, officers or directors should be discovered by the
Company which should be set forth in a supplement to the Proxy Statement, the
Company shall promptly inform SAI.
3.31 Schedules. All of the schedules to this Agreement, including, but
not limited to, those which refer to the Company, its Subsidiaries, the
Shareholders, the Assets, the Central Stations and the Monitoring Business are,
and as of the Closing will be, true, accurate and complete and have been
prepared in conformance with the provisions of this Agreement.
3.32 Representations and Warranties True on Closing Date. The
representations and warranties made by the Selling Shareholders herein, and all
statements made in any exhibit,
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schedule or certificate or other document or instrument furnished pursuant to
this Agreement, do not contain, and as of the Closing 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. The
Selling Shareholders have clearly and fully disclosed to SAI, in writing, all
material facts concerning the Company and its Subsidiaries necessary for SAI to
accurately evaluate its investment in the Company and its Subsidiaries, their
Assets and the Monitoring Business and other business conducted by the Company
and its Subsidiaries.
ARTICLE 4
REPRESENTATIONS, WARRANTIES, AND
ACKNOWLEDGEMENTS OF SAI AND KING ACQUISITION
SAI and King Acquisition, jointly and severally, represent, warrant,
and acknowledge to the Selling Shareholders that:
4.1 Incorporation. SAI is a validly existing corporation in good
standing under the laws of the State of Delaware. King Acquisition is a validly
existing corporation in good standing under the laws of the state of New Jersey.
SAI and King Acquisition each have the requisite corporate power and authority
to own and operate their respective properties and assets, and to carry on their
respective businesses as presently conducted and as proposed to be conducted.
4.2 Power and Authority. Subject to approval of the Merger and other
transactions contemplated herein by the shareholders of SAI, SAI and King
Acquisition each have all requisite power and authority to execute and deliver
this Agreement; to consummate the Merger and to carry out and perform its
obligations under the terms of this Agreement.
4.3 Authorization. All action on the part of SAI and King Acquisition
necessary for the authorization, execution, delivery and performance of this
Agreement and the performance of all of the obligations of SAI and King
Acquisition hereunder have been taken or will be taken prior to the Closing.
This Agreement has been duly executed and delivered by SAI and King Acquisition,
respectively, and constitutes their valid and binding obligations, enforceable
against each in accordance with its terms.
4.4 SAI Securities. SAI has taken, or prior to the Closing will take,
all actions necessary to authorize and approve the issuance of the SAI Preferred
and the SAI Common to be issued in connection with the Merger, and as of the
Effective Time the SAI Preferred and the SAI Common will, when issued in
accordance herewith, be duly authorized, validly issued, fully paid and
nonassessable. There are no statutory or contractual shareholders' preemptive
rights or rights of refusal with respect to the issuance of the SAI Preferred or
the SAI Common upon consummation of the Merger.
4.5 Commission Filings. SAI has filed and made available to the Company
and the Shareholders all forms, reports and documents required to be filed by
SAI with the SEC under
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the Securities Exchange Act, and the Securities Act during the one year period
ending on the date hereof (collectively, the "SAI SEC Reports"). The SAI SEC
Reports (i) at the time filed, complied in all material respects with the
applicable requirements of the Securities Exchange Act, and (ii) did not at the
time they were filed (or if amended or superseded by a filing prior to the date
of this Agreement, then on the date of such filing) contain any untrue statement
of a material fact or omit to state a material fact required to be stated in
such SAI SEC Reports or necessary in order to make the statements in such SAI
SEC Reports, in the light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of SAI
included in the SAI SEC Reports (the "SAI Financial Statements") complied when
filed as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, and were, when filed, in accordance with the books and records
of SAI, complete and accurate in all material respects, and presented fairly the
consolidated financial position and the consolidated results of operations,
changes in Shareholders' equity and cash flows of SAI and its Subsidiaries as of
the dates and for the periods indicated, in accordance with generally accepted
accounting principles, consistently applied, subject in the case of interim
financial statements to normal year-end adjustments and the absence of certain
footnote information.
4.6 Disclosure. The representations and warranties made by SAI herein,
and all statements made in any exhibit, schedule or certificate furnished by SAI
pursuant to this Agreement, do not contain, and at 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.
ARTICLE 5
COVENANTS OF THE SELLING SHAREHOLDERS
5.1 Maintenance of Business. From the date hereof until the Closing,
the Selling Shareholders shall cause the Company and its Subsidiaries to carry
on and preserve the business, goodwill and the relationships of the Company, its
Subsidiaries and the Monitoring Business and any other business conducted by the
Company or its Subsidiaries 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,
except for the Monital Retail Account Transactions or as otherwise expressly
permitted or contemplated hereby, the Selling Shareholders shall not cause or
permit the Company and its Subsidiaries to, and neither the Company nor any of
its Subsidiaries shall, without SAI's prior express written consent:
(a) incur any additional indebtedness for money borrowed,
or guarantee any indebtedness or obligation of any
other party;
(b) pay any dividends or make any distributions with
respect to its capital stock;
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(c) 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;
(d) enter into, amend or terminate any agreement or
arrangement, other than in the ordinary course of
business and the Company shall notify SAI prior to
entering into, amending or terminating any material
agreement or arrangement even in the ordinary course
of business;
(e) increase the compensation payable or to become
payable to any of its officers, employees or agents,
or adopt or amend any employee benefit plan;
(f) acquire or dispose of any properties or assets used
in its business except in the ordinary course of
business;
(g) permit any change in its business or the manner in
which its books and records are maintained;
(h) create or suffer to be imposed any lien, mortgage,
security interest or other charge on or against its
business, properties or assets; or
(i) 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 Selling Shareholders
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 business and operations of the Company and
its Subsidiaries after the Closing, including but not limited to, any consents
required with respect to any Real Estate Leases or Equipment Leases for
continued use of such facilities and Equipment following the Closing on the
terms set forth in such Real Estate Leases and Equipment Leases.
5.4 Access to Information. From the date hereof until the Closing, the
Company and the Selling Shareholders shall give SAI and its accountants, legal
counsel and other representatives full access, during normal business hours, to
all of the properties, books, contracts, commitments and records relating to the
business, Assets and Liabilities of the Company and its Subsidiaries, and will
furnish SAI, its accountants, legal counsel and other representatives during
such period all such information concerning their affairs as SAI may reasonably
request; provided, that any furnishing of such information or any investigation
by SAI shall not affect SAI's right to rely on the representations, warranties
and covenants made by the Selling Shareholders in this Agreement.
5.5 Certain Defaults; Litigation. The Selling Shareholders will give
prompt notice to SAI of:
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(a) any default by the Company, its Subsidiaries 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 or any of its
Subsidiaries 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, its Subsidiaries or the
Monitoring Business or other business conducted by
the Company and its Subsidiaries 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
Company, its Subsidiaries or the Monitoring Business
or other business conducted by the Company and its
Subsidiaries subsequent to the date of this Agreement
and prior to the Closing.
5.6 Assistance in Transition. From the date hereof until the Closing,
the Selling Shareholders shall provide, and cause the Company and it
Subsidiaries to provide, SAI all reasonable assistance in connection with the
transition of ownership and management of the Company and its Subsidiaries. Such
assistance shall include, but not be limited to (i) arranging for the
availability of the premises located at __________________________________, at
an agreed upon rental rate during the transition, and (ii) utilization of all of
the facilities of the Central Stations to operate the Monitoring Business during
the transition at SAI's expense.
5.7 Other Negotiations. Except as expressly set forth in the letter of
intent. From the date hereof until the termination of this Agreement, the
Selling Shareholders and the Company will not, and will cause the Company's
officers and directors not to, initiate discussions or negotiate, or authorize
any person or entity to discuss or negotiate on behalf of the Selling
Shareholders or the Company, with any party other than SAI, or entertain or
consider any inquiries or proposals received from any party other than SAI,
concerning the possible disposition of all or any portion of the business,
assets or capital stock of the Company or its Subsidiaries.
5.8 Assistance in Compliance with Loan Covenants. The Company and the
Selling Shareholders will cooperate with in (i) SAI's negotiating of all of the
documentation to be entered into by the Company, the Shareholders, SAI, SAI's
lenders, and any other party in connection with obtaining financing for the
acquisition of the Shares, (ii) any actions required of SAI, the Company and the
Shareholders to comply with the covenants contained in any loan agreement with
SAI's lenders and (iii) closing the transactions contemplated thereby. Each
Selling Shareholder agrees to enter into a Consent to Assignment of Acquisition
Instruments, in the form of Exhibit 5.8(a) hereto, pursuant to which such
Selling Shareholder will agree that SAI's lenders may enforce SAI's remedies
under this Agreement in the event of SAI's default under its loan agreements
with such lenders. In addition, the Selling Shareholders will cause each lessor
under the Real Estate Leases and the Equipment Leases to enter into an
agreement, in the form of Exhibit 5.8(b), collaterally assigning the Company's
interests in each such lease to SAI's lenders.
5.9 Noncompetition and Nonsolicitation. The Selling Shareholders each
acknowledge that but for their agreement to be bound by the terms of this
Section 5.9, SAI
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would not consummate the transactions contemplated by this Agreement. From the
date hereof until the fifth (5th) anniversary of the Closing Date (unless
otherwise provided), each Selling Shareholder agrees that (x) he will refer all
inquiries by current or former clients (as of the Closing) of the Company and
its Subsidiaries relating to the business of the Company and its Subsidiaries to
SAI, and that he will not, directly or indirectly:
(a) enter into competition with the Company or SAI, or
their respective Subsidiaries by establishing a
remote alarm system monitoring center providing
monitoring services to any location within twenty
five (25) miles of any location where the Company,
SAI or their respective Subsidiaries provide such
services;
(b) provide, or solicit any Dealer or Subscriber for the
purposes of providing, any services similar to those
provided by the Company, SAI or their respective
Subsidiaries, either directly or through any other
person or entity.
(c) reveal the customer list of the Company or its
Subsidiaries to any person;
(d) employ any employee of the Company, SAI or their
respective Subsidiaries or solicit or encourage any
such employee to terminate his or her employment with
any of the foregoing; or
(e) for so long as the Company and its Subsidiaries is
engaged in the Monitoring Business and its other
businesses, take any other action which is intended
to, or which would reasonably be expected to:
(i) adversely affect the Company's, SAI's, or
its Subsidiaries' interest in any Contract;
(ii) adversely affect the Company's, SAI's, or
their respective Subsidiaries' contractual
relationship with any Dealer or Subscriber;
or
(iii) discourage any Dealer, Subscriber or
supplier from continuing its business
relationship with the Company, SAI, or their
respective Subsidiaries after the Closing on
the same terms as were maintained prior to
the Closing.
For purposes of this Section 5.9, the term "Selling Shareholder" shall
also include any corporation, partnership or other business entity in which a
Selling Shareholder now or in the future owns, directly or indirectly, a
controlling equity interest, and the parents, spouse, children, brothers and/or
sisters of a Selling Shareholder, or any entity in which any of them own,
directly or indirectly, a controlling interest. Notwithstanding any other
provision of this Agreement, each Selling Shareholder agrees that money damages
would not be a sufficient remedy for breach of this Section 5.9 and that SAI
shall be entitled to specific performance, injunctive relief or other equitable
relief as a remedy for breach of this Section 5.9.
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5.10 Confidentiality. From the date hereof until the Closing, the
Selling Shareholders will, and will cause the Company and its Subsidiaries and
their respective officers, directors and employees to, treat as strictly
confidential all Confidential Information concerning SAI, the Company and their
respective Subsidiaries that is not part of the public domain and shall not
disclose any such information to any third party. At all times after the Closing
each of the Selling Shareholders will treat and hold as confidential all
Confidential Information concerning SAI, the Company and their respective
Subsidiaries, refrain from using any of such Confidential Information (except,
as applicable, in direct furtherance of such Shareholder's duties on behalf of
SAI, the Company or their respective Subsidiaries (as directed by SAI) and shall
deliver promptly to the SAI or the Company or destroy, at the request and option
of SAI, all tangible embodiments (and all copies) of Confidential Information
concerning SAI, the Company or their respective Subsidiaries which are in such
Shareholder's possession. In the event that any of the Selling Shareholders is
requested or required (by oral question or written request for information or
documents in any legal proceeding, interrogatory, subpoena, civil investigative
demand, or similar process) to disclose any Confidential Information concerning
SAI, the Company or their respective Subsidiaries, such Shareholder will notify
SAI promptly of the request or requirement so that SAI may seek an appropriate
protective order or waive compliance with the provisions of this Section 5.10.
If, in the absence of a protective order or the receipt of a waiver hereunder,
any of the Selling Shareholders is, on the advice of counsel, compelled to
disclose any of such Confidential Information to any tribunal or else stand
liable for contempt, such Selling Shareholder may disclose such Confidential
Information to the tribunal; provided, however, that the disclosing Selling
Shareholder shall, upon the request of SAI or the Company and at their expense,
exert all reasonable efforts to obtain an order or other assurance that
confidential treatment will be accorded to such portion of the Company
Confidential Information required to be disclosed as the Company or SAI shall
reasonably designate.
5.11 Tax Returns. The Selling Shareholders agree to cause the Company
and its Subsidiaries to file, prior to the Closing Date, all federal, state, and
local income, property, and payroll tax returns. The Selling Shareholders hereby
agrees to indemnify SAI pursuant to Article X hereof for any costs incurred for
any unpaid tax liabilities related to the Company or its Subsidiaries arising
from any state of facts existing prior to the Closing Date, including, but not
limited to federal, state, and local income taxes.
5.12 Financial Statement Audits. If at any time XXX xxxxx it necessary
or advisable to have an independent audit performed on the financial statements
of the Company or its Subsidiaries, (including, without limitation, in
connection with the SAI proxy) the Selling Shareholders will fully cooperate
with SAI and the independent auditors in the performance of the audit. In
furtherance and not in limitation of the foregoing, the Selling Shareholders
will cooperate and provide all assistance reasonably requested by SAI's
independent accountants and the Company's independent accountants (including
without limitation, executing any and all customary management representation
letters with respect to the Company's financial statements) in connection with
the preparation and delivery to SAI of audited financial statements and for the
Company as of and for each of the fiscal years ended December 31, [prior and
appropriate post-closing years].
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5.13 Disclosure to State Taxing Authorities. The Selling Shareholders
have made all necessary disclosures related to the exchange of the Shares in
connection with the Merger as are required under the applicable state laws, and
no amounts are required to be withheld from consideration to be received by the
Selling Shareholders in connection with the Merger pursuant to such laws.
5.14 Update Disclosure; Breaches. From and after the date of this
Agreement until the Closing, the Selling Shareholders shall promptly notify SAI,
by written update to the attachments hereto, of (i) the occurrence or
non-occurrence of any event which would be likely to cause any condition to its
obligations to effect the Merger and the other transactions contemplated by this
Agreement not to be satisfied, (ii) any fact, condition or occurrence which will
result in any of the representations or warranties of the Selling Shareholders
not being true and correct as of the Closing, or (iii) the failure of the
Selling Shareholders to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by the Company, its Subsidiaries or
the Selling Shareholders pursuant to this Agreement which would be likely to
result in any condition to the obligations of any Party to effect the Merger and
the other transactions contemplated by this Agreement not to be satisfied. The
delivery of any notice pursuant to this Section 5.15 shall not cure any breach
of any representation or warranty requiring disclosure of such matter prior to
the date of this Agreement or otherwise limit or affect the remedies available
hereunder to SAI if SAI, within ten (10) days after receipt of such notice,
advises the Selling Shareholders of its objection to the matter disclosed in
such notice.
5.15 Waiver and Release. Each Selling Shareholder, on behalf of himself
and his heirs, executors, administrators, successors and assigns (with respect
to each Selling Shareholder, the "Releasing Parties"), irrevocably and
unconditionally waives and releases any and all rights with respect to, and
releases, forever acquits and discharges each of the Company and its
Subsidiaries and their officers, employees, agents and other representatives,
and their respective heirs, executors, administrators, successors and assigns
("Released Parties"), with respect to, each and all claims, demands, charges,
complaints, obligations, causes of action, suits, liabilities, indebtedness,
sums of money, covenants, agreements, instruments, contracts (written or oral,
express or implied), controversies, promises, fees, expenses (including
attorneys' fees, costs and expenses), damages and judgments, at law or in
equity, in contract or tort, in federal, state or other judicial,
administrative, arbitration or other proceedings, of any nature whatsoever,
known or unknown, suspected or unsuspected, previously, now or hereafter
arising, in each case which arise out of, are based upon or are connected with
facts or events occurring or in existence on or prior to the Effective Time
("Released Claims"). Each Selling Shareholder further represents and warrants
that such Shareholder has not assigned or otherwise transferred any right or
interest in or to any of the Released Claims. This Section 5.15 shall not apply
to any of the following: (a) claims for salaries and benefits accrued through
the Closing under the express terms of the written benefit plans of the Company
or its Subsidiaries, or (b) claims for indemnification pursuant to Section
10.1(b) herein, to the extent applicable.
5.16 Post-Closing Transfer of SAI Securities.
(a) The Selling Shareholders hereby acknowledge and agree
that the SAI Preferred [or the SAI Common] issued in
connection with the Merger may
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not be transferred except pursuant to (a) a
registered offering under the Securities Act (in
which case all transfers shall be made in accordance
with all applicable provisions of the Registration
Agreement), (b) Rule 144 promulgated pursuant to the
Securities Act (or any similar rule or rules then in
force) if available, or (c) subject to the conditions
specified in subparagraph (ii) below, any other
legally available means of transfer.
(b) In connection with the transfer of any SAI Preferred
[or SAI Common] issued in connection with the Merger
(other than a transfer pursuant to a registered
public offering), the holder thereof shall deliver
written notice to SAI describing in reasonable detail
the transfer or proposed transfer, together with an
opinion of securities counsel (with such opinion and
such counsel being satisfactory to SAI) to the effect
that such transfer of SAI Preferred [or SAI Common]
may be effected without registration of such SAI
Preferred [or SAI Common] under the Securities Act or
any applicable state securities law. In addition, if
the holder [of SAI Preferred] delivers to SAI such an
opinion that concludes that no subsequent transfer of
such SAI Preferred [or SAI Common] will require
registration under the Securities Act or any
applicable state securities law, SAI shall promptly
upon such contemplated transfer deliver new
certificates for such SAI Preferred [or SAI Common]
which do not bear the restrictive legend set forth in
Section 3.2(a). If SAI is not required to deliver new
certificates for such SAI Preferred [or SAI Common]
not bearing such legends, the holder thereof shall
not transfer the same until the prospective
transferee has confirmed to SAI in writing its
agreement to be bound by the conditions contained in
this Section.
ARTICLE 6
COVENANTS OF SAI
6.1 Necessary Consents. Prior to the Closing, SAI will use its best
efforts obtain such consents and take such other actions as may be necessary or
appropriate to allow the consummation of the Merger and the other transactions
contemplated hereby, including the approval of its shareholders.
6.2 Offer of Employment. SAI agrees that SAI, the Company or its
Subsidiaries will offer employment to each of the individuals listed on Schedule
6.2 at the annual salary rates set forth on Schedule 6.2. Each such employee
that accepts such an offer will be an employee at will.
6.3 Confidentiality. SAI agrees to abide by the confidentiality
provisions of the Letter of Intent; provided, however, that SAI, as a reporting
company under the Securities Exchange Act and as an issuer of securities under
the Securities Act, may make all disclosures concerning this Agreement, the
Selling Shareholders and the Company and its Subsidiaries as are required by
Federal and state securities laws, as determined by SAI and its counsel.
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6.4 Stockholders Meetings. SAI shall call a meeting of its
stockholders, to be held as promptly as practicable for the purpose of voting
upon the issuance of the shares of SAI Preferred and SAI Common contemplated
hereunder, SAI will, through its Board of Directors recommend to its
stockholders, as applicable, approval of such matters and will coordinate and
cooperate with respect to the timing of such meetings and shall use its best
efforts to hold such meeting on the same day and as soon as practicable after
the date hereof.
As promptly as practicable after the execution of this Agreement, SAI
shall prepared and file with the SEC the SAI Proxy Statement, shall use its vest
efforts to cause the Proxy to become approved by the SEC as soon as after such
filing as practicable, and shall promptly furnish a copy of the Proxy Statement
to each of SAI's Stockholders.
ARTICLE 7
SAI'S CONDITIONS FOR CLOSING
The obligations of SAI and King Acquisition to consummate the Merger
and the other transactions contemplated by this Agreement is subject to the
fulfillment, at or before the Closing, of all the following conditions, unless
waived in writing by SAI:
7.1 Representations True. The representations and warranties of the
Selling Shareholders in this Agreement shall be true and correct when made and
shall be true and correct at the Closing as those made as of the Closing.
7.2 Covenants Performed. The Company and the Selling Shareholders shall
have performed or complied with all of the terms, covenants and conditions of
this Agreement to be performed or complied with at or prior to the Closing.
7.3 No Violations; No Actions. As of the Closing, consummation of the
transactions contemplated by this Agreement shall not violate any order, decree
or judgment of any court or governmental entity and no action or proceeding
shall have been instituted by any person or entity or threatened by any
governmental entity which, in either such case, in the reasonable judgment of
SAI, has a probability of resulting in an order judgment or decree restraining,
prohibiting or rendering unlawful the consummation of the Merger or the other
transactions contemplated by this Agreement.
7.4 Company RMR. As of the Closing, the Company shall have the Minimum
RMR.
7.5 Company Assets. As of the Closing, the Company shall have a tax
basis of at least $18 million, calculated in accordance with GAAP, in
depreciable and/or amortizable assets for Federal income tax purposes.
7.6 Closing Balance Sheet. The Company shall have delivered the Closing
Balance Sheet to SAI.
7.7 No Material Adverse Change. During the period commencing on the
date of execution of this Agreement to the Closing, there shall not have been
any material adverse
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change in the condition (financial or otherwise), liabilities, business or
prospects of the Company or any of its Subsidiaries.
7.8 Opinion of Counsel for the Selling Shareholders. SAI shall have
received opinions from counsel for the Selling Shareholders, in form and
substance satisfactory to SAI, dated as of the Closing Date and to be dated as
of the Closing Date, respectively, covering the subject matter contained in
Sections 3.1, 3.2, 3.3, 3.5, 3.6, 3.12, 3.15, 3.16, 3.17, 3.19, 3.20, 3.21,
3.25, 3.27 and 3.29.
7.9 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 SAI, and SAI shall have received all such originals or certified
or other copies of such documents as it may reasonably request.
7.10 Employment Agreement. SAI, the Company or its Subsidiaries shall
have entered into a written employment agreement(s) with __________________, in
the form(s) attached as Exhibit(s) 7.10.
7.11 Delivery of Documents. SAI shall have received all documents and
other items to be delivered by the Selling Shareholders under Section 9.3.
7.12 Exhibits. The Selling Shareholders shall have completed and
attached hereto all Exhibits and Schedules required by this Agreement, and all
such Schedules shall have been acceptable to SAI, in its sole discretion.
7.13 Required Consents. As of the Closing Date, all corporate
statutory, regulatory and third party 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 to the transactions contemplated hereby and to the continued
uninterrupted operation of the business of the Company and its Subsidiaries
shall have been obtained.
7.14 SV/SAI Transactions. The transactions contemplated in the SV/SAI
Agreement to be consummated at or prior to the consummation of the transactions
contemplated hereby shall have been consummated.
7.15 Monital Acquisition Documents. The Company and the other parties
thereto shall have executed the Monitol Acquisition Documents, in substantially
the forms attached hereto as Exhibit 7.15, and the transactions consummated by
the Monitol Acquisition Documents shall have been consummated in accordance with
the terms thereof.
7.16 Officer's and Other Certificates. The Selling Shareholders shall
have delivered to SAI the following:
(a) certificates of the each Selling Shareholder, dated
as of the Escrow Closing Date and to be dated as of
the Closing Date, respectively, stating that the
conditions specified in Sections 7.1, 7.2, 7.3, 7.4,
7.5, 7.7, 7.10,
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7.13 and 7.15 have been fulfilled at or prior to the
Escrow Closing and the Closing, respectively;
(b) certificates of the Company, executed on behalf of
the Company by its President, dated as of the Closing
Date, respectively, stating that the conditions
specified in Sections 7.1, 7.2, 7.3, 7.4, 7.5, 7.7,
7.10, 7.13 and 7.15 have been fulfilled at or prior
to the Closing;
(c) certificates of the Company's Secretary, dated as of
the Closing Date, respectively certifying that: (x)
that attached thereto are true, accurate and complete
copies of the Articles or Certificate of
Incorporation and By-laws of the Company and each of
its Subsidiaries, and all amendments thereto, and
copies of the resolutions adopted by the Board of
Directors and shareholders approving the Merger and
other transactions contemplated by this Agreement;
and that (y) there have been no amendments or
modifications to the attached Articles or
Certificates of Incorporation since the date of such
certificate and that the attached resolutions are in
full force and effect on the date of such certificate
and have not been superceded or modified in any
manner whatsoever; and
(d) incumbency certificates, in form and content, dated
as of the Closing Date, satisfactory in form and
content to SAI and its counsel.
7.17 The stockholders of SAI shall have approved the issuance of the
SAI Preferred and SAI Common pursuant to this agreement and the transactions
contemplated pursuant to the SAI/SV Agreement (the "SAI Stockholder Approval").
ARTICLE 8
SELLING SHAREHOLDERS' CONDITIONS FOR CLOSING
The obligation of the Selling Shareholders to consummate the
transactions contemplated by this Agreement are subject to the fulfillment, at
or before the Closing, of all the following conditions, unless waived in writing
by a majority in interest of the Selling Shareholders:
8.1 Representations True. The representations and warranties of SAI set
forth in Article IV shall be true and correct when made and true and correct as
of the Closing as though made as of the Closing.
8.2 Covenants Performed. SAI shall have performed or complied with all
of the terms, covenants and conditions of this Agreement to be performed or
complied with by SAI at or before the Closing.
8.3 No Violations; No Actions. As of the Closing, consummation of the
transactions contemplated by this Agreement shall not violate any order, decree
or judgment of any court or
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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
the Selling Shareholders, 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 the Selling Shareholders, and they shall have received all such
counterpart originals or certified or other copies of such documents as they may
reasonably request.
8.5 Delivery of Documents. The Selling Shareholders shall have received
all documents and other items to be delivered by SAI under Section 9.4.
8.6 Required Consents. As of the Closing, 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 to the transactions
contemplated hereby shall have been obtained; provided, however, that the
consents of the shareholders of SAI and King Acquisition shall not have been
obtained prior to the meeting of shareholders of SAI contemplated herein.
8.7 SV/SAI Transactions. The transactions contemplated in the SV/SAI
Agreement to be consummated at or prior to the consummation of the transactions
contemplated hereby shall have been consummated.
ARTICLE 9
CLOSINGS
9.1 Time and Place. The Closing shall each occur at the offices of SAI,
or at any other place to which the Parties shall mutually agree, at ________
a.m. or such date as all of the conditions to closing set forth in Articles 7
and 8 have been satisfied or waived by the applicable parties. All actions to be
taken, and all documents and instruments to be delivered, at the Closing shall
be deemed to have been taken or delivered, as the case, may be, simultaneously.
9.2 Escrow Closing. In the event that all conditions to Closing set
forth in Article 8, except the SAI Stockholder Approval, have been satisfied or
waived by the appropriate parties on or prior to June 30, 2000, the parties
shall make all of their respective payments and deliveries and execute all
documents and instruments required herein with respect to the Closing, for the
filing of the Articles of Merger and all such payments, deliveries and documents
shall be delivered to the Escrow Agent, all pursuant to the terms and conditions
of the Escrow Agreement set forth as Exhibit 9.2 attached hereto (the "Escrow
Agreement"), and the transactions contemplated hereby shall be considered
tendered in escrow (an "Escrow Closing"). From and after an Escrow Agreement,
(i) the parties shall continue to comply with their respective covenants under
this Agreement, including without limitation, those in Articles 5 and 6, (ii)
the Closing shall take place upon the terms and conditions set forth in the
Escrow Agreement upon
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the occurrence of the SAI Stockholder Approval and (iii) termination of this
Agreement shall be governed by the Escrow Agreement rather than Article 11.
9.3 Actions to be taken in connection with the Closing. At the Closing
on the Closing Date, upon the unanimous direction of the parties thereto to be
given upon satisfaction of the conditions to Closing set forth in Article 8:
(a) SAI shall deliver to the Selling Shareholders a
certificate, dated the Closing Date, in form and
substance satisfactory to the Selling Shareholders
and their counsel, confirming that the shareholders
of SAI and SAI, as the sole shareholder of King
Acquisition, have approved Merger and transactions
contemplated hereby;
(b) the Selling Shareholders shall deliver to SAI the
corporate records of the Company and its Subsidiaries
relating to the Monitoring Business and other
business conducted by the Company and its
Subsidiaries as set forth in Section 3.12(j); and
(c) the available parties (or the Escrow Agent, as
applicable) shall,: (i) file or cause to be filed the
appropriate Certificates of Merger with the Secretary
of State of the state of New Jersey; (ii) deliver to
SAI the items called for by Section 9.4; and (iii)
make the payments to the Selling Shareholders
referred to in Section 9.5(a) and deliver to the
Selling Shareholders the other items called for by
Section 9.5.
9.4 Deliveries of the Selling Shareholders. At or prior to the Closing,
the Selling Shareholders will execute and deliver or cause to be executed and
delivered, simultaneously with the execution and delivery of the items referred
to in Section 9.5 below, the following:
(a) Stock Certificates. Certificates representing the
Company Shares endorsed over to SAI or accompanied by
duly executed stock powers;
(b) Corporate Documents. The Articles or Certificate of
Incorporation of the Company and each of its
Subsidiaries, certified by the Secretary of State of
the state(s) of New Jersey and __________ as of a
date not more than ten days prior to the Closing
Date, 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. A Long-form Certificate
of Good Standing, dated not more than ten days prior
to the Closing Date, with respect to the Company,
issued by the Secretary of State of the state of New
Jersey and by the Secretary of State of each foreign
jurisdiction in which the Company is qualified to do
business;
(d) Consents. Evidence that all consents, approvals, or
authorizations of or notifications to any third
parties (including governmental agencies), if any,
required to exchange the Company Shares in connection
with the Merger
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and to consummate the Merger and the other
transactions contemplated hereby and to continue to
operate the business of the Company and its
Subsidiaries without interruption have been obtained,
including without limitation, any revenue notices
required by the state of New Jersey with any
corresponding taxes due paid by the Selling
Shareholders, and the consent the lessors under the
Real Estate Leases and the Equipment Leases for the
continued use of any leased Equipment and the
facilities following the Closing on the terms
contained in the respective leases.
(e) Opinion of Counsel. The opinion of counsel referred
to in Section 7.8 of this Agreement;
(f) Certificates. The certificates referred to in Section
7.16 of this Agreement;
(g) Collateral Assignment of Leases. The Collateral
Assignment of Leases for each of the Company's Leases
and Equipment Leases in the form of Exhibit 9.4(h);
(h) Employment Agreement. Executed employment
agreement(s) between the SAI or the Company and the
individual(s) referred to Section 7.10;
(i) Evidence of Release of Liens. Evidence, in form and
substance satisfactory to SAI, that all liens,
charges and encumbrances on the Shares, the Company
and its properties, have been fully released prior to
the Closing, or will be released concurrently with
the Closing;
(j) Resignations. The written resignations of each
director and officer of the Company and each of its
Subsidiaries, effective as of the Closing;
(k) Signature Cards. Substitute signature cards for all
of the bank accounts of the Company and each of its
Subsidiaries naming persons designated by SAI as the
new signatories for said bank accounts;
(l) Credit Cards. All corporate credit cards of the
Company and its Subsidiaries;
(m) Other Documents. Such other documents and instruments
as SAI or its counsel reasonably shall deem necessary
to consummate the transactions contemplated hereby.
9.5 Deliveries of SAI. At the Closing, SAI will execute and deliver or
cause to be executed and delivered, simultaneously with the delivery of the
items referred to in Section 9.4 above, the following:
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(a) Payment of Cash Consideration. SAI shall pay the cash
consideration to be paid in connection with the
Merger and for payment to the Selling shareholders at
the Closing by bank wire transfer;
(b) Delivery of SAI Preferred and SAI Common. SAI shall
deliver a certificate or certificates representing
the shares of SAI Preferred or SAI Common to which
each equity holder of the Company is entitled in
connection with the Merger for delivery pursuant to
Article 2.
(c) Resolutions. A copy of the resolutions of the Board
of Directors and Stockholders of SAI and the Board of
Directors and sole shareholder of King Acquisition,
certified by SAI's Secretary as having been duly and
validly adopted and being in full force and effect,
authorizing execution and delivery of this Agreement,
the consummation of the Merger and the performance of
the transactions contemplated hereby by SAI and SAI,
respectively, subject to the approval of the
shareholders of SAI;
(d) Corporate Documents. The Certificate of Incorporation
of SAI and the Certificate of Incorporation of King
Acquisition, certified by the Secretary of State of
the states of Delaware and New Jersey respectively
as of a date not more than ten days prior to the
Closing Date, and the By-Laws of SAI and King
Acquisition, certified by the secretary of SAI as in
effect at the Closing;
(e) Certificate of Good Standing. Certificates of Good
Standing, dated not more than ten days prior to the
Closing Date, with respect to SAI and King
Acquisition, issued by the Secretary of State of the
states of Delaware and New Jersey;
(f) Officer's Certificate. Certificates, dated as of the
Escrow Closing Date and the Closing Date,
respectively, from an officer of SAI, confirming the
satisfaction of the conditions required pursuant to
Sections 8.1 and 8.2 as of the Escrow Closing and the
Closing, respectively;
(g) Other Documents. Such other documents and instruments
as the Selling Shareholders or their counsel
reasonably shall deem necessary to consummate the
transactions contemplated hereby.
All actions and proceedings hereunder and all documents and other
papers required to be delivered by the SAI or King Acquisition hereunder or in
connection with the consummation of the Merger and the other transactions
contemplated hereby and all other related matters shall have been approved by,
and, in the case of such documents and papers, shall be in form and substance
reasonably satisfactory to, the Company, the Selling Shareholders and their
respective counsel.
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ARTICLE 10
INDEMNIFICATION
10.1 Indemnification.
(a) The Selling Shareholders, jointly and severally, will
indemnify and hold harmless SAI, its successors,
affiliates and assignees and their respective
officers, directors and employee ("SAI Indemnified
Parties") against any losses, claims, damages or
liabilities, including reasonable attorneys' fees and
other reasonable defense costs (hereafter "Loss") to
which any SAI Indemnified Party becomes subject in
connection with:
(i) finders' fees or brokerage commissions
incurred or alleged to have been incurred by
the Shareholders with respect to the
transactions contemplated by this Agreement;
(ii) any liability of the Company or its
Subsidiaries not disclosed in writing prior
to the Closing;
(iii) any misrepresentation of fact, or failure to
disclose a material fact, by the Selling
Shareholders;
(iv) any breach of any representation or warranty
by the Selling Shareholders contained in
this Agreement or in any document delivered
hereunder;
(v) any claims which have been or may be in the
future asserted arising out of the provision
of Monitoring Services (or failure to
adequately provide such services) or
otherwise arising out of the business
conducted by the Company and its
Subsidiaries by the Company or its
Subsidiaries which occurred prior to the
Closing;
(vi) any breach of any covenant or agreement by
the Company or the Selling Shareholders
contained herein or in any document
delivered hereunder, to be performed prior
to or after the Closing; or
(vii) any other liability or expense resulting
from a dispute or cause of action relating
to the business of the Company or its
Subsidiaries, arising from an event, act, or
omission occurring before or on the Closing
or related to the enforcement of the
indemnification provisions of this
Agreement.
(b) SAI will indemnify and hold harmless the Selling
Shareholders, their heirs, successors, affiliates,
assigns and their respective officers, directors and
employees ("Selling Shareholder Indemnified Parties")
against any
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Loss to which any Selling Shareholder Indemnified
Party becomes subject in connection with:
(i) finders' fees or brokerage commissions
incurred or alleged to have been incurred by
SAI with respect to the purchase
transaction;
(ii) any misrepresentation of fact, or failure to
disclose a material fact, by SAI;
(iii) any breach of any representation or warranty
by SAI contained herein or in any document
delivered hereunder;
(iv) any breach of any covenant or agreement by
SAI contained herein or in any document
delivered hereunder, to be performed prior
to or after the Closing Date; or
(v) any liability or expense resulting from a
dispute or cause of action relating to the
Company or its Subsidiaries, arising from an
event, act, or omission occurring 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 10.1(b) or enforcement of the indemnification
provisions of this Agreement.
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 (subject to Indemnitee's approval, which
shall not be unreasonably withheld) 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
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expense and through counsel of its choice, provided
however, that Indemnitee 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. In the event that the
Indemnitor fails to agree to undertake defense of the
Third Party Claim within thirty (30) days of receipt
of notice of such claim from the Indemnitee, the
Indemnitee shall be entitled to undertake such
defense with counsel of its own choice, and the
Indemnitor shall promptly reimburse the Indemnitee
for all expenses incurred. The Indemnitor without the
written consent of the Indemnitee may settle no Third
Party Claim, 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.
(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 the insurance company, in
insurance premiums as a result of the claim for which
such proceeds were paid). The Indemnitor shall not be
liable for any increase in Losses sustained by the
Indemnitee, resulting from Indemnitee's failure to
give Indemnitor timely written notice of any matter
likely to give rise to a right of Indemnification
hereunder.
ARTICLE 11
TERMINATION
11.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, by written notice by the terminating Party to the other
Parties, whether before or after approval of the matters presented in connection
with the Merger by the Selling Shareholders of the Company, as follows:
(a) by mutual written consent of SAI and the Company; or
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(b) by either SAI or the Company, if the Merger shall not
have been consummated by ____________(provided,
however, that the right to terminate this Agreement
under this Section 11.1(b) shall not be available to
any Party whose failure to fulfill any obligation
under this Agreement has been the cause of or
resulted in the failure of the Merger to occur on or
before such date, and provided further, that this
Agreement may be extended up to 45 days by either
Party by written notice to the other Party if the
Merger would have been consummated but for the
absence of one or more required Approvals or
third-party consents, and such Approval(s) or
consent(s) can reasonably be expected to be obtained
within such 45 day period); or
(c) by either SAI or the Company if a court of competent
jurisdiction or other governmental entity shall have
issued a final order, decree or ruling, or taken any
other action, having the effect of permanently
restraining, enjoining or otherwise prohibiting the
Merger, and all appeals with respect to such order or
action have been exhausted or the time for appeal of
such order, decree, ruling or action shall have
expired (provided, however, that the right to
terminate this Agreement under this Section 11.1(c)
shall not be available to any party which has not
complied with its obligations under Section 5.3); or
(d) by SAI, if a breach of any representation, warranty,
covenant or agreement on the part of the Selling
Shareholders set forth in this Agreement shall have
occurred which would cause the conditions set forth
in Article 7 not to be satisfied, and, that with
respect to any breach of a covenant or agreement
hereunder, such covenant or agreement is incapable of
being cured or, if capable of being cured, shall not
have been cured within ten (10) business days
following receipt by the Company of written notice of
such breach from SAI; or
(e) by the Company, if a breach of any representation,
warranty, covenant or agreement on the part of SAI
set forth in this Agreement shall have occurred which
would cause the conditions set forth in Article 8 not
to be satisfied, and, with respect to any breach of a
covenant or agreement hereunder, such covenant or
agreement is incapable of being cured or, if capable
of being cured, shall not have been cured within ten
(10) business days following receipt by SAI of
written notice of such breach from the Company.
Notwithstanding the foregoing, in the event of an
Escrow Closing, this Agreement may thereafter be
terminated only pursuant to the terms of the Escrow
Agreement.
11.2 Effect of Termination. In the event of termination of this
Agreement pursuant to Section 11.1, there shall be no Liability or obligation on
the part of SAI, the Company, or their respective officers, directors,
shareholders or affiliates, except as provided in Article 10, and further except
for the liability of any Party then in breach of any of its representations,
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warranties, covenants or agreements in this Agreement; and provided, that the
provisions of [Sections 5.9, 5.10 and 6.3, Article 10 and this Section 11.2]
shall remain in full force and effect and survive any termination of this
Agreement.
ARTICLE 12
MISCELLANEOUS
12.1 Survival. The representations, warranties, covenants and
indemnification obligations of the parties 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.
12.2 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.
12.3 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS
WITHOUT GIVING ANY EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS. THE SELLING
SHAREHOLDERS AGREE THAT THEY WILL NOT ASSERT ANY CLAIM AGAINST ANY OFFICER,
DIRECTOR, EMPLOYEE OR AGENT OF SAI OR ANY OF ITS AFFILIATES, PURSUANT TO ANY
CLAIM THEY MAY HAVE UNDER THIS AGREEMENT BY REASON OF ANY FAILURE OR ALLEGED
FAILURE BY SAI 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 ILLINOIS FOR THE COUNTY OF XXXX. EACH PARTY AGREES THAT HE OR IT
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 A STATE COURT
LOCATED IN THE COUNTY OF XXXX IN THE STATE OF ILLINOIS. EACH PARTY 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 SELLING SHAREHOLDERS AT THE ADDRESSES PROVIDED
HEREIN, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING.
NOTHING CONTAINED IN THIS SECTION SHALL AFFECT THE RIGHT OF SAI TO SERVE PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW. IN THE EVENT THAT ANY PARTY SHOULD
COMMENCE OR MAINTAIN ANY ACTION ARISING OUT OF OR RELATED TO THIS AGREEMENT IN A
FORUM OTHER THAN THE STATE COURTS LOCATED IN THE STATE OF ILLINOIS, COUNTY OF
XXXX, THE OTHER PARTY SHALL BE ENTITLED TO MOVE FOR THE DISMISSAL OF SUCH
ACTION, AND THE NON-MOVING PARTY STIPULATES THAT SUCH ACTION SHALL BE DISMISSED.
THE PARTIES AGREE THAT PRIOR TO
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INSTITUTING ANY SUIT, THEY WILL GIVE WRITTEN NOTICE OF THEIR INTENT TO DO SO AND
MAKE A REASONABLE ATTEMPT TO RESOLVE ANY DISPUTE BY NEGOTIATING WITH EACH OTHER
IN GOOD FAITH.
12.4 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.
12.5 Each Party to Bear Own Costs. The Selling Shareholders and SAI
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.
12.6 Entire Agreement; Amendment. This Agreement, its Exhibits and
Schedules, the Escrow Agreement and the other documents delivered pursuant
hereto at the Escrow Closing and 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. Accordingly, this agreement
supercedes, among other things, the SAI/Xxxx XXX and all provisions of the
Letter of Intent or the SV/SAI Agreement relating to the consummation of the
acquisition of the Company by SAI which are covered by the terms of this
Agreement. 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.
12.7 Notices. 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 SAI or King Acquisition at: Security Associates International, Inc.
0000 Xxxxx Xxxxxxxxx Xxxxxxx Xxxx
Xxxxxxxxx Xxxxxxx, Xxxxxxxx 00000-0000
ATTN: PRESIDENT
To KC ACQUISITION CORP. at: KC Acquisition Corp.
X.X. Xxx 0000
Xxxxx Xxxxxxxxxx, XX 00000-0000
To Xx. Xxxxxx Few Sr. at: Xx. Xxxxxx Few Sr.
____________________
____________________
To Xx. Xxxxxxx XxXxxx at: Xx. Xxxxxxx XxXxxx
____________________
____________________
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Any party may change its address for purposes of this Section 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.
12.8 Delays or Omissions. Except as expressly provided herein, no delay
or omission to exercise any right, power or remedy accruing to any party to this
Agreement, upon any breach or default by the other party under this Agreement,
shall impair any such party, 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 party
of any provisions or conditions of this agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies either under this Agreement or by law or otherwise afforded to any
party, shall be cumulative and not alternative.
12.9 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.
12.10 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.
12.11 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and shall not be considered in
construing or interpreting this Agreement.
12.12 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.
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The foregoing Agreement is hereby executed as of the date first above
written.
SECURITY ASSOCIATES
INTERNATIONAL, INC.
By:_____________________________________
Xxxxx X. Xxxxxxx, its President
KING CENTRAL ACQUISITION CORP.
By:_____________________________________
KC ACQUISITION CORP.
By:_____________________________________
SELLING SHAREHOLDERS
By:_____________________________________
Xxxxxx Xxxx, Xx.
By:_____________________________________
Xxxxxxx XxXxxx
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