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EXHIBIT 10.47
ASSOCIATION AGREEMENT - S
THIS ASSOCIATION AGREEMENT (the "Agreement"), dated as of
_________________, is entered into by and between Security Associates
International, Inc., a Delaware Corporation ("SAI"), and _____________________,
a(n) _______________ ____________ ("Dealer"). SAI and Dealer hereby agree as
follows:
1. DEFINITIONS AND USE OF TERMS
1.1 DEFINITIONS. The following terms shall have the meanings assigned below
when used in this Agreement:
(a) "Account" shall men an arrangement between a Subscriber and
Dealer, typically evidenced by a Subscriber Agreement, pursuant
to which a Subscriber purchases from Dealer the services of a
CENTRAL MONITORING STATION to monitor, on a remote basis, the
security alarm system of the Subscriber;
(b) "Affiliate" shall mean any person that controls, is controlled by
or is under common control with, Dealer. For purposes of this
definition, any person that owns more than 10% of the equity of
another person shall be deemed conclusively to control such other
person;
(c) "Applicable Law" shall include any law, license, rule,
regulation, order, injunction, notice, approval or judgment of
any federal, state, or local government or governmental
department, agency, board or the like, which applies to this
Agreement, the DEALER AGREEMENT, the provision of services
pursuant to the DEALER AGREEMENT, and any agreement with any such
government or governmental department, agency or board relating
to compliance with any of the foregoing;
(d) "CENTRAL MONITORING STATION" shall mean one or more CENTRAL
MONITORING STATIONs owned by SAI (or a subsidiary of SAI) and
designated in the DEALER AGREEMENT as the CENTRAL MONITORING
STATIONs that are to provide service to all of Dealer's Accounts;
(e) "Closing Date" shall have the meaning assigned in Section 3.2;
(f) "Common Stock" means the common stock, $0.001 par value per
share, of Security Associates International, Inc., a Delaware
corporation;
(g) "DEALER AGREEMENT" means the agreement between Dealer and SAI, or
a subsidiary of SAI, pursuant to which the CENTRAL MONITORING
STATION provides services to the Subscribers of the Accounts, in
the form of Exhibit A attached hereto;
(h) "Default" means the occurrence of any of (i) the breach by Dealer
of the performance of any of its covenants under Sections 2.1.2,
2.1.3, 2.1.4, 2.1.5 or 2.1.7 of this Agreement, (ii) the
misrepresentation by Dealer of any material fact set forth in
this Agreement, or (iii) any other material breach by Dealer of
any other representation, warranty, covenant or agreement
contained herein;
(i) "Effective Date" means the first day of the first month following
the signing of this Agreement;
(j) "Permits" means all governmental approvals, licenses,
registrations and permits, and applications therefor;
(k) Subscriber" shall mean the party to which the Dealer provides
monitoring services;
(l) "Subscriber Agreement" means a written agreement between a
Subscriber and Dealer, evidencing an Account, pursuant to which
the Dealer provides monitoring services to the Subscriber in the
form attached hereto as Exhibit B;
(m) "Term" means the period commencing on the date hereof and ending
on the third anniversary of the Closing Date;
(n) "Vested Shares" means those shares of Common Stock issued to
Dealer pursuant to the terms of this Agreement as to which the
risk of forfeiture under Section 3.4 hereof and the restrictions
on transfer under Section 3.5 hereof shall have lapsed in
accordance with the provisions of Section 3.3 hereof; "Unvested
Shares" means those shares of Common Stock issued to Dealer
pursuant to this Agreement that are not Vested Shares.
2. TERMS OF ASSOCIATION.
2.1 DEALER'S RESPONSIBILITIES CONCERNING MONITORING. Upon the terms and
subject to the conditions contained in this Agreement, Dealer hereby agrees that
the CENTRAL MONITORING STATION shall be the provider of monitoring services to
all of Dealer's Accounts transferred pursuant to Section 2.1.2 or which are
presently monitored in the CENTRAL MONITORING STATION.
2.1.1 DEALER AGREEMENT. Concurrently with the execution of this Agreement,
Dealer will execute and deliver the DEALER AGREEMENT which sets forth the terms
and conditions and prices under which the CENTRAL MONITORING STATION will
provide services to Dealer's Subscribers.
2.1.2 TRANSFER OF ACCOUNTS. No later than __________________, Dealer shall
transfer no less than ___________________ Accounts to the CENTRAL MONITORING
STATION for monitoring for the entire term of the DEALER AGREEMENT. All costs
associated with the transfers, including, but not limited to visits to
Subscriber's premises and reprogramming of security systems shall be the
exclusive responsibility of Dealer. Monitoring fees for the transferred Accounts
will accrue under the DEALER AGREEMENT from the date of transfer for each
transferred Account.
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2.1.3 ACCOUNTS PRESENTLY MONITORED IN THE CENTRAL MONITORING STATION.
Dealer agrees that all of Dealer's Accounts that are presently monitored at the
CENTRAL MONITORING STATION will, on the Effective Date, become subject to the
terms of the DEALER AGREEMENT for the entire term of the DEALER AGREEMENT. All
previous agreements with SAI or the CENTRAL MONITORING STATION with respect to
those Accounts are superceded by the DEALER Agreement. _____ Accounts are
presently being monitored in the CENTRAL MONITORING STATION.
2.1.4 FEES. Dealer shall pay all fees for monitoring services and all other
amounts required to be paid, as set forth in the DEALER AGREEMENT and attached
price page, at the times and in the manner set forth therein.
2.1.5 MAINTENANCE OF ACCOUNTS. If Dealer subsequently transfers any of the
Accounts transferred pursuant to Section 2.1.2 or any of the Accounts presently
being monitored as set forth in Section 2.1.3 (collectively; the "Monitored
Accounts") to any central station other than an SAI CENTRAL MONITORING STATION
at any time during the Term of this Agreement, Dealer will be deemed to be in
breach of this Agreement as of the date of the transfer.
2.1.6 MAINTENANCE OF SUBSCRIBER RELATIONSHIPS. Dealer shall undertake its
best efforts to maintain good relationships and operational reliability with its
Subscribers and their security systems in order to maximize the number of
Monitored Accounts that remain in the CENTRAL MONITORING STATION during the
term.
2.1.7 OBLIGATIONS UNDER THE MONITORING AGREEMENT SURVIVE TRANSFER. Dealer's
obligation to have the Monitored Accounts monitored by the CENTRAL MONITORING
STATION for the duration of the Agreement shall survive the sale or other
transfer of any Account. By way of illustration, if Dealer were to sell a
Monitored Account to a third party (other than SAI or any subsidiary), Dealer
would be in breach of this Agreement, if during the Term of this Agreement said
third party attempts to or were to transfer such Account to another CENTRAL
MONITORING STATION.
2.1.8 EXCEPTIONS TO MONITORING AGREEMENT. If, and only if, the following
conditions apply, Dealer may contract with a party other than the CENTRAL
MONITORING STATION for monitoring of those Accounts to which the conditions
apply: (a) it is illegal under Applicable Law for the CENTRAL MONITORING STATION
to provide monitoring services for the Monitored Account in question, or (b) the
CENTRAL MONITORING STATION does not have the technical capability to provide the
services for which the Subscriber under that Monitored Account has contracted.
In either event, Dealer must specify in writing to SAI the Applicable Law that
would be violated or the exact service that the CENTRAL MONITORING STATION is
not capable of providing. Even if one of the two conditions applies, if there
exists an alternate CENTRAL MONITORING STATION owned by SAI (or a subsidiary)
that is capable of providing the required services on the terms set forth in the
DEALER AGREEMENT, Dealer shall transfer the Monitored Account in question to
such alternate CENTRAL MONITORING STATION.
2.1.9 SUBSCRIBER AGREEMENT. Dealer will provide CENTRAL MONITORING STATION
with a copy of the executed SAI standard form subscriber agreement for every
Account to be monitored unless Dealer has submitted and SAI has approved
Dealer's existing subscriber agreement a copy or copies, of which shall be
attached to this agreement.
2.2 RIGHTS OF FIRST REFUSAL. During the Term of this Agreement, Dealer
hereby grants to SAI the right of first refusal for any proposed sale of
Accounts by Dealer ("Account Sale") or any borrowings by Dealer which are to be
secured by Accounts ("Secured Borrowings").
2.2.1 NOTICE OF THIRD PARTY PROPOSAL. In the event that Dealer proposes to
enter into an Account Sale or a Secured Borrowing with a party other than SAI or
a subsidiary or affiliate of SAI (a "third party"), Dealer shall upon receipt of
the third party's proposal, offer to SAI the opportunity to enter into the
Account Sale or Secured Borrowing on terms equivalent or superior to Dealer than
those offered by the third party. Dealer shall convey the terms of the third
party proposal to SAI by a written notice which shall include a photocopy of the
third party proposal as well as a description of the Accounts proposed to be
sold or which are proposed as collateral for the Secured Borrowing.
2.2.2 SAI'S RESPONSE. If SAI wishes to exercise its right of first refusal
and enter into the proposed transaction, SAI will, within ten (10) days
following receipt of notice of the third party proposal, respond in writing and
offer to enter into the transaction on economic terms that are equivalent or
superior to Dealer than those offered by the third party. Any response must
include a proposal detailing the economic terms under which SAI or a subsidiary
will enter into the transaction. If those economic terms are equivalent or
superior to Dealer than those offered by the third party, the Dealer will enter
into the Account Sale or Secured Borrowing with SAI or a subsidiary on the terms
proposed by SAI. If SAI fails to respond within the required ten (10) days or
does not offer economic terms that are equivalent or superior to Dealer than
those offered by the third party, Dealer, for a period of sixty (60) days
following the expiration of such ten (10) day period, shall be free to
consummate the transaction with the third party on terms no less favorable to
Dealer than those presented to SAI pursuant to Section 2.2.1.
3. CONSIDERATION FOR ENTERING INTO THE ASSOCIATION AGREEMENT.
3.1 ISSUANCE OF SECURITIES. In consideration of the performance by Dealer
of its obligations under this Agreement and the DEALER AGREEMENT, SAI agrees to
issue to Dealer a certificate representing _____ shares of Common Stock.
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3.2 CLOSING DATE. The certificates representing the shares of Common Stock
will be issued to Dealer on the later of the Effective Date or, if applicable,
the date on which the transfer to the CENTRAL MONITORING STATION of the last of
the Accounts required to be transferred pursuant to Section 2.1.2 has occurred
(the "Closing Date").
3.3 VESTING OF COMMON STOCK. On the Closing Date, 25% of shares of Common
Stock issued to Dealer pursuant to the terms of this Agreement will be Vested
Shares and the remaining 75% will be Unvested Shares. On each anniversary of the
Closing Date, assuming that no Default on the part of Dealer has occurred, 25%
of the shares of Common Stock issued to Dealer pursuant to the terms of this
Agreement will become Vested Shares. The following table sets forth for the
Closing Date and each of the three anniversaries of the Closing Date, the
cumulative percentage of such shares that will be Vested Shares if no Default
has occurred prior to that anniversary :
Anniversary Percent Vested
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Closing Date 25%
First 50%
Second 75%
Third 100%
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3.4 REMEDY FOR DEFAULT. Dealer acknowledges and agrees that the issuance of
Common Stock to Dealer pursuant to this Agreement is in consideration of
Dealer's performance of its obligations under this Agreement and the DEALER
AGREEMENT for the entire Term. If there shall occur a Default by Dealer in the
performance of any of its obligations under this Agreement or the DEALER
AGREEMENT, Dealer will either forfeit all shares of Common Stock that remain
Unvested Shares as of the date of the Default or immediately pay to SAI the
unpaid balance due pursuant to the DEALER AGREEMENT for the balance of the Term,
whichever is greater. The following table sets forth for the Closing Date and
each of the three anniversaries of the Closing Date, the percentage of the
shares of Common Stock issued to Dealer pursuant to this Agreement that will be
forfeited if a Default by Dealer occurs any time during the year preceding the
date of such anniversary:
Anniversary Percent Forfeited
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First 75%
Second 50%
Third 25%
SAI will, promptly upon becoming aware of an event that has caused the
forfeiture of Common Stock, notify Dealer of the nature of the event, the
provision of this Agreement or the DEALER AGREEMENT as to which the Default has
occurred and the number of shares of Common Stock which have been forfeited as a
result. Any disputes concerning forfeitures will be determined by binding
arbitration as provided in Section 6.5. In determining whether the "unpaid
balance" is greater than the value of the Unvested Shares, the value of the
Unvested Shares shall be determined by multiplying the closing price of SAI's
Common Stock on the date that SAI notifies Dealer of the Default by the number
of Unvested Shares.
3.5 RESTRICTIONS ON TRANSFER; RESTRICTIVE LEGENDS. Dealer understands and
agrees that it may not sell, transfer, pledge, hypothecate or otherwise dispose
of, whether by assignment, operation of law or otherwise, any Unvested Shares of
Common Stock, without SAI's prior written consent, which may be withheld in
SAI's sole discretion. As a mechanism for carrying out the provisions of Section
3.4 and this Section 3.5, all certificates representing Unvested Shares
will bear the restrictive legend set forth below:
The securities represented by this certificate are subject to forfeiture
and restrictions on transfer pursuant to the provisions of an ASSOCIATION
AGREEMENT, a copy of which is on file at the offices of Security Associates
International, Inc., and may not be sold, transferred, pledged,
hypothecated or otherwise disposed of, whether by assignment, operation of
law or otherwise, except in compliance with the terms of that Agreement.
3.6 REMOVAL OF LEGEND. At any time, after each anniversary of the Closing
Date, at the written request of Dealer, and upon delivery to SAI of the
certificates bearing the restrictive legends, SAI will cancel the certificates
so delivered and issue to Dealer a new certificate bearing no restrictive legend
representing the number of shares of Common Stock which have become Vested
Shares, and an additional certificate bearing the restrictive legend
representing the balance of the shares which have not been forfeited pursuant to
Section 3.4 (i.e., the Unvested Shares).
3.7 CANCELLATION OF SECURITIES. In the event that Dealer forfeits Unvested
Shares as provided in Section 3.4, promptly upon the request of SAI, Dealer
shall deliver to SAI for cancellation all certificates held by Dealer
evidencing, in whole or in part, Unvested Shares. SAI shall immediately issue to
Dealer a new certificate evidencing the Vested Shares, if any, that were
evidenced by the certificate so cancelled. Whether or not such certificate or
certificates shall have been delivered to SAI, from the date of such forfeiture
all rights of Dealer with respect to the forfeited shares, including, without
limitation, the right to vote such shares and the right to receive dividends or
distributions with respect thereto, shall cease, such shares shall be deemed no
longer outstanding, and the certificates representing the Common Stock issued to
Dealer shall represent only the Vested Shares.
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4. REPRESENTATIONS WARRANTIES AND COVENANTS OF DEALER.
Dealer represents and warrants as follows:
4.1 ORGANIZATION. Dealer is a corporation [sole proprietorship,
partnership, limited liability company] duly organized, validly existing and in
good standing under the laws of the State of _____________ and has all requisite
[corporate] power and authority to own its assets and to conduct its business in
the manner in which it is now conducted. Dealer is duly qualified to do business
in, and is in good standing under the laws of, each jurisdiction in which the
Accounts to be monitored by the CENTRAL MONITORING STATION require such
qualification.
4.2 POWER AND AUTHORITY. Dealer has the [corporate] power and authority to
execute and deliver and perform its obligations under this Agreement and the
DEALER AGREEMENT. This Agreement and the DEALER AGREEMENT have been duly
authorized, executed and delivered by Dealer and constitute the legal, valid and
binding obligations of Dealer enforceable against Dealer in accordance with
their terms.
4.3 ACCOUNTS. Exhibit 4.3(a) is a true and complete list of all Accounts to
be transferred to the CENTRAL MONITORING STATION pursuant to Section 2.1.2 and
Exhibit 4.3(b) is a true and complete list of the Accounts presently being
monitored by the CENTRAL MONITORING STATION. Exhibit 4.3(c) is a true and
complete list of all Accounts where subscriber is currently in default to the
dealer. Except as disclosed on Schedule 4.3(c) no Subscriber is in default on
any such Account and Dealer has no present reason to believe that any such
Account will or is likely to be cancelled.
4.4 PERMITS. Dealer possesses all Permits required by Applicable Law to
sell, install and service security alarm systems and to contract with
Subscribers to provide monitoring services with the appropriate jurisdictions.
5. REPRESENTATIONS AND WARRANTIES OF SAI.
SAI represents and warrants to, and agrees with, Dealer as follows:
5.1 ORGANIZATION. SAI is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.
5.2 POWER OF AUTHORITY. SAI has the power and authority to execute and
deliver this Agreement and to perform its obligations hereunder. This Agreement
has been duly authorized, executed, and delivered by SAI and constitutes the
legal, valid and binding obligation of SAI enforceable against SAI in accordance
with its terms.
5.3 PROSPECTUS. SAI has delivered to Dealer a prospectus dated April 22,
1998 pertaining to the offering of the Common Stock and Supplement No. 1
thereto, dated July 2, 1998 (as supplemented, the "Prospectus"). No
representation or warranty by SAI in this Agreement or the Prospectus contains
any untrue statement of material fact, or omits or shall omit to state a
material fact necessary in order to make the statements contained herein and
therein not misleading.
6. MISCELLANEOUS PROVISIONS.
6.1 NOTICES. Any notice, consent, request, claim, demand, instruction or
other communication to be given hereunder by SAI or Dealer shall be in writing
and shall be deemed to have been given (i) if by hand, when actually received,
(ii) if by mail, five days after deposit in the U.S. Mail, postage prepaid,
(iii) if by overnight courier, the next business day after deposit with the
overnight courier and (iv) if by telex or telefax on the next business day after
transmittal. Any such notice, consent, request, claim, demand, instruction or
other communication may be given by hand, mail, overnight courier service,
telex, or telefax, and shall be addressed as follows:
If to SAI, to: If to Dealer, to:
Security Associates International, Inc. Company Name
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ Address
Arlington Heights, IL 60005-4142 City, ST Zip
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇ Fax No.(----------------
Attention: President Attention: President
or to such other address as a party may from time to time designate by written
notice to the other.
6.2 COSTS. The expenses of each party in connection with this Agreement
shall be the sole responsibility of such party.
6.3 INCORPORATION BY REFERENCE. The Schedules, Exhibits, certificates and
other documents attached hereto or referred to herein are deemed to be a part of
this Agreement and are incorporated herein by this reference. 6.4 ENTIRE
AGREEMENT. This Agreement and the other agreements referred to herein set forth
the entire understanding of the parties relating to the subject matter hereof
and supersede all prior agreements, understandings, and representations, whether
oral or written.
6.5 ARBITRATION. All disputes arising under this Agreement shall be
resolved by binding arbitration under the Commercial Arbitration Rules of the
American Arbitration Association (the "Rules"). Such arbitration shall be
conducted in Chicago, Illinois by a single arbitrator selected in accordance
with the Rules.
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6.6 GOVERNING LAW. This Agreement shall be construed in accordance with the
law of the State of Illinois excluding its conflict of law rules.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
SECURITY ASSOCIATES INTERNATIONAL, INC.
By:
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Its
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By: Federal Tax I.D. Number:
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Its
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