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Exhibit 10.9
SECURITY ASSOCIATES INTERNATIONAL, INC.
COMMON STOCK SUBSCRIPTION AND PURCHASE AGREEMENT
This Agreement is made as of September 5, 1996, between Security
Associates International, Inc., a Delaware corporation (the "Company"), and TJS
Partners, L.P., a New York limited partnership (the "Purchaser").
1.
1.1. Authorization. The Company will authorize the subscription, issuance
and sale of Three Million Five Hundred Twenty-Five Thousand Six Hundred Eighty
Two (3,525,682) shares of its Common Stock having the rights, privileges and
preferences as set forth in the Certificate of Incorporation and the By-laws in
the form attached to this Agreement as Exhibits 1.1A and 1.1B, respectively.
1.2. Sale of Shares. Subject to the terms and conditions hereof, the
Company will issue and sell to Purchaser, and the Purchaser will buy from the
Company, the total number of shares of its Common Stock specified in Section
1.1 ("New Shares") at a purchase price of $0.442 per New Share (the "Purchase
Price Per Share") for an aggregate purchase price of One Million Five Hundred
Fifty-Eight Thousand Three Hundred Fifty-One Dollars ($1,558,351.00).
1.3. Promissory Note. Subject to the terms and conditions hereof, the
Company will authorize the issuance of, and will issue to Purchaser, the
Promissory Note for the purpose of evidencing the Loan, all as described and
defined in Section 2.
2.
Closing Date; Delivery; Consideration
2.1. Closing Date. The closing of the purchase and sale of the New Shares
hereunder shall be held at the offices of Xxxxxxxx & Xxxxxx, Ltd., Suite 2900,
00 Xxxxx Xxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000 at 9:00 a.m., local time on
September 5, 1996 (the "Closing") or at such other time and place upon which
the Company and the Purchaser shall agree (the date of the Closing is
hereinafter referred to as the "Closing Date").
2.2. Delivery; Consideration. At the Closing, the Company shall deliver
to Purchaser (a) a certificate or certificates, registered in Purchaser's name,
representing the number of New Shares to be purchased by Purchaser, against
delivery by Purchaser of consideration therefor, which shall consist of payment
of One Million Five Hundred Fifty-Eight Thousand Three Hundred Fifty-One
Dollars ($1,558,351.00) by wire transfer of same day funds to the Company, (b)
the Promissory Note, duly executed by the Company, payable to the
Purchaser and evidencing the Loan against the advance by the Purchaser of the
principal
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amount of such Loan (as defined below), and (c) options and warrants
granting to the Purchaser rights which are, in all material respects, identical
to the rights of the holders of the Remaining Options (as defined below)
evidenced by the Standby Option and Warrant Agreement in the form of Exhibit
2.2.
2.3. The "Loan" shall be (i) in the principal amount of $3,441,649.00,
(ii) subordinate to any Senior Indebtedness (as defined below), whether now
existing or hereafter arising, (iii) for a term not to exceed the earlier of
twelve (12) months or thirty (30) days after the completion of the rights
offering ("Rights Offering") described in Section 7.12 and the receipt by the
Company of the proceeds therefrom, provided that the Company's obligation to
repay the Loan prior to the expiration of twelve (12) months shall be limited
to the net proceeds of the Rights Offering, and (iv) evidenced by and otherwise
having the terms set forth in a non-negotiable promissory note in the form
attached as Exhibit 2.3 (the "Promissory Note"). Purchaser agrees that it will
not sell, assign, transfer or pledge the Promissory Note except in compliance
with the Securities Act of 1933, as amended, (the "Securities Act") and any
applicable state securities laws. Purchaser agrees that in the event a new
senior lender requests modification to the subordination provisions of the
Promissory Note as a condition of lending to the Company, Purchaser will agree
to any commercially reasonable requests to modify such provisions of the
Promissory Note. As used herein "Senior Indebtedness" shall mean the principal
of and unpaid accrued interest on (a) all indebtedness of the Company to banks,
insurance companies or other financial institutions regularly engaged in the
business of lending money, which is for money borrowed by the Company (whether
or not secured), (b) any such indebtedness or debentures, notes or other
evidence of indebtedness issued in exchange for such Senior Indebtedness
referred to in clause (a) above, (c) 12% Notes in the principal amount of
$387,921.00 issued by the Company in 1992, 1993 and 1994, which Notes are
secured by a first lien on monitoring contracts owned by the Company, (d) 14%
Convertible Notes in the principal amount of $170,000.00, which Notes are
convertible into 85,000 shares of the Company's Common Stock and are secured by
a second lien on monitoring contracts owned by the Company, and (e) a
Promissory Note in the principal amount of $777,475.55 issued by All Security
Monitoring Services, L.L.C. ("All Security") to Xxxxxxx X. Xxxxx, which Note is
secured by all of the assets of All Security and which represents the remaining
portion of the purchase price of All Security's business acquired in 1995.
3.
Representations and Warranties of the Company
The Company hereby severally represents and warrants to the Purchaser with
respect to the sale of the New Shares as follows:
3.1. Organization and Standing; Certificate of Incorporation and By-laws.
The Company is a corporation duly organized and validly existing under, and by
virtue of, the laws of the State of Delaware and is in good standing under such
laws. The Company has requisite corporate power and authority to own and
operate its properties and assets, and to carry on its business as presently
conducted and as proposed to be conducted. The Company is duly
qualified or licensed and in good standing as a foreign corporation in each
jurisdiction wherein
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the character of its properties or the nature of the activities conducted by
it makes such qualification or licensing necessary, except where the failure
to be so qualified or licensed would not have a material adverse effect on the
Company or its property or business. The attached copies of the Company's
Certificate of Incorporation and By-laws are true, correct and complete and
contain all amendments through the Closing Date.
3.2. Corporate Power. The Company will have at the Closing Date all
requisite legal and corporate power and authority to execute and deliver this
Agreement, to sell and issue the New Shares hereunder, to issue, and borrow
pursuant to, the Promissory Note and to carry out and perform its obligations
under the terms of this Agreement.
3.3. Subsidiaries. Other than as set forth on Schedule 3.3, the Company
has no subsidiaries or affiliated companies and does not otherwise own or
control, directly or indirectly, any equity interest in any corporation,
association or business entity. As used herein, a "subsidiary" is any
corporation, limited liability company or partnership with respect to which the
Company owns fifty percent (50%) or more of the equity interests and any
subsidiary of a subsidiary.
3.4. Capitalization. The authorized capital stock of the Company will
consist, immediately prior to the Closing, of 10,000,000 shares of common
stock, $.001 par value (the "Common Stock"), of which 3,669,587 of such shares
(excluding the New Shares) are issued and outstanding. The outstanding shares
have been duly authorized and validly issued, and are fully paid and
nonassessable. Options and warrants to purchase 463,088 shares of Common Stock
are issued and outstanding. The Company will issue, concurrently with the
Closing, options to purchase 500,000 shares of Common Stock in connection with
the transactions contemplated by Section 7.10 hereof. At or prior to the
Closing the options and warrants for in the aggregate 742,155 shares of Common
Stock held by Xxxxxx X. Xxxxx ("Xxxxx"), Xxxxx X. Xxxxxxx ("Xxxxxxx") and
Xxxxxxx Xxxxx ("Xxxxx"), officers of the Company, shall be canceled and shall
be of no further force or effect and the options for in the aggregate 132,528
shares of Common Stock held by Xxxxx X. Xxxxxxx and Xxxxxx Xxxxxx shall be
canceled and, in either case, shall be of no further force and effect. All
outstanding securities of the Company were issued in compliance with applicable
Federal and state securities laws. Except set forth above, there are no
options, warrants or other rights to purchase any of the Company's authorized
and unissued capital stock. The holders of Common Stock and of options to
purchase Common Stock (other than options to be canceled or exercised at or
prior to Closing) together with the number of shares held or rights to such
options and the exercise price and periods during which such options or
debentures may be exercised or converted are set forth on Schedule 3.4. Except
as set forth on Schedule 3.4 attached hereto, there will be as of the Closing
Date no other holders of Common Stock or outstanding options, warrants or other
rights, commitments or arrangements, written or oral, to which the Company is a
party or by which it is bound, to purchase or otherwise acquire any authorized
but unissued shares of Common Stock of the Company or any security directly or
indirectly convertible into or exchangeable or exercisable for any Common Stock
of the Company. The options and warrants listed on Schedule 3.4 which are to
remain outstanding as of the Closing Date are referred to collectively as the
"Remaining Options."
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3.5. Authorization. All corporate action on the part of the Company, its
directors and stockholders necessary for the authorization, execution, delivery
and performance of this Agreement by the Company, the authorization, sale,
issuance and delivery of the New Shares or the issuance and borrowing under the
Promissory Note and the performance of all of the Company's obligations
hereunder has been taken or will be taken prior to the Closing. This
Agreement, when executed and delivered by the Company, shall constitute a valid
and binding obligation of the Company, enforceable in accordance with its
terms. The New Shares, when issued in compliance with the provisions of this
Agreement, will be validly issued, fully paid and nonassessable and will have
the rights set forth in the Certificate of Incorporation and the By-laws. No
further approval or authorization of the stockholders or the directors of the
Company or of any governmental authority or agency will be required for the
issuance and sale of the New Shares or the issuance of the Promissory Note, as
contemplated by this Agreement. Except as set forth in Schedule 3.5 attached
hereto, no stockholder of the Company or any other person is entitled to any
preemptive rights with respect to the purchase or sale of any securities by the
Company. Except as set forth in Schedule 3.5 attached hereto, the Company, in
light of its business or proposed business, does not require any consent,
approval, authorization or order of, or declaration, filing or registration
with, any court or governmental or regulatory agency or board in connection
with the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.
3.6. Financial Statements. The Company has delivered to Purchaser its
combined audited balance sheet and statement of operations and the audited
balance sheets and statements of operations of each of its subsidiaries for the
periods ended December 31, 1992, 1993, and 1994, its combined unaudited balance
sheet and statement of operations for the period ended December 31, 1995 and
its combined unaudited balance sheet and statement of operations for the three
month period ended June 30, 1996 (collectively, the "Financial Statements").
The Financial Statements are complete and correct in all material respects and
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated, except that the
unaudited financial statements do not contain footnotes. The Financial
Statements accurately set out and describe the financial condition and
operating results of the Company on a combined basis and of each of its
subsidiaries as of the dates, and during the periods, indicated therein.
3.7. Absence of Changes. Except as set forth in Schedule 3.7 attached
hereto and the transactions contemplated by Section 7.10 hereof, since June 30,
1996: (a) neither the Company nor any of its subsidiaries has entered into any
agreement or transaction which was not in the ordinary course of business; (b)
there has been no damage to, destruction of or loss of physical property
(whether or not covered by insurance) materially adversely affecting the
business or operations of the Company or any of its subsidiaries; (c) neither
the Company nor any of its subsidiaries have declared or paid any dividend or
made any distribution (in cash, securities or other property) on its stock, or
redeemed, purchased or otherwise acquired any of its stock; (d) neither the
Company nor any subsidiary has increased the compensation of any of its
respective officers, or the rate of pay of its employees as a group, except as
part of regular compensation increases in the ordinary course of business; and
the Company does not know of the impending resignation or termination of
employment of any key officer or employee of the Company or any of its
subsidiaries that if consummated would have a materially adverse effect
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on its business, except that Xxxxxx Xxxxxxx, manager of Securities
Associates Command Center II, LLC, has orally agreed to work for the Company
only until December 31, 1996; (e) there has been no labor dispute involving the
Company, any subsidiary or their respective employees and none is pending or,
to the best of the Company's knowledge, threatened; (f) there has not been any
change, except in the ordinary course of business, in the contingent
obligations of the Company or any subsidiary, by way of guaranty, endorsement,
indemnity, warranty or otherwise; (g) there have not been any loans made by the
Company or any subsidiary to any of its employees, officers or directors other
than travel advances and office advances made in the ordinary course of
business; (h) neither the Company nor any subsidiary has borrowed any amount or
incurred or become subject to any liabilities (absolute or contingent), except
expenses incurred in the ordinary course of business; (i) neither the Company
nor any subsidiary has paid any obligations or liabilities, other than current
liabilities paid in the ordinary course of business; (j) neither the Company
nor any subsidiary has mortgaged, pledged or subjected to any lien, charge or
any other encumbrance, any of its properties or assets; (k) neither the Company
nor any subsidiary has sold, assigned or transferred any of its assets other
than in the ordinary course of business; (l) neither the Company nor any
subsidiary has made any capital expenditures or commitments therefor except in
the ordinary course of business; and (m) to the best knowledge of the Company,
there has been no other event or condition of any character pertaining to and
materially adversely affecting the assets or business of the Company or any
subsidiary.
3.8. Material Liabilities. Except as disclosed on Schedule 3.8 attached
hereto, neither the Company nor any subsidiary has any material liabilities or
obligations, absolute or contingent (individually or in the aggregate), except
(i) the liabilities and obligations set forth in the Financial Statements; (ii)
liabilities and obligations which have been incurred subsequent to June 30,
1996 in the ordinary course of business which have not been, in the aggregate,
materially adverse; (iii) liabilities and obligations under sales, procurement
and other contracts and arrangements entered into in the ordinary course of
business; (iv) the Company's obligations in connection with the transactions
contemplated by Section 7.10 and the payment of certain debts of the Company
and its subsidiaries in connection therewith.
3.9. Title to Properties and Assets; Liens, etc. The Company and its
subsidiaries have good and marketable title to their properties and assets, and
have good title to all their leasehold interests, in each case subject to no
mortgage, pledge, lien, lease, encumbrance or charge, other than (i) the lien
for current taxes not yet due and payable; (ii) possible minor liens and
encumbrances which do not in any case materially detract from the value of the
property subject thereto or materially impair the operations of the Company,
and which have not arisen otherwise than in the ordinary course of business;
and (iii) the liens and security interests granted to Security Leasing
Partners, LP of St. Louis, Missouri, Xxxxxxx X. Xxxxx, the holders of certain
promissory notes issued by subsidiaries of the Company, NBD Bank, and certain
holders of 12% and 14% promissory notes issued by the Company, all as set forth
in Schedule 3.9 attached hereto. The Company owns or leases all such
properties as are necessary to its operations as now conducted and such
properties are in good operating condition and repair, reasonable wear and tear
excepted.
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3.10. Compliance with Other Instruments, None Burdensome, etc. The
Company and its subsidiaries are not in violation of any term of their
respective Certificates of Incorporation or By-laws, or other organizational
documents, or, in any material respect, of any term or provision of any
material mortgage, indebtedness, indenture, contract, agreement, instrument,
judgment or decree, and are not in violation of any order, statute, rule or
regulation applicable to the Company where such violation would materially and
adversely affect the Company and its subsidiaries, taken as a whole. The
execution, delivery and performance of and compliance with this Agreement, and
the issuance of the New Shares and the Promissory Note to Purchaser (i) have
not resulted and will not result in any violation of, or conflict with, or
constitute a default under, the Certificate of Incorporation or By-laws of the
Company or any of the organizational documents of its subsidiaries or any of
their respective agreements, (ii) have not resulted and will not result in the
creation of, any mortgage, pledge, lien, encumbrance or charge upon any of the
properties or assets of the Company or its subsidiaries, (iii) have not
resulted and will not result in the loss of any license, certificate, legal
privilege or legal right enjoyed or possessed by the Company; (iv) do not and
will not give any party to any agreement to which the Company is a party a
right of termination; or (v) do not and will not require the consent of any
other person or entity under any agreement, indenture, mortgage, document or
other instrument or undertaking by which the Company is bound or to which any
of its properties are subject. There exist no violations or defaults under the
provisions of this Section 3.10 which materially and adversely affect the
business of the Company, its subsidiaries or any of their respective properties
or assets.
3.11. Intangible Assets. The Company and its subsidiaries (i) own or have
the right to use, free and clear of all liens, claims and restrictions, all
trademarks, service marks, trade names, copyrights (and licenses with respect
to the foregoing) used in the conduct of their business as now conducted or as
proposed to be conducted without infringing upon or otherwise acting adversely
to the right or claimed right of any person under or with respect to any of the
foregoing; and (ii) except as disclosed on Schedule 3.11, are not obligated or
under any liability whatsoever to make any payments by way of royalties, fees
or otherwise to any owner of, licensor of, or other claimant to, any trademark,
trade name, copyright or other intangible asset, with respect to the use
thereof or in connection with the conduct of its business or otherwise. The
Company and its subsidiaries have not granted any licenses with respect to
their business as proposed. The business of the Company does not, and will not
cause the Company to, violate any patent, trademark, service xxxx, trade name,
trade secret, copyright, license or proprietary interest of any other person.
The Company possesses all proprietary technology necessary for the conduct of
its business, both as proposed to be conducted in the Company's business plan
and as presently conducted.
3.12. Litigation, etc. There are no actions, suits, proceedings or
investigations pending or, to the best knowledge of the Company, threatened
against the Company or any subsidiary or their respective properties before any
court, arbitration panel or governmental agency (nor, to the best of the
Company's knowledge, is there any reasonable basis therefor) except as
described on Schedule 3.12.
3.13. Employees. Except as disclosed on Schedule 3.13A, no officer,
director, employee or stockholder, or any member of their immediate families,
is, directly or indirectly,
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interested in any material contract with the Company. No officer of the
Company is a party to or bound by any agreement, contract or commitment, or
subject to any restrictions (including confidentiality or non-compete
restrictions) in connection with any previous or current employment of any such
person, which adversely affects, or in the future may adversely affect, the
business, or the proposed business of the Company. The Company is not a
guarantor or indemnitor of any indebtedness of any other person, firm or
corporation, except as disclosed on Schedule 3.13B.
3.14. Registration Rights. Except for the rights granted in or pursuant
to this Agreement, the Company is not under any contractual obligation to
register with any federal or state securities regulatory body, any of its
presently outstanding securities or any of its securities which may hereafter
be issued or which permit or entitle the holder thereof to include securities
of the Company in any registration statement filed by the Company.
3.15. Governmental Consent, etc. No consent, approval or authorization of
(or designation, declaration or filing with) any governmental agency on the
part of the Company is required in connection with the valid execution and
delivery of this Agreement, or the offer, sale or issuance of the New Shares.
3.16. Offering. Subject to the accuracy of the Purchaser's
representations in Section 4 hereof and in response to the Company's
Suitability Questionnaire in the form attached hereto as Exhibit 3.16 (the
"Suitability Questionnaire"), the offer, sale and issuance of the New Shares
and the issue of the Promissory Notes in conformity with the terms of this
Agreement, constitute transactions exempt from the registration requirements of
Section 5 of the Securities Act.
3.17. Brokers or Finders; Other Offers. Neither the Company nor any of
its subsidiaries has incurred, or will incur, directly or indirectly, as a
result of any action taken by the Company, any liability for brokerage or
finders' fees or agents' commissions or any similar charges in connection with
this Agreement, except for the finders' fee due Pro Finance Associates, Inc. on
the Closing of this Agreement in accordance with the letter attached hereto as
Exhibit 3.17, which fee shall not exceed $110,000.00. The payment of said fee
shall be solely the obligation of the Company.
3.18. Tax Matters. The Company and its subsidiaries: (i) have timely
filed all tax returns that are required to have been filed by them with all
appropriate federal, state, county and local governmental agencies (and all
such returns fairly reflect the Company's operations for tax purposes), and all
taxes, fees, assessments and governmental charges of any nature shown by such
returns to be due and payable have been paid, except for those amounts being
contested in good faith and for which appropriate amounts have been reserved in
accordance with generally accepted accounting principles and except for certain
filings with the states of Illinois and Delaware which have been brought
current; (ii) have timely paid all taxes owed by them which they obligated to
withhold from amounts owing to any employee (including without limitation
social security taxes), creditor or third party (other than taxes the validity
of which are being contested in good faith by appropriate proceedings) and
except for certain state franchise taxes in the states of Illinois and
Delaware which have been brought current; and
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(iii) have not waived any statute of limitations with respect to
taxes or agreed to any extension of time with respect to a tax assessment or
deficiency. The assessment of any additional taxes for periods for which
returns have been filed is not expected to exceed the recorded liability
therefor, and, to the best of the Company's knowledge, there are no material
unresolved questions or claims concerning the Company's tax liability. Neither
the Company's nor any subsidiary's tax returns have been reviewed or audited by
any federal, state, local or county taxing authority. To the best of the
Company's knowledge, there is no pending dispute with any taxing authority
relating to any of said returns which, if determined adversely to the Company
or its subsidiaries, would result in the assertion by any taxing authority of
any valid deficiency in any material amount for taxes.
3.19. Insurance. The Company and its subsidiaries have valid workers'
compensation, fire, casualty and liability insurance policies, in such amounts
and with such coverage as are carried by similar companies in the Company's
industry, in each case with reputable insurers. The Company is not in default
with respect to any provision contained in any such policy and has not failed
to give any notice or present any claim under any such policy in due and timely
fashion. There are no outstanding unpaid claims under any such policy. The
Company has not received notice of, nor has it knowledge of, any inaccuracy in
any application for such policies, any failure to pay premiums when due or any
similar state of facts that might form the basis for termination of any such
insurance. The Company has not canceled or terminated any insurance policy,
nor has any insurance company canceled or terminated any insurance policy of
the Company.
3.20. Environmental and Safety Regulations. The Company knows of no
violation or violations by the Company, any subsidiary, or their respective
employees or agents of any environmental or safety regulation that in the
aggregate would have a materially adverse effect on the business, properties,
prospects or financial condition of the Company.
3.21. Disclosure. The Company's Confidential Placement Memorandum dated
March 19, 1996, attached hereto as Exhibit 3.21A, was based upon facts and
assumptions that were valid on March 19, 1996, but which no longer are valid,
in part, as of the date of this Agreement. This Agreement with the Schedules
and Exhibits hereto and the Company's Pro Forma Projected Consolidated
Statement as of June 30, 1996 (the "Pro Forma Statement") attached hereto as
Exhibit 3.21B, are based on updated facts and assumptions and when taken as a
whole, do not contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances under which they were
made. The Pro Forma Statement was prepared in good faith; however, the Company
does not warrant that it will achieve the financial projections contained
therein. There exists no fact or circumstance which, to the knowledge of the
Company, materially adversely affects or will materially adversely affect the
business, properties or assets, or condition, financial or otherwise, of the
Company, both at the present and as proposed by the Company in its business
plan, except as set forth in Schedule 3.21 attached hereto.
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3.22. Only Common Voting Stock Will Be Outstanding. The only issued and
outstanding shares of capital stock of the Company at Closing will be common
voting shares possessing identical rights and privileges.
3.23. Pension Plans. Except as set forth on Schedule 3.23, the Company
does not have any pension, health, retirement, profit sharing, bonus, stock
purchase, stock option, severance or similar employee benefit plans or
obligations, whether of a legally binding nature or in the nature of informal
understandings.
3.24. Representations and Warranties True on Closing Date. The
representations and warranties of the Company contained in this Agreement and
all information contained in any exhibit, schedule or attachment hereto or in
any writing delivered by the Company to the Purchaser will be true and correct
in all material respects at the Closing Date as though then made and as though
the Closing Date were substituted for the date of this Agreement throughout
this Agreement.
4.
Representations and Warranties of the Purchaser
The Purchaser hereby severally represents and warrants to the Company with
respect to the purchase of the New Shares as follows:
4.1. Investment. It is acquiring the New Shares and the Promissory Note
for investment for its own account, not as a nominee or agent, and not with the
view to, or for resale in connection with, any distribution thereof. It
understands that neither the New Shares nor the Promissory Note have been, nor
will be, registered under the Securities Act or the securities laws and
regulations of any state by reason of specific exemption(s) from the
registration provisions of the Securities Act and such state laws and
regulations, the availability of which depends upon, among other things, the
bona fide nature of the investment intent and the accuracy of the Purchaser's
representations as expressed herein and in the Suitability Questionnaire.
4.2. Legend. Purchaser acknowledges that the certificates representing
the New Shares, will bear a legend of substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 OR ANY STATE SECURITIES LAWS. SUCH
SECURITIES MAY NOT BE SOLD OR TRANSFERRED WITHOUT
SUCH REGISTRATION, UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO IT
THAT A PROPOSED SALE OR TRANSFER DOES NOT REQUIRE
REGISTRATION UNDER APPLICABLE LAW.
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4.3. Rule 144. Purchaser acknowledges that the New Shares and the
Promissory Note, must be held indefinitely unless subsequently registered under
the Securities Act and applicable state securities laws and regulations or
unless an exemption from such registration is available. Purchaser is aware of
the provisions of Rule 144 promulgated under the Securities Act which permit
limited resale of securities purchased in a private placement subject to the
satisfaction of certain conditions.
4.4. No Public Market. Purchaser understands that there is only one
public market maker for the Common Stock of the Company, that the trading in
the Common Stock is extremely limited and that the Company has made no
assurances that a public market will ever exist for the Company's securities.
Purchaser acknowledges that because the shares of Common Stock acquired hereby
will not be registered under the Securities Act, Purchaser will not be able to
participate in any public market for the Common Stock until such time as the
shares acquired by Purchaser are registered under the Securities Act and
applicable state laws and regulations or exemptions from such registration is
available.
4.5. Access to Data. Purchaser has had an opportunity to discuss the
Company's business, management and financial affairs with the Company's
management and has had the opportunity to review the Company's facilities and
business plan. It understands that such discussions, as well as any written
information issued by the Company, including the business plan, were intended
to describe certain aspects of the Company's business and prospects but were
not a thorough or exhaustive description. All questions of Purchaser have been
answered, and all information requested by Purchaser has been supplied, to the
complete satisfaction of Purchaser.
4.6. Authorization. This Agreement, when executed and delivered by
Purchaser, will constitute a valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms.
4.7. Brokers or Finders. The Purchaser has not incurred and will not
incur, directly or indirectly, as a result of any action taken by Purchaser,
any liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement.
4.8. Organization and Standing; Articles of Partnership. The Purchaser is
a limited partnership duly formed and existing under, and by virtue of, the
laws of the State of New York and is in good standing under such laws. The
Purchaser has requisite corporate power and authority to own and operate its
properties and assets, and to carry on its business as presently conducted and
as proposed to be conducted. The Purchaser has furnished the Company with
copies of its Articles of Partnership, as amended and its financial statements
as of December 31, 1995. Said copies are true, correct and complete and
contain all amendments through the Closing Date and said financial statements
accurately describe the financial condition of the Purchaser as of the date
thereof, and in all material respects as of the Closing Date.
4.9. Power and Authority. The Purchaser will have at the Closing Date all
requisite power and authority to execute and deliver this Agreement, to
subscribe and purchase the New
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Shares and to make the Loan hereunder and to carry out and perform its
obligations under the terms of this Agreement.
4.10. Authorization. All action on the part of the Purchaser necessary
for the authorization, execution, delivery and performance of this Agreement by
the Purchaser, the subscription and purchase of the New Shares, the making of
the Loan, and the performance of all of the Purchaser's obligations hereunder
has been taken or will be taken prior to the Closing. This Agreement, when
executed and delivered by the Purchaser, shall constitute a valid and binding
obligation of the Purchaser, enforceable in accordance with its terms.
5.
Purchaser's Conditions to Closing
The Purchaser's obligations to purchase the Shares at the Closing are
subject to the fulfillment of the following conditions, the waiver of which
shall not be effective unless it is provided in writing by the Purchaser:
5.1. Correctness of Representations and Warranties. The representations
and warranties made by the Company in Section 3 hereof shall be true and
correct when made, and shall be true and correct on the Closing Date as if made
on and as of the Closing Date.
5.2. Covenants. All covenants, agreements and conditions contained in
this Agreement are to be performed by the Company on or prior to the Closing
Date shall have been performed or complied with.
5.3. Compliance with State Securities Laws. The Company shall have
obtained all permits and qualifications required by the State of New York for
the offer and sale of the New Shares, or shall have the availability of
exemptions therefrom.
5.4. Legal Matters. All material matters of a legal nature which pertain
to this Agreement and the transactions contemplated hereby shall have been
reasonably approved by counsel to the Purchaser.
5.5. Directors. Effective as of the Closing Date, the Company's Board of
Directors will consist of those persons whose names appear in Schedule 5.5.
5.6. Cancellation and/or Exercise of Certain Options and Warrants. The
options and warrants which, as described in Section 3.4 above, are to be
canceled or exercised at or prior to Closing shall have been so canceled or
exercised and written evidence thereof, reasonably satisfactory to the
Purchaser, shall have been provided to the Purchaser.
5.7. Completion of Acquisitions. The acquisitions contemplated by Section
7.10 shall occur simultaneously with the Closing of the transactions
contemplated by this Agreement on the Closing Date.
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5.8. Opinion of Company's Counsel. The Purchaser shall have received from
Xxxxxxxx & Xxxxxx, Ltd., counsel to the Company, an opinion dated the Closing
Date, in the form of Exhibit 5.8.
5.9. Officer's and Other Certificates. The Company shall have delivered
to the Purchaser the following:
(a) an officer's certificate, dated the Closing Date, stating that the
conditions specified in Sections 5.1, 5.2, 5.6 and 5.7 have been satisfied on
or prior to the Closing Date;
(b) incumbency certificates for the officers of the Company executing this
Agreement or any documents delivered in connection with this Agreement;
(c) copies of the resolutions adopted by the Company's Board of Directors
and the stockholders (to the extent required by the Company's Certificate of
Incorporation and By-laws) of the Company authorizing the execution, delivery
and performance of this Agreement and the transactions contemplated hereby,
certified to by the Secretary of the Company as being in full force and effect
on the Closing Date;
(d) a certified copy of the Certificate of Incorporation of the Company,
as then in effect, and as filed with the Secretary of State of Delaware;
(e) a certificate, dated as of a recent date, of the Secretary of State of
Delaware attesting as to the good standing of the Company in such State;
(f) a stock certificate registered in the name of the Purchaser
representing the New Shares purchased by the Purchaser on the Closing Date;
(g) a copy of the Company's By-laws, as amended, certified to by the
Secretary of the Company as being in full force and effect on the Closing Date;
and
(h) such other certificates or documents as the Purchaser or its counsel
may reasonably request relating to the transactions contemplated hereby.
5.10. Legal Action. There shall not have been instituted or threatened
any legal proceeding seeking to prohibit or threaten the consummation of the
transactions contemplated by this Agreement. None of the parties hereto shall
be prohibited by any order, writ, injunction or decree of any governmental body
of competent jurisdiction from consummating the transactions contemplated by
this Agreement.
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6.
Company's Conditions to Closing
The Company's obligation to sell and issue the New Shares and to issue the
Promissory Note the Closing Date is subject to the fulfillment as of the
Closing Date of the following conditions, the waiver of which shall not be
effective unless it is provided in writing:
6.1. Representations. The representations made by the Purchaser in
Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Closing Date.
6.2. Compliance with State Securities Laws. The Company shall have
obtained all permits and qualifications required by any state for the offer and
sale of the New Shares, or shall have the availability of exemptions therefrom.
6.3. Legal Matters. All material matters of a legal nature which pertain
to this Agreement, and the transactions contemplated hereby, shall have been
reasonably approved by the counsel to the Company.
6.4. Loan from Purchaser. At the Closing, Purchaser shall advance the
principal amount of the Loan to the Company.
6.5. Issue of an Irrevocable Voting Proxy by the Purchaser. The Purchaser
shall have executed and delivered an irrevocable power of attorney in favor of
Xxxxx and Xxxxxxx empowering them jointly (or individually in the event of the
death or resignation of one of them as an officer of the Company), for a period
ending on the earlier of (i) the date of the Company's second annual meeting
following the Closing or (ii) eighteen (18) months following the Closing, to
vote all the New Shares as well as any other shares of the capital stock of the
Company acquired by Purchaser; provided, however, that during such period,
Xxxxx and Xxxxxxx shall not be entitled to vote any of the Purchaser's shares
on any material corporate matter, which for purposes hereof shall include (A)
any proposal to amend the Certificate of Incorporation or the By-laws of the
Company or (B) any other matter that would impair, diminish or adversely affect
the Purchaser's rights as a stockholder of the Company as compared to any other
holders of Common Stock; provided that such proxy shall immediately terminate
upon the occurrence of an Event of Default as defined in the Promissory Note.
The precise terms and conditions of said power of attorney are set forth in the
Power of Attorney attached as Exhibit 6.5.
6.6. Suitability Questionnaire. The Purchaser will have executed and
delivered to the Company a Suitability Questionnaire, acceptable to counsel for
the Company.
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7.
Affirmative Covenants of the Company
The Company hereby covenants and agrees as follows:
7.1. Key Man Insurance. As soon as practicable, but no later than ninety
(90) days after the Closing, the Company shall have obtained, and shall
maintain, key-man life insurance policies from a nationally recognized
insurance company, for the benefit of the Company on the lives of Xxxxx and
Xxxxxxx, each policy to be in the amount of $500,000.00.
7.2. Financial Information. Subject to Section 7.5, from the date of this
Agreement until the time of the Company's first public offering ( the "Initial
Public Offering"), the Company will mail the following reports to the Purchaser
for so long as, and at any time when, Purchaser is the holder of the Promissory
Note or a holder of at least fifteen percent (15%) of the issued and
outstanding Common Stock of the Company.
(a) As soon as practicable, but not later than sixty (60) days after the
Closing Date, the Company shall deliver to Purchaser its combined audited
balance sheet and statement of operations and the audited balance sheets
and statements of operations of each of its subsidiaries for the fiscal
year ended December 31, 1995.
(b) As soon as practicable after the end of each fiscal year beginning
with the fiscal year ending December 31, 1996, and in any event within
ninety (90) days thereafter, unaudited consolidated balance sheets of the
Company and its subsidiaries, if any, as of the end of such fiscal year,
and consolidated statements of income and consolidated statements of
changes in financial position of the Company and its subsidiaries, if
any, for such year, prepared in accordance with generally accepted
accounting principles and setting forth in each case in comparative form
the figures for the previous fiscal year, all in reasonable detail, which
statements shall be audited by independent public accountants of national
standing selected by the Company and provided to Purchaser in audited
form no later than six (6) months after the end of each fiscal year.
(c) As soon as practicable after the end of the first, second and third
quarterly accounting periods in each fiscal year of the Company and in
any event no later than sixty (60) days thereafter, an unaudited
consolidated balance sheet of the Company and its subsidiaries, if any,
as of the end of each such quarterly period, and consolidated statements
of income and consolidated statements of changes in financial condition
of the Company and its subsidiaries, if any, for such a period and for
the current fiscal year to date, prepared in accordance with generally
accepted accounting principles (other than for accompanying notes), all
in reasonable detail and signed, subject to changes resulting from
year-end audit adjustments, by the principal financial or accounting
officer of the Company.
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(d) Contemporaneously with their delivery to holders of the Company's
Common Stock, a copy of each report or other communication delivered to
holders of its Common Stock.
7.3. Additional Information. Subject to Section 7.5, as long as Purchaser
is the holder of the Promissory Note or, at any time when Purchaser is a holder
of at least fifteen percent (15%) of the total issued and outstanding Common
Stock of the Company, the Company will deliver or provide to Purchaser:
(a) Within thirty (30) days prior to the beginning of each fiscal year,
an Annual Plan. The Annual Plan shall set forth full and complete
forecasted balance sheets, income statements and statements of cash flow
for such fiscal year and for each month within that year. The Annual
Plan shall also describe the marketing, organization and staffing and
financial strategies which support the Annual Plan's forecasted figures.
(b) Promptly after each meeting or the execution of an action by written
consent, copies of the minutes of proceedings or actions by written
consent of the Company's Board of Directors and stockholders.
(c) For so long as Purchaser is eligible to receive reports under this
Section 7.3, it shall also have the right, at its expense, to visit and
inspect any of the properties of the Company or any of it its
subsidiaries, to examine its books of account and records, and to discuss
their affairs, finances and accountants with their officers, all at such
reasonable times as often may be reasonably requested, provided, however,
that the Company shall not be obligated to provide any information, other
than to the designee(s) of Purchaser on the Board of Directors, that it
reasonably considers to be a trade secret or to contain confidential
information.
7.4. Assignment of Rights to Financial Information. The rights granted
pursuant to Sections 7.2 and 7.3 may not be assigned or otherwise conveyed by
Purchaser or by any subsequent transferee of any such rights without the prior
written consent of the Company, other than in connection with the pro rata
distribution of its interests under this Agreement to its partners as permitted
by Section 11.3 hereof unless they ask not to receive such information.
7.5. Termination Covenants. The covenants set forth in Section 7 shall
terminate and be of no further force or effect at such time as the Company is
required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
7.6. Other Insurance. From and after the Closing, the Company shall
maintain valid policies of worker's compensation insurance and such other
insurance with respect to its properties and business of the kinds, in amounts
and with insurers as directed from time to time by the Company's Board of
Directors. The activities and operations of the Company will be conducted in a
manner so as to conform to all applicable provisions of such insurance
policies.
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7.7. Taxes and Other Liabilities. The Company will pay and discharge,
before the same become delinquent and before penalties accrue thereon, all
taxes, assessments and governmental charges upon or against it or any of its
properties, and all its other material liabilities at any time existing, except
to the extent and so long as (a) the same are being contested in good faith and
by appropriate proceedings in such manner as not to cause any materially
adverse effect upon the financial condition of the Company or the loss of any
right of redemption from any sale thereunder and (b) the Company shall have set
aside on its books reserves (segregated to the extent required by generally
accepted accounting principles) deemed by it adequate with respect thereto.
7.8. Notice of Litigation and Disputes. The Company will promptly notify
Purchaser of any significant suits or litigation instituted against it or any
of its subsidiaries, or disputes that have a high probability of resulting in
material litigation.
7.9. Election of Directors. So long as, and at any time when, at least
fifteen percent (15%) of the shares issued hereunder are held of record by
Purchaser, (a) Xxxxx and Xxxxxxx agree that in any election of a director or
directors of the Company, they shall vote their shares of capital stock of the
Company and the New Shares with respect to which they will have a proxy in such
a manner that immediately after such election the Company's Board of Directors
shall include two designees of Purchaser; (b) the Company will use its best
efforts to cause such designees to be elected to the Company's Board of
Directors; and (c) in the event of any vacancy on the Board of Directors, the
Company and the Purchaser will use their best efforts to fill the vacancy such
that the Board will include such designees. The Company covenants that at all
times on or after thirty (30) days following the Closing, its By-laws will
contain provisions authorizing no more than seven (7) directors and
indemnifying its directors to the fullest extent permitted under applicable
law. In addition, at least one of Purchaser's designees shall be appointed to
each of the committees established or maintained by the Board of Directors.
7.10. Acquisition by the Company of Minority Interests in Subsidiaries.
The Company owns sixty percent (60%) of all the outstanding membership
interests of Monitor Service Group, LLC, an Illinois limited liability company
("MSG"). MSG, in turn, owns fifty percent (50%) of the outstanding membership
interests of Security Associates Command Center II, LLC, a Michigan limited
liability company ("SACC"). The Company will acquire, directly or through a
wholly-owned subsidiary, free and clear of all liens and encumbrances, at or
before the Closing all the outstanding membership interests in MSG and SACC not
then owned by the Company. On or before the Closing, the Company will own,
directly or indirectly, all of the outstanding membership interests in MSG and
SACC.
7.11. Use of Funds. The Company will use the proceeds from the sale of
the New Shares and from the Loan as provided on Schedule 7.11.
7.12. Rights Offering. The Company, within ten (10) days of receipt of
notice from the Purchaser to do so, shall initiate the process of preparing the
registration of a rights offering under the Securities Act (the "Rights
Offering"), or such other offering as the Parties may agree
to. Pursuant to the Rights Offering, if all such Rights are exercised, the
planned proceeds of the
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Rights Offering shall equal in the aggregate at least two times the initial
principal amount of the Loan. If the Company and the Purchaser shall agree,
the Company shall initiate an initial public offering of the Company's Common
Stock (an "Initial Public Offering") in lieu of the Rights Offering.
7.13. Company Participation in Rights Offering; Standby Purchasers;
Standstill.
(a) Purchaser acknowledges and agrees that the Board of Directors may
authorize the officers and directors of the Company to contact and otherwise
encourage existing stockholders of the Company to exercise (and possibly
obtain) sufficient number of Rights such that fifty-one percent (51%) of all
new shares of Common Stock issued upon exercise of the Rights will be issued to
persons other than Purchaser.
(b) The Purchaser shall endeavor to locate on behalf of the Company one or
more parties who are prepared to act as standby purchasers (the "Standby
Purchasers") in the Rights Offering. Such Standby Purchasers shall commit
that, to the extent such Rights are not exercised prior to expiration, they
shall purchase from the Company the same number of shares that were purchasable
under such unexercised Rights for a price equal to the exercise price under
such Rights.
(c) Purchaser shall use its best efforts to insure that no partner of
Purchaser shall obtain sufficient shares of Common Stock to beneficially own
five percent (5%) or more of the then outstanding shares of Common Stock.
7.14. Senior Executive Incentive Compensation Plan. As soon as
practicable, the Company shall implement an incentive compensation plan for
Xxxxxxx, Xxxxx and Xxxxx in their capacities as senior executives of the
Company and any other senior executives designated by Xxxxx, Xxxxxxx and Xxxxx
(the "Incentive Compensation Plan") which shall be satisfactory in form and
substance to Purchaser and which shall have the following principal terms: (i)
to the extent the Company's value has increased at a compound growth rate in
excess of 20%, the participants shall be entitled to 20% of such excess value
to be allocated among the participants in accordance with their joint
instructions, (ii) the initial valuation to be used for such purposes shall be
the value of the Company implied by the Purchaser's acquisition of the New
Shares, (iii) the determination of whether a distribution is due under the
Incentive Compensation Plan shall not be made until one or more triggering
events occurs, such as an initial public offering, a major disposition or the
running of a specified period, (iv) the valuation of the Company as of any
trigger event shall be based on a multiple of adjusted cash flow, and (v) the
distribution under the Incentive Compensation Plan shall be made either in cash
or shares of the Company's Common stock, at the Company's election; provided
that the parties agree that they shall endeavor in good faith and use their
reasonable best efforts to agree to the definitive form of the Incentive
Compensation Plan; and provided further that if the parties are unable to agree
to such definitive form within sixty (60) days after the date hereof then,
unless the parties otherwise agree, the options of Xxxxxxx, Xxxxx and Xxxxx
that were canceled as of the Closing Date shall be reinstated and concurrently
with such reinstatement the Purchaser shall be granted options
identical to such reinstated options pursuant to an agreement substantially
similar to the Standby Option and Warrant Agreement.
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7.15. Employment Agreements. Prior to or at Closing, the Company has
entered into employment agreements with each of Xxxxx, Xxxxxxx and Xxxxx, in
the form of Exhibit 7.15 attached hereto (the "Employment Agreements").
7.16. Licenses. The Company will obtain and keep in full force and effect
all licenses, permits and other authorizations from governmental authorities
which shall be necessary to the conduct of its business.
7.17. Material Changes. The Company will promptly notify the Purchaser of
any material adverse change in the business, properties, assets or condition,
financial or otherwise, of the Company, and of any litigation or governmental
proceeding pending or, to the best knowledge of the Company, threatened against
the Company or against any officer or key employee of the Company.
7.18. Compliance with Law. The Company will comply in all material
respects with all applicable statutes, rules and regulations of the United
States, of the states thereof and their counties, municipalities and other
subdivisions and of any other jurisdiction applicable to the Company, and will
do all things necessary to preserve, renew and keep in full force and effect
and in good standing its corporate existence and authority necessary to
continue its business.
7.19. Lock-up Agreements. The Company will enter into agreements with
Xxxxxxx, Xxxxx and Xxxxx (a) substantially in the form of Exhibit 7.19A hereto
(each a "Lock-Up Agreement"), pursuant to which such persons shall agree that
in the event the Company conducts an Initial Public Offering: that for a period
of at least 180 days after the effective date of the Company's Initial Public
Offering such persons will not, directly or indirectly, sell, offer or contract
to sell, grant any option for the sale of, or otherwise dispose of or transfer
any shares of Common Stock or any securities convertible into or exchangeable
or exercisable for Common Stock of the Company other than securities which are
included and sold in such Initial Public Offering or those which are sold or
otherwise transferred to a Permitted Transferee (as defined in the Lock-up
Agreements); and (b) substantially in the form of Exhibit 7.19B hereto, to
grant to the Company and to the Purchaser a right of first refusal with respect
to any securities of the Company which such persons propose to sell or
otherwise dispose of. Until the Company shall have completed its Initial
Public Offering, the Company will exercise its best efforts to enter into
similar agreements with all of its officers, directors and 5% stockholders.
7.20. Conflicting Agreements. The Company will not enter into any
agreement which, by its terms, might restrict the performance of the Company's
obligations under this Agreement, the New Shares, the Promissory Note or any of
the other agreements attached as exhibits hereto, including, but not limited
to, registration rights relating to the New Shares.
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8.
Negative Covenants of the Company.
The Company covenants and agrees with the Purchaser that as long as, and
at any time when, the Purchaser is the holder of the Promissory Note or a
holder of at least fifteen percent (15%) of the issued and outstanding Common
stock of the Company, without the consent of the Purchaser, which shall not be
unreasonably withheld:
8.1. Merger; Sale of Assets. The Company will not become a party to any
merger or consolidation, or sell, lease or otherwise dispose of any of its
assets, other than sales and leases of assets in the ordinary course of
business and other than the replacement of outmoded or damaged equipment with
new equipment unless such transaction is approved by 2/3 of the minority
stockholders of the Company (excluding shares held directly or indirectly by
Purchaser and the officers and directors of the Company). The Company will not
voluntarily dissolve, liquidate or wind up the Company or carry out any partial
liquidation of the Company.
8.2. Business. The Company will not engage in any business other than its
current business, businesses anticipated in its business plan and related
services and activities appropriate or necessary in connection therewith.
8.3. Stock Repurchases. The Company will not purchase or redeem any
shares of its capital stock other than pursuant to agreements with officers or
employees of the Company relating to repurchase of stock after termination of
employment.
8.4. Dividends. The Company will not declare or pay any dividend or make
any distribution in cash, securities or other property to the stockholders of
the Company.
8.5. Indebtedness. The Company will not create, incur or assume or
otherwise become or remain liable with respect to Indebtedness to be incurred
in an amount exceeding 4.5 times the cash flow of the Company at any one time
outstanding.
8.6. Capital Expenditures. The Company will not make or commit to make
capital expenditures in any one year in excess of fifteen percent (15%) of the
annual cash flow of the Company.
8.7. Acquisition. The Company will not acquire any assets or stock of
another entity which acquisition in the aggregate costs more than 25% of owned
accounts or 25% of third party maintained accounts if it is a single
transaction acquisition, whether by means of acquisition of assets or stock or
by merger.
8.8. Amendments. The Company will not amend its Certificate of
Incorporation or By-laws in any way that would impair, diminish or adversely
affect the Purchaser's rights as a stockholder of the Company.
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8.9. Issuance of Shares. Except as set forth in Schedule 8.9 attached
hereto, the Company will not authorize, create or issue any series or shares of
capital stock (or options, warrants or other rights to purchase or acquire any
capital stock or any security convertible into or exchangeable or exercisable
for any capital stock), or adopt or otherwise institute any stock option or
stock purchase plan for, or otherwise issue any stock or options to, employees,
consultants or directors of the Company except that the Company may authorize
options for employees, consultants and directors; provided, however, that the
total number of such options shall not exceed the amount determined pursuant to
Section 7.14 hereof, and such options may only be issued on terms and
conditions acceptable to the Board of Directors.
8.10. Transactions with Affiliates. The Company will not engage in any
transaction with, nor enter into any contract, agreement or other arrangement
providing for, nor amend any existing agreement relating to, the employment of,
furnishing of services by, rental of real or personal property from, or
otherwise requiring payments to, any officer, director or stockholder of the
Company or any affiliate or associate of such persons or entities, except for
employment agreements with employees and normal employee benefits.
9.
Purchaser's Right of First Refusal
9.1. Right of First Refusal. The Company hereby grants to Purchaser the
right of first refusal to purchase its pro rata share of all or any part of any
New Securities (as defined in this Section 9.1) which the Company may, from
time to time, propose to sell and issue. A pro rata share, for purposes of
this right of first refusal, is the ratio that the number of New Shares then
held by Purchaser, bears to the total number of shares of Common Stock then
outstanding.
(a) Except as set forth below, "New Securities" shall mean any shares of
capital stock of the Company, whether now authorized or not, and rights,
options or warrants to purchase said shares of Common Stock, and securities of
any type whatsoever that are, or may become, convertible into said shares of
Common Stock. Notwithstanding the foregoing, "New Securities" does not include
(i) the New Shares; (ii) securities issued in the acquisition of another
corporation by the Company by merger, purchase of substantially all of the
assets or other reorganization whereby the Company or its stockholders own not
less than fifty-one (51%) of the voting power of the surviving or successor
corporation; (iii) stock issued pursuant to any rights or agreements,
including, without limitation, convertible securities, options and warrants,
provided that the rights of first refusal established by this Section 9.1 apply
with respect to the initial sale or grant by the Company of such rights or
agreements; (iv) stock issued in connection with any stock split, stock
dividend or recapitalization by the Company; (v) stock issued pursuant to any
stock option plan for directors, employees and consultants of the Company; and
(vi) stock issued with respect to the Remaining Options.
(b) In the event the Company proposes to undertake an issuance of New
Securities, it shall give Purchaser written notice of its intention, describing
the type of New Securities, and the price and terms upon which the Company
proposes to issue the same. Purchaser shall have fifteen (15) days from the
date of receipt of any such notice to agree to purchase up to
Purchaser's pro rata share of such New Securities for the price and upon the
terms specified in
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the notice by giving written notice to the Company and stating therein
the quantity of New Securities to be purchased.
(c) In the event Purchaser fails to exercise such right of first refusal
within said fifteen (15) day period, the Company shall have ninety (90) days
thereafter to sell the New Securities not elected to be purchased by Purchaser
at the price and upon the terms no more favorable to the purchasers of such
securities than specified in the Company's notice. In the event the Company
has not sold the New Securities or entered into an agreement to sell the New
Securities within said ninety (90) day period, the Company shall not thereafter
issue or sell any of such New Securities without first offering such securities
in the manner provided above.
(d) In the event that such terms and conditions of a bona fide offer do
not provide for the Purchaser to have any registration rights, the Company
agrees with the Purchaser that in the event the Purchaser acquires any New
Securities pursuant to paragraph (b) above, such New Securities shall be deemed
Registrable Securities for the purposes of Section 10 hereof.
(e) The closing of the purchase of shares pursuant to this Section 9 shall
occur at the principal office of the Company (i) on the fifth business day
after the expiration of fifteen (15) days after receipt of the Company's Notice
if the Purchaser purchases all such New Securities, (ii) concurrently with the
closing of the sale of New Securities if the Purchaser does not purchase all
such New Securities, or (iii) at such other time as the Purchaser and the
Company may mutually determine. At the closing, the Company shall deliver to
the Purchaser, the certificate or certificates representing such shares, free
and clear of all liens and encumbrances whatsoever (other than those imposed by
this Agreement), and the Purchaser shall pay to the Company, in cash or by
delivery of a certified check, the amount of the purchase price for the shares
of New Securities purchased by the Purchaser pursuant to this Section 9.
(f) The right of first refusal granted under this Agreement shall expire
upon the first to occur of the following: (i) the closing of the first public
offering of the Common Stock of the Company to the general public which is
effected pursuant to a registration statement filed with, and declared
effective under the Securities Act, and such right of first refusal and related
right of notice shall not apply to the offer or sale of shares pursuant to such
public offering; (ii) September 5, 1999; or (iii) as to Purchaser, if Purchaser
no longer holds at least fifteen percent (15%) of the outstanding capital stock
of the Company.
10.
Registration Rights.
10.1. Required Registration. If at any time after one year from the
Closing Date, the Purchaser shall decide to sell or otherwise dispose of
Registrable Securities of the Company then owned by the Purchaser, the
Purchaser may give written notice to the Company of the proposed disposition,
specifying the number of Registrable Securities so to be sold or disposed
of and requesting that the Company prepare and file a registration statement
under the Securities Act covering such Registrable Securities. The Company
shall use its best efforts to
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cause an appropriate registration statement (the "Registration
Statement") covering such Registrable Securities to be filed with the
Commission and to become effective as soon as reasonably practicable and to
remain effective until the completion of the distribution of the Registrable
Securities to be offered or sold, but not to exceed 180 days. The Company
shall not be obligated to file more than one Registration Statement pursuant to
the foregoing provisions of this Section 10.1. The Company shall bear all of
the Costs and Expenses (as defined in Section 10.9 herein) of such Registration
Statements. In addition to the foregoing and without regard to there first
having been filed the Registration Statement provided for in the foregoing
provisions of this Section 10.1, from such time as the Company shall be
eligible to register its securities on such form the Purchaser will be entitled
to demand three Registration Statements on Form S-3 (or any similar short-form
Registration Statement) and the Company's shall bear all of the Costs and
Expenses of such Registration Statements. The Company will use its best
efforts to utilize a short-form registration statement for which the Company
qualifies. A demand for registration under this Section 10.1 will not count as
such until it has become effective. Any demand registration required pursuant
to this Section 10.1 may be delayed for a period not to exceed ninety (90)
days, if the Company certifies in writing that proceeding with such
registration would disrupt a material financing or other transaction of the
Company.
10.2. Procedure for Registration. In connection with the filing of a
Registration Statement pursuant to Section 10.1 hereof, and in supplementation
and not in limitation of the provisions hereof, the Company shall:
(a) Notify the Purchaser as to the filing of the Registration Statement
and of all amendments or supplements thereto filed prior to the effective date
of such Registration Statement;
(b) Notify the Purchaser promptly after the Company shall receive notice
thereof, of the time when said Registration Statement became effective or when
any amendment or supplement to any prospectus forming a part of such
Registration Statement has been filed;
(c) Notify the Purchaser promptly of any request by the Commission for the
amending or supplementing of such Registration Statement or prospectus or for
additional information;
(d) Prepare and promptly file with the Commission and promptly notify the
Purchaser of the filing of any amendments or supplements to such Registration
Statement or prospectus as may be necessary to correct any statements or
omissions if, at any time when a prospectus relating to the Registrable
Securities is required to be delivered under the Securities Act, any event with
respect to the Company shall have occurred as a result of which any such
prospectus or any other prospectus as then in effect would include an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading; and, in addition, prepare and file
with the Commission, promptly upon the Purchaser's written request, any
amendments or supplements to such Registration Statement or
prospectus which may be reasonably necessary or advisable in connection with
the distribution of the Registrable Securities;
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(e) Prepare, promptly upon request of the Purchaser or any underwriters
for the Purchaser, such amendment or amendments to such Registration Statement
and such prospectus or prospectuses as may be reasonably necessary to permit
compliance with the requirements of Section 10(a)(3) of the Securities Act
until the completion of the distribution of the Registrable Securities, but not
to exceed 180 days;
(f) Advise the Purchaser promptly after the Company shall receive notice
or obtain knowledge of the issuance of any stop order by the Commission
suspending the effectiveness of any such Registration Statement or amendment
thereto or of the initiation or threatening of any proceeding for that purpose,
and promptly use its best efforts to prevent the issuance of any stop order or
obtain its withdrawal promptly if such stop order should be issued;
(g) Use its best efforts to qualify, as soon as reasonably practicable,
the Registrable Securities for sale under the securities or blue-sky laws of
such states and jurisdictions within the United States as shall be reasonably
requested by the Purchaser; provided, that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business, to
become subject to taxation or to file a consent to service of process generally
in any of the aforesaid states or jurisdictions;
(h) Furnish the Purchaser, as soon as available, copies of any
Registration Statement and each preliminary or final prospectus, or supplement
or amendment required to be prepared pursuant hereto, all in such quantities as
the Purchaser may, from time to time, reasonably request; and
(i) If requested by the Purchaser, enter into an agreement with the
underwriters of the Registrable Securities being registered containing
customary provisions and reflecting the foregoing.
10.3. Incidental Registration. If at any time the Company shall
propose the filing of a Registration Statement on an appropriate form under the
Securities Act of any securities of the Company, otherwise than pursuant to
Section 10.1 hereof, other than in connection with the Rights Offering and
other than a registration statement on Forms S-8 or S-4 or any equivalent form
then in effect, then the Company shall give the Purchaser notice of such
proposed registration and shall include in any Registration Statement relating
to such securities all or a portion of the Registrable Securities then owned by
the Purchaser, which the Purchaser shall request, by notice given by the
Purchaser to the Company within 30 days after the giving of such notice by the
Company, to be so included. In the event of the inclusion of Registrable
Securities pursuant to this Section 10.3, the Company shall bear all of the
Costs and Expenses of such registration; provided, however, that the Purchaser
shall pay, pro rata based upon the number of Registrable Securities included
therein, the underwriters discounts and compensation attributable to the
inclusion of such Registrable Securities. In the event the distribution of
securities of the Company covered by a Registration Statement referred to in
this Section 10.3 is to be underwritten, then the Company's obligation to
include Registrable Securities in such Registration Statement shall be subject,
at the option of the Company, to the following further conditions:
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(a) The distribution for the account of the Purchaser shall be
underwritten by the same underwriters who are underwriting the distribution of
the securities for the account of the Company and/or any other persons whose
securities are covered by such Registration Statement, and the Purchaser will
enter into an agreement with such underwriters containing customary provisions;
(b) If the underwriting agreement entered into with the aforesaid
underwriters contains restrictions upon the sale of securities of the Company,
other than the securities which are to be included in the proposed
distribution, for a period not exceeding 180 days from the effective date of
the Registration Statement, then such restrictions will be binding upon the
Purchaser and, if requested by the Company, the Purchaser will enter into a
written agreement to that effect; and
(c) If the underwriters state in writing that they are unwilling to
include any or all of the Purchaser's securities in the proposed underwriting
because such inclusion will materially interfere with the orderly sale and
distribution of the securities being offered by the Company, then the number of
the Purchaser's securities to be included will be reduced pro rata on the basis
of the number of shares owned by all holders of Registrable Securities, or
there will be no inclusion of the Purchaser's securities in the registration
statement and proposed distribution, in accordance with such statement by the
underwriters.
10.4. Indemnification by the Company. The Company will indemnify and
hold harmless the Purchaser, any underwriter (as defined in the Securities Act)
for the Purchaser, each partner, officer and director of the Purchaser, and
each person, if any, who controls the Purchaser or such underwriter within the
meaning of the Securities Act (but, in the case of an underwriter or a
controlling person, only if such underwriter or controlling person indemnifies
the persons mentioned in subdivision (b) of Section 10.5 hereof in the manner
set forth therein), against any losses, claims, damages or liabilities, joint
or several, to which the Purchaser or any such underwriter, partner, officer,
director or controlling person becomes subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) are caused by any untrue statement or alleged untrue
statement of any material fact contained in any preliminary prospectus (if used
prior to the effective date of the Registration Statement), or contained, on
the effective date thereof, in any Registration Statement under which
Registrable Securities were registered under the Securities Act, the prospectus
contained therein, or any amendment or supplement thereto, or arising out of or
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; and the Company will reimburse the Purchaser and any such
underwriter, partner, officer, director or controlling person for any legal or
other expenses reasonably incurred by the Purchaser, or any such partner,
officer, director, underwriter or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable to any such persons in
any such case to the extent that any such loss, claim, damage, liability or
action arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with information furnished to the Company in writing by such person
expressly for inclusion in any of the foregoing documents.
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10.5. Indemnification by The Purchaser. The Purchaser shall:
(a) Furnish in writing all information to the Company concerning itself
and its holdings of securities of the Company as shall be required in
connection with the preparation and filing of any Registration Statement
covering any Registrable Securities; and
(b) Indemnify and hold harmless the Company, each of its directors, each
of its officers who has signed a Registration Statement, each person, if any,
who controls the Company within the meaning of the Securities Act and any
underwriter (as defined in the Securities Act) for the Company, against any
losses, claims, damages or liabilities to which the Company or any such
director, officer, controlling person or underwriter may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) are caused by any untrue or alleged
untrue statement of any material fact contained in any preliminary prospectus
(if used prior to the effective date of the Registration Statement) or
contained on the effective date thereof, in any Registration Statement under
which Registrable Securities were registered under the Securities Act, the
prospectus contained therein, or any amendment or supplement thereto, or
arising out of or based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading; in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with information
furnished in writing to the Company by the Purchaser expressly for inclusion in
any of the foregoing documents, and the Purchaser shall reimburse the Company
and any such underwriter, officer, director or controlling person for any legal
or other expenses reasonably incurred by the Company or any such director,
officer or controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action.
10.6. Contribution. In order to provide for just and equitable
contribution to joint liability under the Securities Act in any case in which
either (a) the Purchaser or other person or entity entitled to indemnification
under this Agreement, makes a claim for indemnification pursuant to Section
10.4 or Section 10.5 but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
Section 10.4 or Section 10.5 provides for indemnification in such case, or (b)
contribution under the Securities Act may be required on the part of any the
Purchaser, the Company or other person in circumstances for which
indemnification is provided under Section 10.4 or Section 10.5; then, and in
each such case, the Purchaser, the Company and such person will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that the
Purchaser or other person is responsible for the portion represented by the
percentage that the public offering price of its securities offered by the
Registration Statement bears to the public offering price of all securities
offered in such Registration Statement; provided, however, that, in any such
case, (i) neither the Purchaser, the Company nor any other person will be
required to contribute any amount in excess of the public offering price of all
such Registrable Securities offered by it pursuant to such Registration
Statement; and (ii) no person or entity guilty of
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fraudulent misrepresentation (within the meaning of Section 12(f) of
the Securities Act) will be entitled to contribution from any person or entity
who was not guilty of such fraudulent misrepresentation.
10.7. Notification by The Purchaser. The Purchaser and each other person
indemnified pursuant to Section 10.4 hereof will, in the event it receives
notice of the commencement of any action against it which is based upon an
alleged act or omission which, if proven, would result in the Company's having
to indemnify it pursuant to Section 10.4 hereof, promptly notify the Company,
in writing, of the commencement of such action and permit the Company, if the
Company so notifies the Purchaser within 10 days after receipt by the Company
of notice of the commencement of the action, to participate in and to assume
the defense of such action with counsel reasonably satisfactory to the
Purchaser or such other indemnified person, as the case may be; provided,
however, that the Purchaser shall be entitled to retain its own counsel at the
Company's expense if it believes there exists a conflict of interest between
the Company and the Purchaser. The omission to notify the Company promptly of
the commencement of any such action shall not relieve the Company of any
liability to indemnify the Purchaser or such other indemnified person, as the
case may be, under Section 10.4 hereof, except to the extent the Company shall
suffer any loss by reason of such failure to give notice and shall not relieve
the Company of any other liabilities which it may have under this or any other
agreement.
10.8. Notification by Company. The Company agrees that, in the event it
receives notice of the commencement of any action against it which is based
upon an alleged act or omission which, if proven, would result in the Purchaser
having to indemnify the Company pursuant to subdivision (b) of Section 10.5
hereof, the Company will promptly notify the Purchaser in writing of the
commencement of such action and permit the Purchaser, if the Purchaser so
notifies the Company within 10 days after receipt by it of notice of the
commencement of the action, to participate in and to assume the defense of such
action with counsel reasonably satisfactory to the Company; provided, however,
that the Company shall be entitled to retain its own counsel at the Purchaser's
expense if it believes there exists a conflict of interest between the
Purchaser and the Company. The omission to notify the Purchaser promptly of
the commencement of any such action will not relieve the Purchaser of liability
to indemnify the Company under subdivision (b) of Section 10.5 hereof, except
to the extent that the Purchaser suffers any loss by reason of such failure to
give notice and shall not relieve the Purchaser of any other liabilities which
it may have under this or any other agreement.
10.9. Costs and Expenses. As used in this Agreement, "Costs and
Expenses" shall include all of the costs and expenses relating to the
Registration Statement involved, including but not limited to registration,
filing and qualification fees, blue-sky expenses, printing expenses, reasonable
fees and disbursements of counsel to the Company and counsel for the Purchaser,
(provided, however, that no more than one such counsel for the Purchaser will
be so designated on any occasion), and accounting fees; provided however, that
underwriting discounts and commissions and reimbursable underwriters' expenses
will be borne pro rata by the holders of the securities included in the
Registration Statement.
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10.10. Rule 144 Reporting. After the Company becomes subject to the
reporting requirements of Sections 13 or 15(d) of the Exchange Act, and with a
view to making available the benefits of certain rules and regulations of the
Commission which may permit the sale of the New Shares without registration,
until the New Shares may be freely disposed of without any limitations, the
Company agrees to:
(a) Cause public information with respect to the Company to be available,
as set forth in Rule 144 or any comparable rule or regulation under the
Securities Act, at all times;
(b) Use its best efforts to file with the Commission in a timely manner
all reports and other documents required of the Company under the Securities
Act and the Exchange Act; and
(c) Furnish to the Purchaser forthwith upon request a written statement by
the Company as to its compliance with the reporting requirements of Rule 144
and of the Securities Act and Exchange Act.
10.11. Certain Definitions. The following terms shall have the respective
definitions set forth below:
Affiliate: has the meaning such term is given in Rule 405
promulgated under the Securities Act.
Associate: has the meaning such term is given in Rule 405
promulgated under the Securities Act.
Commission: the Securities and Exchange Commission.
Public Offering: a distribution of New Securities in an
underwritten public offering to the general public pursuant to a
Registration Statement filed with and declared effective by the
Commission pursuant to the Securities Act.
Registrable Securities: (i) The New Shares, (ii) any other
securities which pursuant to the terms of this Agreement are deemed to be
Registrable Securities and (iii) any securities issued or issuable with
respect to the securities referred to in clauses (i) or (ii) above by way
of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization,
provided that a Registrable Security ceases to be a Registrable Security
when (a) it has been effectively registered under the Securities Act and
disposed of in accordance with the Registration Statement covering it,
(b) it has been distributed pursuant to Rules 144 or 144A (or any similar
provisions then in force) under the Securities Act or (c) it has
otherwise been transferred and a new certificate or other evidence of
ownership for it not bearing a legend restricting transfer under the
Securities Act and not subject to any stop transfer order has been
delivered by or on behalf of the Company and no other restriction on
transfer exists.
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11.
Miscellaneous.
11.1. 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 Company
agrees that it will not assert against any partner of the Purchaser (or against
any partner, officer, director, employee or agent of the Purchaser or any of
its Affiliates) any claim it may have under this Agreement by reason of any
failure or alleged failure by the Purchaser to meet its obligations hereunder.
The parties hereto agree and intend that the proper and exclusive forum for the
litigation of any disputes or controversies arising out of, or related to, this
Agreement shall be the courts of the State of Illinois and of any Federal Court
located in such state. The Company agrees that 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 one located in the State of Illinois.
The Company 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 Company at the
address provided herein, such service to become effective 30 days after such
mailing. Nothing contained in this Section shall affect the right of the
Purchaser to serve process in any other manner permitted by law or commence
legal proceedings or otherwise proceed against the Company in any other
jurisdiction. In the event the Company should commence or maintain any action
arising out of or related to this Agreement in a forum other than the courts
located in the State of Illinois, the Purchaser shall be entitled to request
the dismissal of such action, and the Company stipulates that such action shall
be dismissed.
11.2. Survival. The representations and warranties, covenants and
agreements made herein shall survive any investigation made by any Purchaser
and the closing of the transactions contemplated hereby.
11.3. Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
The Purchaser may not assign any part of its rights and obligations hereunder
without the prior written consent of the Company, which shall not be
unreasonably withheld, other than as part of a pro rata distribution of its
interests under this Agreement to its partners. A person to whom all or a part
of the Purchaser's rights are assigned shall become a party to this Agreement,
entitled to all the rights and benefits and subject to all of the duties and
obligations of Purchaser hereunder. Whenever reference is made to the Purchaser
in this Agreement, such reference shall include any assignees of the
Purchaser's rights hereunder.
11.4. Entire Agreement; Amendment. This Agreement and the other documents
delivered pursuant hereto at the Closing constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged
or
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terminated other than by a written instrument signed by the party
against whom enforcement of any such amendment, waiver, discharge or termination
is sought.
11.5. Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by
messenger, addressed (a) if to the Purchaser, or at 00 Xxxxxxxxxx Xxxxxx, 0xx
Xxxxx, Xxx Xxxx, XX 00000 or at such other address the Purchaser shall have
furnished to the Company in writing; or (b) if to the Company, at 0000 Xxxxx
Xxxxxxxxx Xxxxxxx Xxxx, Xxxxxxxxx Xxxxxxx, Xxxxxxxx 00000-0000, addressed to
the President of the Company, or at such other address the Company shall have
furnished to the Purchaser in writing.
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or
seventy-two (72) hours after the same has been deposited in a regularly
maintained receptacle for the deposit of the United States mail, addressed and
mailed as aforesaid.
11.6. Delays or Omissions. Except as expressly provided herein, no delay
or omission to exercise any right, power or remedy accruing to any holder of
New Shares, upon any breach or default of the Company under this Agreement,
shall impair any such right, power or remedy of such holder 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 holder
of any breach or default under this Agreement, or any waiver on the part of any
holder of any provisions or conditions of this agreement, must be in writing
and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
11.7. Expenses. The Company and Purchaser shall each bear its own legal
and other expenses incurred on its behalf with respect to the preparation of
this Agreement, any related documents and the transactions contemplated hereby.
11.8. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
11.9. Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective
if it materially changes the economic benefit of this Agreement to any party.
11.10. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
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11.11. Waiver of Jury Trial. The Parties hereby expressly waive any right
they may have to a jury trial in any suit, action or proceeding existing under
or relating to this Agreement, any stock, promissory notes or other securities
issued by the Company pursuant to this Agreement or any of the other documents
executed and delivered in connection with this Agreement.
The foregoing Agreement is hereby executed as of the date first above
written.
Security Associates International, Inc.
a Delaware corporation
("Company")
By: /s/ Xxxxx X. Xxxxxxx
--------------------
Its: President
--------------------
TJS Partners, L.P.
a New York limited partnership
("Purchaser")
By: /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------
Its: Managing Partner of TJS Mangement, L.P.,
-----------------------------------------
its General Partner
-----------------------------------------
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The undersigned acknowledge that they are significant stockholders of the
Company and that they will receive material economic benefits upon the
consummation of the transactions contemplated hereby. In order to induce the
Purchaser to enter into this Agreement, the undersigned agree to be bound by
Section 7.9 hereof.
Dated September 5, 1996
/s/ Xxxxxx X. Xxxxx
------------------------
Xxxxxx X. Xxxxx
/s/ Xxxxx X. Xxxxxxx
------------------------
Xxxxx X. Xxxxxxx
31
