Document:

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                                                                     EXHIBIT 4.3

                                                                  EXECUTION COPY

                          REGISTRATION RIGHTS AGREEMENT

                           DATED AS OF MARCH 13, 2001
                                  BY AND AMONG

                                   ADVANCEPCS,
                                   AS ISSUER,

                     THE SUBSIDIARIES LISTED IN SCHEDULE A,
                                  AS GUARANTORS
                                       AND

                         BANC OF AMERICA SECURITIES LLC
               MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
                         BANC ONE CAPITAL MARKETS, INC.
                             CHASE SECURITIES, INC.
                            CIBC WORLD MARKETS CORP.
                           SCOTIA CAPITAL "USA", INC.

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                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                              <C>
Section 1. Definitions............................................................................................1

Section 2. Holders................................................................................................3

Section 3. Registered Exchange Offer..............................................................................3

Section 4. Shelf Registration.....................................................................................5

Section 5. Liquidated Damages.....................................................................................6

Section 6. Registration Procedures................................................................................7

Section 7. Registration Expenses.................................................................................15

Section 8. Indemnification.......................................................................................16

Section 9. Rule 144a and Rule 144................................................................................19

Section 10. Miscellaneous........................................................................................19
</TABLE>

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                  This Registration Rights Agreement (this "AGREEMENT") is made
and entered into as of March 13, 2001, by and among AdvancePCS, a Delaware
corporation (the "COMPANY"), the subsidiaries listed in Schedule A (each a
"GUARANTOR" and, collectively, the "GUARANTORS") and Banc of America Securities
LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Banc One Capital
Markets, Inc., Chase Securities, Inc., CIBC World Markets Corp., and Scotia
Capital "USA", Inc. (each, an "INITIAL PURCHASER" and, collectively, the
"INITIAL PURCHASERS"), each of whom has agreed to purchase the Company's 8 1/2%
Senior Notes due 2008 (the "NOTES") pursuant to tHE Purchase Agreement (as
defined below).

                  This Agreement is made pursuant to the Purchase Agreement,
dated March 7, 2001 (the "PURCHASE AGREEMENT"), by and among the Company, the
Guarantors and the Initial Purchasers. In order to induce the Initial Purchasers
to purchase the Notes, the Company has agreed to provide the registration rights
set forth in this Agreement. The execution and delivery of this Agreement is a
condition to the obligations of the Initial Purchasers set forth in Section 2 of
the Purchase Agreement. Capitalized terms used herein and not otherwise defined
herein shall have the meaning assigned to them under the indenture, dated as of
March 13, 2001 (the "INDENTURE"), entered into by and among the Company, the
Guarantors and U.S. Trust Company of Texas, N.A., as Trustee, relating to the
Notes and the Exchange Notes (as defined below).

                  The parties hereby agree as follows:

                  Section 1. Definitions. As used in this Agreement, the
following capitalized terms shall have the following meanings:

                  ACT:  The Securities Act of 1933, as amended.

                  AFFILIATE:  As defined in Rule 144 of the Act.

                  BROKER-DEALER: Any broker or dealer registered under the
Exchange Act.

                  BUSINESS DAY: Any day other than a Saturday, a Sunday or a day
on which banking institutions in the City of New York are authorized by law,
regulation or executive order to remain closed.

                  CERTIFICATED SECURITIES: Definitive Notes, as defined in the
Indenture.

                  CLOSING DATE:  The date hereof.

                  COMMISSION:  The Securities and Exchange Commission.

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                  CONSUMMATE: An Exchange Offer shall be deemed "Consummated"
for purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Exchange Notes to be issued in the Exchange Offer, (b) the
maintenance of such Exchange Offer Registration Statement continuously effective
and the keeping of the Exchange Offer open for a period not less than the period
required pursuant to Section 3(b) hereof and (c) the delivery by the Company to
the Registrar under the Indenture of Exchange Notes in the same aggregate
principal amount as the aggregate principal amount of Notes tendered by Holders
thereof pursuant to the Exchange Offer.

                  CONSUMMATION DEADLINE:  As defined in Section 3(b) hereof.

                  EFFECTIVENESS DEADLINE: As defined in Sections 3(a) and 4(a)
hereof.

                  EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.

                  EXCHANGE NOTES: The Company's 8 1/2% Senior Notes due 2008 to
be issued pursuant to the Indenture: (i) in the Exchange Offer or (ii) as
contemplated by Section 4 hereof.

                  EXCHANGE OFFER: The exchange and issuance by the Company of a
principal amount of Exchange Notes (which shall be registered pursuant to the
Exchange Offer Registration Statement) equal to the outstanding principal amount
of Notes that are tendered by the Holders in connection with such exchange and
issuance.

                  EXCHANGE OFFER REGISTRATION STATEMENT: The Registration
Statement relating to the Exchange Offer, including the related Prospectus.

                  EXEMPT RESALES: The transactions in which the Initial
Purchasers propose to sell the Notes to certain "qualified institutional
buyers," as such term is defined in Rule 144A under the Act and pursuant to
Regulation S under the Act.

                  FILING DEADLINE:  As defined in Sections 3(a) and 4(a) hereof.

                  HOLDERS:  As defined in Section 2 hereof.

                  PROSPECTUS: The prospectus included in a Registration
Statement at the time such Registration Statement is declared effective, as
amended or supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such Prospectus.

                  RECOMMENCEMENT DATE:  As defined in Section 6(d) hereof.

                  REGISTRATION DEFAULT:  As defined in Section 5 hereof.

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                  REGISTRATION STATEMENT: Any registration statement of the
Company and the Guarantors relating to (a) an offering of Exchange Notes
pursuant to an Exchange Offer or (b) the registration for resale of Transfer
Restricted Securities pursuant to the Shelf Registration Statement, in each
case, (i) that is filed pursuant to the provisions of this Agreement and (ii)
including the Prospectus included therein, all amendments and supplements
thereto (including post-effective amendments) and all exhibits and material
incorporated by reference therein.

                  REGULATION S:  Regulation S promulgated under the Act.

                  RULE 144:  Rule 144 promulgated under the Act.

                  SHELF REGISTRATION STATEMENT:  As defined in Section 4 hereof.

                  SUSPENSION NOTICE:  As defined in Section 6(d) hereof.

                  TIA: The Trust Indenture Act of 1939 as in effect on the date
of the Indenture.

                  TRANSFER RESTRICTED SECURITIES: (A) Each Note, until the
earliest to occur of (i) the date on which such Note is exchanged in the
Exchange Offer for an Exchange Note which is entitled to be resold to the public
by the Holder thereof without complying with the prospectus delivery
requirements of the Act, (ii) the date on which such Note has been disposed of
in accordance with a Shelf Registration Statement (and the purchasers thereof
have been issued Exchange Notes), or (iii) the date on which such Note is
distributed to the public pursuant to Rule 144 under the Act or is saleable
pursuant to Rule 144(k) under the Act (or similar provisions then in effect) and
(B) each Exchange Note held by a Broker Dealer until the date on which such
Exchange Note is disposed of by a Broker-Dealer pursuant to the "Plan of
Distribution" contemplated by the Exchange Offer Registration Statement
(including the delivery of the Prospectus contained therein).

                  Section 2. Holders. A Person is deemed to be a holder of
Transfer Restricted Securities (each, a "HOLDER") whenever such Person owns
Transfer Restricted Securities.

                  Section 3. Registered Exchange Offer. (a) Unless the Exchange
Offer shall not be permitted by applicable federal law (after the procedures set
forth in Section 6(a)(i) below have been complied with), the Company and the
Guarantors shall (i) cause the Exchange Offer Registration Statement to be filed
with the Commission as soon as practicable after the Closing Date, but in no
event later than 90 days after the Closing Date (such 90th day being the "FILING
DEADLINE"), (ii) use their reasonable best efforts to cause such Exchange Offer
Registration Statement to become effective at the earliest possible time, but in
no event later than 150 days after the Closing Date (such 150th day being the
"EFFECTIVENESS DEADLINE"), (iii) in connection with the foregoing, (A) file all
pre-effective amendments to such Exchange Offer Registration Statement as may be
necessary in order to cause it to become effective, (B) file, if applicable, a
post-effective amendment to such Exchange Offer Registration Statement pursuant
to Rule 430A under the Act and (C) cause all necessary filings, if any, in
connection with the registration and qualification of the Exchange Notes to be
made under the Blue Sky laws of such jurisdictions as are necessary to permit
Consummation of the Exchange Offer, and (iv) upon the effectiveness of such
Exchange Offer Registration Statement, commence and Consummate the Exchange
Offer.

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The Exchange Offer shall be on the appropriate form permitting (i) registration
of the Exchange Notes to be offered in exchange for the Notes that are Transfer
Restricted Securities and (ii) resales of Exchange Notes by any Broker-Dealer
that tendered into the Exchange Offer Notes that such Broker-Dealer acquired for
its own account as a result of market making activities or other trading
activities (other than Notes acquired directly from the Company or any of its
Affiliates) as contemplated by Section 3(c) below.

                  (b) The Company and the Guarantors shall use their reasonable
best efforts to cause the Exchange Offer Registration Statement to be effective
continuously, and shall keep the Exchange Offer open for a period of not less
than the minimum period required under applicable federal and state securities
laws to Consummate the Exchange Offer; provided, however, that in no event shall
such period be less than 20 Business Days. The Company and the Guarantors shall
cause the Exchange Offer to comply with all applicable federal and state
securities laws. No securities other than the Exchange Notes and the guarantees
of such Exchange Notes shall be included in the Exchange Offer Registration
Statement. The Company and the Guarantors shall use their best efforts to cause
the Exchange Offer to be Consummated on the earliest practicable date after the
Exchange Offer Registration Statement has become effective, but in no event
later than 30 days thereafter (such 30th day being the "CONSUMMATION DEADLINE").

                  (c) The Company shall include a "Plan of Distribution" section
in the Prospectus contained in the Exchange Offer Registration Statement and
indicate therein that any Broker-Dealer who holds Transfer Restricted Securities
that were acquired for the account of such Broker-Dealer as a result of
market-making activities or other trading activities (other than Notes acquired
directly from the Company or any Affiliate of the Company), may exchange such
Transfer Restricted Securities pursuant to the Exchange Offer. Such "Plan of
Distribution" section shall also contain all other information with respect to
such sales by such Broker-Dealers that the Commission may require in order to
permit such sales pursuant thereto, but such "Plan of Distribution" shall not
name any such Broker-Dealer or disclose the amount of Transfer Restricted
Securities held by any such Broker-Dealer, except to the extent required by the
Commission as a result of a change in policy, rules or regulations after the
date of this Agreement. See the Shearman & Sterling no-action letter (available
July 2, 1993).

                  Because any such Broker-Dealer may be deemed to be an
"underwriter" within the meaning of the Act and must, therefore, deliver a
prospectus meeting the requirements of the Act in connection with its initial
sale of any Exchange Notes received by such Broker-Dealer in the Exchange Offer,
the Company and the Guarantors shall permit the use of the Prospectus contained
in the Exchange Offer Registration Statement by such Broker-Dealer to satisfy
such prospectus delivery requirement through the Consummation Deadline and
thereafter as provided in the remainder of this paragraph. To the extent
necessary to ensure that the prospectus contained in the Exchange Offer
Registration Statement is available for sales of Exchange Notes by any
Broker-Dealer that acquired Exchange Notes as a result of market-making or
similar activities such that the Broker-Dealer would be required to deliver a
prospectus under the Act upon a subsequent sale or other disposition of the
Exchange Notes, then the Company and the Guarantors agree to use their best
efforts to keep the Exchange Offer Registration Statement continuously
effective, supplemented, amended and current as required by and subject to the
provisions of Section 6(a) and (c) hereof and in conformity with the
requirements of this Agreement, the Act and the policies, rules and regulations
of the Commission as announced from

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time to time, for a period of one-hundred-eighty (180) days (as extended
pursuant to Section 6(c)(i)) from the Consummation Deadline or such shorter
period as will terminate when all Transfer Restricted Securities covered by such
Registration Statement have been sold pursuant thereto if any such Broker-Dealer
desiring such action shall notify the Company in writing that such Broker-Dealer
acquired Exchange Notes as a result of market-making or other similar activities
such that the Broker-Dealer would be required to deliver a prospectus under the
Act upon a subsequent sale or other disposition of the Exchange Notes. The
Company and the Guarantors shall provide copies of the latest version of such
Prospectus to such Broker-Dealers, in such number as such Broker-Dealers may
reasonably request promptly upon such request, and in no event later than one
Business Day after the date of such request, at any time during such period.

                  Section 4. Shelf Registration. (a) Shelf Registration. If (i)
the Exchange Offer is not permitted by applicable law (after the Company and the
Guarantors have complied with the procedures set forth in Section 6(a)(i) below)
or (ii) if any Holder of Transfer Restricted Securities shall notify the Company
in writing within 20 Business Days following the Consummation Deadline that (A)
such Holder was prohibited by law or Commission policy from participating in the
Exchange Offer or (B) such Holder may not resell the Exchange Notes acquired by
it in the Exchange Offer to the public without delivering a prospectus and the
Prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such Holder or (C) such Holder is a
Broker-Dealer and holds Notes acquired directly from the Company or any of its
Affiliates, then the Company and the Guarantors shall: (x) cause to be filed, on
or prior to 60 days after the earlier of (i) the date on which the Company
determines that the Exchange Offer Registration Statement cannot be filed as a
result of clause (a)(i) above and (ii) the date on which the Company receives
the notice specified in clause (a)(ii) above, (such earlier date, the "FILING
DEADLINE"), a shelf registration statement pursuant to Rule 415 under the Act
(which may be an amendment to the Exchange Offer Registration Statement (the
"SHELF REGISTRATION STATEMENT")), relating to all Transfer Restricted Securities
the Holders of which shall provide the Company with certain information in
accordance with Section 4(b) hereof and (y) shall use their reasonable best
efforts to cause such Shelf Registration Statement to become effective on or
prior to 60 days after the Filing Deadline for the Shelf Registration Statement
(such 60th day the "EFFECTIVENESS DEADLINE").

                  If, after the Company and the Guarantors filed an Exchange
Offer Registration Statement that satisfies the requirements of Section 3(a)
above, the Company and the Guarantors are required to file and make effective a
Shelf Registration Statement solely because the Exchange Offer is not permitted
under applicable federal law (i.e., clause (a)(i) of this Section 4 above), then
the filing of the Exchange Offer Registration Statement shall be deemed to
satisfy the requirements of clause (x) of this Section 4(a) above; provided
that, in such event, the Company and the Guarantors shall remain obligated to
use reasonable best efforts to meet the Effectiveness Deadline set forth in
clause (y).

                  To the extent necessary to ensure that the Shelf Registration
Statement is available for sales of Transfer Restricted Securities by the
Holders thereof entitled to the benefit of this Section 4(a) and the other
securities required to be registered therein pursuant to Section 6(b)(ii)
hereof, the Company and the Guarantors shall use their best efforts to keep any
Shelf Registration Statement required by this Section 4(a) continuously
effective, supplemented,

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amended and current as required by and subject to the provisions of Sections
6(b) and (c) hereof and in conformity with the requirements of this Agreement,
the Act and the policies, rules and regulations of the Commission as announced
from time to time, for a period of at least two years (as extended pursuant to
Section 6(c)(i)) following the Closing Date, or such shorter period as will
terminate when all Transfer Restricted Securities covered by such Shelf
Registration Statement have been sold pursuant thereto.

                  (c) Provision by Holders of Certain Information in Connection
with the Shelf Registration Statement. No Holder of Transfer Restricted
Securities may include any of its Transfer Restricted Securities in any Shelf
Registration Statement pursuant to this Agreement unless and until such Holder
furnishes to the Company in writing, within 20 days after receipt of a request
therefor, the information specified in Item 507 or 508 of Regulation S-K, as
applicable, of the Act for use in connection with any Shelf Registration
Statement or Prospectus or preliminary Prospectus included therein. No Holder of
Transfer Restricted Securities shall be entitled to liquidated damages pursuant
to Section 5 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.

                  Section 5. Liquidated Damages. If (i) any Registration
Statement required by this Agreement is not filed with the Commission on or
prior to the applicable Filing Deadline, (ii) any such Registration Statement
has not been declared effective by the Commission on or prior to the applicable
Effectiveness Deadline, (iii) the Exchange Offer has not been Consummated on or
prior to the Consummation Deadline, (iv) the Shelf Registration Statement is
declared effective but thereafter, pending the announcement of a material
corporate transaction, the Company issues a notice that the Shelf Registration
Statement is unusable, or such notice is required under applicable securities
laws to be issued by the Company, and, during the period specified in the last
paragraph of Section 4(a) above, the aggregate number of days in any consecutive
twelve-month period for which all such notices are issued or required to be
issued exceeds 45 days, or (v) the Exchange Offer Registration Statement is
filed and declared effective but thereafter (A) during the period through and
including the Consummation Deadline, shall cease to be effective or fail to be
usable for its intended purpose without being succeeded within 2 Business Days
by a post-effective amendment to such Exchange Offer Registration Statement that
cures such failure and that is itself declared effective immediately or (B)
during the period from the day after the Consummation Deadline through and
including the one-hundred-eightieth day after the Consummation Deadline, pending
the announcement of a material corporate transaction, the Company issues a
notice that the Exchange Offer Registration Statement is unusable for the
purposes contemplated by the second paragraph of Section 3(c) above, or such
notice is required under applicable securities laws to be issued by the Company,
and, during the period specified in the second paragraph of Section 3(c) above,
the aggregate number of days for which all such notices are issued or required
to be issued exceeds 45 days (each such event referred to in clauses (i) through
(v), a "REGISTRATION DEFAULT"), then the Company and the Guarantors hereby
jointly and severally agree to pay to each Holder of Transfer Restricted
Securities affected thereby liquidated damages in an amount equal to one-half of
one percent (0.5%) per annum of the principal amount of the Transfer Restricted
Securities held by such Holder for each day that the Registration Default
continues for the first 90-day period immediately following the occurrence of
such Registration Default. The amount

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of the liquidated damages shall increase by an additional one-quarter of one
percent (0.25%) with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of liquidated
damages of two percent (2.00%) per annum of the principal amount of the Transfer
Restricted Securities affected thereby; provided that the Company and the
Guarantors shall in no event be required to pay liquidated damages for more than
one Registration Default at any given time. Notwithstanding anything to the
contrary set forth herein, (1) upon filing of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the case
of (i) above, (2) upon the effectiveness of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the case
of (ii) above, (3) upon Consummation of the Exchange Offer, in the case of (iii)
above, or (4) upon the filing of a post-effective amendment to the Registration
Statement or an additional Registration Statement that causes the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration Statement)
to again be declared effective or made usable in the case of (iv) or (v)(A) or
(B) above, as applicable, the liquidated damages payable with respect to the
Transfer Restricted Securities as a result of such clause (i), (ii), (iii), (iv)
or (v)(A) or (B), as applicable, shall cease, if the Company is otherwise in
compliance with this Section 5.

                  All accrued liquidated damages shall be paid to the Holders
entitled thereto, in the manner provided for the payment of interest in the
Indenture, on each Interest Payment Date, as more fully set forth in the
Indenture and the Notes. Notwithstanding the fact that any securities for which
liquidated damages are due cease to be Transfer Restricted Securities on the
Interest Payment Date, all obligations of the Company and the Guarantors to pay
accrued liquidated damages with respect to such securities shall survive until
such time as such obligations with respect to such securities shall have been
satisfied in full.

                  In the event that the Exchange Offer Registration Statement is
declared effective but thereafter the Company issues a notice as contemplated by
clause (v)(B) above, the number of days during which such Registration Statement
is unusable shall be deducted from the first annual 45-day "blackout" period
permitted under clause (iv) above for purposes of determining the number of days
during which additional interest would accrue in the event of a Registration
Default under clause (iv) above.

                  Section 6. Registration Procedures. (a) Exchange Offer
Registration Statement. In connection with the Exchange Offer, the Company and
the Guarantors shall (x) comply with all applicable provisions of Section 6(c)
below, (y) use their reasonable best efforts to effect such exchange and to
permit the resale of Exchange Notes by any Broker-Dealer that tendered in the
Exchange Offer Notes that such Broker-Dealer acquired for its own account as a
result of its market making activities or other trading activities (other than
Notes acquired directly from the Company or any of its Affiliates) being sold in
accordance with the intended method or methods of distribution thereof, and (z)
comply with all of the following provisions:

                  (i) If, following the date hereof there has been announced a
         change in Commission policy with respect to exchange offers such as the
         Exchange Offer, that in the reasonable opinion of counsel to the
         Company raises a substantial question as to whether the Exchange Offer
         is permitted by applicable federal law, the Company and the Guarantors
         hereby agree to seek a no-action letter or other favorable decision
         from the Commission allowing the Company and the Guarantors to
         Consummate an Exchange

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         Offer for such Transfer Restricted Securities. The Company and the
         Guarantors hereby agree to pursue the issuance of such a decision to
         the Commission staff level. In connection with the foregoing, the
         Company and the Guarantors hereby agree to take all such other actions
         as may be requested by the Commission or otherwise reasonably required
         in connection with the issuance of such decision, including without
         limitation (A) participating in telephonic conferences with the
         Commission, (B) delivering to the Commission staff an analysis prepared
         by counsel to the Company setting forth the legal bases, if any, upon
         which such counsel has concluded that such an Exchange Offer should be
         permitted and (C) diligently pursuing a resolution (which need not be
         favorable) by the Commission staff.

                  (ii) As a condition to its participation in the Exchange
         Offer, each Holder of Transfer Restricted Securities (including,
         without limitation, any Holder who is a Broker Dealer) shall furnish,
         upon the request of the Company, prior to the Consummation of the
         Exchange Offer, a written representation to the Company and the
         Guarantors (which may be contained in the letter of transmittal
         contemplated by the Exchange Offer Registration Statement) to the
         effect that (A) it is not an Affiliate of the Company, (B) it is not
         engaged in, and does not intend to engage in, and has no arrangement or
         understanding with any person to participate in, a distribution of the
         Exchange Notes to be issued in the Exchange Offer and (C) it is
         acquiring the Exchange Notes in its ordinary course of business. As a
         condition to its participation in the Exchange Offer each Holder using
         the Exchange Offer to participate in a distribution of the Exchange
         Notes shall acknowledge and agree that if the resales are of Exchange
         Notes obtained by such Holder in exchange for Notes acquired directly
         from the Company or an Affiliate thereof, it (1) could not, under
         Commission policy as in effect on the date of this Agreement, rely on
         the position of the Commission enunciated in Morgan Stanley and Co.,
         Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation
         (available May 13, 1988), as interpreted in the Commission's letter to
         Shearman & Sterling dated July 2, 1993, and similar no-action letters
         (including, if applicable, any no-action letter obtained pursuant to
         clause (i) above), and (2) must comply with the registration and
         prospectus delivery requirements of the Act in connection with a
         secondary resale transaction and that such a secondary resale
         transaction must be covered by an effective registration statement
         containing the selling security holder information required by Item 507
         or 508, as applicable, of Regulation S-K.

                  (iii) Prior to effectiveness of the Exchange Offer
         Registration Statement, the Company and the Guarantors shall provide a
         supplemental letter to the Commission (A) stating that the Company and
         the Guarantors are registering the Exchange Offer in reliance on the
         position of the Commission enunciated in Exxon Capital Holdings
         Corporation (available May 13, 1988), Morgan Stanley and Co., Inc.
         (available June 5, 1991) as interpreted in the Commission's letter to
         Shearman & Sterling dated July 2, 1993, and, if applicable, any
         no-action letter obtained pursuant to clause (i) above, (B) including a
         representation that neither the Company nor any Guarantor has entered
         into any arrangement or understanding with any Person to distribute the
         Exchange Notes to be received in the Exchange Offer and that, to the
         best of the Company's and each Guarantor's information and belief, each
         Holder participating in the Exchange Offer is acquiring the Exchange
         Notes in its ordinary course of business and has no arrangement

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         or understanding with any Person to participate in the distribution of
         the Exchange Notes received in the Exchange Offer and (C) any other
         undertaking or representation required by the Commission as set forth
         in any no-action letter obtained pursuant to clause (i) above, if
         applicable.

                  (b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company and the Guarantors shall:

                  (i) comply with all the provisions of Section 6(c) below and
         use their respective reasonable best efforts to effect such
         registration to permit the sale of the Transfer Restricted Securities
         being sold in accordance with the intended method or methods of
         distribution thereof (as indicated in the information furnished to the
         Company pursuant to Section 4(b) hereof), and pursuant thereto the
         Company and the Guarantors will prepare and file with the Commission a
         Registration Statement relating to the registration on any appropriate
         form under the Act, which form shall be available for the sale of the
         Transfer Restricted Securities in accordance with the intended method
         or methods of distribution thereof within the time periods and
         otherwise in accordance with the provisions hereof, and

                  (ii) issue, upon the request of any Holder or purchaser of
         Notes covered by any Shelf Registration Statement contemplated by this
         Agreement, Exchange Notes having an aggregate principal amount equal to
         the aggregate principal amount of Notes sold pursuant to the Shelf
         Registration Statement and surrendered to the Company for cancellation;
         the Company shall register Exchange Notes on the Shelf Registration
         Statement for this purpose and issue the Exchange Notes to the
         purchaser(s) of securities subject to the Shelf Registration Statement
         in the names as such purchaser(s) shall designate.

                  (c) General Provisions. In connection with any Registration
Statement and any related Prospectus required by this Agreement, the Company and
the Guarantors shall:

                  (i) use their best efforts to keep such Registration Statement
         continuously effective and provide all requisite financial statements
         for the period specified in Section 3 or 4 of this Agreement, as
         applicable. Upon the occurrence of any event that would cause any such
         Registration Statement or the Prospectus contained therein (A) in the
         case of the Registration Statement, to contain an untrue statement of
         material fact or omit to state any material fact required to be stated
         therein or necessary to make the statements therein not misleading, or,
         in the case of the Prospectus, to contain an untrue statement of a
         material fact or omit to state a material fact necessary in order to
         make the statements therein, in the light of the circumstances under
         which they were made, not misleading, or (B) not to be effective and
         usable for resale of Transfer Restricted Securities during the period
         required by this Agreement, the Company and the Guarantors shall file
         promptly an appropriate amendment to such Registration Statement curing
         such defect, and, if Commission review is required, use their
         respective reasonable best efforts to cause such amendment to be
         declared effective as soon as practicable.

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                  (ii) prepare and file with the Commission such amendments and
         post-effective amendments to the applicable Registration Statement as
         may be necessary to keep such Registration Statement effective for the
         applicable period set forth in Section 3 or 4 hereof, as the case may
         be; cause the Prospectus to be supplemented by any required Prospectus
         supplement, and as so supplemented to be filed pursuant to Rule 424
         under the Act, and to comply fully with Rules 424, 430A and 462, as
         applicable, under the Act in a timely manner; and comply with the
         provisions of the Act with respect to the disposition of all securities
         covered by such Registration Statement during the applicable period in
         accordance with the intended method or methods of distribution by the
         sellers thereof set forth in such Registration Statement or supplement
         to the Prospectus;

                  (iii) advise each selling Holder promptly and, if requested by
         such Holder, confirm such advice in writing, (A) when the Prospectus or
         any Prospectus supplement or post-effective amendment has been filed,
         and, with respect to any applicable Registration Statement or any
         post-effective amendment thereto, when the same has become effective,
         (B) of any request by the Commission for amendments to the Registration
         Statement or amendments or supplements to the Prospectus or for
         additional information relating thereto, (C) of the issuance by the
         Commission of any stop order suspending the effectiveness of the
         Registration Statement under the Act or of the suspension by any state
         securities commission of the qualification of the Transfer Restricted
         Securities for offering or sale in any jurisdiction, or the initiation
         of any proceeding for any of the preceding purposes, (D) of the
         existence of any fact or the happening of any event that makes any
         statement of a material fact made in the Registration Statement, the
         Prospectus, any amendment or supplement thereto or any document
         incorporated by reference therein untrue, or that requires the making
         of any additions to or changes in the Registration Statement in order
         to make the statements therein not misleading, or that requires the
         making of any additions to or changes in the Prospectus in order to
         make the statements therein, in the light of the circumstances under
         which they were made, not misleading. If at any time the Commission
         shall issue any stop order suspending the effectiveness of the
         Registration Statement, or any state securities commission or other
         regulatory authority shall issue an order suspending the qualification
         or exemption from qualification of the Transfer Restricted Securities
         under state securities or Blue Sky laws, the Company and the Guarantors
         shall use their respective reasonable best efforts to obtain the
         withdrawal or lifting of such order at the earliest possible time;

                  (iv) subject to Section 6(c)(i), if any fact or event
         contemplated by Section 6(c)(iii)(D) above shall exist or have
         occurred, prepare a supplement or post-effective amendment to the
         Registration Statement or related Prospectus or any document
         incorporated therein by reference or file any other required document
         so that, as thereafter delivered to the purchasers of Transfer
         Restricted Securities, the Prospectus will not contain an untrue
         statement of a material fact or omit to state any material fact
         necessary to make the statements therein, in the light of the
         circumstances under which they were made, not misleading;

                  (v) furnish to each selling Holder named in any Registration
         Statement or Prospectus in connection with such exchange or sale, if
         any, before filing with the Commission, copies of any Registration
         Statement or any Prospectus included therein or

                                       10
<PAGE>   13

         any amendments or supplements to any such Registration Statement or
         Prospectus (including all documents incorporated by reference after the
         initial filing of such Registration Statement), which documents will be
         subject to the review and comment of such Holders in connection with
         such sale, if any, for a period of at least four Business Days, and the
         Company will not file any such Registration Statement or Prospectus or
         any amendment or supplement to any such Registration Statement or
         Prospectus (including all such documents incorporated by reference) to
         which such Holders shall reasonably object within four Business Days
         after the receipt thereof. A Holder shall be deemed to have reasonably
         objected to such filing if such Registration Statement or amendment, as
         applicable, as proposed to be filed, contains an untrue statement of a
         material fact or omits to state any material fact required to be stated
         therein or necessary to make the statements therein not misleading, or
         if the Prospectus or any supplement contains an untrue statement of a
         material fact or omits to state a material fact necessary in order to
         make the statements therein, in the light of the circumstances under
         which they were made, not misleading, or if the Registration Statement
         or Prospectus fails to comply with the applicable requirements of the
         Act;

                  (vi) promptly prior to the filing of any document that is to
         be incorporated by reference into a Registration Statement or
         Prospectus, provide copies of such document to each selling Holder in
         connection with such exchange or sale, if any, make at reasonable times
         the Company's and the Guarantors' representatives available for
         discussion of such document and, subject to appropriate confidentiality
         agreements being entered into, other customary due diligence matters,
         and include such information in such document prior to the filing
         thereof as such selling Holders may reasonably request;

                  (vii) subject to appropriate confidentiality agreements being
         entered into, make available, at reasonable times, for inspection by
         each selling Holder and any attorney or accountant retained by such
         Holders, all financial and other records, pertinent corporate documents
         of the Company and the Guarantors and cause at reasonable times the
         Company's and the Guarantors' officers, directors and employees to
         supply all information reasonably requested by any such Holder,
         attorney or accountant at reasonable times in connection with such
         Registration Statement or any post-effective amendment thereto
         subsequent to the filing thereof and prior to its effectiveness;

                  (viii) if requested by any selling Holders in connection with
         such exchange or sale, promptly include in any Registration Statement
         or Prospectus, pursuant to a supplement or post-effective amendment if
         necessary, such information as such Holders may reasonably request to
         have included therein, including, without limitation, information
         relating to the "Plan of Distribution" of the Transfer Restricted
         Securities; and make all required filings of such Prospectus supplement
         or post-effective amendment as soon as reasonably practicable after the
         Company is notified of the matters to be included in such Prospectus
         supplement or post-effective amendment;

                  (ix) furnish to each selling Holder in connection with such
         exchange or sale, without charge, at least one copy of the Registration
         Statement, as first filed with the Commission, and of each amendment
         thereto, including all documents incorporated by reference therein and
         all exhibits (including exhibits incorporated therein by reference);

                                       11
<PAGE>   14

                  (x) deliver to each selling Holder, without charge, as many
         copies of the Prospectus (including each preliminary prospectus) and
         any amendment or supplement thereto as such Holder reasonably may
         request; the Company and the Guarantors hereby consent to the use (in
         accordance with law, rules, regulations and orders) of the Prospectus
         and any amendment or supplement thereto by each selling Holder in
         connection with the public offering and the sale of the Transfer
         Restricted Securities covered by the Prospectus or any amendment or
         supplement thereto;

                  (xi) upon the request of any selling Holder, enter into such
         agreements (including underwriting agreements) and make such
         representations and warranties and take all such other actions in
         connection therewith as may be reasonable and customary in order to
         expedite or facilitate the disposition of the Transfer Restricted
         Securities pursuant to any applicable Registration Statement
         contemplated by this Agreement as may be reasonably requested by any
         Holder in connection with any sale or resale pursuant to any applicable
         Registration Statement. In such connection, the Company and the
         Guarantors shall:

                           (A) upon request of any Holder furnish (or in the
                  case of paragraphs (2) and (3) below, use its best efforts to
                  cause to be furnished) to each Broker-Dealer or selling
                  Holder, as the case may be, upon Consummation of the Exchange
                  Offer or upon the effectiveness of the Shelf Registration
                  Statement, as the case may be:

                                    (1) a certificate, dated such date, signed
                           on behalf of the Company and each Guarantor by (x)
                           the Chief Executive Officer, President or any Vice
                           President and (y) a principal financial or accounting
                           officer of the Company and such Guarantor,
                           confirming, as of the date thereof, the matters set
                           forth in Section 5(k) of the Purchase Agreement and
                           such other similar matters as such Holders may
                           reasonably request;

                                    (2) opinions, dated the date of Consummation
                           of the Exchange Offer or the date of effectiveness of
                           the Shelf Registration Statement, as the case may be,
                           of counsel for the Company and the Guarantors
                           covering matters similar to those set forth in
                           Sections 5(f), (g), (h) and (i) of the Purchase
                           Agreement subject to the same conditions with respect
                           thereto and to the delivery thereof and such other
                           matters as such Holder may reasonably request which
                           are customarily covered in counsel opinions to
                           underwriters in underwritten public offerings, and in
                           any event including a statement to the effect that
                           such counsel has participated in conferences with
                           officers and other representatives of the Company and
                           the Guarantors, representatives of the independent
                           public accountants for the Company and the Guarantors
                           and have considered the matters required to be stated
                           therein and the statements contained therein,
                           although such counsel has not independently verified
                           the accuracy, completeness or fairness of such
                           statements; and that such counsel advises that, on
                           the basis of the foregoing (relying as to materiality
                           to the extent such counsel deems appropriate upon the
                           statements of officers and other

                                       12
<PAGE>   15

                           representatives of the Company and the Guarantors)
                           and without independent check or verification, no
                           facts came to such counsel's attention that caused
                           such counsel to believe that the applicable
                           Registration Statement, at the time such Registration
                           Statement or any post-effective amendment thereto
                           became effective and, in the case of the Exchange
                           Offer Registration Statement, as of the date of
                           Consummation of the Exchange Offer, contained an
                           untrue statement of a material fact or omitted to
                           state a material fact required to be stated therein
                           or necessary to make the statements therein not
                           misleading, or that the Prospectus contained in such
                           Registration Statement as of its date and, in the
                           case of the opinion dated the date of Consummation of
                           the Exchange Offer, as of the date of Consummation,
                           contained an untrue statement of a material fact or
                           omitted to state a material fact necessary in order
                           to make the statements therein, in the light of the
                           circumstances under which they were made, not
                           misleading. Without limiting the foregoing, such
                           counsel may state further that such counsel assumes
                           no responsibility for, and has not independently
                           verified, the accuracy, completeness or fairness of
                           the financial statements, notes and schedules and
                           other financial data and statistical data included in
                           any Registration Statement contemplated by this
                           Agreement or the related Prospectus; and

                                    (3) customary comfort letters, dated the
                           date of Consummation of the Exchange Offer, or as of
                           the date of effectiveness of the Shelf Registration
                           Statement, as the case may be, from the Company's
                           independent accountants (and, if necessary, any other
                           certified public accountant of any subsidiary of the
                           Company, or of any business acquired by the Company
                           for which financial statements and financial data are
                           required to be included in the Registration
                           Statement), in the customary form and covering
                           matters of the type customarily covered in comfort
                           letters to underwriters in connection with
                           underwritten public offerings; and

                           (B) deliver such other documents and certificates as
                  may be reasonably requested by the selling Holders to evidence
                  compliance with the matters covered in clause (A) above and
                  with any customary conditions contained in any agreement
                  entered into by the Company and the Guarantors pursuant to
                  this clause (xi);

                  (xii) prior to any public offering of Transfer Restricted
         Securities, cooperate with the selling Holders and their counsel in
         connection with the registration and qualification of the Transfer
         Restricted Securities under the securities or Blue Sky laws of such
         jurisdictions as the selling Holders may reasonably request and do any
         and all other acts or things necessary or advisable to enable the
         disposition in such jurisdictions of the Transfer Restricted Securities
         covered by the applicable Registration Statement; provided, however,
         that neither the Company nor any Guarantor shall be required to
         register or qualify as a foreign corporation where it is not now so
         qualified or to take any action that would subject it to the service of
         process in suits or to taxation, other than as

                                       13
<PAGE>   16

         to matters and transactions relating to the Registration Statement, in
         any jurisdiction where it is not now so subject;

                  (xiii) in connection with any sale of Transfer Restricted
         Securities that will result in such securities no longer being Transfer
         Restricted Securities, cooperate with the Holders to facilitate the
         timely preparation and delivery of certificates representing Transfer
         Restricted Securities to be sold and not bearing any restrictive
         legends; and to register such Transfer Restricted Securities in such
         denominations and such names as the selling Holders may request at
         least two Business Days prior to any sale of such Transfer Restricted
         Securities;

                  (xiv) use their reasonable best efforts to cause the
         disposition of the Transfer Restricted Securities covered by the
         Registration Statement to be registered with or approved by such other
         governmental agencies or authorities as may be necessary to enable the
         seller or sellers thereof to consummate the disposition of such
         Transfer Restricted Securities; provided, however, that neither the
         Company nor any Guarantor shall be required to register or qualify as a
         foreign corporation where it is not now so qualified or to take any
         action that would subject it to the service of process in suits or to
         taxation, other than as to matters and transactions relating to the
         Registration Statement, in any jurisdiction where it is not now so
         subject;

                  (xv) provide a CUSIP number for all Transfer Restricted
         Securities not later than the effective date of a Registration
         Statement covering such Transfer Restricted Securities and provide the
         Trustee under the Indenture with certificates for the Transfer
         Restricted Securities which are in a form eligible for deposit with the
         Depository Trust Company;

                  (xvi) otherwise use their reasonable best efforts to comply
         with all applicable rules and regulations of the Commission, and make
         generally available to its security holders with regard to any
         applicable Registration Statement, as soon as practicable, a
         consolidated earnings statement meeting the requirements of Rule 158
         (which need not be audited) covering a twelve-month period beginning
         after the effective date of the Registration Statement (as such term is
         defined in paragraph (c) of Rule 158 under the Act);

                  (xvii) cause the Indenture to be qualified under the TIA not
         later than the effective date of the first Registration Statement
         required by this Agreement and, in connection therewith, cooperate with
         the Trustee and the Holders to effect such changes to the Indenture as
         may be required for such Indenture to be so qualified in accordance
         with the terms of the TIA; and execute and use its reasonable best
         efforts to cause the Trustee to execute, all documents that may be
         required to effect such changes and all other forms and documents
         required to be filed with the Commission to enable such Indenture to be
         so qualified in a timely manner;

                  (xviii) provide promptly to each Holder, upon request, each
         document filed with the Commission pursuant to the requirements of
         Section 13 or Section 15(d) of the Exchange Act if not obtainable from
         the Commission; and

                                       14
<PAGE>   17

                  (xix) the Company and the Guarantors will be deemed not to
         have used their reasonable best efforts to cause the Exchange Offer
         Registration Statement or the Shelf Registration Statement, as the case
         may be, to become, or to remain, effective during the requisite period
         if the Company or any of the Guarantors voluntarily and knowingly takes
         any action that would, or omits to take any action which omission
         would, result in any such Registration Statement not being declared
         effective or in the Holders of Registrable Securities covered thereby
         not being able to exchange or offer and sell such Registrable
         Securities during that period as and to the extent contemplated hereby,
         unless (i) such action is required by applicable law or (ii) such
         action is taken by the Company and the Guarantors in good faith and for
         valid business reasons (but not including avoidance of the Company's or
         the Guarantors', as applicable, obligations hereunder), including a
         material corporate transaction, so long as the Company and the
         Guarantors promptly comply with the requirements of Section 6(c)(iv)
         hereof, if applicable.

                  (d) Restrictions on Holders. Each Holder agrees by acquisition
of a Transfer Restricted Security that, upon receipt of the notice referred to
in Section 6(c)(iii)(C) or any notice from the Company of the existence of any
fact or the happening of any event of the kind described in Section 6(c)(iii)(D)
hereof or, in the case of the Shelf Registration, the Company shall issue a
notice pending the announcement of a material corporate transaction that the
Shelf Registration Statement is unusable (in each case, a "SUSPENSION NOTICE"),
such Holder will forthwith discontinue disposition of Transfer Restricted
Securities pursuant to the applicable Registration Statement until (i) such
Holder has received copies of the supplemented or amended Prospectus
contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is advised in
writing by the Company that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings that are incorporated
by reference in the Prospectus (in each case, the "RECOMMENCEMENT DATE"). Each
Holder receiving a Suspension Notice hereby agrees that it will either (i)
destroy any Prospectuses, other than permanent file copies, then in such
Holder's possession which have been replaced by the Company with more recently
dated Prospectuses or (ii) deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, then in such Holder's possession of
the Prospectus covering such Transfer Restricted Securities that was current at
the time of receipt of the Suspension Notice. The time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by a number of days equal to the number of days
in the period from and including the date of delivery of the Suspension Notice
to the date of delivery of the Recommencement Date.

                  Section 7. Registration Expenses. All expenses incident to the
Company's and the Guarantors' performance of or compliance with this Agreement
will be borne, jointly and severally, by the Company and the Guarantors,
regardless of whether a Registration Statement becomes effective, including
without limitation: (i) all registration and filing fees and expenses; (ii) all
fees and expenses of compliance with federal securities and state Blue Sky or
securities laws; (iii) all expenses of printing (including printing certificates
for the Exchange Notes to be issued in the Exchange Offer and printing of
Prospectuses), messenger and delivery services and telephone; (iv) all fees and
disbursements of counsel for the Company and the Guarantors; (v) all application
and filing fees in connection with listing the Exchange Notes on a national
securities exchange or automated quotation system pursuant to the requirements
hereof; and (vi) all fees and disbursements of independent certified public
accountants of the Company and the

                                       15
<PAGE>   18

Guarantors (including the expenses of any special audit and comfort letters
required by or incident to such performance).

                  The Company will, in any event, bear its and the Guarantors'
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the expenses
of any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Guarantors.

                  Section 8. Indemnification. (a) The Company and the Guarantors
agree, jointly and severally, to indemnify and hold harmless each Holder, its
directors, officers, any underwriter in any underwritten public offering of
Transfer Restricted Securities pursuant to a Shelf Registration Statement and
each Person, if any, who controls such Holder or underwriter (within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act), from and against
(i) any and all loss, liability, claim, damage and expense whatsoever, as
incurred, arising out of any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement (or any amendment or
supplement thereto) pursuant to which the Transfer Restricted Securities are
registered under the Act, including all documents incorporated therein by
reference, or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or arising out of any untrue statement or alleged untrue statement
of a material fact contained in any Prospectus (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; (ii) any and all loss,
liability, claim, damage and expense whatsoever, as incurred, to the extent of
the aggregate amount paid in settlement of any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened, or of
any claim whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, provided that (subject to Section
8(d) below) any such settlement is effected with the written consent of the
Company and the Guarantors; and (iii) any and all expenses whatsoever, as
incurred (including the fees and disbursements of counsel chosen by any
indemnified party, subject to the limitations in Section 8(c) below), reasonably
incurred in investigating, preparing or defending against any litigation or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the extent that
any such expense is not paid under subparagraph (i) or (ii) above; provided,
however, that this indemnity agreement shall not apply to any loss, liability,
claim, damage or expense to the extent arising out of any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Company and the Guarantors
by the Initial Purchasers, such Holder or such underwriter expressly for use in
a Registration Statement (or any amendment thereto) or any Prospectus (or any
amendment or supplement thereto); provided, further, that the Company will not
be liable to any Initial Purchaser, Holder (in its capacity as Holder), or
underwriter (or any person who controls such party within the meaning of Section
15 of the Act or Section 20 of the Exchange Act) with respect to any such untrue
statement or alleged untrue statement or omission or alleged omission made in
any preliminary Prospectus to the extent that the Company shall sustain the
burden of proving that any such loss, liability, claim, damage or expense
resulted from the fact that such Initial Purchaser, Holder (in its capacity as
Holder) or underwriter, as the case may be, sold Transfer Restricted Securities
to a Person to whom such

                                       16
<PAGE>   19

Initial Purchaser, Holder (in its capacity as Holder) or underwriter, as the
case may be, failed to send or give, at or prior to the written confirmation of
the sale of such Securities a copy of the final Prospectus (as amended or
supplemented) if the Company has previously furnished copies thereof
(sufficiently in advance of the closing of such sale to allow for distribution
of the final Prospectus in a timely manner) to such Initial Purchaser, Holder
(in its capacity as Holder) or underwriter, as the case may be, and the loss,
liability, claim, damage or expense of such Initial Purchaser, Holder (in its
capacity as Holder) or underwriter, as the case may be, resulted solely from an
untrue statement or omission or alleged untrue statement or omission of a
material fact contained in or omitted from such preliminary Prospectus which was
corrected in the final Prospectus.

                  (b) Each Holder of Transfer Restricted Securities agrees,
severally and not jointly, to indemnify and hold harmless the Company and the
Guarantors, and their respective directors and officers, and each person, if
any, who controls (within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act) the Company, or the Guarantors to the same extent as the
foregoing indemnity from the Company and the Guarantors set forth in section (a)
above, but only with reference to information relating to such Holder furnished
in writing to the Company by such Holder expressly for use in any Registration
Statement. In no event shall any Holder, its directors, officers or any Person
who controls such Holder be liable or responsible for any amount in excess of
the amount by which the total amount received by such Holder with respect to its
sale of Transfer Restricted Securities pursuant to a Registration Statement
exceeds (i) the amount paid by such Holder for such Transfer Restricted
Securities and (ii) the amount of any damages that such Holder, its directors,
officers or any Person who controls such Holder has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission.

                  (c) In case any action shall be commenced involving any person
in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b)
(the "INDEMNIFIED PARTY"), the indemnified party shall promptly notify the
person against whom such indemnity may be sought (the "INDEMNIFYING PERSON") in
writing and the indemnifying party shall assume the defense of such action,
including the employment of counsel reasonably satisfactory to the indemnified
party and the payment of all fees and expenses of such counsel, as incurred
(except that in the case of any action in respect of which indemnity may be
sought pursuant to both Sections 8(a) and 8(b), a Holder shall not be required
to assume the defense of such action pursuant to this Section 8(c), but may
employ separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel, except as provided below, shall be at the expense of
the Holder). Any indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of the indemnified party
unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified party).
In any such case, the indemnifying party shall not, in connection with

                                       17
<PAGE>   20

any one action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the fees and expenses of more than one separate firm of attorneys
(in addition to any local counsel) for all indemnified parties and all such fees
and expenses shall be reimbursed promptly following receipt of invoice therefor
as they are incurred. Such firm shall be designated in writing by a majority of
the Holders, in the case of the parties indemnified pursuant to Section 8(a),
and by the Company and Guarantors, in the case of parties indemnified pursuant
to Section 8(b). The indemnifying party under this Section 8 shall not be liable
for any settlement of any proceeding effected without its written consent, but
if settled with such consent or if there be a final non-appealable judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
against any loss, claim, damage, liability or expense by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by Section
8(c) hereof, the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 45 days after receipt by such indemnifying
party of the aforesaid request, (ii) such indemnifying party shall have received
notice of the final terms of such proposed settlement as soon as practicable
prior to such settlement being entered into and (iii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement,
compromise or consent to the entry of judgment in any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or could
have been a party and indemnity was or could have been sought hereunder by such
indemnified party, unless such settlement, compromise or consent includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such action, suit or proceeding.

                  (d) To the extent that the indemnification provided for in
this Section 8 is unavailable to an indemnified party in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or judgments, in such proportion as
is appropriate to reflect the relative fault of the Company and the Guarantors,
on the one hand, and of the Holder, on the other hand, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative fault of the Company and the Guarantors, on the one
hand, and of the Holder, on the other hand, shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or such Guarantor, on the one hand, or by
the Holder, on the other hand, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and judgments referred to above shall be deemed to
include, subject to the limitations set forth in the third sentence of Section
8(c), any legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any action or claim.

                                       18
<PAGE>   21

                  The Company, the Guarantors and each Holder agree that it
would not be just and equitable if contribution pursuant to this Section 8(d)
were determined by pro rata allocation (even if the Holders were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or judgments referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any matter,
including any action that could have given rise to such losses, claims, damages,
liabilities or judgments. Notwithstanding the provisions of this Section 8, no
Holder, its directors, its officers or any Person, if any, who controls such
Holder shall be required to contribute, in the aggregate, any amount in excess
of the amount by which the total received by such Holder with respect to the
sale of Transfer Restricted Securities pursuant to a Registration Statement
exceeds (i) the amount paid by such Holder for such Transfer Restricted
Securities and (ii) the amount of any damages which such Holder has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations to contribute pursuant to this
Section 8(c) are several in proportion to the respective principal amount of
Transfer Restricted Securities held by each Holder hereunder and not joint.

                  Section 9. Rule 144A and Rule 144. The Company and each
Guarantor agree with each Holder, for so long as any Transfer Restricted
Securities remain outstanding and during any period in which the Company or such
Guarantor (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make
available, upon request of any Holder, to such Holder or beneficial owner of
Transfer Restricted Securities in connection with any sale thereof and any
prospective purchaser of such Transfer Restricted Securities designated by such
Holder or beneficial owner, the information required by Rule 144A(d)(4) under
the Act in order to permit resales of such Transfer Restricted Securities
pursuant to Rule 144A, and (ii) is subject to Section 13 or 15 (d) of the
Exchange Act, to make all filings required thereby in a timely manner in order
to permit resales of such Transfer Restricted Securities pursuant to Rule 144.

                  Section 10. Miscellaneous. (a) Remedies. The Company and the
Guarantors acknowledge and agree that any failure by the Company and/or the
Guarantors to comply with their respective obligations under Sections 3 and 4
hereof may result in material irreparable injury to the Initial Purchasers or
the Holders for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of any such failure, the Initial Purchasers or any Holder may obtain such relief
as may be required to specifically enforce the Company's and the Guarantors'
obligations under Sections 3 and 4 hereof. The Company and the Guarantors
further agree to waive the defense in any action for specific performance that a
remedy at law would be adequate.

                  (b) No Inconsistent Agreements. Neither the Company nor any
Guarantor will, on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
Except as set forth in the Offering Memorandum, neither the

                                       19
<PAGE>   22

Company nor any Guarantor is party to any agreement granting any registration
rights with respect to its securities to any Person. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's and the Guarantors'
securities under any agreement in effect on the date hereof.

                  (c) Amendments and Waivers. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents to or
departures from the provisions hereof may not be given unless (i) in the case of
Section 5 hereof and this Section 10(c)(i), the Company has obtained the written
consent of Holders of all outstanding Transfer Restricted Securities and (ii) in
the case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose Transfer Restricted Securities are being tendered pursuant to
the Exchange Offer, and that does not affect directly or indirectly the rights
of other Holders whose Transfer Restricted Securities are not being tendered
pursuant to such Exchange Offer, may be given by the Holders of a majority of
the outstanding principal amount of Transfer Restricted Securities subject to
such Exchange Offer.

                  (d) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and
shall have the right to enforce such agreements directly to the extent they may
deem such enforcement necessary or advisable to protect its rights or the rights
of Holders hereunder.

                  (e) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, first-class
mail (registered or certified, return receipt requested), telecopier, or air
courier guaranteeing overnight delivery:

                  (1) if to a Holder, at the address set forth on the records of
         the Registrar under the Indenture, with a copy to the Registrar under
         the Indenture; and

                  (2) if to the Company or the Guarantors:

                      AdvancePCS
                      5215 North O'Conner Boulevard, Suite 1600
                      Irving, Texas 75039
                      Facsimile:  (469) 420-6196
                      Attention:  Legal Department

                      With a copy to:

                      Akin, Gump, Strauss, Hauer & Feld, LLP
                      1700 Pacific Avenue, Suite 4100
                      Dallas, Texas  75201
                      Facsimile:  (214) 969-4343
                      Attention:  Alan Utay, Esq.

                                       20
<PAGE>   23

                  All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when receipt acknowledged, if telecopied; and on the next business day, if
timely delivered to an air courier guaranteeing overnight delivery.

                  Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee at
the address specified in the Indenture.

                  (f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders; provided that nothing herein shall be deemed to
permit any assignment, transfer or other disposition of Transfer Restricted
Securities in violation of the terms hereof or of the Purchase Agreement or the
Indenture. If any transferee of any Holder shall acquire Transfer Restricted
Securities in any manner, whether by operation of law or otherwise, such
Transfer Restricted Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Transfer Restricted Securities such
Person shall be conclusively deemed to have agreed to be bound by and to perform
all of the terms and provisions of this Agreement, including the restrictions on
resale set forth in this Agreement and, if applicable, the Purchase Agreement,
and such Person shall be entitled to receive the benefits hereof.

                  (g) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

                  (h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

                  (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE CONFLICT OF LAW RULES THEREOF.

                  (J) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.

                  (k) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted with respect to the
Transfer Restricted Securities. This Agreement supersedes all prior agreements
and understandings between the parties with respect to such subject matter.

                                       21
<PAGE>   24

                  IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.

                             ADVANCEPCS

                             By:
                                      ------------------------------------------
                                      Name:
                                      Title:

                             ADVANCEPCS, L.P.

                             By:
                                      ------------------------------------------
                                      Name:
                                      Title:

                             ADVANCEPCS RESEARCH, L.L.C.

                             By:
                                      ------------------------------------------
                                      Name:
                                      Title:

                             ADVANCERX.COM, L.P.

                             By:
                                      ------------------------------------------
                                      Name:
                                      Title:

                             ADVP CONSOLIDATION, L.L.C.

                             By:
                                      ------------------------------------------
                                      Name:
                                      Title:

                                       22
<PAGE>   25

                             ADVP MANAGEMENT, L.P.,

                             By:
                                      ------------------------------------------
                                      Name:
                                      Title:

                             AMBULATORY CARE REVIEW SERVICES, INC.

                             By:
                                      ------------------------------------------
                                      Name:
                                      Title:

                             BAUMEL-EISNER NEUROMEDICAL INSTITUTE, INC.

                             By:
                                      ------------------------------------------
                                      Name:
                                      Title:

                             CLINICAL PHARMACEUTICALS, INC.

                             By:
                                      ------------------------------------------
                                      Name:
                                      Title:

                             FFI RX MANAGED CARE, INC.

                             By:
                                      ------------------------------------------
                                      Name:
                                      Title:

                                       23
<PAGE>   26

                             FIRST FLORIDA INTERNATIONAL HOLDINGS, INC.

                             By:
                                      ------------------------------------------
                                      Name:
                                      Title:

                             FIRST FLORIDA MANAGED CARE, INC.

                             By:
                                      ------------------------------------------
                                      Name:
                                      Title:

                             FOUNDATION HEALTH PHARMACEUTICAL SERVICES INC.

                             By:
                                      ------------------------------------------
                                      Name:
                                      Title:

                             HMN HEALTH SERVICES, INC.

                             By:
                                      ------------------------------------------
                                      Name:
                                      Title:

                             INNOVATIVE MEDICAL RESEARCH, INC.

                             By:
                                      ------------------------------------------
                                      Name:
                                      Title:

                                       24
<PAGE>   27

                             INNOVATIVE PHARMACEUTICAL STRATEGIES, INC.

                             By:
                                      ------------------------------------------
                                      Name:
                                      Title:

                             MATURE RX PLUS OF NEVADA, INC.

                             By:
                                      ------------------------------------------
                                      Name:
                                      Title:

                             PCS HEALTH SYSTEMS, INC.

                             By:
                                      ------------------------------------------
                                      Name:
                                      Title:

                             PCS HOLDING CORPORATION

                             By:
                                      ------------------------------------------
                                      Name:
                                      Title:

                             PCS MAIL SERVICES, INC.

                             By:
                                      ------------------------------------------
                                      Name:
                                      Title:

                                       25
<PAGE>   28

                             PCS MAIL SERVICES OF BIRMINGHAM, INC.

                             By:
                                      ------------------------------------------
                                      Name:
                                      Title:

                             PCS MAIL SERVICES OF FT. WORTH, INC.

                             By:
                                      ------------------------------------------
                                      Name:
                                      Title:

                             PCS MAIL SERVICES OF SCOTTSDALE, INC.

                             By:
                                      ------------------------------------------
                                      Name:
                                      Title:

                             PCS SERVICES, INC.

                             By:
                                      ------------------------------------------
                                      Name:
                                      Title:

                             PHOENIX COMMUNICATIONS INTERNATIONAL, INC.

                             By:
                                      ------------------------------------------
                                      Name:
                                      Title:

                                       26
<PAGE>   29

BANC OF AMERICA SECURITIES LLC
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
BANC ONE CAPITAL MARKETS, INC.
CHASE SECURITIES, INC.
CIBC WORLD MARKETS CORP.
SCOTIA CAPITAL "USA", INC.

By:      Banc of America Securities LLC

By:
         --------------------------------------------
         Name:
         Title:

                                       27
<PAGE>   30

                                   SCHEDULE A

                                   GUARANTORS

AdvancePCS, L.P.
AdvancePCS Research, L.L.C.
AdvanceRx.com, L.P.
ADVP Consolidation, L.L.C.
ADVP Management, L.P.
Ambulatory Care Review Services, Inc.
Baumel-Eisner Neuromedical Institute, Inc.
Clinical Pharmaceuticals, Inc.
FFI Rx Managed Care, Inc.
First Florida International Holdings, Inc.
First Florida Managed Care, Inc.
Foundation Health Pharmaceutical Services, Inc.
HMN Health Services, Inc.
Innovative Medical Research, Inc.
Innovative Pharmaceutical Strategies, Inc.
Mature Rx Plus of Nevada, Inc.
PCS Health Systems, Inc.
PCS Holding Corporation
PCS Mail Services, Inc.
PCS Mail Services of Birmingham, Inc.
PCS Mail Services of Ft. Worth, Inc.
PCS Mail Services of Scottsdale, Inc.
PCS Services, Inc.
Phoenix Communications International, Inc.<PAGE>   1
                                                                   Exhibit 10.47

                          PLAN AND AGREEMENT OF MERGER

                                     BETWEEN

                    SECURITY ASSOCIATES INTERNATIONAL, INC.,

                         KING CENTRAL ACQUISITION CORP.

                              KC ACQUISITION CORP.,

                               MR. THOMAS FEW SR.

                                       AND

                               MR. TIMOTHY MCGINN

                               DATED: MAY 2, 2000

<PAGE>   2

                          PLAN AND AGREEMENT OF MERGER

         THIS PLAN AND AGREMENT OF MERGER (the "Agreement"), dated as of May 2,
2000, is entered into by and among Security Associates International, Inc, a
Delaware corporation (the "SAI"), King Central Acquisition Corp., a New Jersey
corporation ("King Acquisition"), KC Acquisition Corp., a New Jersey corporation
(the "Company"), Mr. Thomas Few Sr. ("Few") and Mr. Timothy McGinn ("McGinn")
(Messrs. Few and McGinn are sometimes referred to herein individually as a
"Selling Shareholder" and collectively as the "Selling Shareholders").

                                    RECITALS

         WHEREAS, the board of directors of the Company, and the shareholders of
the Company (the "Shareholders"), have approved the transactions contemplated
hereby and have determined that it is advisable and in their respective best
interests to consummate the merger described in Article II (the "Merger') and
the other transactions contemplated herein; and

         WHEREAS, the respective boards of directors of SAI and King Acquisition
have approved the transactions contemplated hereby, subject to the approval of
the shareholders of SAI, and have determined that it is advisable and in their
respective best interests to consummate the Merger and the other transactions
contemplated herein; and

         WHEREAS, as a result of the Merger, King Acquisition will be merged
with and into the Company, all of the outstanding capital stock of the Company
will be converted into the right to receive a combination of cash and securities
of SAI, all of the outstanding capital stock of King Acquisition will be
converted into capital stock of the Company and the Company will be the
surviving corporation, all on the terms and subject to the conditions set forth
in this Agreement; and

         WHEREAS, for Federal income tax purposes the Parties intend that the
Merger shall qualify as a tax-free reorganization within the meaning of Section
368(a) of the Code (as defined herein);

         NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein and other good and valuable consideration, the parties hereto,
on the basis of, and in reliance upon, the representations, warranties,
covenants, obligations and agreements set forth in this Agreement, and upon the
terms and subject to the conditions contained herein, agree as follows:

                                    ARTICLE 1

                                   DEFINITIONS

         The following terms shall have the meanings assigned below when used in
this Agreement:

                                       2
<PAGE>   3

         1.1 "Account" shall mean a written monitoring agreement pursuant to
which the Company or its Subsidiaries provides Monitoring Services to
Subscribers. All Accounts are "Dealer Owned Accounts," as defined below;

         1.2 "Affiliate" shall mean, with respect to any particular Person, any
Person controlling, controlled by or under common control with such Person,
whether by ownership or control of voting securities, by contract or otherwise;

         1.3 "Agreement" shall mean this Plan and Agreement of Merger;

         1.4 "AMEX" shall mean the American Stock Exchange;

         1.5 "Antenna" shall mean a radio antenna and antenna site used by the
Company or its Subsidiaries pursuant to an antenna site license agreement to
which the Company or its Subsidiaries is a party ("Antenna Lease");

         1.6 "Acquisition Common" shall mean the common stock, $______ par
value, of King Acquisition;

         1.7 "Assets" shall mean all of the assets (as defined under GAAP) of
the Company and its Subsidiaries, including, but not limited to, the assets
listed on Schedule 3.12(a);

         1.8 "Billed Accounts" shall mean Dealer Owned Accounts for which the
Company or its Subsidiaries bills Subscribers on behalf of the Dealers which own
the Accounts;

         1.9 "Central Stations" shall mean the central monitoring stations owned
and operated by the Company, or its Subsidiaries, which are located at the
locations set forth on Schedule 3.4;

         1.10 "Closing" shall mean the consummation of the Merger;

         1.11 "Closing Date" shall mean ______________ or such other time and
date upon which the conditions to closing referred to in Article IX of this
Agreement have been satisfied or waived by the Party authorized to do so as
provided in this Agreement and the Escrow Agreement;

         1.12 "Closing Date Balance Sheet" shall mean the balance sheet,
prepared as provided in Section 3.7, delivered at the Closing showing the assets
and liabilities of the Company and its Subsidiaries as of the Escrow Closing
Date;

         1.13 "Code" shall mean the Internal Revenue Code of 1986, as amended,
and any successor statute thereto, and the rules and any successor statute
thereto, and the rules and regulations issued and promulgated thereunder, as in
effect from time to time;

         1.14 "Company" shall mean KC Acquisition Corp., a New Jersey
corporation;

         1.15 "Company Common" shall mean the Common Stock, par value $ per
share, of the Company;

                                       3
<PAGE>   4

         1.16 "Company Financial Statements" shall mean audited financial
statements of the Company for each of the [two] years ended [December 31, 1999
and the financial statements of the Company for the ________ period ended
___________, 2000, all as more fully described in Section 3.7 of this Agreement.
The Company Financial Statements shall be attached to Schedule 3.7(a);

         1.17 "Confidential Information" shall mean any and all oral, written,
electronic or other information designated as confidential or which ought to be
considered as confidential from its nature or from the circumstances surrounding
its disclosure, regardless of whether such information was disclosed before, on
or after the date of this Agreement, other than such information that (i) is
generally available or known by the public immediately prior to the time of
disclosure (except through the actions or inactions of the Person to whom
disclosure has been made) or (ii) has been acquired or developed independent
from the Person making the disclosure thereof.

         1.18 "Contracts" shall mean Accounts, Dealer Monitoring Agreements, and
all agreements, contracts and arrangements described in items (d), (e), (f),
(g), (k), (m) and (n) of Section 3.12;

         1.19 "Dealer" shall mean an individual or business entity that
contracts in writing to provide Monitoring Services to Subscribers, and who in
turn subcontracts the provision of the actual Monitoring Services from the
Company or its Subsidiaries;

         1.20 "Dealer Monitoring Agreements" shall mean the written contracts
pursuant to which the Company or its Subsidiaries has contracted to provide
Monitoring Services to Dealer Owned Accounts;

         1.21 "Dealer Owned Account" shall mean any Account owned by a Dealer;

         1.22 "Effective Time" shall have the meaning assigned in Section 2.1;

         1.23 "Employee Benefit Plan" shall mean any employee benefit plan
within the meaning of Section 3(3) of ERISA which is (i) maintained for
employees of the Company or any ERISA Affiliate or (ii) has at any time within
the preceding six years been maintained for the employees of the Company or any
current or former ERISA Affiliate.

         1.24 "Environmental Laws" shall mean any and all federal, state and
local laws that relate to or impose liability or standards of conduct concerning
public or occupational health and safety or protection of the environment, as
now or hereafter in effect and as have been or hereafter may be amended or
re-authorized, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. Sec. 9601 et seq.), the
Hazardous Materials Transportation Act (42 U.S.C. Sec. 1802 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. Sec. 6901, et seq.), the
Federal Water Pollution Control Act (33 U.S.C. Sec. 1251 et seq. ), the Toxic
Substances Control Act (15 U.S.C. Sec. 2601 et seq.), the Clean Air Act (42
U.S.C. Sec. 7901 et seq.), the National Environmental Policy Act (42 U.S.C. Sec.
4231 et seq.), the Refuse Act (33 U.S.C. Sec. 407 et seq.), the Safe Drinking
Water Act (42 U.S.C. Sec. 300(f) et seq.), the Occupational Safety and Health
Act (29 U.S.C.

                                       4
<PAGE>   5

Sec 651 et seq.), and all rules, regulations, codes, ordinances and guidance
documents promulgated or published thereunder, and the provisions of any
licenses, permits, orders and decrees issued pursuant to any of the foregoing.

         1.25 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and any successor statute thereto, and the rules and
regulations issued and promulgated thereunder, as in effect from time to time.

         1.26 "ERISA Affiliate" shall mean any Person who is a member of group
which is under common control with the Company, who together with the Company is
treated as a single employer within the meaning of Section 414(b), (c), and (m)
of the Code.

         1.27 "Equipment" shall mean the tangible assets used or useful in
connection with the Monitoring Business or any other business conducted by the
Company, its direct or indirect Subsidiaries, including, but not limited to that
listed on Schedule 3.12(a);

         1.28 "Equipment Lease" shall mean a lease pertaining to Equipment and
shall also include the Antenna Lease.

         1.29     "Escrow Agent" shall mean ___________________________;

         1.30 "Escrow Agreement" shall mean the Escrow Agreement to be entered
into among the Parties and the Escrow Agent pursuant to Section 9.2 which
provides, among other things, for the closing into, and release from escrow, of
the transactions contemplated by this Agreement on the terms and subject to the
conditions contained therein;

         1.31 "Escrow Closing" shall mean the closing in escrow pursuant to the
Escrow Agreement as contemplated in Section 9.2 and in the Escrow Agreement.

         1.32 "Escrow Closing Date" shall mean June 30, 2000 or such other time
and date upon which the conditions to closing in escrow referred to in Article
IX of this Agreement have been satisfied or waived by the Party authorized to do
so as provided in this Agreement;

         1.33 "Excluded Assets" shall have the meaning assigned in Section
3.12(b);

         1.34 "Form Contracts" shall have the meaning assigned in Section 3.13;

         1.35 "GAAP" shall mean "Generally Accepted Accounting Principles" which
shall mean the accounting rules, principles and conventions adopted by the
American Institute of Certified Public Accountants and referred to by that name;

         1.36 "Hazardous Materials" shall mean any hazardous, toxic, dangerous
or other waste, substance or material defined as such in, regulated by or for
the purposes of any Environmental Law.

         1.37 "including" shall indicate examples of a foregoing general
statement and is not a limitation on that general statement.

                                       5
<PAGE>   6

         1.38 "Indemnitee" shall have the meaning assigned in Section 10.2;

         1.39 "Indemnitor" shall have the meaning assigned in Section 10.2;

         1.40 "Intellectual Property" shall mean all of the patents, trademarks,
trade names (including, but not limited to "King Central"), service marks, trade
secrets, designs, know-how, copyrights, computer programs and software and all
rights, licenses and contracts relating to any of the foregoing, and all other
proprietary rights and information of the Company and its Subsidiaries;

         1.41 "Leasehold Property" shall mean any real estate which is the
subject of a Lease under which the Company or its Subsidiaries is or has been
the lessee.

         1.42 "Liabilities" shall have the meaning assigned under GAAP.

         1.43 "Letter of Intent" shall mean the letter of intent, dated as of
April [20], 2000, among SecurityVillage.com, Inc. ("SecurityVillage"), SAI, the
Company and TJS Partners, L.P. which provides, among other things for the Merger
and the other transactions contemplated in this Agreement;

         1.44 "Material Contracts" shall have the meaning assigned in Section
3.10;

         1.45 "Merger" shall have the meaning assigned in the first Recital;

         1.46 "Minimum RMR" shall have the meaning assigned in Section 3.18(a)

         1.47 "Monital Acquisition" shall mean the acquisition of Monital Signal
Corporation ("Monital") by the Company (either directly or through the
acquisition of Monital's parent) as further described in Section 1 of the Letter
of Intent;

         1.48 "Monital Retail Account Transactions" shall mean the sale by
Monital of its retail accounts to Palisades Partners or its assignee for a
purchase price of $450,000, the application of the proceeds therefrom to
indebtedness of Monital to Shrewsbury Bank, the potential loan from Palisades
Partners or its assignee to Monital for the release of certain liens or
encumbrances on such retail accounts and the subsequent repayment of such loan
by SAI upon the closing of the Merger, all as contemplated in Section 2(d) of
the Letter of Intent;

         1.49 "Monitoring Business" shall mean the business of providing
Monitoring Services;

         1.50 "Monitoring Services" shall mean the provision of remote alarm
monitoring services to Subscribers, and all related security services, including
but not limited to, notification and dispatch of emergency personnel, supervised
openings and closings, closed circuit monitoring and any other security related
services;

         1.51 "Multiemployer Plan" shall mean any multiemployer plan as defined
pursuant to Section 3(37) of ERISA to which the Company or any ERISA Affiliate
makes, or accrues an obligation to make, contributions, or has made, or has been
obligated to make, contributions within the preceding six (6) years;

                                       6
<PAGE>   7

         1.52 "Pension Plan" shall mean any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to the provisions of Part 3 of Title I of
ERISA, or Section 412 of the Code and which (i) is maintained for employees of
the Company, its direct or indirect Subsidiaries or any ERISA Affiliate, or (ii)
has at any time within the preceding six years been maintained for the employees
of the Company or any of its current or former ERISA Affiliates;

         1.53 "Permits" shall mean all governmental licenses, registrations,
permits, approvals and applications therefor;

         1.54 "Person" shall mean any individual, trust, corporation,
partnership, limited partnership, limited liability company or other business
association or entity, court, governmental body or governmental agency;

         1.55 "Prebilled RMR" shall mean RMR billed by the Company or its
Subsidiaries to Dealers in advance for monitoring services to be performed
subsequent to the Closing Date;

         1.56 "Real Estate Leases" shall have the meaning assigned in Section
3.11(a);

         1.57 "Releasing Parties" shall have the meaning assigned in Section
5.15;

         1.58 "Released Claims" shall have the meaning assigned in Section 5.15;

         1.59 "Released Parties' shall have the meaning assigned in Section
5.15;

         1.60 "RMR" shall mean the total regular recurring monthly amounts
payable by Dealers, as appropriate, for Monitoring Services. RMR shall exclude
any amounts due under Accounts with receivable balances over ninety (90) days
past due. RMR includes all service charges, including leased equipment revenue.
RMR does not include any amounts derived from:

                  (a)      reimbursement for or payment of telephone line or
                           other utility charges associated with the
                           installation, monitoring, maintenance, or furnishing
                           of the alarm services;

                  (b)      reimbursement or payments of false alarm assessments;

                  (c)      reimbursement or payment of taxes, fees or other
                           charges imposed by any governmental authority or
                           utility relating to the furnishing of alarm services;

                  (d)      reimbursement or payment for time and materials
                           charges that are receivable from any seller or
                           installer of monitoring equipment for services which
                           are not provided on a regular or recurring basis; or

                  (e)      charges incurred in connection with the maintenance
                           of alarm systems or the underlying equipment.

         1.61 "SAI" shall mean Security Associates International, Inc., a
Delaware corporation;

                                       7
<PAGE>   8

         1.62 "King Acquisition" shall mean King Acquisition Corp., a New Jersey
corporation;

         1.63 "SAI Common" shall mean the common stock, $.0001 par value, of
SAI;

         1.64 "SAI Financial Statements" shall have the meaning assigned in
Section 4.5;

         1.65 "SAI indemnified Parties" shall have the meaning assigned in
Section 10.1(a);

         1.66 "SAI Preferred" shall mean the Series ______ Convertible Preferred
Stock, par value $____________ per share of SAI;

         1.67 "SAI SEC Reports" shall have the meaning assigned in Section 4.5;

         1.68 "SAI/King LOI" shall mean the letter of intent, dated April 5,
2000, between SAI and the Selling Shareholders of the Company relating to the
acquisition of the Company by SAI and referred to in Section 3(c)(y) of the
Letter of Intent;

         1.69 "SEC" shall mean the Securities Exchange Commission;

         1.70 "Securities Act" shall mean the Securities Act of 1933, as
amended;

         1.71 "Securities Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended;

         1.72 "SecurityVillage" shall mean SecurityVillage.com, Inc., a Delaware
corporation;

         1.73 "Shareholder Indemnified Parties" shall have the meaning assigned
in Section 10.1(b);

         1.74 "Shareholders" shall have the meaning assigned in the first
Recital of this Agreement;

         1.75 "Shares" shall mean all of the issued and outstanding capital
stock of the Company;

         1.76 "Selling Shareholders" shall mean Thomas Few, Sr. and Timothy
McGinn;

         1.77 "Subscriber" shall mean any individual or entity who has
contracted to obtain remote security system monitoring services for a security
alarm system installed on the premises of that individual or entity;

         1.78 "Subsidiary" shall have the meaning assigned in Section 3.3;

         1.79 "SV/SAI Agreement" shall have the meaning assigned in Section 3 of
the Letter of Intent;

                                       8
<PAGE>   9

         1.80 "SV Option" means the option agreement dated__________________,
between the Company and SecurityVillage, pursuant to which SecurityVillage has
the option to acquire up to______ of Company Common;

         1.81 "Taxes" shall have the meaning assigned in Section 3.23;

         1.82 "Termination Event" shall mean (1) a "Reportable Event" described
in Section 4043 of ERISA and the regulations issued thereunder; or (ii) the
withdrawal of the Company or any ERISA Affiliate from a Pension Plan during a
plan year in which it was a "substantial employer" as defined in Section
4001(a)(2); or (iii) the termination of a Pension Plan, the filing of a notice
of intent to terminate a Pension Plan or the treatment of a Pension Plan
amendment as a termination under Section 4041 of ERISA; or (iv) the institution
of proceedings to terminate, or the appointment of a trustee with respect to,
any Pension Plan by the PBGC; or (v) any other event or condition which would
constitute grounds under Section 4042(a) of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan, or (vi) the partial or
complete withdrawal of the Company or any ERISA Affiliate from a Multiemployer
Plan or (vii) the imposition of a lien pursuant to Section 412 of the Code or
Section 302 of ERISA; or (viii) any event or condition which results in the
reorganization or insolvency of a Multiemployer Plan under Sections 4241 or 4245
of ERISA; or (ix) any event or condition which results in the termination of a
Multiemployer Plan under Section 4041A of ERISA or the institution by the PBGC
of proceedings to terminate a Multiemployer Plan under Section 4042 of ERISA.

         1.83 "Third Party Claim" shall have the meaning assigned in Section
10.2(a);

                                    ARTICLE 2

                                   THE MERGER

         In connection with the Merger, the respective boards of directors and
shareholders of King Acquisition and the Company have, by resolutions duly
adopted, approved the following provisions of this Article II as their "Plan of
Reorganization" within the meaning of applicable law:

         2.1 Articles of Merger. Subject to the provisions of this Agreement,
Certificates of Merger executed on behalf of each of King Acquisition and the
Company and meeting the requirements of Section 14A:10-4.1 of the New Jersey
Business Corporation Law (the "Certificates of Merger"), shall be duly prepared,
executed and acknowledged by the Company, King Acquisition and such other
parties as may be appropriate, and thereafter the Certificates of Merger shall
be delivered to the Secretary of State of the state of New Jersey, as provided
under said Section 14A:10-4.1, for filing as soon as practicable on or after the
Closing. The Merger shall become effective on the date upon which the
Certificate of Merger is filed in accordance with applicable law (the "Effective
Time").

         2.2 Closing. The Closing shall take place as provided in Article IX and
in the Escrow Agreement.

                                       9
<PAGE>   10

         2.3 Effects of the Merger.

                  (a)      At the Effective Time, the separate corporate
                           existence of King Acquisition shall cease, King
                           Acquisition shall be merged with and into the Company
                           and the Company, as the surviving corporation in the
                           Merger (the "Surviving Corporation"), shall continue
                           its corporate existence under the laws of the state
                           of New Jersey under the name "King Central Corp."

                  (b)      At and after the Effective Time, the Merger will have
                           the effects set forth Section 14A:10-6 of the New
                           Jersey Business Corporation Act.

         2.4 Certificate of Incorporation and Bylaws. The Certificate of
Incorporation, as in effect immediately prior to the Effective Time, shall be
the Certificate of Incorporation of the Surviving Corporation immediately after
the Effective Time and shall thereafter continue to be its Certificate of
Incorporation until amended as provided therein and under applicable law.

         2.5 Directors and Officers. The directors of King Acquisition holding
office immediately prior to the Effective Time shall be the directors of the
Surviving Corporation immediately after the Effective Time. The officers of King
Acquisition holding office immediately prior to the Effective Time shall be the
officers of the Surviving Corporation immediately after the Effective Time.

         2.6 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of King Acquisition, the Company or
the holders of any of the following securities, the following securities will be
converted in the manner set forth below:

                  (a)      Each share of Company Common which is issued and
                           outstanding immediately prior to the Effective Time
                           (other than treasury shares) shall be canceled and
                           extinguished and converted into and become a right to
                           receive (x) _____ shares of SAI Preferred [to have
                           $22.5 million liquidation value and be convertible
                           into 4.5 million shares of SAI Common], and (y)
                           $_______ ($5 million total); provided, however, that
                           if as the result of the conversion of any
                           Shareholder's Company Common upon consummation of the
                           Merger, a fractional interest in a share of SAI
                           Preferred would be deliverable under this Section
                           2.6.(a), in lieu of a fractional share being
                           delivered therefor, such fractional interest shall
                           automatically be converted into the right to receive
                           an amount in cash (without interest) equal to the
                           product of the average of the high and low sale
                           prices of ____ shares of Common as reported by the
                           AMEX on the trading day immediately prior to the
                           Effective Time, multiplied by the amount of such
                           fractional interest. No such holder will be entitled
                           to dividends, voting rights or any other rights as a
                           shareholder in respect of any fractional share.

                                       10
<PAGE>   11

                  (b)      The SV Option shall be canceled and extinguished and
                           converted and become a right to receive _______shares
                           of SAI Common (300,000 shares of SAI Common in the
                           aggregate).

                  (c)      Each share of Acquisition Common issued and
                           outstanding immediately prior to the Effective Time
                           shall be converted into one validly issued, fully
                           paid and nonassessable share of Company Common.

         2.7 Closing of Company Transfer Books. Immediately prior to the
Effective Time the stock transfer books of the Company shall be closed and no
transfer of shares of Company stock shall thereafter be made or recognized.
After the Effective Time valid certificates previously representing shares of
Company Common which are presented in accordance with this Agreement to the
Surviving Corporation shall be exchanged as provided in Section 2.8.

         2.8 Exchange of Common Certificates. Each holder of a certificate or
certificates representing shares of Company Common issued and outstanding
immediately prior to the Effective Time shall at or as soon as practicable
following the Closing, surrender to SAI for exchange a certificate or
certificates, duly endorsed in blank or accompanied by duly executed stock
powers, representing the number of shares of Company Common held by such holder.
In exchange therefor, SAI shall (x) issue to such holder of Company Common a
certificate or certificates representing the number of shares of SAI Preferred
to be issued to such holder pursuant to Sections 2.6(a), and (y) the amount of
cash, if any, to be paid to be paid to such holder pursuant to Sections 2.6(a).
Surrendered certificates shall forthwith be canceled. At Closing,
SecurityVillage will surrender the original SV Option to SAI in exchange for the
SAI Common called for by Section 2.6(b). Until so surrendered and exchanged,
each such certificate (or the Option, as applicable) shall represent solely the
right to receive the consideration therefor provided in Sections 2.6(a) and
2.6(b), without interest, and SAI shall not be required to issue to such holder
the stock to which such holder otherwise would be entitled; provided, that
procedures allowing for payment against receipt of customary and appropriate
certifications and indemnities shall be provided with respect to lost or
destroyed certificates.

         2.9 Rights of the Company Shareholders. From and after the Effective
Time, the holders of shares of Company Common issued and outstanding at the
Effective Time shall have no rights with respect to such shares other than to
surrender the certificate or certificates representing such shares pursuant to
Section 2.8.

         2.10 Taking of Necessary Action; Further Action. SAI and King
Acquisition, on the one hand, and the Company and the Shareholders, on the other
hand, shall use reasonable efforts to take all such action (including action to
cause the satisfaction of the conditions to the Merger) as may be necessary or
appropriate in order to effectuate the Merger as promptly as possible. If, at
any time after the Effective Time, any further action is necessary or desirable
to vest the Surviving Corporation with full possession of all the rights,
privileges, immunities and franchises of the Company and Acquisition, the
officers of the Surviving Corporation are fully authorized in the name of either
the Company or Acquisition or otherwise to take, and shall take, all such
action.

                                       11
<PAGE>   12

                                    ARTICLE 3

             REPRESENTATIONS WARRANTIES OF THE SELLING SHAREHOLDERS

         The Selling Shareholders, jointly and severally, represent, warrant,
and acknowledge to SAI, King Acquisitions, and their respective successors and
assigns that on the date of execution of this Agreement, and at the Closing:

         3.1 Organization and Standing; Certificate of Incorporation and
By-laws. The Company and each Subsidiary of the Company is a corporation duly
organized and validly existing under and by virtue of, the laws of the state of
its incorporation and is in good standing under such laws. The Company and each
Subsidiary of the Company has the requisite corporate power and authority to own
and operate its properties and assets, and to carry on its business as presently
conducted and as proposed to be conducted. The Company and each Subsidiary of
the Company is duly qualified or licensed and in good standing as a foreign
corporation in each jurisdiction where the character of its properties or the
nature of the activities conducted by it makes such qualification or licensing
necessary, each of which is listed on Schedule 3.1. The Company and its
Subsidiaries do business under the names listed on Schedule 3.1 and do not
conduct any business, and are not commonly known by any other names, other than
as set forth on Schedule 3.1. The Company and each Subsidiary of the Company has
complied with all laws requiring the registration or other recording of such
names in each jurisdiction in which the Company or such direct or indirect
Subsidiary does business. The certified copies of the Certificate or Articles of
Incorporation and By-laws of the Company and each of its Subsidiaries attached
to Schedule 3.1, are true, correct and complete and contain all amendments
through the date hereof.

         3.2 Power and Authority. The Company, each of its Subsidiaries and the
Selling Shareholders have, and will have at the Closing, all requisite legal
power and authority to execute and deliver this Agreement, to consummate the
Merger and to carry out and perform their obligations under this Agreement. None
of the Company's shareholders has dissented from the transactions contemplated
by this Agreement and no shareholder of the Company has or will have dissenter's
rights as a result thereof. This Agreement has been duly executed and delivered
by the Company and each Selling Shareholder, and constitutes a legal, valid and
binding obligation of the Company and each Selling Shareholder, enforceable
against each in accordance with its terms. Attached to Schedule 3.2 are
certified copies of the resolutions of the Company authorizing the transactions
contemplated hereby, which have not been amended or revoked.

         3.3 Subsidiaries. Except as disclosed on Schedule 3.3, the Company has
no Subsidiaries or affiliated companies and does not otherwise own or control,
directly or indirectly, any equity interest in any corporation, association or
business entity. As used herein, a "Subsidiary" is any corporation, limited
liability company, partnership, or other business entity with respect to which
the Company owns, directly or indirectly, any equity interest, and includes any
Subsidiary of a Subsidiary.

         3.4 Central Stations. The Company and its Subsidiaries own and operate
the Central Stations from which they monitor security systems pursuant to the
Accounts and the Dealer

                                       12
<PAGE>   13

Monitoring Agreements. The Central Stations are located at the locations
described on Schedule 3.4.

         3.5 Capitalization. The authorized capital stock of the Company
consists, and will consist at the Closing, of _____ shares of common stock, ___
par value per share, of which _____ shares are issued and outstanding, and all
of which are, and at the Closing will be, owned, beneficially and of record by
Few and McGinn as set forth on Schedule 3.5. All of such shares have been duly
authorized and validly issued and are fully paid and nonassessable. The
authorized, issued and outstanding capital stock of each Subsidiary of the
Company is, and at the Closing will be, as set forth on Schedule 3.5. All shares
of capital stock of each Subsidiary of the Company are, and at the Closing will
be, owned beneficially and of record by the Company or a Subsidiary of the
Company. Except for the SV Option and [except as described on Schedule 3.5],
there are no pre-emptive rights, options, warrants, conversion rights, rights of
exchange or other rights, plans or agreements of any nature whatsoever providing
for the purchase, issuance or sale of any capital stock of the Company or any
Subsidiary of the Company or of any securities convertible into or exchangeable
for any shares of the capital stock of the Company or any Subsidiary of the
Company. Except for the Letter of Intent, no shareholder of the Company or any
Subsidiary of the Company is party to any agreement or arrangement pursuant to
which it is obligated to dispose of any of the capital stock of the Company or
any Subsidiary of the Company to any party other than SAI in connection with the
Merger. Other than Messrs. Few and McGinn, there are no other holders of capital
stock of the Company. All securities of the Company and each Subsidiary of the
Company were issued and transferred in compliance with all applicable federal
and state securities laws and regulations. The Merger and the exchange of the
shares of Company Common involved therein as contemplated by this Agreement will
be in compliance with all applicable federal and state securities regulations.

         3.6 Consents and Approvals. No approval or authorization of the
Shareholders or the directors of the Company or of any governmental authority or
agency or any other third party is required for the consummation by the Company
of the Merger or the other transactions contemplated by this Agreement, except
for those listed on Schedule 3.6, all of which have been obtained and copies of
which have been delivered to SAI. Except as contemplated by this Agreement, no
filing or registration with any court or governmental or regulatory agency or
board is required to be made on behalf of the Company or any Subsidiary of the
Company in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.

         3.7 Company Financial Statements; Closing Date Balance Sheet.

                  (a)      The Company has delivered to SAI the Company
                           Financial Statements; and, prior to the Closing, the
                           Company will deliver to SAI the Closing Date Balance
                           Sheet. The Company Financial Statements are attached
                           to Schedule 3.7. The Company Financial Statements are
                           complete and correct in all material respects and do
                           not contain any information which is false or
                           misleading. The Closing Date Balance Sheet will be
                           complete and correct in all material respects and
                           will not contain any information which is false or
                           misleading. The Company Financial Statements have
                           been, and

                                       13
<PAGE>   14

                           the Closing Balance Sheet will be, prepared in
                           accordance with GAAP, consistently applied throughout
                           the periods indicated, except for the absence of
                           footnotes and subject in the case of interim
                           financials, including the Closing Balance Sheet, to
                           the effect of normal year-end adjustments (which will
                           not be material). The Company Financial Statements
                           do, and the Closing Date Balance Sheet will, fairly
                           present the financial condition and operating results
                           of the Company and its Subsidiaries as of the dates,
                           and during the periods, indicated therein. Since
                           December 31, 1999, there has not been any material
                           adverse change, or any event or condition which could
                           reasonably be expected to result in any material
                           adverse change, in the financial condition, results
                           or operations, business, prospects or properties of
                           the Company or any of its Subsidiaries, the
                           Monitoring Business or any other business conducted
                           by the Company or any of its Subsidiaries (a
                           "Material Adverse Effect").

                  (b)      The books and records of the Company and each of its
                           Subsidiaries are and have been properly prepared and
                           maintained in form and substance adequate for
                           preparing audited financial statements in accordance
                           with GAAP, and fairly and accurately reflect all of
                           the assets and liabilities of the Company, its
                           Subsidiaries and all contracts and transactions to
                           which the Company or its Subsidiaries is or was a
                           party or by which the Company, its Subsidiaries or
                           any of their respective businesses or assets is or
                           was affected. The corporate minute books of the
                           Company and each of its Subsidiaries, copies of which
                           have been made available to SAI, correctly reflect
                           all resolutions adopted and all other material
                           corporate actions taken at all meetings or through
                           consents of the directors (including committees
                           thereof) and the shareholders of the Company and each
                           of its Subsidiaries. The stock transfer books and
                           stock ledger of the Company and each of its
                           Subsidiaries are complete and correctly reflect all
                           issuances and transfers of the capital stock of the
                           Company and each of such Subsidiaries.

                  (c)      At the Closing the Company will have a tax basis of
                           at least $18 million, calculated in accordance with
                           GAAP, in depreciable and/or amortizable assets for
                           federal income tax purposes.

         3.8 Absence of Changes. Except for Monital Retail Accounts and except
as otherwise set forth in Schedule 3.8, since December 31, 1999:

                  (a)      neither the Company nor any of its Subsidiaries has
                           entered into any material agreement or transaction
                           which was not in the ordinary course of business;

                  (b)      there has been no material damage to, destruction of
                           or loss of physical property (whether or not covered
                           by insurance) or any other material adverse change in
                           the Company, its Subsidiaries, or their Assets, the

                                       14
<PAGE>   15

                           Monitoring Business or any other business conducted
                           by the Company or any of its Subsidiaries;

                  (c)      neither the Company nor any of its Subsidiaries has
                           declared or paid any dividend or made any
                           distribution (in cash, securities or other property)
                           on its capital stock, or redeemed, purchased or
                           otherwise acquired any of its capital stock;

                  (d)      neither the Company nor any of its Subsidiaries has
                           increased the compensation of its officers, or the
                           rate of pay of its employees as a group; and there
                           are no impending resignations or terminations of any
                           officers or employees of the Company or any of its
                           Subsidiaries that would have an adverse effect on
                           their respective businesses;

                  (e)      there has been no labor dispute involving the Company
                           or any of its Subsidiaries;

                  (f)      there has not been any material change in the
                           contingent obligations of the Company or any of its
                           Subsidiaries by way of guaranty, endorsement,
                           indemnity, warranty or otherwise;

                  (g)      there have not been any loans made by the Company or
                           any of Subsidiaries to any of their employees,
                           officers or directors;

                  (h)      neither the Company nor any of its Subsidiaries has
                           borrowed any amount or incurred or become subject to
                           any liabilities (absolute or contingent), except
                           non-material expenses incurred in the ordinary course
                           of business;

                  (i)      neither the Company nor any of its Subsidiaries has
                           paid any material obligations or liabilities, other
                           than current liabilities paid in the ordinary course
                           of business;

                  (j)      neither the Company nor any of its Subsidiaries has
                           mortgaged, pledged or subjected to any lien, charge
                           or any other encumbrance, any of its properties or
                           assets;

                  (k)      neither the Company nor any of its Subsidiaries has
                           sold, assigned, transferred or leased any of its
                           assets other than in the ordinary course of business;

                  (l)      neither the Company nor any of its Subsidiaries has
                           made any material capital expenditures or commitments
                           therefor;

                  (m)      neither the Company nor any of its Subsidiaries has
                           changed its accounting methods or practices;

                  (n)      there has been no other event or condition of any
                           character that has or can reasonably be expected to
                           result in a Material Adverse Effect;

                                       15
<PAGE>   16

                  (o)      neither the Company nor any of it Subsidiaries has
                           changed the pricing for its services or indicated
                           that reduced pricing for their services could be
                           expected; and

                  (p)      neither the Company nor any of its Subsidiaries has
                           received, verbally or in writing, any notice of
                           intent to cancel or reduce use of its services by any
                           Dealer.

         3.9 Liabilities and Indebtedness. Schedule 3.9 contains a true and
complete list of each and every Liability of the Company and each of its
Subsidiaries, including, but not limited to, all prebilled RMR and unearned
revenue and each and every agreement or other instrument under or pursuant to
which the Company or any of its Subsidiaries has outstanding indebtedness. The
Company has furnished SAI with true and correct copies of each such agreement
and instrument, including all amendments and copies of any guarantee security
agreements and/or financing statements executed by the Company or any of its
Subsidiaries relating to said agreements. Neither the Company nor any of its
Subsidiaries is in default in any material respect under any of its agreements
or evidences of indebtedness. Except as recorded on the face of the Closing
Balance Sheet or as disclosed on Schedule 3.9 attached hereto, the Company has
no material (individually or in the aggregate) Liabilities or obligations,
absolute or contingent.

         3.10 Material Contracts. Schedule 3.10 contains a true, accurate and
complete list of each and every agreement, contract, arrangement or
understanding of the Company and each of its Subsidiaries pursuant to which the
Company or its Subsidiaries is obligated (or potentially obligated) to pay more
than $10,000 or pursuant to which the Company or any of its Subsidiaries is
obligated (or potentially obligated) to provide services with a value in excess
of $10,000 ("Material Contract"). No party (including the Company or any of its
Subsidiaries) to any Material Contract is in default in any material respect
thereunder. Except as set forth on Schedule 3.10, neither the Company nor any of
its Subsidiaries is a party to any Material Contract.

         3.11 Leases.

                  (a)      Schedule 3.11(a) contains a true and complete list of
                           all real estate leases of the Company and each of its
                           Subsidiaries (the "Real Estate Leases") and sets
                           forth a brief summary of the principal terms thereof.
                           True and complete copies of all such Real Estate
                           Leases have been supplied to SAI, including all
                           amendments thereto. SAI will be able to utilize all
                           of the Central Stations under such Real Estate Leases
                           for those facilities for the balance of the terms of
                           their respective leases, including any renewal terms.
                           Neither the Company nor any Shareholder has any
                           knowledge of any intention on the part of any lessor
                           to terminate any Real Estate Lease or raise the
                           rental rate or take any other action that might make
                           the continued use by the Company or any of its
                           Subsidiaries of any of the facilities housing the
                           Central Stations more onerous.

                  (b)      Schedule 3.11(b) contains a true, accurate and
                           complete list of every equipment lease of the Company
                           and each of its Subsidiaries, including the Antenna
                           Lease ("Equipment Leases") and sets forth a brief
                           summary

                                       16
<PAGE>   17

                           of the principal terms of each such lease. True,
                           accurate and complete copies of all such Equipment
                           Leases have been supplied to SAI, including all
                           amendments thereto. SAI will be able to utilize all
                           of the equipment leased under such Equipment Leases
                           for the balance of the terms of their respective
                           leases, including any renewal terms. Neither the
                           Company nor any Shareholder has any knowledge of any
                           intention on the part of any lessor to terminate any
                           Equipment Lease or raise the rental rate or take any
                           other action that might make the continued use by the
                           Company or any of its Subsidiaries of any of the
                           equipment leased thereunder more onerous.

                  (c)      Neither the Company, its Subsidiaries nor any other
                           party is in default under the terms of any Real
                           Estate Lease or Equipment Lease. None of the Real
                           Estate Leases or Equipment Leases requires the
                           consent of the lessors thereunder to the transactions
                           contemplated by this Agreement. Consummation of the
                           transactions contemplated hereby will not result in
                           the cancellation of any of the Real Estate Leases or
                           Equipment Leases or the acceleration of the
                           obligations thereunder. The Company has obtained and
                           delivered to SAI all necessary landlord and other
                           lessor consents necessary for SAI operate the Central
                           Stations, and to assume the rights of the Company or
                           its Subsidiaries under the Real Estate Leases and the
                           Equipment Leases.

         3.12 Title to Properties and Assets; Liens, etc. The Company or one of
its wholly-owned Subsidiaries has good and marketable title to its properties
and assets, and has good title to all its leasehold interests, in each case
subject to no mortgage, pledge, lien, lease, encumbrance or charge ("Lien"). The
Company or its Subsidiaries own or lease all such equipment and properties as
are necessary to the Monitoring Business and each other business conducted by
the Company or its Subsidiaries. Schedule 3.12(a) contains a complete and
accurate listing of the Assets of the Company and its Subsidiaries which consist
of:

                  (a)      Cash and Securities;

                  (b)      Bank Accounts;

                  (c)      Contracts;

                  (d)      Equipment;

                  (e)      Intellectual property;

                  (f)      Leasehold interests in Real Estate Leases and
                           Equipment Leases;

                  (g)      The rights to the telephone lines used in the
                           Monitoring Business, all of which are listed on
                           Schedule 3.12(a);

                  (h)      Accounts receivable;

                                       17
<PAGE>   18

                  (i)      Prepaid expenses and deposits;

                  (j)      All books and records of the Company and each of its
                           Subsidiaries, including without limitation all
                           financial, accounting and personnel records, all
                           original Contracts, monitoring and service records,
                           lockout codes, computer codes, up and download codes
                           and information, and all other documentation
                           necessary or appropriate in order for SAI to operate
                           the Monitoring Business;

                  (k)      All other contracts and commitments by which the
                           Company is bound;

                  (l)      The goodwill of the Company;

                  (m)      All contracts and policies of insurance; and

                  (n)      All other assets and rights used in the operation of
                           the Monitoring Business, excepting only those listed
                           on Schedule 3.12(b) as "Excluded Assets".

         All Equipment owned by the Company or any of its Subsidiaries is, and
at the Closing will be, in good operating condition and repair. All of the
Equipment is in compliance with all applicable statutes, rules, regulations and
ordinances.

         Schedule 3.12(b) is a true and complete list of those assets formerly
owned by the Company or any of its Subsidiaries which have been distributed to
the shareholders of the Company or any of its Subsidiaries or entities
controlled by such shareholders at or prior to the Closing. Assets listed on
Schedule 3.12(b) which are to be distributed to the Selling Shareholders
immediately prior to the Closing, if any, shall be referred to herein as
"Excluded Assets." Except as disclosed on Schedule 3.12 or referred to
specifically in this Agreement, other than the Excluded Assets, no Asset of the
Company or any of its Subsidiaries has been disposed of since December 31, 1998,
other than in the ordinary course of business.

         3.13 Form Contracts. Attached to Schedule 3.13 are the forms of
agreements the Company and its Subsidiaries use with Dealers and Subscribers to
document its arrangements for monitoring Dealer Owned Accounts (collectively,
the "Form Contracts"). The Form Contracts include all contracts currently in
use, and earlier forms of contracts that were used for agreements that are still
in effect. Neither the Company nor any of its Subsidiaries has entered into any
oral agreements with any Subscriber or Dealer. Except as disclosed on Schedule
3.13 there are no agreements with any Dealer or Subscriber materially varying
from the provisions of the Form Contracts. Neither the Company nor any of its
Subsidiaries provides monitoring to any Subscriber of a Dealer that has not
executed a written contract with that Dealer. The Company and each of its
Subsidiaries has delivered to SAI all of the Dealer Monitoring Agreements of the
Company and its Subsidiaries and copies of the form agreements used by the
respective Dealers for each Dealer Owned Account.

         3.14 Telephone Lines. Schedule 3.14 contains a true, accurate and
complete list of (i) each telephone line being used in the operations of the
Company and its Subsidiaries; (ii) the

                                       18
<PAGE>   19

name of the owner of the line if other than the Company or one of its
Subsidiaries, (iii) the name of the telephone service supplier for each line;
(iv) all charges associated with each line, including without limitation,
advertising and yellow pages charges, and (v) the specific use to which each
line is put. Where the use of a line is dedicated to a particular Dealer or
other entity, Schedule 3.14 also sets forth a brief description of the agreement
for dedication of that line. Except as disclosed on Schedule 3.14, the Company
and its Subsidiaries have the exclusive right to use all the telephone lines.
Except those disclosed on Schedule 3.14, there are no charges associated with
the telephone lines. Immediately following the Closing the Company and its
Subsidiaries will have all right, title, interest in and the right to use as
currently used all of said telephone lines. All of the contract rights and
outstanding obligations of the Company and its Subsidiaries with respect to any
and all Yellow Page listings and advertisements are set forth on Schedule 3.14.
The Company will provide SAI with the forms of any and all telephone agency and
supersession letters and will take such actions as are necessary for the
continuing right of the Company and its Subsidiaries to use of all such
telephone lines after the Closing.

         3.15 Compliance with Other Instruments. Neither the Company nor any of
its Subsidiaries is in violation of any term of its respective Articles or
Certificate of Incorporation or By-laws, or of any term or provision of any
mortgage, indebtedness, indenture, contract, agreement, instrument, judgment or
decree applicable to the Company or such Subsidiary. The execution, delivery and
performance of and compliance with this Agreement (i) have not resulted and will
not result in any violation of, or conflict with, or constitute a default under,
the Articles or Certificate of Incorporation or By-laws of the Company or any of
its Subsidiaries or of the governing documents of any Selling Shareholder, (ii)
have not resulted, and will not result, in the creation of, any Lien upon any of
the properties or assets of the Company or its Subsidiaries or any Selling
Shareholder, (iii) have not resulted and will not result in the loss of any
license, permit, certificate, legal privilege or legal right enjoyed or
possessed by the Company or any of its Subsidiaries; (iv) do not and will not
give any party to any agreement to which the Company or any of its Subsidiaries
is a party a right of termination; and (v) do not and will not require the
consent of any other person or entity under any agreement, indenture, mortgage,
lease or other instrument or undertaking by which the Company, any of its
Subsidiaries or any Selling Shareholder is bound or to which any of their
respective properties are subject. No Selling Shareholder is a party to, subject
to or bound by any agreement or any judgment, order, writ, prohibition,
injunction or decree of any court or other governmental body which would prevent
the execution or delivery of this Agreement by such Selling Shareholder, such
Selling Shareholder's approval of the Merger or the conversion of such
Shareholder's shares of Company Common pursuant to the Merger.

         3.16 Compliance with Laws.

                  (a)      The Company and each of its Subsidiaries has
                           complied, and is currently in compliance, with all
                           laws, rules, regulations, and orders applicable to
                           the operation of its remote alarm monitoring business
                           or any other business conducted by the Company or any
                           such Subsidiary. Neither the Company nor any of its
                           Subsidiaries has taken any action, or failed to take
                           any action which would in any way preclude or prevent
                           the Company or any such Subsidiary from continuing to
                           operate the Monitoring Business

                                       19
<PAGE>   20

                           or any other business conducted by the Company or any
                           such Subsidiary following the Closing. The Company
                           and its Subsidiaries, and their respective employees,
                           have, and following the Closing, [assuming the
                           continued employment of _________________, who will
                           act as the qualifying license holder of the Company
                           and its Subsidiaries,] the Company, its Subsidiaries,
                           and their respective employees will continue to have,
                           all Permits necessary for the conduct of the
                           Monitoring Business (including, if required separate
                           licenses required for the monitoring of burglar alarm
                           systems, fire alarm systems and combined systems) and
                           any other business conducted by the Company or any
                           such Subsidiary in all jurisdictions in which the
                           Company or any such Subsidiary does business, and all
                           such Permits are currently in effect.

                  (b)      No violations are, or have been, recorded in respect
                           of any such Permits and no proceedings are pending,
                           or threatened concerning revocation or limitation of
                           any such Permit. No such Permit will be revoked as a
                           result of the transactions contemplated by this
                           Agreement. Copies of all Permits used in the conduct
                           of the business of the Company and its Subsidiaries
                           are attached to Schedule 3.16.

                  (c)      All of the Dealers for which the Company and its
                           Subsidiaries provide Monitoring Services are licensed
                           as installers of security systems by the appropriate
                           entities in the jurisdictions in which they conduct
                           business and neither the Company, its Subsidiaries or
                           any of their respective shareholders are aware of any
                           fact which could lead to the revocation or suspension
                           of any of such Dealer's licenses.

         3.17 Intellectual Property. The Company and each of its Subsidiaries
owns or has the right to use, and following the Closing the Company and each of
its Subsidiaries will continue to own and have the right to use, free and clear
of all Liens, claims and restrictions, all Intellectual Property used in the
conduct of their respective businesses without infringing upon or otherwise
acting adversely to the right or claimed right of any person. Schedule 3.17
contains a true and complete list of the Intellectual Property of the Company,
its Subsidiaries and the owner(s), licensors, grantors and licensee(s) thereof.
Except as disclosed on Schedule 3.17, neither the Company nor any of its
Subsidiaries is, or following the Closing will be, obligated or under any
liability to make any payments for royalties, fees or otherwise to any owner of,
licensor of, or other claimant to, any Intellectual Property, with respect to
the use thereof or in connection with the conduct of its business or otherwise.
Neither the Company nor any of its Subsidiaries has granted any licenses
allowing third parties to use any of the Intellectual Property of the Company or
its Subsidiaries. The conduct of the Monitoring Business or any other business
conducted by the Company and its Subsidiaries does not, and will not, violate
the Intellectual Property or any other proprietary interest of any other Person.
The Company and its Subsidiaries possess, and after the Closing will possess,
ownership of or licenses to utilize all proprietary technology necessary for the
conduct of the Monitoring Business and any other business conducted by the
Company or its Subsidiaries. Neither the Company nor any of its Subsidiaries is
in default under any agreement governing its use of any Intellectual Property.

                                       20
<PAGE>   21

         3.18 Schedule 3.18 consists of the following:

                  (a)      Schedule 3.18(a) is a true, accurate and complete
                           list of the Dealer Monitoring Agreements of the
                           Company, its direct and indirect Subsidiaries, and
                           sets forth completely and accurately, as of
                           ________(i) the RMR due from each Dealer under each
                           such agreement; (ii) the agings of the amounts
                           receivable from each Dealer under each such
                           agreement; and (iii) the method of billing such
                           Dealers. At the Closing , there will be Dealer
                           Monitoring Agreements covering no less than _________
                           Accounts, with RMR payable to the Company, its direct
                           or indirect Subsidiaries of no less than
                           $_________("Minimum RMR").

                  (b)      All Accounts listed on Schedule 3.18(a) are evidenced
                           by written contracts. The Accounts and Dealer
                           Monitoring Agreements arose in bona-fide arms length
                           transactions in the normal course of business and
                           such agreements are valid and binding obligations of
                           the Dealers and Subscribers that are parties thereto
                           without any counterclaims, set-offs or other defenses
                           thereto, and neither the Company, its Subsidiaries or
                           any selling Shareholder has any basis to believe that
                           the amounts payable under such Accounts and Dealer
                           Monitoring Agreements are not collectible. Neither
                           the Company nor any of its Subsidiaries has any basis
                           to believe that any Account or Dealer Monitoring
                           Agreement will not continue in existence after the
                           Closing.

         3.19 Litigation, etc. There are no actions, suits, proceedings or
investigations pending or threatened against the Company, its Subsidiaries or
their respective properties before any court, arbitration panel or governmental
agency (nor is there any reasonable basis therefor), nor is there any judgment,
decree, injunction, rule or order of any court, governmental department,
commission, agency, instrumentality or arbitrator outstanding against the
Company, its Subsidiaries or their respective assets or the Monitoring Business
or any other business conducted by the Company and its Subsidiaries, except as
described on Schedule 3.19. Schedule 3.19 also contains a true and complete list
of every incident for the last (5) five years in which a Subscriber or third
party asserted that it experienced a loss related to any failure or omission of
the Company, its Subsidiaries or their provision of Monitoring Services, a short
description of the claim and its current status or resolution.

         3.20 Related Party Transactions. Except as disclosed on Schedule 3.20,
neither the Company, its Subsidiaries nor any shareholder, officer, director,
employee of the Company, its Subsidiaries, or any member of their immediate
families, is, directly or indirectly, interested in any contract with the
Company or its Subsidiaries, including but not limited to any agreement, written
or unwritten, for employment or consulting, or any lease for real or personal
property. No officer or employee of the Company or its Subsidiaries is a party
to or bound by any agreement, contract or commitment, or subject to any
restrictions (including confidentiality or non-compete restrictions) in
connection with any previous or current employment of any such person, which
adversely affects, or in the future may adversely affect, the business of the
Company or any of its Subsidiaries. Neither the Company nor any of its
Subsidiaries is a

                                       21
<PAGE>   22

guarantor or indemnitor of any indebtedness of any other person, firm or
corporation, except as disclosed on Schedule 3.20. All existing agreements
between each Shareholder and the Company or its Subsidiaries have been (or on or
prior to the Closing will be) terminated and, thereafter, except as contemplated
herein, such Shareholder will not be a party to, subject to or bound by any
agreement, commitment or understanding whatsoever between such Shareholder and
the Company.

         3.21 Securities Law Compliance. The Merger and the exchange of the
securities involved therein constitutes a transaction exempt from the
registration requirements of the Securities Act, and the state securities laws
and regulations of the states of New Jersey and _____.

                  (a)      Each of the Selling Shareholders understands and
                           agrees that: (i) the SAI Preferred to be issued
                           pursuant to the Merger has not been, and as of the
                           Effective Time will not be, registered under the
                           Securities Act or under any state securities laws;
                           (ii) the SAI Preferred is being offered and issued in
                           reliance upon Federal and state exemptions for
                           transactions not involving any public offering; (iii)
                           a "stop transfer" order will be placed against the
                           certificates representing shares of SAI Preferred
                           issued pursuant to the Merger; until such time as (A)
                           such SAI Preferred is registered under the Securities
                           Act or until SAI has received an opinion of counsel
                           satisfactory to it that a proposed transfer or sale
                           does not require registration or qualification under
                           applicable law, and (iv) until removed in accordance
                           with Section 5.16, the certificates representing the
                           shares of SAI Preferred and SAI Common issued in the
                           Merger will bear the legend set forth below:

                                    The shares evidenced by this certificate
                                    have not been registered under the
                                    Securities Act of 1933, as amended, or any
                                    applicable state securities laws. No
                                    transfer or sale of these shares or any
                                    interest therein may be made without such
                                    registration and qualification unless the
                                    issuer has received an opinion of counsel
                                    satisfactory to it that a proposed transfer
                                    or sale does not require registration or
                                    qualification under applicable law.

                  (b)      The Selling Shareholders each further represent that:
                           (i) he is acquiring the SAI Preferred to be acquired
                           him pursuant to the Merger solely for his own account
                           for investment purposes and not with a view to the
                           distribution thereof within the meaning of the
                           Securities Act; (ii) he is a sophisticated investor
                           with knowledge and experience in business and
                           financial matters and is an "accredited investor"
                           within the meaning of Rule 501 under the Securities
                           Act; (iii) he has had access to all SAI SEC Reports
                           filed by SAI during the current year and the year
                           preceding the current year, and has had the
                           opportunity to obtain additional information and ask
                           questions and receive answers as desired in order to
                           evaluate the

                                       22
<PAGE>   23

                           merits and risks inherent in holding the SAI
                           Preferred; (iv) he has not been offered the SAI
                           Preferred by any form of general advertising or
                           general solicitation; and (v) he is able to bear the
                           economic risk and lack of liquidity inherent in
                           holding the SAI Preferred.

         3.22 Brokers or Finders. Neither the Company, its Subsidiaries nor any
Shareholder has dealt with any broker or finder, and have not incurred, and will
not incur, directly or indirectly, as a result of any action taken by the
Company, its Subsidiaries or any Selling Shareholder, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with the transactions contemplated by this Agreement.

         3.23 Tax Matters. The Company and each of its Subsidiaries: (i) has
timely filed all income, sales and employment tax returns that are required to
have been filed with all appropriate federal, state, county and local
governmental agencies that relate to the Company or, its Subsidiaries or with
respect to which the Company or any of its Subsidiaries is liable or otherwise
in any way subject, including without limitation all tax returns due for the
period ending December 31, 1999, (and all such returns fairly reflect the
operations of the Company and its Subsidiaries for tax purposes), and all taxes,
fees, assessments and governmental charges of any nature ("Taxes") shown by such
returns to be due and payable have been paid, except for those amounts set forth
on Schedule 3.23 as being contested in good faith and for which appropriate
amounts have been reserved and are reflected on the Company's Financial
Statements, and will be reflected the Closing Date Balance Sheet, in accordance
with GAAP; (ii) has timely paid all Taxes owed by it or which it is obligated to
withhold from amounts owing to any employee (including without limitation social
security taxes), creditor or third party and (iii) has not waived any statute of
limitations with respect to taxes or agreed to any extension of time with
respect to a tax assessment or deficiency. The assessment of any additional
Taxes for periods for which returns have been filed will not exceed the
liability appearing on the Closing Date Balance Sheet therefor, and there are no
material unresolved questions or claims concerning the tax liability of the
Company, its Subsidiaries. The tax returns of the Company and its Subsidiaries
have not been reviewed or audited by any federal, state, local or county taxing
authority. There is no pending dispute with any taxing authority relating to any
of said tax returns. The Company's Financial Statements do, and the Closing Date
Balance Sheet will, accurately reflect all of the tax liability of the Company
and its Subsidiaries for Taxes as of their respective dates. All of the income,
sales and employment-related tax returns of the Company and its Subsidiaries for
the years 1997, 1998 and 1999 are attached to Schedule 3.23. The books of the
Company and its Subsidiaries will be closed as of the Closing Date in order to
properly determine the Taxes due for the period ending on the Closing Date. The
Selling Shareholders will fully cooperate with the Company and its Subsidiaries
in preparing their respective tax returns, including, but not limited to, those
for the stub period ending on the Closing Date.

         3.24 Insurance. The Company and each of its Subsidiaries has valid
workers' compensation, fire, casualty, liability, and errors and omissions
policies, in such amounts and with such coverage as is reasonably related to the
foreseeable risks of the Company and its Subsidiaries, in each case with
reputable insurers. The Company has provided to SAI true, accurate and complete
copies of all such policies. All of the fire, casualty, liability and errors and
omissions policies of the Company and its Subsidiaries are "occurrence" policies
not "claims

                                       23
<PAGE>   24

made" policies. Neither the Company nor any of its Subsidiaries is in default
with respect to any provision contained in any such policy and has not failed to
give any notice or present any claim under any such policy in due and timely
fashion. Neither the Company nor any of its Subsidiaries will be placed in
default, and their coverage will not be canceled, as a result of the
transactions contemplated by this Agreement. There are no outstanding unpaid
claims under any such policy. Neither the Company nor any of its Subsidiaries
has received notice of, nor have they knowledge of, any inaccuracy in any
application for such policies, any failure to pay premiums when due or any
similar state of facts that might form the basis for termination of any such
insurance or rejection of any claim. Within three years prior to the Closing
Date, neither the Company nor any of its Subsidiaries has canceled or terminated
any insurance policy, nor has any insurance company canceled or terminated any
insurance policy of the Company or its Subsidiaries or rejected any claim under
such policy. All such policies will remain in full force and effect following
the Closing. Following the Closing, the Company and its Subsidiaries will be
able to cancel all such policies upon no more than thirty (30) days written
notice without payment of any additional premium or any penalty.

         3.25 Pension Plans. Neither the Company nor any of its Subsidiaries
maintains or contributes to, or has any obligation under, or on the Closing Date
will maintain, contribute to, or have any obligation under, any Employee Benefit
Plan other than those identified on Schedule 3.25. The Company has provided SAI
with true, accurate and complete copies of all contracts, agreements, and
documents described in Exhibit 3.25.

                  (a)      ERISA and Code Compliance and Liability. The Company
                           and each ERISA Affiliate is in compliance with all
                           applicable provisions of ERISA with respect to all
                           Employee Benefit Plans. Each Employee Benefit Plan
                           that is intended to be qualified under Section 401(a)
                           of the Code has been determined by the Internal
                           Revenue Service to be so qualified, and each trust
                           related to such plan has been determined to be exempt
                           under Section 501(a) of the Code. No material
                           liability has been incurred by the Company or any
                           ERISA Affiliate that remains unsatisfied for any
                           taxes or penalties with respect to any Employee
                           Benefit Plan or any Multiemployer Plan.

                  (b)      Funding. No Pension Plan has been terminated, nor has
                           any accumulated funding deficiency (as defined in
                           Section 412 of the Code) occurred, nor has any
                           funding waiver from the Internal Revenue Service been
                           received or requested with respect to any Pension
                           Plan, nor has the Company or any ERISA Affiliate
                           failed to make any contributions or to pay and
                           amounts due and owing as required by Section 412 of
                           the Code, Section 302 of ERISA or the terms of any
                           Pension Plan prior to the due dates of such
                           contributions under Section 412 of the Code or
                           Section 302 of ERISA, nor has there been any event
                           requiring any disclosure under Section 4041[c][3][C],
                           4063(a) or 4068 of ERISA with respect to any Pension
                           Plan.

                                       24
<PAGE>   25

                  (c)      Prohibited Transactions and Payments. Neither the
                           Company nor any ERISA Affiliate has (i) engaged in a
                           non-exempt "prohibited transaction" as such term is
                           defined in Section 406 of ERISA or Section 4975 of
                           the Code; (ii) incurred any liability to the PBGC
                           which remains outstanding other than the payment of
                           premiums and there are no premium payments which are
                           due and unpaid; (iii) failed to make a required
                           contribution or payment to a Multiemployer Plan; or
                           (iv) failed to make a required installment or other
                           required payment under Section 412 of the code.

                  (d)      No Termination Event. No Termination Event has
                           occurred or is reasonably expected to occur.

                  (e)      ERISA Litigation. No material proceeding, claim,
                           lawsuit and/or investigation is existing or
                           threatened concerning or involving any (i) employee
                           welfare benefit plan (as defined in Section 3(1) of
                           ERISA) currently maintained or contributed to by the
                           Company or any of its Subsidiaries, (ii) Pension Plan
                           or (iii) Multiemployer Plan.

         3.26 Directors, Officers and Employees.

                  (a)      Directors, Officers and Employees. Schedule 3.26 sets
                           forth the names of each director, officer and
                           employee of the Company and each of its Subsidiaries
                           and states the rate of compensation payable to each.
                           Attached to Schedule 3.26 are copies of each written
                           employment agreement and noncompetition agreement
                           with such directors, officers and employees

                  (b)      Labor Matters. Neither the Company nor any of its
                           Subsidiaries has been, or is, a party to any
                           collective bargaining agreement with any union
                           representing any of its employees. The Company and
                           each of its Subsidiaries has been, and is, in
                           compliance with all applicable laws, rules and
                           regulations relating to employment and employment
                           practices, immigration laws, terms and conditions of
                           employment, wages and hours. None of the employees of
                           the Company or its Subsidiaries is represented by a
                           labor union. There has not been, and there are not
                           presently, pending or threatened any unfair labor
                           practice or discrimination charges or complaints
                           against the Company or its Subsidiaries before the
                           National Labor Relations Board, the Equal Employment
                           Opportunity Commission or any similar national, state
                           or local body.

                  (c)      Continued Service by Certain Employees. The employees
                           identified on Schedule 3.26 as key employees have
                           agreed to remain employed by SAI, the Company or its
                           Subsidiaries at their current compensation levels.
                           [____________]will continue to act as the Company's
                           qualifying license holder. The Selling Shareholders
                           agree to have each such employee execute a letter
                           agreement with SAI providing for the following:

                                       25
<PAGE>   26

                           (i)      Continued employment by SAI, the Company or
                                    a Subsidiary of the Company;

                           (ii)     Continued compensation at current levels;
                                    and

                           (iii)    Confidentiality and non-competition
                                    undertakings.

         3.27 Environmental and Safety Regulations. The Company and each of its
Subsidiaries is in compliance with all applicable Environmental Laws and no real
estate owned by the Company or its Subsidiaries or portion of the Leasehold
Property has been used as a land fill. There currently are not any Hazardous
Materials generated, manufactured, released, stored, buried or deposited over,
beneath, in or on (or used in the construction of or renovation of) the
Leasehold Property in violation of applicable Environmental Laws which could
have a material adverse effect on the business, operations, properties or
financial condition of the Company or its Subsidiaries.

         3.28 UL Compliance and Compliance with Laws. The Central Stations are
certified by Underwriters Laboratories, Inc. ("U.L."). A copy of each U.L.
listing of the Central Stations is included in Exhibit 3.28. The Selling
Shareholders are not aware of any reason why the Central Stations would lose
their U.L. certifications. No Accounts require inspections to be or remain in
compliance with any governmental regulation, law or code, and all Accounts are
in compliance with any applicable code or regulation.

         3.29 Ownership of Stock. The Selling Shareholders are the lawful
owners, both beneficially and of record, of the Shares, free and clear of all
liens, encumbrances, restrictions and claims of every kind. The Shares are fully
paid and non-assessable and have the rights set forth in the Company's Articles
or Certificate of Incorporation and Bylaws. Schedule 3.29 sets forth the Shares
owned by each Shareholder; and each Selling Shareholder has good and marketable
title to the Shares owned by such Selling Shareholder.

         3.30 Proxy Statement. The information supplied by the Company for
inclusion in the SAI Proxy Statement shall not, on the date the Proxy Statement
is first mailed to the stockholders of SAI at the time of the Stockholders'
Meeting and at the Effective Time, contain any statement which, at such time and
in light of the circumstances under which it was made, is false or misleading
with respect to any material fact, or omit to state any material fact necessary
in order to make the statements made in the Proxy Statement not false or
misleading. If at any time prior to the Effective Time any event relating to SAI
or any of its Affiliates, officers or directors should be discovered by the
Company which should be set forth in a supplement to the Proxy Statement, the
Company shall promptly inform SAI.

         3.31 Schedules. All of the schedules to this Agreement, including, but
not limited to, those which refer to the Company, its Subsidiaries, the
Shareholders, the Assets, the Central Stations and the Monitoring Business are,
and as of the Closing will be, true, accurate and complete and have been
prepared in conformance with the provisions of this Agreement.

         3.32 Representations and Warranties True on Closing Date. The
representations and warranties made by the Selling Shareholders herein, and all
statements made in any exhibit,

                                       26
<PAGE>   27

schedule or certificate or other document or instrument furnished pursuant to
this Agreement, do not contain, and as of the Closing will not contain, any
untrue statement of a material fact, or omit to state any material fact required
to be stated therein, or necessary in order to make the statements made, in
light of the circumstances under which they were made, not misleading. The
Selling Shareholders have clearly and fully disclosed to SAI, in writing, all
material facts concerning the Company and its Subsidiaries necessary for SAI to
accurately evaluate its investment in the Company and its Subsidiaries, their
Assets and the Monitoring Business and other business conducted by the Company
and its Subsidiaries.

                                    ARTICLE 4

                        REPRESENTATIONS, WARRANTIES, AND

                   ACKNOWLEDGEMENTS OF SAI AND KING ACQUISITION

         SAI and King Acquisition, jointly and severally, represent, warrant,
and acknowledge to the Selling Shareholders that:

         4.1 Incorporation. SAI is a validly existing corporation in good
standing under the laws of the State of Delaware. King Acquisition is a validly
existing corporation in good standing under the laws of the state of New Jersey.
SAI and King Acquisition each have the requisite corporate power and authority
to own and operate their respective properties and assets, and to carry on their
respective businesses as presently conducted and as proposed to be conducted.

         4.2 Power and Authority. Subject to approval of the Merger and other
transactions contemplated herein by the shareholders of SAI, SAI and King
Acquisition each have all requisite power and authority to execute and deliver
this Agreement; to consummate the Merger and to carry out and perform its
obligations under the terms of this Agreement.

         4.3 Authorization. All action on the part of SAI and King Acquisition
necessary for the authorization, execution, delivery and performance of this
Agreement and the performance of all of the obligations of SAI and King
Acquisition hereunder have been taken or will be taken prior to the Closing.
This Agreement has been duly executed and delivered by SAI and King Acquisition,
respectively, and constitutes their valid and binding obligations, enforceable
against each in accordance with its terms.

         4.4 SAI Securities. SAI has taken, or prior to the Closing will take,
all actions necessary to authorize and approve the issuance of the SAI Preferred
and the SAI Common to be issued in connection with the Merger, and as of the
Effective Time the SAI Preferred and the SAI Common will, when issued in
accordance herewith, be duly authorized, validly issued, fully paid and
nonassessable. There are no statutory or contractual shareholders' preemptive
rights or rights of refusal with respect to the issuance of the SAI Preferred or
the SAI Common upon consummation of the Merger.

         4.5 Commission Filings. SAI has filed and made available to the Company
and the Shareholders all forms, reports and documents required to be filed by
SAI with the SEC under

                                       27
<PAGE>   28

the Securities Exchange Act, and the Securities Act during the one year period
ending on the date hereof (collectively, the "SAI SEC Reports"). The SAI SEC
Reports (i) at the time filed, complied in all material respects with the
applicable requirements of the Securities Exchange Act, and (ii) did not at the
time they were filed (or if amended or superseded by a filing prior to the date
of this Agreement, then on the date of such filing) contain any untrue statement
of a material fact or omit to state a material fact required to be stated in
such SAI SEC Reports or necessary in order to make the statements in such SAI
SEC Reports, in the light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of SAI
included in the SAI SEC Reports (the "SAI Financial Statements") complied when
filed as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, and were, when filed, in accordance with the books and records
of SAI, complete and accurate in all material respects, and presented fairly the
consolidated financial position and the consolidated results of operations,
changes in Shareholders' equity and cash flows of SAI and its Subsidiaries as of
the dates and for the periods indicated, in accordance with generally accepted
accounting principles, consistently applied, subject in the case of interim
financial statements to normal year-end adjustments and the absence of certain
footnote information.

         4.6 Disclosure. The representations and warranties made by SAI herein,
and all statements made in any exhibit, schedule or certificate furnished by SAI
pursuant to this Agreement, do not contain, and at the Closing Date will not
contain, any untrue statement of a material fact, or omit to state any material
fact required to be stated therein, or necessary in order to make the statements
made, in light of the circumstances under which they were made, not misleading.

                                    ARTICLE 5

                      COVENANTS OF THE SELLING SHAREHOLDERS

         5.1 Maintenance of Business. From the date hereof until the Closing,
the Selling Shareholders shall cause the Company and its Subsidiaries to carry
on and preserve the business, goodwill and the relationships of the Company, its
Subsidiaries and the Monitoring Business and any other business conducted by the
Company or its Subsidiaries with Dealers, Subscribers, suppliers, employees,
agents and others in substantially the same manner as they have been prior to
the date hereof.

         5.2 Absence of Certain Changes. From the date hereof until the Closing,
except for the Monital Retail Account Transactions or as otherwise expressly
permitted or contemplated hereby, the Selling Shareholders shall not cause or
permit the Company and its Subsidiaries to, and neither the Company nor any of
its Subsidiaries shall, without SAI's prior express written consent:

                  (a)      incur any additional indebtedness for money borrowed,
                           or guarantee any indebtedness or obligation of any
                           other party;

                  (b)      pay any dividends or make any distributions with
                           respect to its capital stock;

                                       28
<PAGE>   29

                  (c)      issue any capital stock or securities convertible
                           into capital stock or grant or issue any options,
                           warrants or rights to subscribe for its capital stock
                           or securities convertible into its capital stock;

                  (d)      enter into, amend or terminate any agreement or
                           arrangement, other than in the ordinary course of
                           business and the Company shall notify SAI prior to
                           entering into, amending or terminating any material
                           agreement or arrangement even in the ordinary course
                           of business;

                  (e)      increase the compensation payable or to become
                           payable to any of its officers, employees or agents,
                           or adopt or amend any employee benefit plan;

                  (f)      acquire or dispose of any properties or assets used
                           in its business except in the ordinary course of
                           business;

                  (g)      permit any change in its business or the manner in
                           which its books and records are maintained;

                  (h)      create or suffer to be imposed any lien, mortgage,
                           security interest or other charge on or against its
                           business, properties or assets; or

                  (i)      engage in any activities or transactions outside the
                           ordinary course of its business as conducted at the
                           date hereof.

         5.3 Necessary Consents. Prior to the Closing, the Selling Shareholders
will obtain written consents and take such other actions as may be necessary or
appropriate to allow the consummation of the transactions contemplated hereby
and to allow the continuation of the business and operations of the Company and
its Subsidiaries after the Closing, including but not limited to, any consents
required with respect to any Real Estate Leases or Equipment Leases for
continued use of such facilities and Equipment following the Closing on the
terms set forth in such Real Estate Leases and Equipment Leases.

         5.4 Access to Information. From the date hereof until the Closing, the
Company and the Selling Shareholders shall give SAI and its accountants, legal
counsel and other representatives full access, during normal business hours, to
all of the properties, books, contracts, commitments and records relating to the
business, Assets and Liabilities of the Company and its Subsidiaries, and will
furnish SAI, its accountants, legal counsel and other representatives during
such period all such information concerning their affairs as SAI may reasonably
request; provided, that any furnishing of such information or any investigation
by SAI shall not affect SAI's right to rely on the representations, warranties
and covenants made by the Selling Shareholders in this Agreement.

         5.5 Certain Defaults; Litigation. The Selling Shareholders will give
prompt notice to SAI of:

                                       29
<PAGE>   30

                  (a)      any default by the Company, its Subsidiaries or any
                           other party, subsequent to the date of this Agreement
                           and prior to the Closing under any instrument or
                           agreement to which the Company or any of its
                           Subsidiaries is a party or by which it is bound,
                           which default could, if not remedied, result in any
                           adverse change in the financial condition, business
                           or prospects of the Company, its Subsidiaries or the
                           Monitoring Business or other business conducted by
                           the Company and its Subsidiaries or which would
                           render incorrect any representation or warranty made
                           herein, and

                  (b)      any suit, action, proceeding or investigation
                           instituted or threatened against or affecting the
                           Company, its Subsidiaries or the Monitoring Business
                           or other business conducted by the Company and its
                           Subsidiaries subsequent to the date of this Agreement
                           and prior to the Closing.

         5.6 Assistance in Transition. From the date hereof until the Closing,
the Selling Shareholders shall provide, and cause the Company and it
Subsidiaries to provide, SAI all reasonable assistance in connection with the
transition of ownership and management of the Company and its Subsidiaries. Such
assistance shall include, but not be limited to (i) arranging for the
availability of the premises located at __________________________________, at
an agreed upon rental rate during the transition, and (ii) utilization of all of
the facilities of the Central Stations to operate the Monitoring Business during
the transition at SAI's expense.

         5.7 Other Negotiations. Except as expressly set forth in the letter of
intent. From the date hereof until the termination of this Agreement, the
Selling Shareholders and the Company will not, and will cause the Company's
officers and directors not to, initiate discussions or negotiate, or authorize
any person or entity to discuss or negotiate on behalf of the Selling
Shareholders or the Company, with any party other than SAI, or entertain or
consider any inquiries or proposals received from any party other than SAI,
concerning the possible disposition of all or any portion of the business,
assets or capital stock of the Company or its Subsidiaries.

         5.8 Assistance in Compliance with Loan Covenants. The Company and the
Selling Shareholders will cooperate with in (i) SAI's negotiating of all of the
documentation to be entered into by the Company, the Shareholders, SAI, SAI's
lenders, and any other party in connection with obtaining financing for the
acquisition of the Shares, (ii) any actions required of SAI, the Company and the
Shareholders to comply with the covenants contained in any loan agreement with
SAI's lenders and (iii) closing the transactions contemplated thereby. Each
Selling Shareholder agrees to enter into a Consent to Assignment of Acquisition
Instruments, in the form of Exhibit 5.8(a) hereto, pursuant to which such
Selling Shareholder will agree that SAI's lenders may enforce SAI's remedies
under this Agreement in the event of SAI's default under its loan agreements
with such lenders. In addition, the Selling Shareholders will cause each lessor
under the Real Estate Leases and the Equipment Leases to enter into an
agreement, in the form of Exhibit 5.8(b), collaterally assigning the Company's
interests in each such lease to SAI's lenders.

         5.9 Noncompetition and Nonsolicitation. The Selling Shareholders each
acknowledge that but for their agreement to be bound by the terms of this
Section 5.9, SAI

                                       30
<PAGE>   31

would not consummate the transactions contemplated by this Agreement. From the
date hereof until the fifth (5th) anniversary of the Closing Date (unless
otherwise provided), each Selling Shareholder agrees that (x) he will refer all
inquiries by current or former clients (as of the Closing) of the Company and
its Subsidiaries relating to the business of the Company and its Subsidiaries to
SAI, and that he will not, directly or indirectly:

                  (a)      enter into competition with the Company or SAI, or
                           their respective Subsidiaries by establishing a
                           remote alarm system monitoring center providing
                           monitoring services to any location within twenty
                           five (25) miles of any location where the Company,
                           SAI or their respective Subsidiaries provide such
                           services;

                  (b)      provide, or solicit any Dealer or Subscriber for the
                           purposes of providing, any services similar to those
                           provided by the Company, SAI or their respective
                           Subsidiaries, either directly or through any other
                           person or entity.

                  (c)      reveal the customer list of the Company or its
                           Subsidiaries to any person;

                  (d)      employ any employee of the Company, SAI or their
                           respective Subsidiaries or solicit or encourage any
                           such employee to terminate his or her employment with
                           any of the foregoing; or

                  (e)      for so long as the Company and its Subsidiaries is
                           engaged in the Monitoring Business and its other
                           businesses, take any other action which is intended
                           to, or which would reasonably be expected to:

                           (i)      adversely affect the Company's, SAI's, or
                                    its Subsidiaries' interest in any Contract;

                           (ii)     adversely affect the Company's, SAI's, or
                                    their respective Subsidiaries' contractual
                                    relationship with any Dealer or Subscriber;
                                    or

                           (iii)    discourage any Dealer, Subscriber or
                                    supplier from continuing its business
                                    relationship with the Company, SAI, or their
                                    respective Subsidiaries after the Closing on
                                    the same terms as were maintained prior to
                                    the Closing.

         For purposes of this Section 5.9, the term "Selling Shareholder" shall
also include any corporation, partnership or other business entity in which a
Selling Shareholder now or in the future owns, directly or indirectly, a
controlling equity interest, and the parents, spouse, children, brothers and/or
sisters of a Selling Shareholder, or any entity in which any of them own,
directly or indirectly, a controlling interest. Notwithstanding any other
provision of this Agreement, each Selling Shareholder agrees that money damages
would not be a sufficient remedy for breach of this Section 5.9 and that SAI
shall be entitled to specific performance, injunctive relief or other equitable
relief as a remedy for breach of this Section 5.9.

                                       31
<PAGE>   32

         5.10 Confidentiality. From the date hereof until the Closing, the
Selling Shareholders will, and will cause the Company and its Subsidiaries and
their respective officers, directors and employees to, treat as strictly
confidential all Confidential Information concerning SAI, the Company and their
respective Subsidiaries that is not part of the public domain and shall not
disclose any such information to any third party. At all times after the Closing
each of the Selling Shareholders will treat and hold as confidential all
Confidential Information concerning SAI, the Company and their respective
Subsidiaries, refrain from using any of such Confidential Information (except,
as applicable, in direct furtherance of such Shareholder's duties on behalf of
SAI, the Company or their respective Subsidiaries (as directed by SAI) and shall
deliver promptly to the SAI or the Company or destroy, at the request and option
of SAI, all tangible embodiments (and all copies) of Confidential Information
concerning SAI, the Company or their respective Subsidiaries which are in such
Shareholder's possession. In the event that any of the Selling Shareholders is
requested or required (by oral question or written request for information or
documents in any legal proceeding, interrogatory, subpoena, civil investigative
demand, or similar process) to disclose any Confidential Information concerning
SAI, the Company or their respective Subsidiaries, such Shareholder will notify
SAI promptly of the request or requirement so that SAI may seek an appropriate
protective order or waive compliance with the provisions of this Section 5.10.
If, in the absence of a protective order or the receipt of a waiver hereunder,
any of the Selling Shareholders is, on the advice of counsel, compelled to
disclose any of such Confidential Information to any tribunal or else stand
liable for contempt, such Selling Shareholder may disclose such Confidential
Information to the tribunal; provided, however, that the disclosing Selling
Shareholder shall, upon the request of SAI or the Company and at their expense,
exert all reasonable efforts to obtain an order or other assurance that
confidential treatment will be accorded to such portion of the Company
Confidential Information required to be disclosed as the Company or SAI shall
reasonably designate.

         5.11 Tax Returns. The Selling Shareholders agree to cause the Company
and its Subsidiaries to file, prior to the Closing Date, all federal, state, and
local income, property, and payroll tax returns. The Selling Shareholders hereby
agrees to indemnify SAI pursuant to Article X hereof for any costs incurred for
any unpaid tax liabilities related to the Company or its Subsidiaries arising
from any state of facts existing prior to the Closing Date, including, but not
limited to federal, state, and local income taxes.

         5.12 Financial Statement Audits. If at any time SAI deems it necessary
or advisable to have an independent audit performed on the financial statements
of the Company or its Subsidiaries, (including, without limitation, in
connection with the SAI proxy) the Selling Shareholders will fully cooperate
with SAI and the independent auditors in the performance of the audit. In
furtherance and not in limitation of the foregoing, the Selling Shareholders
will cooperate and provide all assistance reasonably requested by SAI's
independent accountants and the Company's independent accountants (including
without limitation, executing any and all customary management representation
letters with respect to the Company's financial statements) in connection with
the preparation and delivery to SAI of audited financial statements and for the
Company as of and for each of the fiscal years ended December 31, [prior and
appropriate post-closing years].

                                       32
<PAGE>   33

         5.13 Disclosure to State Taxing Authorities. The Selling Shareholders
have made all necessary disclosures related to the exchange of the Shares in
connection with the Merger as are required under the applicable state laws, and
no amounts are required to be withheld from consideration to be received by the
Selling Shareholders in connection with the Merger pursuant to such laws.

         5.14 Update Disclosure; Breaches. From and after the date of this
Agreement until the Closing, the Selling Shareholders shall promptly notify SAI,
by written update to the attachments hereto, of (i) the occurrence or
non-occurrence of any event which would be likely to cause any condition to its
obligations to effect the Merger and the other transactions contemplated by this
Agreement not to be satisfied, (ii) any fact, condition or occurrence which will
result in any of the representations or warranties of the Selling Shareholders
not being true and correct as of the Closing, or (iii) the failure of the
Selling Shareholders to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by the Company, its Subsidiaries or
the Selling Shareholders pursuant to this Agreement which would be likely to
result in any condition to the obligations of any Party to effect the Merger and
the other transactions contemplated by this Agreement not to be satisfied. The
delivery of any notice pursuant to this Section 5.15 shall not cure any breach
of any representation or warranty requiring disclosure of such matter prior to
the date of this Agreement or otherwise limit or affect the remedies available
hereunder to SAI if SAI, within ten (10) days after receipt of such notice,
advises the Selling Shareholders of its objection to the matter disclosed in
such notice.

         5.15 Waiver and Release. Each Selling Shareholder, on behalf of himself
and his heirs, executors, administrators, successors and assigns (with respect
to each Selling Shareholder, the "Releasing Parties"), irrevocably and
unconditionally waives and releases any and all rights with respect to, and
releases, forever acquits and discharges each of the Company and its
Subsidiaries and their officers, employees, agents and other representatives,
and their respective heirs, executors, administrators, successors and assigns
("Released Parties"), with respect to, each and all claims, demands, charges,
complaints, obligations, causes of action, suits, liabilities, indebtedness,
sums of money, covenants, agreements, instruments, contracts (written or oral,
express or implied), controversies, promises, fees, expenses (including
attorneys' fees, costs and expenses), damages and judgments, at law or in
equity, in contract or tort, in federal, state or other judicial,
administrative, arbitration or other proceedings, of any nature whatsoever,
known or unknown, suspected or unsuspected, previously, now or hereafter
arising, in each case which arise out of, are based upon or are connected with
facts or events occurring or in existence on or prior to the Effective Time
("Released Claims"). Each Selling Shareholder further represents and warrants
that such Shareholder has not assigned or otherwise transferred any right or
interest in or to any of the Released Claims. This Section 5.15 shall not apply
to any of the following: (a) claims for salaries and benefits accrued through
the Closing under the express terms of the written benefit plans of the Company
or its Subsidiaries, or (b) claims for indemnification pursuant to Section
10.1(b) herein, to the extent applicable.

         5.16 Post-Closing Transfer of SAI Securities.

                  (a)      The Selling Shareholders hereby acknowledge and agree
                           that the SAI Preferred [or the SAI Common] issued in
                           connection with the Merger may

                                       33
<PAGE>   34

                           not be transferred except pursuant to (a) a
                           registered offering under the Securities Act (in
                           which case all transfers shall be made in accordance
                           with all applicable provisions of the Registration
                           Agreement), (b) Rule 144 promulgated pursuant to the
                           Securities Act (or any similar rule or rules then in
                           force) if available, or (c) subject to the conditions
                           specified in subparagraph (ii) below, any other
                           legally available means of transfer.

                  (b)      In connection with the transfer of any SAI Preferred
                           [or SAI Common] issued in connection with the Merger
                           (other than a transfer pursuant to a registered
                           public offering), the holder thereof shall deliver
                           written notice to SAI describing in reasonable detail
                           the transfer or proposed transfer, together with an
                           opinion of securities counsel (with such opinion and
                           such counsel being satisfactory to SAI) to the effect
                           that such transfer of SAI Preferred [or SAI Common]
                           may be effected without registration of such SAI
                           Preferred [or SAI Common] under the Securities Act or
                           any applicable state securities law. In addition, if
                           the holder [of SAI Preferred] delivers to SAI such an
                           opinion that concludes that no subsequent transfer of
                           such SAI Preferred [or SAI Common] will require
                           registration under the Securities Act or any
                           applicable state securities law, SAI shall promptly
                           upon such contemplated transfer deliver new
                           certificates for such SAI Preferred [or SAI Common]
                           which do not bear the restrictive legend set forth in
                           Section 3.2(a). If SAI is not required to deliver new
                           certificates for such SAI Preferred [or SAI Common]
                           not bearing such legends, the holder thereof shall
                           not transfer the same until the prospective
                           transferee has confirmed to SAI in writing its
                           agreement to be bound by the conditions contained in
                           this Section.

                                    ARTICLE 6

                                COVENANTS OF SAI

         6.1 Necessary Consents. Prior to the Closing, SAI will use its best
efforts obtain such consents and take such other actions as may be necessary or
appropriate to allow the consummation of the Merger and the other transactions
contemplated hereby, including the approval of its shareholders.

         6.2 Offer of Employment. SAI agrees that SAI, the Company or its
Subsidiaries will offer employment to each of the individuals listed on Schedule
6.2 at the annual salary rates set forth on Schedule 6.2. Each such employee
that accepts such an offer will be an employee at will.

         6.3 Confidentiality. SAI agrees to abide by the confidentiality
provisions of the Letter of Intent; provided, however, that SAI, as a reporting
company under the Securities Exchange Act and as an issuer of securities under
the Securities Act, may make all disclosures concerning this Agreement, the
Selling Shareholders and the Company and its Subsidiaries as are required by
Federal and state securities laws, as determined by SAI and its counsel.

                                       34
<PAGE>   35

         6.4 Stockholders Meetings. SAI shall call a meeting of its
stockholders, to be held as promptly as practicable for the purpose of voting
upon the issuance of the shares of SAI Preferred and SAI Common contemplated
hereunder, SAI will, through its Board of Directors recommend to its
stockholders, as applicable, approval of such matters and will coordinate and
cooperate with respect to the timing of such meetings and shall use its best
efforts to hold such meeting on the same day and as soon as practicable after
the date hereof.

         As promptly as practicable after the execution of this Agreement, SAI
shall prepared and file with the SEC the SAI Proxy Statement, shall use its vest
efforts to cause the Proxy to become approved by the SEC as soon as after such
filing as practicable, and shall promptly furnish a copy of the Proxy Statement
to each of SAI's Stockholders.

                                    ARTICLE 7

                          SAI'S CONDITIONS FOR CLOSING

         The obligations of SAI and King Acquisition to consummate the Merger
and the other transactions contemplated by this Agreement is subject to the
fulfillment, at or before the Closing, of all the following conditions, unless
waived in writing by SAI:

         7.1 Representations True. The representations and warranties of the
Selling Shareholders in this Agreement shall be true and correct when made and
shall be true and correct at the Closing as those made as of the Closing.

         7.2 Covenants Performed. The Company and the Selling Shareholders shall
have performed or complied with all of the terms, covenants and conditions of
this Agreement to be performed or complied with at or prior to the Closing.

         7.3 No Violations; No Actions. As of the Closing, consummation of the
transactions contemplated by this Agreement shall not violate any order, decree
or judgment of any court or governmental entity and no action or proceeding
shall have been instituted by any person or entity or threatened by any
governmental entity which, in either such case, in the reasonable judgment of
SAI, has a probability of resulting in an order judgment or decree restraining,
prohibiting or rendering unlawful the consummation of the Merger or the other
transactions contemplated by this Agreement.

         7.4 Company RMR. As of the Closing, the Company shall have the Minimum
RMR.

         7.5 Company Assets. As of the Closing, the Company shall have a tax
basis of at least $18 million, calculated in accordance with GAAP, in
depreciable and/or amortizable assets for Federal income tax purposes.

         7.6 Closing Balance Sheet. The Company shall have delivered the Closing
Balance Sheet to SAI.

         7.7 No Material Adverse Change. During the period commencing on the
date of execution of this Agreement to the Closing, there shall not have been
any material adverse

                                       35
<PAGE>   36

change in the condition (financial or otherwise), liabilities, business or
prospects of the Company or any of its Subsidiaries.

         7.8 Opinion of Counsel for the Selling Shareholders. SAI shall have
received opinions from counsel for the Selling Shareholders, in form and
substance satisfactory to SAI, dated as of the Closing Date and to be dated as
of the Closing Date, respectively, covering the subject matter contained in
Sections 3.1, 3.2, 3.3, 3.5, 3.6, 3.12, 3.15, 3.16, 3.17, 3.19, 3.20, 3.21,
3.25, 3.27 and 3.29.

         7.9 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be in form and substance
satisfactory to SAI, and SAI shall have received all such originals or certified
or other copies of such documents as it may reasonably request.

         7.10 Employment Agreement. SAI, the Company or its Subsidiaries shall
have entered into a written employment agreement(s) with __________________, in
the form(s) attached as Exhibit(s) 7.10.

         7.11 Delivery of Documents. SAI shall have received all documents and
other items to be delivered by the Selling Shareholders under Section 9.3.

         7.12 Exhibits. The Selling Shareholders shall have completed and
attached hereto all Exhibits and Schedules required by this Agreement, and all
such Schedules shall have been acceptable to SAI, in its sole discretion.

         7.13 Required Consents. As of the Closing Date, all corporate
statutory, regulatory and third party consents and approvals which are required
under the laws or regulations of the United States and any other authority shall
have been obtained; and all other necessary consents and approvals of third
parties to the transactions contemplated hereby and to the continued
uninterrupted operation of the business of the Company and its Subsidiaries
shall have been obtained.

         7.14 SV/SAI Transactions. The transactions contemplated in the SV/SAI
Agreement to be consummated at or prior to the consummation of the transactions
contemplated hereby shall have been consummated.

         7.15 Monital Acquisition Documents. The Company and the other parties
thereto shall have executed the Monitol Acquisition Documents, in substantially
the forms attached hereto as Exhibit 7.15, and the transactions consummated by
the Monitol Acquisition Documents shall have been consummated in accordance with
the terms thereof.

         7.16 Officer's and Other Certificates. The Selling Shareholders shall
have delivered to SAI the following:

                  (a)      certificates of the each Selling Shareholder, dated
                           as of the Escrow Closing Date and to be dated as of
                           the Closing Date, respectively, stating that the
                           conditions specified in Sections 7.1, 7.2, 7.3, 7.4,
                           7.5, 7.7, 7.10,

                                       36
<PAGE>   37

                           7.13 and 7.15 have been fulfilled at or prior to the
                           Escrow Closing and the Closing, respectively;

                  (b)      certificates of the Company, executed on behalf of
                           the Company by its President, dated as of the Closing
                           Date, respectively, stating that the conditions
                           specified in Sections 7.1, 7.2, 7.3, 7.4, 7.5, 7.7,
                           7.10, 7.13 and 7.15 have been fulfilled at or prior
                           to the Closing;

                  (c)      certificates of the Company's Secretary, dated as of
                           the Closing Date, respectively certifying that: (x)
                           that attached thereto are true, accurate and complete
                           copies of the Articles or Certificate of
                           Incorporation and By-laws of the Company and each of
                           its Subsidiaries, and all amendments thereto, and
                           copies of the resolutions adopted by the Board of
                           Directors and shareholders approving the Merger and
                           other transactions contemplated by this Agreement;
                           and that (y) there have been no amendments or
                           modifications to the attached Articles or
                           Certificates of Incorporation since the date of such
                           certificate and that the attached resolutions are in
                           full force and effect on the date of such certificate
                           and have not been superceded or modified in any
                           manner whatsoever; and

                  (d)      incumbency certificates, in form and content, dated
                           as of the Closing Date, satisfactory in form and
                           content to SAI and its counsel.

         7.17 The stockholders of SAI shall have approved the issuance of the
SAI Preferred and SAI Common pursuant to this agreement and the transactions
contemplated pursuant to the SAI/SV Agreement (the "SAI Stockholder Approval").

                                    ARTICLE 8

                  SELLING SHAREHOLDERS' CONDITIONS FOR CLOSING

         The obligation of the Selling Shareholders to consummate the
transactions contemplated by this Agreement are subject to the fulfillment, at
or before the Closing, of all the following conditions, unless waived in writing
by a majority in interest of the Selling Shareholders:

         8.1 Representations True. The representations and warranties of SAI set
forth in Article IV shall be true and correct when made and true and correct as
of the Closing as though made as of the Closing.

         8.2 Covenants Performed. SAI shall have performed or complied with all
of the terms, covenants and conditions of this Agreement to be performed or
complied with by SAI at or before the Closing.

         8.3 No Violations; No Actions. As of the Closing, consummation of the
transactions contemplated by this Agreement shall not violate any order, decree
or judgment of any court or

                                       37
<PAGE>   38

governmental body having competent jurisdiction and no action or proceeding
shall have been instituted by any person or entity or threatened by any
governmental agency which, in either such case, in the reasonable judgment of
the Selling Shareholders, has a probability of resulting in an order judgment or
decree restraining, prohibiting or rendering unlawful the consummation of the
transactions contemplated by this Agreement.

         8.4 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be in form and substance
satisfactory to the Selling Shareholders, and they shall have received all such
counterpart originals or certified or other copies of such documents as they may
reasonably request.

         8.5 Delivery of Documents. The Selling Shareholders shall have received
all documents and other items to be delivered by SAI under Section 9.4.

         8.6 Required Consents. As of the Closing, all statutory and regulatory
consents and approvals which are required under the laws or regulations of the
United States and any other authority shall have been obtained; and all other
necessary consents and approvals of third parties to the transactions
contemplated hereby shall have been obtained; provided, however, that the
consents of the shareholders of SAI and King Acquisition shall not have been
obtained prior to the meeting of shareholders of SAI contemplated herein.

         8.7 SV/SAI Transactions. The transactions contemplated in the SV/SAI
Agreement to be consummated at or prior to the consummation of the transactions
contemplated hereby shall have been consummated.

                                    ARTICLE 9

                                    CLOSINGS

         9.1 Time and Place. The Closing shall each occur at the offices of SAI,
or at any other place to which the Parties shall mutually agree, at ________
a.m. or such date as all of the conditions to closing set forth in Articles 7
and 8 have been satisfied or waived by the applicable parties. All actions to be
taken, and all documents and instruments to be delivered, at the Closing shall
be deemed to have been taken or delivered, as the case, may be, simultaneously.

         9.2 Escrow Closing. In the event that all conditions to Closing set
forth in Article 8, except the SAI Stockholder Approval, have been satisfied or
waived by the appropriate parties on or prior to June 30, 2000, the parties
shall make all of their respective payments and deliveries and execute all
documents and instruments required herein with respect to the Closing, for the
filing of the Articles of Merger and all such payments, deliveries and documents
shall be delivered to the Escrow Agent, all pursuant to the terms and conditions
of the Escrow Agreement set forth as Exhibit 9.2 attached hereto (the "Escrow
Agreement"), and the transactions contemplated hereby shall be considered
tendered in escrow (an "Escrow Closing"). From and after an Escrow Agreement,
(i) the parties shall continue to comply with their respective covenants under
this Agreement, including without limitation, those in Articles 5 and 6, (ii)
the Closing shall take place upon the terms and conditions set forth in the
Escrow Agreement upon

                                       38
<PAGE>   39

the occurrence of the SAI Stockholder Approval and (iii) termination of this
Agreement shall be governed by the Escrow Agreement rather than Article 11.

         9.3 Actions to be taken in connection with the Closing. At the Closing
on the Closing Date, upon the unanimous direction of the parties thereto to be
given upon satisfaction of the conditions to Closing set forth in Article 8:

                  (a)      SAI shall deliver to the Selling Shareholders a
                           certificate, dated the Closing Date, in form and
                           substance satisfactory to the Selling Shareholders
                           and their counsel, confirming that the shareholders
                           of SAI and SAI, as the sole shareholder of King
                           Acquisition, have approved Merger and transactions
                           contemplated hereby;

                  (b)      the Selling Shareholders shall deliver to SAI the
                           corporate records of the Company and its Subsidiaries
                           relating to the Monitoring Business and other
                           business conducted by the Company and its
                           Subsidiaries as set forth in Section 3.12(j); and

                  (c)      the available parties (or the Escrow Agent, as
                           applicable) shall,: (i) file or cause to be filed the
                           appropriate Certificates of Merger with the Secretary
                           of State of the state of New Jersey; (ii) deliver to
                           SAI the items called for by Section 9.4; and (iii)
                           make the payments to the Selling Shareholders
                           referred to in Section 9.5(a) and deliver to the
                           Selling Shareholders the other items called for by
                           Section 9.5.

         9.4 Deliveries of the Selling Shareholders. At or prior to the Closing,
the Selling Shareholders will execute and deliver or cause to be executed and
delivered, simultaneously with the execution and delivery of the items referred
to in Section 9.5 below, the following:

                  (a)      Stock Certificates. Certificates representing the
                           Company Shares endorsed over to SAI or accompanied by
                           duly executed stock powers;

                  (b)      Corporate Documents. The Articles or Certificate of
                           Incorporation of the Company and each of its
                           Subsidiaries, certified by the Secretary of State of
                           the state(s) of New Jersey and __________ as of a
                           date not more than ten days prior to the Closing
                           Date, and the By-Laws of the Company, certified by
                           the Secretary of the Company as in effect at the
                           Closing;

                  (c)      Certificate of Good Standing. A Long-form Certificate
                           of Good Standing, dated not more than ten days prior
                           to the Closing Date, with respect to the Company,
                           issued by the Secretary of State of the state of New
                           Jersey and by the Secretary of State of each foreign
                           jurisdiction in which the Company is qualified to do
                           business;

                  (d)      Consents. Evidence that all consents, approvals, or
                           authorizations of or notifications to any third
                           parties (including governmental agencies), if any,
                           required to exchange the Company Shares in connection
                           with the Merger

                                       39
<PAGE>   40

                           and to consummate the Merger and the other
                           transactions contemplated hereby and to continue to
                           operate the business of the Company and its
                           Subsidiaries without interruption have been obtained,
                           including without limitation, any revenue notices
                           required by the state of New Jersey with any
                           corresponding taxes due paid by the Selling
                           Shareholders, and the consent the lessors under the
                           Real Estate Leases and the Equipment Leases for the
                           continued use of any leased Equipment and the
                           facilities following the Closing on the terms
                           contained in the respective leases.

                  (e)      Opinion of Counsel. The opinion of counsel referred
                           to in Section 7.8 of this Agreement;

                  (f)      Certificates. The certificates referred to in Section
                           7.16 of this Agreement;

                  (g)      Collateral Assignment of Leases. The Collateral
                           Assignment of Leases for each of the Company's Leases
                           and Equipment Leases in the form of Exhibit 9.4(h);

                  (h)      Employment Agreement. Executed employment
                           agreement(s) between the SAI or the Company and the
                           individual(s) referred to Section 7.10;

                  (i)      Evidence of Release of Liens. Evidence, in form and
                           substance satisfactory to SAI, that all liens,
                           charges and encumbrances on the Shares, the Company
                           and its properties, have been fully released prior to
                           the Closing, or will be released concurrently with
                           the Closing;

                  (j)      Resignations. The written resignations of each
                           director and officer of the Company and each of its
                           Subsidiaries, effective as of the Closing;

                  (k)      Signature Cards. Substitute signature cards for all
                           of the bank accounts of the Company and each of its
                           Subsidiaries naming persons designated by SAI as the
                           new signatories for said bank accounts;

                  (l)      Credit Cards. All corporate credit cards of the
                           Company and its Subsidiaries;

                  (m)      Other Documents. Such other documents and instruments
                           as SAI or its counsel reasonably shall deem necessary
                           to consummate the transactions contemplated hereby.

         9.5 Deliveries of SAI. At the Closing, SAI will execute and deliver or
cause to be executed and delivered, simultaneously with the delivery of the
items referred to in Section 9.4 above, the following:

                                       40
<PAGE>   41

                  (a)      Payment of Cash Consideration. SAI shall pay the cash
                           consideration to be paid in connection with the
                           Merger and for payment to the Selling shareholders at
                           the Closing by bank wire transfer;

                  (b)      Delivery of SAI Preferred and SAI Common. SAI shall
                           deliver a certificate or certificates representing
                           the shares of SAI Preferred or SAI Common to which
                           each equity holder of the Company is entitled in
                           connection with the Merger for delivery pursuant to
                           Article 2.

                  (c)      Resolutions. A copy of the resolutions of the Board
                           of Directors and Stockholders of SAI and the Board of
                           Directors and sole shareholder of King Acquisition,
                           certified by SAI's Secretary as having been duly and
                           validly adopted and being in full force and effect,
                           authorizing execution and delivery of this Agreement,
                           the consummation of the Merger and the performance of
                           the transactions contemplated hereby by SAI and SAI,
                           respectively, subject to the approval of the
                           shareholders of SAI;

                  (d)      Corporate Documents. The Certificate of Incorporation
                           of SAI and the Certificate of Incorporation of King
                           Acquisition, certified by the Secretary of State of
                           the states of Delaware and New Jersey respectively
                           as of a date not more than ten days prior to the
                           Closing Date, and the By-Laws of SAI and King
                           Acquisition, certified by the secretary of SAI as in
                           effect at the Closing;

                  (e)      Certificate of Good Standing. Certificates of Good
                           Standing, dated not more than ten days prior to the
                           Closing Date, with respect to SAI and King
                           Acquisition, issued by the Secretary of State of the
                           states of Delaware and New Jersey;

                  (f)      Officer's Certificate. Certificates, dated as of the
                           Escrow Closing Date and the Closing Date,
                           respectively, from an officer of SAI, confirming the
                           satisfaction of the conditions required pursuant to
                           Sections 8.1 and 8.2 as of the Escrow Closing and the
                           Closing, respectively;

                  (g)      Other Documents. Such other documents and instruments
                           as the Selling Shareholders or their counsel
                           reasonably shall deem necessary to consummate the
                           transactions contemplated hereby.

         All actions and proceedings hereunder and all documents and other
papers required to be delivered by the SAI or King Acquisition hereunder or in
connection with the consummation of the Merger and the other transactions
contemplated hereby and all other related matters shall have been approved by,
and, in the case of such documents and papers, shall be in form and substance
reasonably satisfactory to, the Company, the Selling Shareholders and their
respective counsel.

                                       41
<PAGE>   42

                                   ARTICLE 10

                                 INDEMNIFICATION

         10.1 Indemnification.

                  (a)      The Selling Shareholders, jointly and severally, will
                           indemnify and hold harmless SAI, its successors,
                           affiliates and assignees and their respective
                           officers, directors and employee ("SAI Indemnified
                           Parties") against any losses, claims, damages or
                           liabilities, including reasonable attorneys' fees and
                           other reasonable defense costs (hereafter "Loss") to
                           which any SAI Indemnified Party becomes subject in
                           connection with:

                           (i)      finders' fees or brokerage commissions
                                    incurred or alleged to have been incurred by
                                    the Shareholders with respect to the
                                    transactions contemplated by this Agreement;

                           (ii)     any liability of the Company or its
                                    Subsidiaries not disclosed in writing prior
                                    to the Closing;

                           (iii)    any misrepresentation of fact, or failure to
                                    disclose a material fact, by the Selling
                                    Shareholders;

                           (iv)     any breach of any representation or warranty
                                    by the Selling Shareholders contained in
                                    this Agreement or in any document delivered
                                    hereunder;

                           (v)      any claims which have been or may be in the
                                    future asserted arising out of the provision
                                    of Monitoring Services (or failure to
                                    adequately provide such services) or
                                    otherwise arising out of the business
                                    conducted by the Company and its
                                    Subsidiaries by the Company or its
                                    Subsidiaries which occurred prior to the
                                    Closing;

                           (vi)     any breach of any covenant or agreement by
                                    the Company or the Selling Shareholders
                                    contained herein or in any document
                                    delivered hereunder, to be performed prior
                                    to or after the Closing; or

                           (vii)    any other liability or expense resulting
                                    from a dispute or cause of action relating
                                    to the business of the Company or its
                                    Subsidiaries, arising from an event, act, or
                                    omission occurring before or on the Closing
                                    or related to the enforcement of the
                                    indemnification provisions of this
                                    Agreement.

                  (b)      SAI will indemnify and hold harmless the Selling
                           Shareholders, their heirs, successors, affiliates,
                           assigns and their respective officers, directors and
                           employees ("Selling Shareholder Indemnified Parties")
                           against any

                                       42
<PAGE>   43

                           Loss to which any Selling Shareholder Indemnified
                           Party becomes subject in connection with:

                           (i)      finders' fees or brokerage commissions
                                    incurred or alleged to have been incurred by
                                    SAI with respect to the purchase
                                    transaction;

                           (ii)     any misrepresentation of fact, or failure to
                                    disclose a material fact, by SAI;

                           (iii)    any breach of any representation or warranty
                                    by SAI contained herein or in any document
                                    delivered hereunder;

                           (iv)     any breach of any covenant or agreement by
                                    SAI contained herein or in any document
                                    delivered hereunder, to be performed prior
                                    to or after the Closing Date; or

                           (v)      any liability or expense resulting from a
                                    dispute or cause of action relating to the
                                    Company or its Subsidiaries, arising from an
                                    event, act, or omission occurring after the
                                    Closing Date.

                  (c)      Such indemnification shall include any and all
                           actions, suits, proceedings, demands, assessments or
                           judgments, costs and expenses incidental to any of
                           the foregoing matters set forth in Section 10.1(a)
                           and 10.1(b) or enforcement of the indemnification
                           provisions of this Agreement.

         10.2 Indemnification Procedures. For the purposes of this Section 10.2,
the term "Indemnitee" shall refer to the person or persons entitled, or claiming
to be entitled, to be indemnified, pursuant to the provisions of Section 10.1.
The term "Indemnitor" shall refer to the person or persons having the obligation
to indemnify pursuant to such provisions.

                  (a)      Notice. An Indemnitee shall promptly give the
                           Indemnitor written notice of any matter which an
                           Indemnitee has determined has given or could give
                           rise to a right of indemnification under this
                           Agreement, stating the amount of the Loss, if known,
                           and method of computation thereof, all with
                           reasonable particularity and containing a reference
                           to the provisions of this Agreement in respect of
                           which such right of indemnification is claimed or
                           arises. If an Indemnitee shall receive notice of any
                           claim by a third party which is or may be subject to
                           indemnification (a "Third Party Claim"), the
                           Indemnitee shall give the Indemnitor prompt written
                           notice of such Third Party Claim and shall permit the
                           Indemnitor, at its option, to participate in the
                           defense of such Third Party Claim by counsel of its
                           own choice (subject to Indemnitee's approval, which
                           shall not be unreasonably withheld) and at its
                           expense. If, however, the Indemnitor acknowledges in
                           writing its obligation to indemnify the Indemnitee
                           hereunder against all Losses that may result from
                           such Third Party Claim (subject to the limitations
                           set forth herein), then the Indemnitor shall be
                           entitled, at its option, to assume and control the
                           defense of such Third Party Claim at its

                                       43
<PAGE>   44

                           expense and through counsel of its choice, provided
                           however, that Indemnitee shall have the right to
                           approve in its sole reasonable discretion the choice
                           of counsel. In the event the Indemnitor exercises its
                           right to undertake the defense of any such Third
                           Party Claim, the Indemnitee shall co-operate with the
                           Indemnitor in such defense and make available to the
                           Indemnitor, at the Indemnitor's expense, all
                           witnesses, pertinent records, materials and
                           information in its possession or under its control
                           relating thereto as is reasonably required by the
                           Indemnitor. Similarly, in the event the Indemnitee
                           is, directly or indirectly, conducting the defense
                           against any such Third Party Claim, the Indemnitor
                           shall co-operate with the Indemnitee in such defense
                           and make available to it all such witnesses, records,
                           materials and information in its possession or under
                           its control relating thereto as is reasonably
                           required by the Indemnitee. In the event that the
                           Indemnitor fails to agree to undertake defense of the
                           Third Party Claim within thirty (30) days of receipt
                           of notice of such claim from the Indemnitee, the
                           Indemnitee shall be entitled to undertake such
                           defense with counsel of its own choice, and the
                           Indemnitor shall promptly reimburse the Indemnitee
                           for all expenses incurred. The Indemnitor without the
                           written consent of the Indemnitee may settle no Third
                           Party Claim, unless the settlement involves only the
                           payment of money by the Indemnitor. Similarly, no
                           Third Party Claim, which is being defended in good
                           faith by the Indemnitor, shall be settled by the
                           Indemnitee without the written consent of the
                           Indemnitor.

                  (b)      Calculation of Losses. Losses shall be determined
                           after taking into account any insurance proceeds
                           received by an Indemnitee or its affiliates from a
                           non-affiliated insurance company on account of such
                           Losses (after taking into account any costs incurred
                           in obtaining such proceeds and any increase,
                           determined in the reasonable judgment of the
                           Indemnitee and confirmed by the insurance company, in
                           insurance premiums as a result of the claim for which
                           such proceeds were paid). The Indemnitor shall not be
                           liable for any increase in Losses sustained by the
                           Indemnitee, resulting from Indemnitee's failure to
                           give Indemnitor timely written notice of any matter
                           likely to give rise to a right of Indemnification
                           hereunder.

                                   ARTICLE 11

                                  TERMINATION

         11.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, by written notice by the terminating Party to the other
Parties, whether before or after approval of the matters presented in connection
with the Merger by the Selling Shareholders of the Company, as follows:

                  (a)      by mutual written consent of SAI and the Company; or

                                       44
<PAGE>   45

                  (b)      by either SAI or the Company, if the Merger shall not
                           have been consummated by ____________(provided,
                           however, that the right to terminate this Agreement
                           under this Section 11.1(b) shall not be available to
                           any Party whose failure to fulfill any obligation
                           under this Agreement has been the cause of or
                           resulted in the failure of the Merger to occur on or
                           before such date, and provided further, that this
                           Agreement may be extended up to 45 days by either
                           Party by written notice to the other Party if the
                           Merger would have been consummated but for the
                           absence of one or more required Approvals or
                           third-party consents, and such Approval(s) or
                           consent(s) can reasonably be expected to be obtained
                           within such 45 day period); or

                  (c)      by either SAI or the Company if a court of competent
                           jurisdiction or other governmental entity shall have
                           issued a final order, decree or ruling, or taken any
                           other action, having the effect of permanently
                           restraining, enjoining or otherwise prohibiting the
                           Merger, and all appeals with respect to such order or
                           action have been exhausted or the time for appeal of
                           such order, decree, ruling or action shall have
                           expired (provided, however, that the right to
                           terminate this Agreement under this Section 11.1(c)
                           shall not be available to any party which has not
                           complied with its obligations under Section 5.3); or

                  (d)      by SAI, if a breach of any representation, warranty,
                           covenant or agreement on the part of the Selling
                           Shareholders set forth in this Agreement shall have
                           occurred which would cause the conditions set forth
                           in Article 7 not to be satisfied, and, that with
                           respect to any breach of a covenant or agreement
                           hereunder, such covenant or agreement is incapable of
                           being cured or, if capable of being cured, shall not
                           have been cured within ten (10) business days
                           following receipt by the Company of written notice of
                           such breach from SAI; or

                  (e)      by the Company, if a breach of any representation,
                           warranty, covenant or agreement on the part of SAI
                           set forth in this Agreement shall have occurred which
                           would cause the conditions set forth in Article 8 not
                           to be satisfied, and, with respect to any breach of a
                           covenant or agreement hereunder, such covenant or
                           agreement is incapable of being cured or, if capable
                           of being cured, shall not have been cured within ten
                           (10) business days following receipt by SAI of
                           written notice of such breach from the Company.
                           Notwithstanding the foregoing, in the event of an
                           Escrow Closing, this Agreement may thereafter be
                           terminated only pursuant to the terms of the Escrow
                           Agreement.

         11.2 Effect of Termination. In the event of termination of this
Agreement pursuant to Section 11.1, there shall be no Liability or obligation on
the part of SAI, the Company, or their respective officers, directors,
shareholders or affiliates, except as provided in Article 10, and further except
for the liability of any Party then in breach of any of its representations,

                                       45
<PAGE>   46

warranties, covenants or agreements in this Agreement; and provided, that the
provisions of [Sections 5.9, 5.10 and 6.3, Article 10 and this Section 11.2]
shall remain in full force and effect and survive any termination of this
Agreement.

                                   ARTICLE 12

                                  MISCELLANEOUS

         12.1 Survival. The representations, warranties, covenants and
indemnification obligations of the parties contained in this Agreement and their
respective obligations to be performed under the terms hereof at, prior to or
after the Closing hereunder, shall not expire with, or be terminated or
extinguished by, such Closing, but shall survive the Closing and any
investigation made at any time by or on behalf of a party.

         12.2 Further Assurances. At the request of a party to this Agreement,
and without further consideration, the other party agrees to execute such
documents and instruments and to do such further acts as may be necessary or
desirable to effectuate the transactions contemplated hereby.

         12.3 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS
WITHOUT GIVING ANY EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS. THE SELLING
SHAREHOLDERS AGREE THAT THEY WILL NOT ASSERT ANY CLAIM AGAINST ANY OFFICER,
DIRECTOR, EMPLOYEE OR AGENT OF SAI OR ANY OF ITS AFFILIATES, PURSUANT TO ANY
CLAIM THEY MAY HAVE UNDER THIS AGREEMENT BY REASON OF ANY FAILURE OR ALLEGED
FAILURE BY SAI TO MEET ITS OBLIGATIONS HEREUNDER. THE PARTIES HERETO AGREE AND
INTEND THAT THE PROPER AND EXCLUSIVE FORUM FOR THE LITIGATION OF ANY DISPUTES OR
CONTROVERSIES ARISING OUT OF, OR RELATED TO, THIS AGREEMENT SHALL BE THE COURTS
OF THE STATE OF ILLINOIS FOR THE COUNTY OF COOK. EACH PARTY AGREES THAT HE OR IT
WILL NOT COMMENCE OR MOVE TO TRANSFER ANY ACTION OR PROCEEDING, ARISING OUT OF
OR RELATING TO THIS AGREEMENT, IN OR TO ANY COURT OTHER THAN A STATE COURT
LOCATED IN THE COUNTY OF COOK IN THE STATE OF ILLINOIS. EACH PARTY IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFORESAID COURTS IN ANY SUCH
ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, TO THE SELLING SHAREHOLDERS AT THE ADDRESSES PROVIDED
HEREIN, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING.
NOTHING CONTAINED IN THIS SECTION SHALL AFFECT THE RIGHT OF SAI TO SERVE PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW. IN THE EVENT THAT ANY PARTY SHOULD
COMMENCE OR MAINTAIN ANY ACTION ARISING OUT OF OR RELATED TO THIS AGREEMENT IN A
FORUM OTHER THAN THE STATE COURTS LOCATED IN THE STATE OF ILLINOIS, COUNTY OF
COOK, THE OTHER PARTY SHALL BE ENTITLED TO MOVE FOR THE DISMISSAL OF SUCH
ACTION, AND THE NON-MOVING PARTY STIPULATES THAT SUCH ACTION SHALL BE DISMISSED.
THE PARTIES AGREE THAT PRIOR TO

                                       46
<PAGE>   47

INSTITUTING ANY SUIT, THEY WILL GIVE WRITTEN NOTICE OF THEIR INTENT TO DO SO AND
MAKE A REASONABLE ATTEMPT TO RESOLVE ANY DISPUTE BY NEGOTIATING WITH EACH OTHER
IN GOOD FAITH.

         12.4 Successors and Assigns. This Agreement shall be binding on, and
inure to the benefit of, the parties to it and their respective heirs, legal
representatives, successors, and assigns.

         12.5 Each Party to Bear Own Costs. The Selling Shareholders and SAI
shall each bear its own legal and other expenses incurred on its behalf with
respect to the preparation of this Agreement, any related documents and the
transactions contemplated hereby.

         12.6 Entire Agreement; Amendment. This Agreement, its Exhibits and
Schedules, the Escrow Agreement and the other documents delivered pursuant
hereto at the Escrow Closing and the Closing constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Accordingly, this agreement
supercedes, among other things, the SAI/King LOI and all provisions of the
Letter of Intent or the SV/SAI Agreement relating to the consummation of the
acquisition of the Company by SAI which are covered by the terms of this
Agreement. Except as expressly provided herein, neither this Agreement nor any
term hereof may be amended, waived, discharged or terminated other than by a
written instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought.

         12.7 Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed:

         To SAI or King Acquisition at:  Security Associates International, Inc.
                                         2101 South Arlington Heights Road
                                         Arlington Heights, Illinois 60005-4142
                                         ATTN: PRESIDENT

         To KC ACQUISITION CORP. at:     KC Acquisition Corp.
                                         P.O. Box 1943
                                         South Hackensack, NJ 07606-0543

         To Mr. Thomas Few Sr. at:       Mr. Thomas Few Sr.
                                         ____________________
                                         ____________________

         To Mr. Timothy McGinn at:       Mr. Timothy McGinn
                                         ____________________
                                         ____________________

                                       47
<PAGE>   48

         Any party may change its address for purposes of this Section by giving
notice of the new address to the other party in the manner set forth above.

         Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or
seventy-two (72) hours after the same has been deposited in a regularly
maintained receptacle for the deposit of the United States mail, addressed and
mailed as aforesaid.

         12.8 Delays or Omissions. Except as expressly provided herein, no delay
or omission to exercise any right, power or remedy accruing to any party to this
Agreement, upon any breach or default by the other party under this Agreement,
shall impair any such party, power or remedy of such party nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default be deemed a waiver of any
other breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies either under this Agreement or by law or otherwise afforded to any
party, shall be cumulative and not alternative.

         12.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.

         12.10 Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.

         12.11 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and shall not be considered in
construing or interpreting this Agreement.

         12.12 Incorporation by Reference. The Schedules, Exhibits, certificates
and other documents attached hereto or referred to herein are deemed to be a
part of this Agreement and are incorporated herein by this reference.

                                       48
<PAGE>   49

         The foregoing Agreement is hereby executed as of the date first above
written.

                                       SECURITY ASSOCIATES
                                       INTERNATIONAL, INC.

                                       By:_____________________________________
                                           James S. Brannen, its President

                                       KING CENTRAL ACQUISITION CORP.

                                       By:_____________________________________

                                       KC ACQUISITION CORP.

                                       By:_____________________________________

                                       SELLING SHAREHOLDERS

                                       By:_____________________________________
                                           Thomas Frew, Sr.

                                       By:_____________________________________
                                           Timothy McGinn

                                       49

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