Document:

Exhibit 10.8

 

GUARANTY AND SURETYSHIP AGREEMENT

 

This Guaranty and Suretyship Agreement (this “Guaranty”) is made and entered into this 18th day of January, 2013, by and among INTERFACE SECURITY SYSTEMS HOLDINGS, INC., a Delaware corporation (“Parent”), and each of the other parties which may from time to time become party hereto (collectively and together with Parent, the “Guarantors” and each, individually, a “Guarantor”) in favor of CAPITAL ONE, N.A., in its capacity as agent for the Banks under the Credit Agreement referred to herein (hereinafter referred to in such capacity as the “Agent”).

 

BACKGROUND

 

In order to induce the Banks to make loans and other extension of credit from time to time to INTERFACE SECURITY SYSTEMS, L.L.C., a Louisiana limited liability company (“ISS”), THE GREATER ALARM COMPANY, INC., a California corporation (“GAC”), WESTEC ACQUISITION CORP., a Delaware corporation (“WAC”), WESTEC INTELLIGENT SURVEILLANCE, INC., a Delaware corporation (“WIS” and together with ISS, GAC and WAC, each individually, a “Borrower” and collectively, the “Borrowers”), in accordance with that certain Credit Agreement dated as of even date herewith (as it may hereafter from time to time be amended, restated, modified or supplemented, the “Credit Agreement”) by and among the Borrowers, the Guarantors party thereto, the Banks and the Agent, each Guarantor hereby, jointly and severally, unconditionally and irrevocably guarantees, and becomes surety as though it were a primary obligor for, the full and timely payment when due, whether at maturity, by declaration, acceleration or otherwise, of the Obligations (both those now in existence and those that shall hereafter arise and including, without limitation, all costs and expenses of enforcement and collection, including reasonable attorney’s fees and any and all interest and fees from time to time accruing on such Obligations whether or not such interest and fees are an allowed claim in connection with any Insolvency Proceeding) of each Borrower to Banks (or any of them) and the Agent under the Credit Agreement and the other Loan Documents, and any extensions, renewals, replacements or refundings thereof (hereinafter referred to as the “Guaranteed Indebtedness”), whether or not such Guaranteed Indebtedness or any portion thereof shall hereafter be released or discharged or is for any reason invalid or unenforceable.  This is an absolute, present and continuing guaranty of payment of the Guaranteed Indebtedness and not merely of collection.

 

1.                                      Capitalized terms used herein and not otherwise defined herein shall have such meanings given to them in the Credit Agreement.

 

2.                                      Each Guarantor agrees to make such full payment forthwith upon demand of the Agent when the Guaranteed Indebtedness or any portion thereof is due to be paid by any Borrower to the Agent or any of the Banks, whether at stated maturity, by declaration, acceleration or otherwise.  Each Guarantor agrees to make such full payment irrespective of whether or not any one or more of the following events has occurred: (i) any of the Banks or the Agent has made any demand on any Borrower or any Guarantor; (ii) any of the Banks or the Agent has taken any action of any nature against any Borrower or any Guarantor; (iii) any of the Banks or the Agent has pursued any rights which it has against any other Person who may be liable for the Guaranteed Indebtedness; (iv) any of the Banks or the Agent holds or has resorted

 

 

to any security for the Guaranteed Indebtedness; or (v) any of the Banks or the Agent has invoked any other remedy or right it has available with respect to the Guaranteed Indebtedness. Each Guarantor further agrees to make full payment to the Agent and the Banks even if circumstances exist which otherwise constitute a legal or equitable discharge of such Guarantor as surety or guarantor.  The Guarantors’ liabilities and obligations hereunder shall be joint and several.

 

3.                                      Each Guarantor represents and warrants to the Agent and the Banks that: (i) no other agreement, representation or special condition exists between such Guarantor and the Agent and the Banks regarding the liability of such Guarantor hereunder, nor does any understanding exist between such Guarantor, the Agent and the Banks that the obligations of such Guarantor hereunder are or will be other than as set forth herein; and (ii) as of the date hereof, such Guarantor has no defense, offset or counterclaim whatsoever to any action or proceeding that may be brought to enforce this Guaranty.

 

4.                                      Each Guarantor waives and agrees not to enforce any of the rights of such Guarantor against any Borrower or any other Guarantor, including, but not limited to: (i) any and all rights at law, in equity or otherwise to reimbursement, exoneration, contribution, indemnification, set off or any other rights that could accrue to a surety against a principal, to a guarantor against a maker or obligor or to any accommodation party against the party accommodated, (ii) any right of such Guarantor to be subrogated in whole or in part to any right or claim with respect to any Guaranteed Indebtedness or any portion thereof to the Agent or the Banks which might otherwise arise from payment by any Guarantor to the Agent or the Banks on the account of the Guaranteed Indebtedness or any portion thereof; and (iii) any right of any Guarantor to require the marshalling of assets of any Borrower or any other Guarantor which might otherwise arise from payment by any Guarantor to the Agent or the Banks on account of the Guaranteed Indebtedness or any portion thereof.  If any amount shall be paid to any Guarantor in violation of the preceding sentence, such amount shall be deemed to have been paid to such Guarantor for the benefit of, and held in trust for the benefit of, the Agent and the Banks and shall forthwith be paid to the Agent to be credited and applied upon the Guaranteed Indebtedness, whether matured or unmatured, in accordance with the terms of the Credit Agreement.  Parent acknowledges that as a direct or indirect owner of each Borrower, it will receive direct and indirect benefits from the financing arrangements contemplated by the Credit Agreement and that the waivers set forth in this Section are knowingly made in contemplation of such benefits.  Each other Guarantor acknowledges that as either an owner of each Borrower or a Subsidiary of a Borrower and as a member of a consolidated group of companies, it will receive direct and indirect benefits from the financing arrangements contemplated by the Credit Agreement and that the waivers set forth in this Section are knowingly made in contemplation of such benefits.

 

5.                                      Each Guarantor waives (a) promptness and diligence by the Agent and the Banks with respect to its rights under the Credit Agreement or any of the other Loan Documents, including, but not limited to, this Guaranty; (b) any defense, right of set-off or other claim whatsoever (other than manifest error or payment in full and performance in full of all of the Obligations after any termination of the Credit Agreement in accordance with the terms of the Loan Documents) that any Borrower or any third party may or might have to the payment or performance of the Obligations; (c) any defense, right of set-off, claim or counterclaim

 

 

whatsoever (other than manifest error or payment and performance in full or part of all of the Obligations after any termination of the Credit Agreement in accordance with the terms of the Loan Documents), and any and all other rights, benefits, protections and other defenses that such Guarantor may have, now or at any time hereafter, to full payment or performance of the Guaranteed Indebtedness pursuant to the terms of this Guaranty; and (d) all other principles or provisions of law, if any, that conflict with the terms of this Guaranty, including, without limitation, the effect of any circumstances that may or might constitute a legal or equitable discharge of a guarantor or surety.

 

6.                                      Each Guarantor waives any and all notice with respect to: (i) acceptance by the Agent or any Bank of this Guaranty; (ii) the provisions of any note, instrument or agreement relating to the Guaranteed Indebtedness; and (iii) any default in connection with the Guaranteed Indebtedness.

 

7.                                      Each Guarantor waives any presentment, demand, notice of dishonor or nonpayment, protest, and notice of protest, notice of acceleration and notice of intent to accelerate and all other notices whatsoever in connection with the Guaranteed Indebtedness.

 

8.                                      Each Guarantor agrees that any of the Agent or the Banks, or both, may from time to time and as many times as the Agent, in its sole discretion, deems appropriate, do any of the following without notice to any Guarantor and without adversely affecting the validity or enforceability of this Guaranty: (i) release, surrender, exchange, compromise, or settle the Guaranteed Indebtedness or any portion thereof, (ii) change, renew, or waive the terms of the Guaranteed Indebtedness or any portion thereof; (iii) change, renew, or waive the terms, including without limitation, the rate of interest charged to any Borrower or any Guarantor, of any note, instrument, or agreement relating to the Guaranteed Indebtedness or any portion thereof; (iv) grant any extension or indulgence with respect to the payment to the Agent or the Banks of the Guaranteed Indebtedness or any portion thereof; (v) enter into any agreement of forbearance with respect to the Guaranteed Indebtedness or any portion thereof; (vi) release, surrender, exchange or compromise any security held by the Agent or the Banks for the Guaranteed Indebtedness; (vii) release any Person who is a guarantor or surety or who has agreed to purchase the Guaranteed Indebtedness or any portion thereof; and (viii) release, surrender, exchange or compromise any security or Lien held by the Agent or the Banks for the liabilities of any Person who is a guarantor or surety for the Guaranteed Indebtedness or any portion thereof.  Each Guarantor agrees that the Agent and the Banks may do any of the above as they deem necessary or advisable, in their sole discretion, without giving any notice to any Guarantor, and that each Guarantor will remain liable for full payment to the Agent and the Banks of the Guaranteed Indebtedness.

 

9.                                      Each Guarantor agrees to be jointly and severally bound by the terms of this Guaranty and to be jointly and severally liable under this Guaranty.  As a result of such liability, each Guarantor acknowledges that any of the Agent and the Banks may, in their sole discretion, elect to enforce this Guaranty for the total Guaranteed Indebtedness against any Guarantor without any duty or responsibility to pursue the other Guarantors and that such an election by the Agent or the Banks shall not be a defense to any action such Bank may elect to take against any Guarantor.

 

 

10.                               If any amount owing hereunder shall have become due and payable (by acceleration or otherwise), the Agent, the Banks and any branch, subsidiary or affiliate of any of the Agent or the Banks anywhere in the world shall each have the right, at any time and from time to time to the fullest extent permitted by Law, in addition to all other rights and remedies available to it, without prior notice to any Guarantor, to set-off against and to appropriate and apply to such due and payable amounts any debt owing to, and any other funds held in any manner for the account of any Guarantor by the Agent or the Banks or any such branch, subsidiary or affiliate including, without limitation, all funds in all deposit accounts (whether time or demand, general or special, provisionally credited or finally credited, or otherwise) now or hereafter maintained by any Guarantor with the Agent or the Banks or such branch, subsidiary or affiliate. Such right shall exist whether or not the Agent or the Banks shall have given notice or made any demand hereunder or under any of the Notes or Loan Documents, whether or not such debt owing to or funds held for the account of any Guarantor is or are matured or unmatured, and regardless of the existence or adequacy of any collateral, guaranty or any other security, right or remedy available to the Agent and the Banks.  Each Guarantor hereby consents to and confirms the foregoing arrangements, and confirms the Agent’s and the Banks’ rights and each such branch’s, subsidiary’s and affiliate’s rights of banker’s lien and set-off.

 

11.                               Each Guarantor recognizes and agrees that each Borrower, after the date hereof, may incur additional Indebtedness or other obligations, fees and expenses to the Agent or the Banks under the Credit Agreement, refinance existing Guaranteed Indebtedness or pay existing Guaranteed Indebtedness and subsequently incur additional Indebtedness to the Agent or the Banks under the Credit Agreement, and that in any such transaction, even if such transaction is not now contemplated, the Agent or the Banks will rely in any such case upon this Guaranty and the enforceability thereof against each Guarantor and that this Guaranty shall remain in full force and effect with respect to such future Indebtedness of each Borrower to the Agent or the Banks and such Indebtedness shall for all purposes constitute Guaranteed Indebtedness.

 

12.                               Each Guarantor further agrees that, if at any time all or any part of any payment, from whomever received, theretofore applied by Agent and the Banks to any of the Guaranteed Indebtedness is or must be rescinded or returned by the Agent and the Banks for any reason whatsoever including, without limitation, the insolvency, bankruptcy or reorganization of any Guarantor, such liability shall, for the purposes of this Guaranty, to the extent that such payment is or must be rescinded or returned, be deemed to have continued in existence, notwithstanding such application by the Agent and the Banks, and this Guaranty shall continue to be effective or be reinstated, as the case may be, as to such liabilities, all as though such application by the Agent or the Banks had not been made.

 

13.                               Each Guarantor agrees that no failure or delay on the part of the Agent and the Banks to exercise any of their rights, powers or privileges under this Guaranty shall be a waiver of such rights, powers or privileges or a waiver of any default, nor shall any single or partial exercise of any of the Agent’s or any Bank’s rights, powers or privileges preclude other or further exercise thereof or the exercise of any other right, power or privilege or be construed as a waiver of any default.  Each Guarantor further agrees that no waiver or modification of any rights of the Agent and the Banks under this Guaranty shall be effective unless in writing and signed by the Agent and the Banks.  Each Guarantor further agrees that each written waiver shall extend only

 

 

to the specific instance actually recited in such written waiver and shall not impair the rights of the Agent and the Banks in any other respect.

 

14.                               Each Guarantor unconditionally agrees to pay all costs and expenses, including reasonable attorney’s fees, incurred by the Agent and the Banks in enforcing this Guaranty against any Guarantor.

 

15.                               Each Guarantor agrees that this Guaranty and the rights and obligations of the parties hereto shall for all purposes be governed by and construed and enforced in accordance with the substantive law of the State of New York without giving effect to its principles of conflict of laws.

 

16.                               Each Guarantor recognizes that this Guaranty when executed constitutes a sealed instrument and as a result the instrument will be enforceable as such without regard to any statute of limitations which might otherwise be applicable and without any consideration.

 

17.                               Each Guarantor acknowledges that in addition to binding itself to this Guaranty, at the time of execution of this Guaranty, the Agent offered to such Guarantor a copy of this Guaranty in the form in which it was executed and that by acknowledging this fact such Guarantor may not later be able to claim that a copy of this Guaranty was not received by it.

 

18.                               Each Guarantor agrees that this Guaranty shall be binding upon each Guarantor and its successors and assigns; provided, however, that no Guarantor may assign or transfer any of its rights and obligations hereunder or any interest herein.  Each Guarantor further agrees that (i) this Guaranty is freely assignable and transferable by the Agent and the Banks in connection with any assignment or transfer of the Guaranteed Indebtedness and (ii) this Guaranty shall inure to the benefit of the Agent and the Banks and their respective successors and assigns.

 

19.                               Each Guarantor agrees that if any Guarantor fails to perform any covenant or agreement hereunder or if there occurs and exists an Event of Default under the Credit Agreement, all or any part of the Guaranteed Indebtedness may be declared to be forthwith due and payable and, in the case of an Event of Default described in Section 8.1.14 or Section 8.1.15 of the Credit Agreement, the Guaranteed Indebtedness shall be immediately due and payable, in any case without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived.

 

20.                               Each Guarantor agrees that the enumeration of the Agent’s and the Banks’ rights and remedies set forth in this Guaranty is not intended to be exhaustive and the exercise by the Agent or any Bank of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative and shall be in addition to any other right or remedy given hereunder or under any other agreement among the parties to the Loan Documents or which may now or hereafter exist at law or in equity or by suit or otherwise.

 

21.                               Each Guarantor agrees that all notices, statements, requests, demands and other communications under this Guaranty shall be given to each of the Guarantors at the addresses set forth in the Credit Agreement in the manner provided in Section 10.6 of the Credit Agreement.

 

 

22.                               Parent covenants and agrees that it will not create any subsidiary or permit any subsidiary of Parent to exist, except for ISS and GAC and that it shall own no assets other than its interests in the Borrowers.

 

23.                               (a)                                 Each Guarantor agrees that the provisions of this Guaranty are severable, and in an action or proceeding involving any state or federal bankruptcy, insolvency or other law affecting the rights of creditors generally:

 

(i)                                     if any clause or provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision in this Guaranty in any jurisdiction; and

 

(ii)                                  if this Guaranty would be held or determined to be void, invalid or unenforceable on account of the amount of a Guarantor’s aggregate liability under this Guaranty, then, notwithstanding any other provision of this Guaranty to the contrary, the aggregate amount of such liability shall, without any further action by the Agent or the Banks, such Guarantor or any other Person, be automatically limited and reduced to the highest amount which is valid and enforceable as determined in such action or proceeding, which (without limiting the generality of the foregoing) may be an amount which is not greater than the greater of:

 

(A)                               the fair consideration actually received by such Guarantor under the terms of and as a result of the Loan Documents, including, without limiting the generality of the foregoing, and to the extent not inconsistent with applicable federal and state laws affecting the enforceability of guarantees, distributions or advances made to such Guarantor with the proceeds of any credit extended under the Loan Documents in exchange for its guaranty of the Guaranteed Indebtedness, or

 

(B)                               the excess of (1) the amount of the fair saleable value of the assets of such Guarantor as of the date of this Guaranty as determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors as in effect on the date thereof over (2) the amount of all liabilities of such Guarantor as of the date of this Guaranty, also as determined on the basis of applicable federal and state laws governing the insolvency of debtors as in effect on the date thereof.

 

(b)                                 If the guaranty by any one or more Guarantors of the Guaranteed Indebtedness is held or determined to be void, invalid or unenforceable, in whole or in part, such holding or determination shall not impair or affect:

 

(i)                                     the validity and enforceability of the guaranty hereunder by any other Guarantor, which shall continue in full force and effect in accordance with its terms; or

 

(ii)                                  the validity and enforceability of any clause or provision not so held to be void, invalid or unenforceable.

 

24.                               EACH GUARANTOR HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY

 

 

WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS GUARANTY. EACH GUARANTOR (i) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE AGENT HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND EXECUTION AND DELIVERY HEREOF BY EACH GUARANTOR, AND (ii) ACKNOWLEDGES THAT THE ENTERING INTO OF THE CREDIT AGREEMENT BY THE AGENT AND THE BANKS HAS BEEN INDUCED BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS SET FORTH IN THIS SECTION.

 

25.                               Each Guarantor (i) hereby irrevocably submits to the nonexclusive jurisdiction of a state or federal court of competent jurisdiction located in New York, New York (hereinafter referred to as the “New York Courts”) for purposes of any suit, action or other proceeding which relates to this Guaranty or any other Loan Document, (ii) to the extent permitted by applicable Law, hereby waives and agrees not to assert by way of motion, as a defense or otherwise in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of the New York Courts; that such suit, action or proceeding is brought in an inconvenient forum; that the venue of such suit, action or proceeding is improper; or that this Guaranty or any Loan Document may not be enforced in or by the New York Courts, (iii) hereby agrees not to seek, and hereby waives, any collateral review by any other court, which may be called upon to enforce the judgment of any of the New York Courts, of the merits of any such suit, action or proceeding or the jurisdiction of the New York Courts, and (iv) waives personal service of any and all process upon it and consents that all such service of process by made by certified or registered mail addressed as described in Section 21 hereof and that service so made shall be deemed to be completed upon actual receipt thereof. Nothing herein shall limit the Agent’s or any Bank’s right to bring any suit, action or other proceeding against any Guarantor or any Guarantor’s assets or to serve process on any Guarantor by any means authorized by Law.

 

26.                               This Guaranty may be executed in counterparts, all of which counterparts when taken together shall constitute one and the same instrument, and any signature of a Guarantor delivered by electronic transmission shall have the same effect as the delivery of an original signature of such Guarantor.

 

[REMAINDER OF PAGE INTENTIONALLY BLANK; SIGNATURE FOLLOWS]

 

 

IN WITNESS WHEREOF, each Guarantor intending to be legally bound, has executed this Guaranty as of the date first above written with the intention that this Guaranty shall constitute a sealed instrument.

 

	
 
    	
INTERFACE   SECURITY SYSTEMS 
   HOLDINGS, INC., a Delaware corporation
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Kenneth Obermeyer
    
	
 
    	
 
    	
Kenneth Obermeyer, Chief Financial Officer
    

 

Signature Page

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Guaranty and Suretyship AgreementExhibit 10.9

 

AMENDED AND RESTATED

EMPLOYMENT AND NON-COMPETITION AGREEMENT

 

This AMENDED AND RESTATED EMPLOYMENT AND NON-COMPETITION AGREEMENT (this “Agreement”), dated as of April 30, 2010, is between Interface Security Systems, L.L.C., a Louisiana limited liability company (the “Employer”), and Michael T. Shaw (the “Employee”).

 

WHEREAS, Employee and the Employer are parties to that certain Employment and Non-Competition Agreement dated as of December 13, 2001 (the “Employment Contract”); and

 

WHEREAS, Employee and the Employer desire to amend and restate the Employment Contract in its entirety.

 

NOW, THEREFORE, it is hereby agreed as follows:

 

Section 1.                                           AMENDED AND RESTATED EMPLOYMENT CONTRACT.  This Agreement amends and restates in its entirety the Employment Contract.

 

Section 2.                                           EMPLOYMENT AND DUTIES.  The Employer hereby employs the Employee, and the Employee hereby accepts employment, upon the terms and subject to the conditions hereinafter set forth.  The Employee shall be employed as the Chief Executive Officer of the Employer and each of its subsidiaries.  In such capacity, the Employee shall have the responsibilities and duties customary for such offices and such other executive responsibilities and duties as are assigned by the Board of Directors (the “Board”) of Interface Security Systems Holdings, Inc. (“Holdings”), which are consistent with the Employee’s position.  The Employee agrees to devote his full working time and efforts to the performance of his duties to the Employer and each of its subsidiaries.

 

Section 3.                                           TERM.  The initial term of employment of the Employee under the Employment Contract commenced on December 13, 2001 (the “Commencement Date”) and shall continue until December 31, 2012 (the “Initial Term”), unless earlier terminated pursuant to Section 6, and shall be renewed automatically for one additional one (1) year term thereafter unless terminated by either party by written notice to the other given at least ninety (90) days prior to the expiration of the then current term.

 

Section 4.                                           COMPENSATION AND BENEFITS.  Until the termination of the Employee’s employment hereunder, in consideration for the services of the Employee hereunder, the Employer shall compensate the Employee as follows:

 

(a)                                 Base Salary.  The Employer shall pay the Employee, in accordance with the Employer’s then current payroll practices, a base salary (the “Base Salary”) at an annual rate of $350,000.  The Board may in its sole discretion increase Employee’s Base Salary, but in no event will Base Salary be decreased below $350,000.

 

(b)                                 Bonus.  The Employee shall be eligible to receive from the Employer, for each of the fiscal years of the Employer (each, a “Fiscal Year”) during the term of this Agreement, hereto bonus in an amount determined by the Board in its discretion (the “Bonus”).

 

 

(c)                                  Vacation.  The Employee shall be entitled to four (4) weeks vacation each calendar year.  Any vacation shall be taken at the reasonable and mutual convenience of the Employer and the Employee.  Accrued vacation not taken in any calendar year will not be carried forward or used in any subsequent calendar year.

 

(d)                                 Insurance; Other Benefits.  Employee shall be entitled to participate in or receive benefits under all accident, disability, life and health insurance plans, all pension, retirement, deferred compensation and stock incentive plans and all other employee benefit plans maintained by Employer and approved by the Board for participation by senior executives of Employer.

 

(e)                                  Fringe Benefits.  Employee shall be entitled to receive a company car allowance equal to $2,500 per month.

 

Section 5.                                           EXPENSES.  The Employer shall reimburse the Employee for all reasonable expenses of types authorized by the Employer and incurred by the Employee in the performance of his duties hereunder.  The Employee shall comply with such budget limitations and approval and reporting requirements with respect to expenses as the Employer may establish from time to time.

 

Section 6.                                           TERMINATION.  The Employee’s employment hereunder shall commence on the Commencement Date and continue until the expiration of the Initial Term, and any extension of such term pursuant to Section 3 above, except that the employment of the Employee hereunder shall earlier terminate:

 

(a)                                 Death.  Upon the death of the Employee during the term of his employment hereunder.

 

(b)                                 Disability.  At the option of the Employer, in the event of the Employee’s Disability (as defined below), upon thirty (30) days’ written notice from the Employer.  For purposes hereof, the Employee shall be deemed to have a “Disability” if an independent medical doctor (selected by the Employer’s health or disability insurer) certifies that the Employee has for three (3) months, consecutive or non-consecutive, in any twelve (12) month period been disabled in a manner which would constitute “disability” for purposes of the disability insurance policy provided by the Employer pursuant to Section 4(f).  Any refusal by the Employee to submit to a medical examination for the purpose of certifying Disability under this Section 6(b) shall be deemed to constitute conclusive evidence of the Employee’s Disability.

 

(c)                                  For Cause.  For “Cause” immediately upon written notice by the Employer to the Employee.  For purposes of this Agreement, a termination shall be for Cause if the Board shall determine that any one or more of the following has occurred:

 

(i)                                     the Employee shall have committed an act of fraud, embezzlement, misappropriation of funds or material property or breach of fiduciary duty against the Employer, including, but not limited to, the offer, payment, solicitation or acceptance of any unlawful bribe or kickback with respect to the Employer’s business; or

 

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(ii)                                  the Employee shall have been convicted by a court of competent jurisdiction of, or pleaded guilty or nolo contendere to, any felony; or

 

(iii)                               the Employee shall have committed a breach of any of the covenants, terms and provisions of Section 7, 8 or 9 hereof; or

 

(iv)                              the Employee shall have breached any one or more of the provisions of (A) this Agreement (excluding Section 7, 8 and 9 hereof) or (B) the Stockholder Agreement dated as of the date hereof among Holdings and its stockholders, and, in each case, such breach shall have continued for a period of twenty (20) days after written notice to the Employee specifying such breach in reasonable detail; or

 

(v)                                 the Employee shall have refused, after explicit written notice, to obey any lawful resolution of or direction by the Board which is consistent with his duties hereunder; or

 

(vi)                              the Employee shall be chronically absent from work (excluding vacation, illnesses or leaves of absence approved by the Board), and such chronic absence shall continue after explicit written notice from the Board.

 

(d)                                 Resignation or Termination Without Cause.  At any time, upon written notice by either the Employer or the Employee to the other party hereto.

 

(e)                                  For Good Reason.  At any time, by Employee for “Good Reason”.  For purposes of this Agreement, “Good Reason” shall mean that the Employee has complied with the “Good Reason Process” (as hereinafter defined) following the occurrence of any of the following events (referred to individually as a “Good Reason Event” and collectively as “Good Reason Events”):

 

(i)                                     any substantial adverse change, not consented to by Employee in a writing signed by him, in the nature or scope of Employee’s responsibilities, authorities, power, functions or duties contemplated by this Agreement,

 

(ii)                                  any removal, during the term of this Agreement, of Employee from, or any failure by management to nominate Employee to, or if nominated, any failure by the stockholders of Holdings to reelect Employee to, the Board;

 

(iii)                               an involuntary reduction in Employee’s Base Salary;

 

(iv)                              a breach by Employer of any of its other material obligations under this Agreement and the failure of Employer to cure such breach within thirty (30) days after written notice thereof by Employee; or

 

(v)                                 the relocation of Employer’s primary offices at which Employee is principally employed to a location more than sixty (60) miles from Employee’s current offices, or the requirement by Employer for Employee to be based anywhere other than Employer’s primary offices at such current location (or more than sixty (60) miles there from) on an extended basis, except for travel on Employer’s business to an extent substantially consistent with Employee’s current business travel obligations.

 

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“Good Reason Process” shall mean that (i) one or more Good Reason Events has occurred; (ii) Employee notifies Employer in writing of the occurrence of such Good Reason Events; (iii) Employee cooperates in good faith with Employer’s efforts, for a period not more than thirty (30) days following such notice, to permit Employer to cure such Good Reason Events or to modify Employee’s employment situation in a manner acceptable to Employee and Employer; and (iv) notwithstanding such efforts, one or more of such Good Reason Events specified continues to exist for a period of more than thirty (30) days following such notice and has not been cured or otherwise modified in a manner acceptable to Employee.

 

(f)                                   Rights and Remedies on Termination.

 

(i)                                     If the Employee’s employment hereunder is terminated pursuant to Section 6(a), Section 6(b), Section 6(c) or by Employee pursuant to Section 6(d), then the Employee (or his estate, as applicable) shall be entitled to receive his Base Salary through the date of termination or expiration.

 

(ii)                                  If the Employee’s employment hereunder is terminated by the Employer pursuant to Section 3, Section 6(d) (other than for resignation by the Employee) or by the Employee pursuant to Section 6(e), then the Employee shall be entitled to continue to receive payment, in accordance with the Employer’s then current payroll practices, of the Employee’s Base Salary, Fringe Benefits, Insurance and other benefits in effect at the time of such termination, for one year (the “Severance Period”), provided, if Employee is employed or engaged as a consultant, advisor or similar position (“Subsequent Employment”) during the Severance Period, the amounts due to Employee under this Section 6(f)(ii) will be reduced by the amounts earned by Employee in his Subsequent Employment.

 

(iii)                               If the Employee’s employment hereunder is terminated pursuant to Section 6(a), Section 6(b), Section 6(d), or Section 6(e), then the Employee shall be entitled to payment for any accrued vacation as of the date of termination.

 

(iv)                              Except as otherwise set forth in this Section 6(f), the Employee shall not be entitled to any severance, bonus or other compensation after termination other than payment of any portion of his Base Salary through the date of his termination and any expense reimbursements under Section 5 hereof for expenses incurred in the performance of his duties prior to termination; provided that if Employee’s employment is terminated due to Employee’s death or Disability after the end of a Fiscal Year but prior to the payment of any Bonus that has been earned for such Fiscal Year, the Employee, his successors or his heirs, as applicable, shall be entitled to the payment of any such Bonus for such Fiscal Year.

 

Section 7.                                           INVENTIONS: ASSIGNMENT.  All rights to discoveries, inventions, improvements and innovations (including all data and records pertaining thereto) related to the business of the Employer or any of Holdings or any of its subsidiaries (collectively, the “Interface Companies”), whether or not patentable, copyrightable, registrable as a trademark, or reduced to writing, that the Employee may discover, invent or originate during the term of his employment hereunder, and for a period of six (6) months thereafter, either alone or with others

 

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and whether or not during working hours or by the use of the facilities of any of the Interface Companies (“Inventions”), shall be the exclusive property of the Employer.  The Employee shall promptly disclose all Inventions to the Employer, shall execute at the request of the Employer any assignments or other documents the Employer may deem necessary to protect or perfect its rights therein, and shall assist the Employer, at the Employer’s expense, in obtaining, defending and enforcing the Employer’s rights therein.  The Employee hereby appoints the Employer as his attorney-in-fact to execute on his behalf any assignments or other documents deemed necessary by the Employer to protect or perfect its rights to any Inventions.

 

Section 8.                                           CONFIDENTIAL INFORMATION.  The Employee recognizes and acknowledges that certain assets of the Employer and the other Interface Companies, including, without limitation, information regarding customers, pricing policies, methods of operation, proprietary production processes, proprietary computer programs, sales, products, profits, costs, markets, key personnel, formulae, product applications, technical processes, and trade secrets (hereinafter called “Confidential Information”) are valuable, special, and unique assets of the Interface Companies and their affiliates.  The Employee shall not, during or after his term of employment, disclose any or any part of the Confidential Information to any person, firm, corporation, association, or any other entity for any reason or purpose whatsoever, directly or indirectly, except as may be required pursuant to his employment hereunder; provided, that Confidential Information shall in no event include (a) information which was generally available to the public at the time of disclosure by the Employee or (b) information which becomes publicly available other than as a consequence of the breach by the Employee of his confidentiality obligations hereunder.  In the event of the termination of his employment, whether voluntary or involuntary and whether by the Employer or the Employee, the Employee shall deliver to the Employer all documents and data pertaining to the Confidential Information and shall not take with him any documents or data of any kind or any reproductions (in whole or in part) or extracts of any items relating to the Confidential Information.  Nothing contained within this Section 8 shall prohibit Employee from disclosing Confidential Information if such disclosure is required pursuant to any final and non appealable order, judgment or decree of any governmental authority.  Nothing contained within this Section 8 shall prohibit Employee from disclosing Confidential Information if such disclosure is required by law, governmental process or valid legal process.  In the event that the Employee is legally compelled to disclose any of the Confidential Information, he shall provide the Employer with prompt written notice so that the Employer, at its sole cost and expense, may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this Agreement.  In the event that such protective order or other remedy is not obtained, or that the Employer waives compliance with the provisions of this Agreement, the Employee shall furnish only that portion of the Confidential Information that he is advised by counsel is legally required.

 

Section 9.                                           NON-COMPETITION.  During the term of the Employee’s employment hereunder and for the Designated Period (as defined below) after termination of the Employee’s employment hereunder, the Employee will not (a) anywhere within the Designated Territory (as defined below), engage, directly or indirectly, alone or as a shareholder (other than as a holder of capital stock of Holdings or its successors or assigns, or as a holder of less than two percent (2%) of the common stock of any publicly traded corporation), partner, officer, director, employee, consultant or advisor, or otherwise in any way participate in or become associated with, any other business organization that is engaged or becomes engaged in the business of installing,

 

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selling, servicing or monitoring residential or commercial security systems (the “Designated Industry”), (b) divert to any competitor of any Interface Company any customer of any Interface Company, or (c) solicit or encourage any officer, key employee or consultant of any Interface Company to leave its employ for alternative employment or hire or offer employment to, any person to whom any Company has offered employment.  For purposes hereof, the term “Designated Period” shall mean one year, the term “Designated Territory” shall mean any state in which Employer and its subsidiaries have in the aggregate at least 500 customers at the time of Employee’s termination and the term “Interface Company” shall mean any affiliate or subsidiary of Holdings.  The Employee acknowledges that the provisions of this Section 9 are essential to protect the business and goodwill of the Employer.  The Employee will continue to be bound by the provisions of this Section 9 until their expiration and shall not be entitled to any compensation from the Employer with respect thereto except as provided above.  If at any time the provisions of this Section 9 shall be determined to be invalid or unenforceable by reason of being vague or unreasonable as to area, duration or scope of activity, this Section 9 shall be considered divisible and shall become and be immediately amended to only such area, duration and scope of activity as shall be determined to be reasonable and enforceable by the court or other body having jurisdiction over the matter; and the Employee agrees that this Section 9 as so amended shall be valid and binding as though any invalid or unenforceable provision had not been included herein.

 

Section 10.                                    GENERAL.

 

(a)                                 Notices.  All notices and other communications hereunder shall be in writing or by written telecommunication, and shall be deemed to have been duly given if delivered personally or if mailed by certified mail, return receipt requested, postage prepaid or sent by written telecommunication or telecopy, to the relevant address set forth below, or to such other address as the recipient of such notice or communication shall have specified to the other party hereto in accordance with this Section 10(a):

 

If to the Employer, to:

 

Interface Security Systems, L.L.C.

c/o SunTx Interface, L.P.

5420 LBJ Freeway, Suite 1000

Dallas, Texas 75240

Attention:  Craig J. Jennings

Fax:  (972) 663-8902

 

With a copy to:

 

Terry Schpok

Akin Gump Strauss Hauer & Feld, LLP

1700 Pacific Avenue, Suite 4100

Dallas, Texas 75201

Fax:  (212) 969-4343

 

If to the Employee, to:

 

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Michael T. Shaw

16508 Kings Pointe Lake Lane

Clarkson Valley, Missouri 63005

 

With a copy to:

 

S. Bryan Lawrence, III

Buchanan Ingersoll Professional Corporation

One Oxford Centre

301 Grant Street, 20th Floor

Pittsburgh, Pennsylvania 15219

Fax:  (412) 562-1041

 

(b)                                 Equitable Remedies.  Each of the parties hereto acknowledges and agrees that upon any breach by the Employee of his obligations under Sections 7, 8 and 9 hereof, the Employer will have no adequate remedy at law, and accordingly will be entitled to specific performance and other appropriate injunctive and equitable relief.

 

(c)                                  Severability.  If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired.

 

(d)                                 Waivers.  No delay or omission by either party hereto in exercising any right, power or privilege hereunder shall impair such right, power or privilege, nor shall any single or partial exercise of any such right, power or privilege preclude any further exercise thereof or the exercise of any other right, power or privilege.

 

(e)                                  No Mitigation.  In no event shall the Employee be obligated to seek other employment or to take any other action by way of mitigation of any amounts payable to the Employee under this Agreement, and, other than as set forth in Section 6(f)(ii), no such amounts shall be reduced if Employee does not seek or obtain other employment.

 

(f)                                   Counterparts.  This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

(g)                                  Arbitration, Other Disputes.  In the event of any dispute or controversy arising under or in connection with this Agreement, the parties shall first promptly try in good faith to settle such dispute or controversy by mediation under the applicable rules of the American Arbitration Association before resorting to arbitration.  In the event such dispute or controversy remains unresolved in whole or in part for a period of thirty (30) days after it arises, the parties will settle any remaining dispute or controversy exclusively by arbitration in Missouri in accordance with the rules of the American Arbitration Association then in effect.  Judgment may be entered on the arbitrator’s award in any court having jurisdiction.  All administrative fees and arbitration fees shall be split equally by Employer and Employee.  Notwithstanding the above, Employer shall be entitled to seek a restraining order or injunction in any competent jurisdiction to prevent any continuation of any violation of any of Sections 7, 8 or 9 hereof.  The

 

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substantially prevailing party may recover attorney’s fees in any dispute or controversy arising under or in connection with this Agreement.

 

(h)                                 Assigns.  This Agreement shall be binding upon and inure to the benefit of the heirs and successors of each of the parties hereto, including any entity which acquires substantially all of the assets or stock of the Employer.

 

(i)                                     Entire Agreement.  This Agreement contains the entire understanding of the parties, supersedes all prior agreements and understandings relating to the subject matter hereof, including, without limitation, any existing Employment Agreement between the parties hereto, and shall not be amended except by a written instrument hereafter signed by each of the parties hereto.

 

(j)                                    Governing Law.  This Agreement and the performance hereof shall be construed and governed in accordance with the laws of the State of Missouri.

 

Signature Page Follows

 

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IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto have caused this Agreement to be duly executed as of the day and the year first above written.

 

 

	
 
    	
/s/ Michael T. Shaw
    
	
 
    	
Michael   T. Shaw
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
INTERFACE   SECURITY SYSTEMS, L.L.C.
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Kenneth Obermeyer
    
	
 
    	
Name:
    	
Kenneth   Obermeyer
    
	
 
    	
Title:
    	
CFO
    

 

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