UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 1 )*
GUARDIAN INTERNATIONAL, INC.
(formerly Everest Securities Systems Corporation,
formerly Everest Funding Corporation,
formerly Burningham Enterprises, Inc.)
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(Name of Issuer)
CLASS A COMMON STOCK, PAR VALUE $.001 PER SHARE
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(Title of Class of Securities)
401376 10 8
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(CUSIP Number)
Richard Ginsburg
President and Chief Executive Officer
Guardian International, Inc.
3880 North 28th Terrace
Hollywood, Florida 33020-1118
(954)926-5200
with a copy to:
Harvey Goldman, Esq.
Steel Hector & Davis LLP
200 South Biscayne Boulevard
41st Floor
Miami, Florida 33131-2398
(305)577-7011
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(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
September 22, 1997 (as to Harold Ginsburg)
October 21, 1997 (as to Sheilah Ginsburg,
Richard Ginsburg and Rhonda Ginsburg)
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
<PAGE>
SCHEDULE 13D
CUSIP NO. 401376 10 8
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1. Name of reporting person
S.S. or I.R.S. Identification No. of above person
Harold Ginsburg
S.S. Identification #: Not Required
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2. Check the appropriate box if a member of a group*
(a) [X]
(b) [ ]
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3. SEC Use Only
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4. Source of Funds*
SC
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5. Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(d) or 2(E) [ ]
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6. Citizenship or Place of Organization
Citizenship, United States of America
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Number of 7. Sole Voting Power
Shares 1,403,533
Beneficially 8. Shared Voting Power
Owned By -0-
Each 9. Sole Dispositive Power
Reporting 1,403,533
Person With 10. Shared Dispositive Power
-0-
11. Aggregate Amount Beneficially Owned by Each Reporting Person
1,403,533
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12. Check Box if the Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
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13. Percent of Class Represented by Amount in Row (11)
15.60%
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14. Type of Reporting Person*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
CUSIP NO. 401376 10 8
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1. Name of reporting person
S.S. or I.R.S. Identification No. of above person
Sheilah Ginsburg
S.S. Identification #: Not Required
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2. Check the appropriate box if a member of a group*
(a) [X]
(b) [ ]
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3. SEC Use Only
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4. Source of Funds*
SC
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5. Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(d) or 2(E) [ ]
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6. Citizenship or Place of Organization
Citizenship, United States of America
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Number of 7. Sole Voting Power
Shares 903,533
Beneficially 8. Shared Voting Power
Owned By -0-
Each 9. Sole Dispositive Power
Reporting 903,533
Person With 10. Shared Dispositive Power
-0-
11. Aggregate Amount Beneficially Owned by Each Reporting Person
903,533
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12. Check Box if the Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
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13. Percent of Class Represented by Amount in Row (11)
10.04%
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14. Type of Reporting Person*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
CUSIP NO. 401376 10 8
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1. Name of reporting person
S.S. or I.R.S. Identification No. of above person
Richard Ginsburg
S.S. Identification #: Not Required
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2. Check the appropriate box if a member of a group*
(a) [X]
(b) [ ]
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3. SEC Use Only
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4. Source of Funds*
SC
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5. Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(d) or 2(E) [ ]
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6. Citizenship or Place of Organization
Citizenship, United States of America
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Number of 7. Sole Voting Power
Shares 629,246
Beneficially 8. Shared Voting Power
Owned By -0-
Each 9. Sole Dispositive Power
Reporting 629,246
Person With 10. Shared Dispositive Power
-0-
11. Aggregate Amount Beneficially Owned by Each Reporting Person
629,246
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12. Check Box if the Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
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13. Percent of Class Represented by Amount in Row (11)
6.99%
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14. Type of Reporting Person*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
CUSIP NO. 401376 10 8
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1. Name of reporting person
S.S. or I.R.S. Identification No. of above person
Rhonda Ginsburg
S.S. Identification #: Not Required
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2. Check the appropriate box if a member of a group*
(a) [X]
(b) [ ]
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3. SEC Use Only
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4. Source of Funds*
SC
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5. Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(d) or 2(E) [ ]
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6. Citizenship or Place of Organization
Citizenship, United States of America
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Number of 7. Sole Voting Power
Shares 629,245
Beneficially 8. Shared Voting Power
Owned By -0-
Each 9. Sole Dispositive Power
Reporting 629,245
Person With 10. Shared Dispositive Power
-0-
11. Aggregate Amount Beneficially Owned by Each Reporting Person
629,245
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12. Check Box if the Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
- ------------------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11)
6.99%
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14. Type of Reporting Person*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
This document dated October 27, 1997, is filed pursuant to Section 13D of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), by Harold
Ginsburg, Sheilah Ginsburg, Richard Ginsburg and Rhonda Ginsburg (collectively,
the "Reporting Persons") as Amendment No. 1 to each of the individual Statements
on Schedule 13D for Sheilah Ginsburg, Richard Ginsburg and Rhonda Ginsburg filed
with the Securities and Exchange Commission as of September 18, 1996 and as
Amendment No. 1 to the individual Statement on Schedule 13D for Harold Ginsburg
filed as of September 27, 1996 (collectively, the "Statements"). This document
relates to the Class A Voting Common Stock, par value $.001 per share (the
"Class A Common Stock"), of Guardian International, Inc., a Nevada corporation
(the "Company"). This Amendment No. 1 is being jointly filed by the Reporting
Persons pursuant to the Joint Filing Agreement filed as Exhibit 2 to this
Amendment No. 1. Unless otherwise noted herein, the items of the Statements not
being amended and supplemented by this Amendment No. 1 should be read together
and be deemed collectively to provide current information concerning the
Reporting Persons as a group pursuant to Section 13(d)(3) of the Exchange Act.
Item 3 of the Statement filed by Harold Ginsburg as of September 27, 1996
is hereby amended and supplemented as follows:
Item 3. Source and Amount of Funds.
On September 22, 1997 Harold Ginsburg received 500,000 additional shares of
Class A Common Stock from ITI pursuant to the Merger Agreement.
Item 4 of each of the Statements is hereby amended and supplemented as
follows:
Item 4. Purpose of the Transaction.
(d) Each Reporting Person (other than Rhonda Ginsburg) is currently a
member of the Board of Directors of the Company (the "Board"). Pursuant to the
terms of a Stock Subscription Agreement by and between the Company and Westar
Capital, Inc., a Kansas corporation ("Westar"), dated as of October 14, 1997
(the "Subscription Agreement"), and the other agreements contemplated thereby,
the size of the Board was increased to eight members. In connection with the
Subscription Agreement, the Reporting Persons also entered into a Stockholders
Agreement containing provisions regarding Board representation, the details of
which are described in Item 6 below.
(e) Pursuant to the Certificate of Amendment to the Company's Articles of
Incorporation (the "Articles") to be filed with the Secretary of State of the
State of Nevada on or about November 23, 1997 (the "Certificate of Amendment"),
the Articles will be amended to authorize 30,000,000 shares of blank-check
preferred stock.
Pursuant to the Certificate of Amendment, the Articles will also be
amended to increase the number of authorized shares of Class B Nonvoting Stock,
par value $.001 per share, of the Company to 1,000,000 shares.
Except as disclosed herein, no Reporting Person has any present intention
to effect any of the transactions enumerated in clauses (b), (c) or (f) through
(j) of Item 4 of Schedule 13D. Actions that may result from the type of changes
set forth in clauses (d) and (e) of Item 4 of Schedule 13D are further described
in Item 6 below.
Item 5 of each of the Statements is hereby amended and supplemented as
follows:
Item 5. Interest in Securities of the Issuer.
As of the date hereof, Harold Ginsburg has sole voting and dispositive
power over 1,403,533 shares of Class A Common Stock, which represents 15.60% of
the 8,996,804 shares of Class A Common Stock issued and outstanding. As of the
date
<PAGE>
hereof, Sheilah Ginsburg has sole voting and dispositive power over 903,533
shares of Class A Common Stock, which represents 10.04% of the 8,996,804 shares
of Class A Common Stock issued and outstanding. As of the date hereof, Richard
Ginsburg has sole voting and dispositive power over 629,246 shares, which
represents 6.99% of the 8,996,804 shares of Class A Common Stock issued and
outstanding. As of the date hereof, Rhonda Ginsburg has sole voting and
dispositive power over 629,245 shares of the 8,996,804 shares of Class A Common
Stock issued and outstanding. The 8,996,804 shares represent the sum of (i)
6,496,804 shares of Common Stock outstanding as disclosed in the Form 10-QSB of
the Company for the quarter ended June 30, 1997, as amended, which is the most
recently available filing by the Company with the Securities and Exchange
Commission, and (ii) 2,500,000 shares of Class A Common Stock newly issued on
October 21, 1997 pursuant to the terms of the Subscription Agreement.
Other than as described herein, no Reporting Person has engaged in any
transaction in the Class A Common Stock of the Company within sixty days of the
date hereof.
Item 6 of each of the Statements is hereby amended and supplemented as
follows:
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer.
Pursuant to the Subscription Agreement, Westar (i) purchased 2,500,000
shares (the "Common Shares") of Class A Common Stock at a purchase price of
$1.50 per share for a total investment of $3,750,000, and (ii) agreed to
purchase, on the date on which the Certificate of Amendment authorizing the
Preferred Stock is filed with the Nevada Secretary of State, 1,875,000 shares
(the "Preferred Shares") of the first series of Preferred Stock, designated as
the "Series A 9 3/4% Convertible Cumulative Preferred Stock, par value $.001 per
share," at a purchase price of $2.00 per share for a total investment of
$3,750,000. The Common Shares and Preferred Shares will represent 37.43% of the
outstanding equity securities of the Company on a fully diluted basis
(12,463,746 shares).
The foregoing description of the Subscription Agreement is a summary of
certain of its provisions and reference is made to a copy of the Subscription
Agreement, which is attached hereto as Exhibit 3 and incorporated herein by
reference for all of its terms and conditions.
In connection with the Subscription Agreement, the Reporting Persons,
Westar (collectively, the "Stockholders") and the Company executed a
Stockholders Agreement, dated as of October 21, 1997 (the "Stockholders
Agreement") for the purposes, among others, of assuring continuity in the
management and ownership of the Company and limiting the manner and terms by
which the shares held by the Stockholders may be transferred. Under the terms of
the Stockholders Agreement, Westar will limit its ownership of Common Stock to
45% of the outstanding shares of the Class A Common Stock on a fully diluted
basis for a period of five years from the purchase of the Common Shares (October
21, 1997) unless Westar receives the Company's permission to exceed such limit.
Under the terms of the Stockholders Agreement, the Stockholders also agreed
that prior to the conversion of the Preferred Shares to an equal number of
shares of Class A Common Stock (the "Conversion"), the Board of Directors of the
Company (the "Board") will consist of eight members, four nominees of the
Reporting Persons, two nominees of Westar and two independent directors
nominated mutually by the Reporting Persons and Westar (the "Independent
Directors"), and after the Conversion, the size of the Board will increase from
eight to nine members, consisting of three nominees of the Reporting Persons,
three nominees of Westar and three Independent Directors.
Pursuant to the terms of the Stockholders Agreement, Westar has the
following rights:
<PAGE>
(a) Preemptive rights to purchase its pro rata share of any equity
offerings of the Company on the same terms, but only if such offerings
(individually or in the aggregate) would reduce Westar's percentage ownership of
the Company's outstanding equity securities to less than 35%, on a fully diluted
basis;
(b) Tag-along rights (on a pro rata basis) if the Reporting Persons effect
a sale or other transfer of more than half of their Common Stock holdings; and
(c) A right to match any third-party cash offer for the purchase of 100% of
the Common Stock or substantially all of the assets of the Company for a period
of 30 days.
Pursuant to the terms of the Stockholders Agreement, without the prior
approval of Westar, the Company shall not (a) so long as shares of Series A
Preferred Stock are outstanding, (i) issue securities on a parity with or senior
to the Series A Preferred Stock as to dividends and liquidation rights or (ii)
authorize or make any dividends or other distributions to the holders of Common
Stock, and (b) so long as Westar or its affiliates own or control at least 15%
of the outstanding equity securities of the Company, issue any equity securities
senior to the Common Stock of the Company. In addition, if an independent
committee of the Board recommends the acceptance of a bona fide third-party cash
offer for the purchase of 100% of the Common Stock or substantially all of the
assets of the Company, Westar agrees to vote in favor of the offer or to
purchase the Common Stock not already owned by Westar on substantially the same
terms and conditions of such offer.
The terms of the Stockholders Agreement also prevent the Reporting Persons
and Westar (each party designated either the "Transferring Stockholder" or the
"Other Stockholder," as the case may be) from effecting a private sale of its
stock except in accordance with the following protocol: For 15 days, the
Transferring Stockholder will negotiate for the sale of the stock exclusively
with the Company, represented by an independent committee of the Board. If the
Transferring Stockholder is unable to reach satisfactory terms for the sale of
the stock with the Company, the Transferring Stockholder will negotiate
exclusively with the Other Stockholder for an additional 30 days to sell the
stock for a price not less than 105% of the price offered by the Company. If the
Transferring Stockholder and the Other Stockholder are unable to agree to terms
for the sale, the Transferring Stockholder is then free for an additional 120
days to sell to any third party for a price not less than 110% of the price
offered by the Other Stockholder; provided, however, that Westar may transfer
its equity securities at any time to an entity in which Westar, its parent or
subsidiaries own or control 50% or more of the outstanding voting securities.
The Common Shares purchased by Westar (including Class A Common Stock
issued upon conversion of the Preferred Shares and Dividend Preferred Shares)
are not registered under the Securities Act of 1933, as amended. The Company and
Westar therefore entered into a Registration Rights Agreement granting Westar
three demand registrations and unlimited piggy-back registration rights with
respect to the Common Shares (including Class A Common Stock issued upon
conversion of the Preferred Shares).
The foregoing descriptions of the Stockholders Agreement and Registration
Rights Agreement are a summary of certain of their provisions and reference is
made to a copy of such Agreements which are attached hereto as Exhibits 4 and 5,
respectively.
Item 7 of each of the Statements is hereby amended and supplemented as
follows:
Item 7. Material to be Filed as Exhibits.
Exhibit 2: Joint Filing Agreement
<PAGE>
Exhibit 3: Stock Subscription Agreement
Exhibit 4: Stockholders Agreement
Exhibit 5: Registration Rights Agreement
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: October 27, 1997 /s/ HAROLD GINSBURG
-------------------
Harold Ginsburg
Dated: October 27, 1997 /s/ SHEILAH GINSBURG
--------------------
Sheilah Ginsburg
Dated: October 27, 1997 /s/ RICHARD GINSBURG
--------------------
Richard Ginsburg
Dated: October 27, 1997 /s/ RHONDA GINSBURG
-------------------
Rhonda Ginsburg
<PAGE>
Exhibit Index
EXHIBIT NO. TITLE
- ----------- -----
Exhibit 2: Joint Filing Agreement
Exhibit 3: Stock Subscription Agreement
Exhibit 4: Stockholders Agreement
Exhibit 5: Registration Rights Agreement
EXHIBIT 2
JOINT FILING AGREEMENT
Be it known that the undersigned hereby agree to file jointly a Schedule
13D, including amendments thereto, reporting the beneficial ownership of the
Class A Common Stock, par value $.001 per share, of Guardian International, Inc.
Dated: October 27, 1997 /s/ HAROLD GINSBURG
-------------------
Harold Ginsburg
Dated: October 27, 1997 /s/ SHEILAH GINSBURG
--------------------
Sheilah Ginsburg
Dated: October 27, 1997 /s/ RICHARD GINSBURG
--------------------
Richard Ginsburg
Dated: October 27, 1997 /s/ RHONDA GINSBURG
-------------------
Rhonda Ginsburg
EXHIBIT 3
STOCK SUBSCRIPTION AGREEMENT
STOCK SUBSCRIPTION AGREEMENT dated as of October 14, 1997, between
Guardian International, Inc., a Nevada corporation (the "Company"), and Westar
Capital, Inc., a Kansas corporation (the "Purchaser").
The Purchaser desires to acquire from the Company, and the Company
wishes to sell to the Purchaser, certain securities to be issued by the Company,
on the terms and conditions set forth below.
1. AUTHORIZATION OF SECURITIES. The Company has authorized the issuance
and sale to the Purchaser of 2,500,000 shares (the "Common Shares") of its Class
A Voting Common Stock, par value $.001 per share (the "Common Stock"), for an
aggregate purchase price of $3,750,000. Subject to the satisfaction of the
conditions set forth in Section 5, the Company has authorized the issuance and
sale to the Purchaser of 1,875,000 shares (the "Preferred Shares") of Series A 9
3/4% Convertible Cumulative Preferred Stock, par value $.001 per share (the
"Preferred Stock"), for an aggregate purchase price of $3,750,000. The Preferred
Shares will have the terms and conditions set forth in the Certificate of
Amendment and the Certificate of Designations to the Articles of Incorporation
of the Company attached hereto as Exhibits A-1 and A-2, (collectively, the
"Articles of Amendment"). The Common Shares and the Preferred Shares may be
collectively referred to as the "Shares".
2. CLOSINGS
2.1 COMMON SHARES CLOSING. The Company will sell to the Purchaser and,
subject to the terms and conditions hereof, the Purchaser will purchase from the
Company, at the closing provided for in this Section 2.1, the Common Shares at
an aggregate purchase price of $3,750,000. The closing of the sale and purchase
of the Common Shares (the "Common Closing") shall take place at the offices of
the Company at 3880 N. 28th Terrace, Hollywood, Florida, 33020, following the
satisfaction or waiver (not violative of law) of the conditions set forth in
Sections 3 and 4, on October 21, 1997 (the "Common Closing Date"), unless
otherwise agreed between the Purchaser and the Company. At the Common Closing,
the Company will deliver to the Purchaser one or more stock certificates (as the
Purchaser may designate in advance), each dated the Common Closing Date and duly
registered in the Purchaser's name (or in the name of any nominee the Purchaser
designates to hold the Common Shares for its account), representing the Common
Shares, against receipt of $3,750,000 from the Purchaser by delivery of federal
funds payable to the Company.
2.2 PREFERRED SHARES CLOSING. The Company will sell to the Purchaser
and, subject to the terms and conditions hereof, the Purchaser will purchase
from the Company, at the closing provided for in this Section 2.2, the Preferred
Shares at an aggregate purchase price of
<PAGE>
$3,750,000. The closing of the sale and purchase of the Preferred Shares (the
"Preferred Closing") shall take place at the offices of the Company at 3880 N.
28th Terrace, Hollywood, Florida, 33020 or by mail if the parties agree,
following the satisfaction or waiver (not violative of law) of the conditions
set forth in Section 5 and the consummation of the Common Closing, on November
30, 1997 (the "Preferred Closing Date"), unless otherwise agreed between the
Purchaser and the Company. At the Preferred Closing, the Company will deliver to
the Purchaser one or more stock certificates (as the Purchaser may designate),
each dated the Preferred Closing Date and duly registered in the Purchaser's
name (or in the name of any nominee the Purchaser designates to hold the
Preferred Shares for its account), representing the Preferred Shares against
receipt of $3,750,000 from the Purchaser by delivery of federal funds payable to
the Company. The Preferred Closing and the Common Closing may be hereinafter
referred to as the "Closings."
3. CONDITIONS TO THE PURCHASER'S OBLIGATIONS RE: COMMON CLOSING. The
Purchaser's obligation to acquire the Common Shares is subject to the
fulfillment, prior to or at the Common Closing, of the following conditions:
3.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties of the Company contained in Section 6 shall be correct as of the date
hereof and at and as of the time of the Common Closing.
3.2 PERFORMANCE AND COMPLIANCE. The Company shall have performed all
agreements and complied with all conditions contained herein required to be
performed or complied with by it prior to or at the Common Closing.
3.3 OFFICER'S CERTIFICATE. The Purchaser shall have received a
certificate of the President and Chief Executive Officer of the Company, dated
the Common Closing Date, certifying that the conditions specified in Sections
3.1, 3.2 and 3.8 have been fulfilled.
3.4 OPINIONS OF COUNSEL OF THE COMPANY. The Purchaser shall have
received an opinion from Steel Hector & Davis LLP, counsel to the Company, dated
the Common Closing Date and substantially in the form of Exhibit B, and an
opinion from Lionel Sawyer & Collins, Nevada counsel to the Company, dated the
Common Closing Date in such form as may be reasonably acceptable to the
Purchaser.
3.5 WAIVERS AND CONSENTS. All waivers and consents required to be
obtained by the Company in connection with the Common Closing shall be
satisfactory in substance and form to the Purchaser, including but not limited
to the consent of Heller Financial, Inc.
3.6 OTHER AGREEMENTS.
(a) The Stockholders Agreement attached hereto as Exhibit C
(the "Stockholders Agreement") shall have been executed and delivered by the
Company, the Ginsburgs (as defined
-2-
<PAGE>
therein), and the Purchaser. All such action shall have been taken as may be
necessary to elect a Board of Directors of the Company, effective upon the
Common Closing, as provided in the Stockholders Agreement.
(b) The Registration Rights Agreement attached hereto as
Exhibit D (the "Registration Rights Agreement") shall have been executed and
delivered by the Company and the Purchaser.
(c) The Employment Agreements attached hereto as Exhibit E and
F (the "Employment Agreements") shall have been executed and delivered by
Richard Ginsburg and Darius G. Nevin and the Company.
(d) The Employment Agreement attached hereto as Exhibit G (the
"Harold Ginsburg Employment Agreement") shall have been executed and delivered
by Harold Ginsburg and the Company.
3.7 CORPORATE ACTION. The Company shall have delivered to the Purchaser
certified copies of (a) the resolutions duly adopted by an independent committee
of the, and the full, board of directors of the Company authorizing the
execution, delivery and performance of this Agreement, and each of the other
agreements contemplated hereby, the filing of the Articles of Amendment, the
issuance and sale of the Preferred Shares and the Common Shares, the reservation
for issuance upon conversion of the Preferred Shares of an aggregate of
2,273,385 shares of Common Stock and the consummation of all other transactions
contemplated by this Agreement, (b) the written consents of the Company's
stockholders adopting the Articles of Amendment, (c) the Articles of
Incorporation and Bylaws of the Company, each as amended to date, and (d)
incumbency of the Company's officers.
3.8 NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the business, assets, liabilities, prospects, results of
operations or condition, financial or otherwise, of the Company and its
subsidiaries, taken as a whole ( "Material Adverse Change").
3.9 STATUS OF PREFERRED STOCK CLOSING. All third party conditions and
consents to the Preferred Stock Closing shall have been satisfied, except the
passage of time with respect to the information statement delivered to
stockholders of the Company in connection with the adoption of the Articles of
Amendment and the filing of the Articles of Amendment with the Secretary of
State of the State of Nevada.
3.10 NO PROCEEDINGS OR LITIGATION. There shall be no proceeding or
action pending or threatened before any tribunal or governmental agency which
seeks to restrain or effect any of the transactions contemplated herein.
-3-
<PAGE>
4. CONDITIONS TO COMPANY'S OBLIGATIONS RE: COMMON CLOSING. The
Company's obligation to sell the Common Shares is subject to the fulfillment,
prior to or at the Common Closing, of the following conditions:
4.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties of the Purchaser contained in Section 7 shall be correct at and as of
the time of the Common Closing.
4.2 PERFORMANCE AND COMPLIANCE. The Purchaser shall have performed all
agreements and complied with all conditions contained herein required to be
performed or complied with by it prior to or at the Common Closing.
4.3 OFFICER'S CERTIFICATE. The Company shall have received a
certificate of the President and Chief Executive Officer of the Purchaser, dated
the Common Closing Date, certifying that the conditions specified in Sections
4.1 and 4.2 have been fulfilled.
4.4 OPINION OF COUNSEL OF THE COMPANY. The Company shall have received
an opinion from John K. Rosenberg, counsel of the Purchaser, dated the Common
Closing Date and substantially in the form of Exhibit H.
4.5 WAIVERS AND CONSENTS. All waivers and consents required to be
obtained by the Purchaser in connection with the Common Closing shall be
satisfactory in substance and form to the Company, including but not limited to
the consent of Protection One, Inc.
4.6 OTHER AGREEMENTS.
(a) The Stockholders Agreement shall have been executed and
delivered by the Company, the Ginsburgs, and the Purchaser. All such action
shall have been taken as may be necessary to elect a Board of Directors of the
Company, effective upon the Common Closing, as provided in the Stockholders
Agreement.
(b) The Registration Rights Agreement shall have been executed
and delivered by the Company and the Purchaser.
(c) The Employment Agreements shall have been executed and
delivered by Richard Ginsburg and Darius G. Nevin and the Company.
(d) The Harold Ginsburg Employment Agreement shall have been
executed and delivered by Harold Ginsburg and the Company.
4.7 FAIRNESS OPINION. The Company shall have received an opinion of
Raymond James & Associates, Inc. stating that the transactions contemplated
hereby are fair from a
-4-
<PAGE>
financial point of view to the existing stockholders of the Company and such
opinion shall not have been withdrawn or adversely modified.
5. CONDITIONS RE: PREFERRED CLOSING. The parties' obligations to
consummate the purchase of the Preferred Shares are subject to the fulfillment,
prior to or at the Preferred Closing, of the following conditions:
5.1 COMMON CLOSING. The consummation of the Common Closing shall have
occurred prior to the Termination Date set forth in Section 11.
5.2 STOCKHOLDER APPROVAL. The Articles of Amendment shall have been
approved by the stockholders of the Company to the extent required by applicable
law.
5.3 ARTICLES OF AMENDMENT. The Articles of Amendment shall have been
filed with the Secretary of the State of Nevada and shall be in full force and
effect under the laws of such state.
6. CONDITIONS TO THE PURCHASER'S OBLIGATIONS RE: PREFERRED CLOSING. The
Purchaser's obligation to acquire the Preferred Shares is subject to the
fulfillment, prior to or at the Preferred Closing, of the following conditions:
6.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties of the Company contained in Section 7 shall be correct as of the date
hereof and at and as of the time of the Preferred Closing.
6.2 PERFORMANCE AND COMPLIANCE. The Company shall have performed all
agreements and complied with all conditions contained herein required to be
performed or complied with by it prior to or at the Preferred Closing.
6.3 OFFICER'S CERTIFICATE. The Purchaser shall have received a
certificate of the President and Chief Executive Officer of the Company, dated
the Preferred Closing Date, certifying that the conditions specified in Sections
6.1, 6.2 and 6.6 have been fulfilled.
6.4 OPINION OF COUNSEL OF THE COMPANY. The Purchaser shall have
received an opinion from Steel Hector & Davis LLP, counsel to the Company, dated
the Preferred Closing Date and substantially in the form of Exhibit B, and an
opinion from Lionel Sawyer & Collins, Nevada counsel to the Company, dated the
Common Closing Date in such form as may be reasonably acceptable to the
Purchaser.
6.5 WAIVERS AND CONSENTS. All waivers and consents required to be
obtained by the Company in connection with the Preferred Closing shall be
satisfactory in substance and form to the Purchaser, including but not limited
to the consent of Heller Financial, Inc.
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6.6 NO MATERIAL ADVERSE CHANGE. There shall have been no Material
Adverse Change.
7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants that:
7.1 ORGANIZATION; GOOD STANDING; VALID AND BINDING. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada and has all requisite corporate power and authority to
own and operate its properties, to carry on its business as now conducted and
proposed to be conducted, to enter into this Agreement, to issue and sell the
Common Shares and the Preferred Shares, and to carry out the terms hereof and
thereof. Each of the Company's subsidiaries is duly organized, validly existing
and in good standing under the laws of its state of incorporation. Each of the
Company and its subsidiaries is duly qualified as a foreign corporation to do
business, and is in good standing in each jurisdiction where the character of
its properties owned or leased or the nature of its activities makes
qualification necessary, except where failure to so qualify would not
individually or in the aggregate have a Material Adverse Change. The execution,
delivery and performance of this Agreement and all other agreements contemplated
hereby to which the Company is a party have been duly authorized by the Company.
Each of such agreements has been duly and validly executed and delivered by the
Company and constitutes a valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, liquidation, moratorium, receivership, conservatorship,
readjustment of debts, fraudulent conveyance or similar laws affecting the
enforcement of creditors rights generally.
7.2 INFORMATION FURNISHED; BUSINESS. The Company has furnished the
Purchaser with true and complete copies of (a) the Company's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1996, as amended to date, (b)
any and all of the Company's Current Reports on Form 8-K which have been filed
with the Securities and Exchange Commission ("SEC") since December 31, 1996, (c)
the Company's Quarterly Reports on Form 10-QSB for the quarters ended March 31,
1997 and June 30, 1997, as amended to date, (collectively "SEC Documents") and
(d) all other reports and documents filed by the Company with the SEC under the
Exchange Act since January 1, 1997. The financial statements contained in the
SEC Documents have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as stated in the
notes thereto), and present fairly (subject, in the case of unaudited
statements, to normal recurring adjustments) the financial condition of the
Company as of their respective dates and the results of operations and cash
flows for the respective periods. Except as disclosed in the SEC Documents or as
set forth on Schedule A, since January 1, 1997 there has been no Material
Adverse Change. Since January 1, 1997, the Company has made all filings required
to be made in compliance with the Exchange Act, and such filings, as modified by
subsequent reports filed pursuant to the Exchange Act conformed in all material
respects to the requirements of the Exchange Act, and the rules and regulations
of the SEC thereunder, and such filings did not contain any untrue statement of
a material fact and did
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not omit to state any material fact necessary in order to make the statements
contained therein not misleading in light of the circumstances under which such
statements were made as of their respective dates of filing.
7.3 LITIGATION. Except as disclosed on Schedule A, there are no
actions, proceedings or investigations nor any judgment, decree, injunction,
rule, or order pending or threatened which question or affect the validity of
this Agreement, the Common Shares or the Preferred Shares, or any action taken
or to be taken pursuant hereto or thereto, or which might result, either in any
case or in the aggregate, in any Material Adverse Change, or in any liabilities
on the part of the Company which, either in any case or in the aggregate, are or
might be material and which liabilities have not been disclosed in the notes to
the Company's financial statements contained in the SEC Documents and adequately
reserved for on the Company's balance sheet as at June 30, 1997.
7.4 COMPLIANCE WITH OTHER INSTRUMENTS. Except for consents and
approvals required to be obtained as set forth on Schedule A, the execution,
delivery and performance of this Agreement and the other agreements contemplated
hereby, and the issuance of the Common Shares and the Preferred Shares, do not
and will not result in any violation of or be in conflict with or constitute
(with or without due notice or lapse of time or both) a default or result in an
adverse event under any term of the Articles of Incorporation, as amended (the
"Charter"), or by-laws of the Company, or of any material agreement, instrument,
obligation, license, judgment, decree, order, statute, rule or governmental
regulation applicable to the Company, its assets or properties or result in the
imposition or creation of any lien or encumbrance upon any asset or property of
the Company. The Company is not in violation of any term of its Charter or
by-laws, or of any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation which is material to the business, operations,
prospects, or affairs of the Company.
7.5 GOVERNMENTAL CONSENTS. Except for such consents, approvals and
authorizations as are set forth on Schedule A, neither the Company, nor any of
its subsidiaries is or will be required to obtain any consent, approval or
authorization of, or to make any declaration or filing with, any governmental
authority as a condition precedent to the valid execution and delivery of this
Agreement and the other agreements contemplated hereby, and, the valid offer,
issue and delivery of the Common Shares and the Preferred Shares. Schedule 6.5
correctly sets forth the names and jurisdictions of domicile of each subsidiary
of the Company.
7.6 CAPITAL STOCK. Schedule A correctly describes each class of the
authorized capital stock of the Company on the date hereof, including, as to
each such class, the number of shares thereof authorized and the number of
shares thereof issued and outstanding. All of the outstanding shares of the
Company are validly issued and outstanding, fully paid and non- assessable and
free of preemptive rights. The Company has no outstanding securities convertible
into or exchangeable for capital stock and no outstanding options, warrants or
other rights to subscribe for or purchase, or agreements for the purchase from
or the issue or sale by the Company of, capital stock, other than as set forth
in such Schedule A, which correctly describes
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each such security, right or agreement and the number of shares subject thereto,
whether or not reserved for on the books of the Company. Schedule A also sets
forth all shares of capital stock reserved or required for issuance pursuant to
any employee benefit, stock option or other similar plan.
7.7 DISCLOSURE. There is no fact known to the Company which materially
adversely affects the business, operations, affairs, prospects, properties,
assets or condition of the Company which has not been set forth in this
Agreement or in Schedule A hereto. No representation or warranty contained in
this Agreement, the other agreements contemplated hereby, or the Schedules
hereto or thereto, or any officers certificate furnished thereunder, at the date
hereof, or at the Common Stock Closing Date and the Preferred Stock Closing Date
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements contained
herein or therein not misleading.
7.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
SEC Documents or as set forth on Schedule A hereto, since January 1, 1997, the
Company has in all material respects conducted its business in the ordinary
course consistent with past practices.
7.9 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on Schedule
A and in the SEC Documents, and liabilities incurred after January 1, 1997 in
the ordinary course of business and consistent with past practices, the Company
does not have any liabilities or obligations (whether absolute, accrued,
contingent or otherwise) of a nature required by GAAP to be reflected in a
consolidated balance sheet (or reflected in the notes thereto).
7.10 NO DEFAULT. Except as set forth on Schedule A hereto, neither the
Company nor any of its subsidiaries is in violation or breach of, or default
under (and no event has occurred which with notice or the lapse of time or both
would constitute a violation or breach of, or a default under) any term,
condition or provision of (i) any material note, bond, mortgage, deed of trust,
security interests, indenture, license, contract, agreement, plan or other
instrument or obligation to which the Company or any such subsidiary is a party
or by which the Company or any such subsidiary or any of their respective
properties or assets may be bound or affected, (ii) any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company, any subsidiary of
the Company or any of their respective properties or assets or (iii) any
registration, license, permit or other consent or approval of any governmental
agency, except in each case for breaches, defaults or violations which would not
individually or in the aggregate have a material adverse effect on the business,
assets, liabilities, results of operations or condition, financial or otherwise,
of the Company and its subsidiaries, taken as a whole.
8. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
represents and warrants that:
8.1 NO DISTRIBUTION. The Purchaser is acquiring the Preferred Shares
and the Common Shares for its own account with the present intention of holding
such securities for
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purposes of investment, and it has no intention of selling such securities in a
public distribution in violation of the federal securities laws or any
applicable state securities laws. The Purchaser understands that the Common
Shares and the Preferred Shares are "restricted securities" as defined in Rule
144 under the Securities Act of 1933, as amended (the "Securities Act"), and
have not been registered pursuant to the provisions of the Securities Act, in as
much as the proposed purchase of the Common Shares and the Preferred Shares is
taking place in a transaction not involving any public offering.
8.2 SOPHISTICATION. The Purchaser is knowledgeable, experienced and
sophisticated in financial and business matters and is able to evaluate the
risks and benefits of the investment in the Common Shares and the Preferred
Shares.
8.3 ECONOMIC RISK. The Purchaser is able to bear the economic risk of
its investment in the Common Shares and the Preferred Shares for an indefinite
period of time because the Common Shares and the Preferred Shares have not been
registered under the Securities Act and, therefore, cannot be sold unless
subsequently registered under the Securities Act or an exemption from such
registration is available.
8.4 ACCESS TO INFORMATION. The Purchaser has been furnished or
otherwise had full access to such other information concerning the Company and
its subsidiaries as it has requested and that was necessary to enable the
Purchaser to evaluate the merits and risks of an investment in the Company, and
after a review of this information, has had an opportunity to ask questions and
receive answers concerning the financial condition and business of the Company
and the terms and conditions of the securities purchased hereunder, and has had
access to and has obtained such additional information concerning the Company
and the securities as it deemed necessary. The Purchaser has carefully reviewed
the information furnished pursuant to Section 7.2.
8.5 ACCREDITED INVESTOR. The Purchaser is an "accredited investor" as
defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
8.6 LEGEND. The Purchaser understands that the certificate(s)
representing the Common Shares and the Preferred Shares (and any Common Stock
issued upon conversation of the Preferred Shares) will bear restrictive legends
thereon as follows:
"The securities represented by this certificate have been acquired
directly or indirectly from the Company without being registered under
the Securities Act of 1933, as amended (the "Act"), or any other
applicable securities laws, and are restricted securities as that term
is defined under Rule 144 promulgated under the Act. These securities
may not be sold, pledged, transferred, distributed or otherwise
disposed of in any manner unless they are registered under the Act and
all other applicable securities laws, or unless the request for
transfer is accompanied by a favorable opinion of counsel, reasonably
satisfactory to the
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Company, stating that the transfer will not result in a violation of
the Act and all other applicable state securities law."
8.7 ADDITIONAL PURCHASER REPRESENTATIONS. The Purchaser is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. The execution, delivery and performance of
this Agreement and all other agreements contemplated hereby to which such
Purchaser is a party have been duly authorized by the Purchaser. Each of such
agreements constitutes a valid and binding obligation of the Purchaser,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, liquidation, moratorium, receivership, conservatorship,
readjustment of debts, fraudulent conveyance or similar laws affecting the
enforcement of creditors rights generally. The Purchaser has made or obtained
all material third party and governmental consents, approvals and filings to be
made or obtained prior to the Closings by the Purchaser in connection with the
consummation of the transactions hereunder. The execution and delivery by the
Purchaser of each of the Agreement and all other agreements contemplated hereby
and the fulfillment of and compliance with the respective terms thereof by the
Purchaser do not and shall not (a) conflict with or result in a breach of the
terms, conditions or provisions of, (b) constitute a default under, or (c)
result in a violation of the organizational documents of the Purchaser or any
material agreement or instrument to which Purchaser is subject.
9. INDEMNIFICATION.
9.1 INDEMNIFICATION BY THE COMPANY. In addition to all other sums due
hereunder or provided for in this Agreement and any other rights and remedies
available to Purchaser under applicable law, the Company agrees to hold harmless
and indemnify the Purchaser and all directors, officers and controlling persons
of the Purchaser (within the meaning of Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (individually referred to as an "Indemnified Person") from and against
any losses, claims, damages, costs and expenses, and liabilities (including
attorneys' fees and expenses of investigation) incurred by each Indemnified
Person pursuant to any action, suit, proceeding or investigation against any one
or more of the Company and such Indemnified Person, and arising out of or in
connection with a breach by the Company of any agreement, representation,
warranty, covenant, or obligation contained in this Agreement or any other
agreement contemplated hereby or delivered hereunder and any and all costs and
expenses incurred by any Indemnified Person in connection with the enforcement
of its rights under this Agreement and the other agreements contemplated hereby.
The Company further agrees, promptly upon demand by an Indemnified Person, from
time to time, to reimburse each Indemnified Person for, or pay, any loss, claim,
damage, liability or expense as to which the Company has indemnified the
Indemnified Person pursuant to this Agreement.
9.2 INDEMNIFICATION BY THE PURCHASER. In addition to all other sums due
hereunder or provided for in this Agreement, the Purchaser agrees to hold
harmless and indemnify the Company and all directors, officers and controlling
persons of the Company (within the meaning
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of Section 15 of the Securities Act or Section 20 of the Exchange Act)
(individually referred to as an "Indemnified Person") from and against any
losses, claims, damages, costs and expenses and liabilities (including
attorneys' fees and expenses of investigation) incurred by each Indemnified
Person pursuant to any action, suit, proceeding or investigation against any one
or more of the Purchaser and such Indemnified Person, and arising out of or in
connection with a breach by the Purchaser of any agreement, representation,
warranty, covenant or obligation contained in this Agreement or any agreement
contemplated hereby or delivered hereunder and any and all costs and expenses
incurred by any Indemnified Person in connection with the enforcement of its
rights under this Agreement and the agreements contemplated hereby. The
Purchaser further agrees, promptly upon demand by an Indemnified Person, from
time to time, to reimburse each Indemnified Person for, or pay, any loss, claim,
damage, liability or expense as to which the Purchaser has indemnified the
Indemnified Person pursuant to this Agreement.
9.3 PROCEDURE. Each Indemnified Person agrees to give prompt written
notice to the indemnifying party after the receipt by the Indemnified Person of
any written notice of the commencement of any action, suit, proceeding or
investigation or threat thereof made in writing for which such Indemnified
Person will claim indemnification or contribution pursuant to this Agreement,
PROVIDED that the failure of any Indemnified Person to give notice shall not
relieve the indemnifying party of its obligations except to the extent that the
indemnifying party is actually prejudiced by the failure to give notice. If any
such action is brought against an indemnified party, the indemnifying party will
be entitled to participate in and to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party for any legal or other expenses incurred by the latter in connection with
the defense thereof unless (i) in the reasonable opinion of counsel for the
indemnifying party a conflict of interest exists between the indemnified party
and indemnifying party, (ii) the indemnified party reasonably objects to such
assumption on the basis that there may be defenses available to it which are
different from or in addition to the defenses available to the indemnifying
party, (iii) the indemnifying party has failed to timely assume the defense of
any such action or proceeding or (iv) the indemnifying party and its counsel do
not actively and vigorously pursue the defense of such action . Whether or not
such defense is assumed by the indemnifying party, the indemnifying party will
not be subject to any liability for any settlement made without its consent. No
indemnifying party will consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect of such claim or litigation. An indemnifying party who
elects not to assume the defense of an action or where a potential conflict of
interest or other defenses may able available, shall not be obligated to pay the
fees and expenses of more than one counsel and local counsel where appropriate
for all parties indemnified by such indemnifying party with respect to such
action, unless in the reasonable judgment of any indemnified party a conflict of
interest may exist between such indemnified party and any other of such
indemnified parties with respect to such action. Cost and expenses incurred by
the indemnified party shall be reimbursed, from time to time, by the Company as
and when bills are received or expenses are incurred.
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9.4 GROSS UP. Any payment required to be made under this Section 9
shall be increased so that the net amount retained by the Indemnified Person,
after deduction of any federal, state, local or foreign tax due thereon
(assuming a maximum effective total statutory tax rate), shall be equal to the
amount otherwise due.
10. EXCHANGE AND REPLACEMENT OF SECURITIES. Upon surrender of any
Preferred Share or Common Share certificate by the Purchaser for exchange at the
office of the Company, the Company, at its expense (exclusive of applicable
transfer taxes or other similar taxes) will issue or cause to be issued, in
exchange, a new Preferred Share or Common Share certificate in such
denominations as may be requested for the same number of Preferred Shares or
Common Shares, as the case may be, and registered as the Purchaser may request.
Upon receipt of evidence satisfactory to the Company of the loss, theft,
destruction or mutilation of any Preferred Share or Common Share certificate,
upon delivery of a written agreement of indemnity reasonably satisfactory to the
Company in form or amount, or, in the case of any such mutilation upon surrender
and cancellation thereof, the Company, at its expense, will issue or cause to be
issued a new Preferred Share or Common Share certificate in replacement of such
lost, stolen, destroyed or mutilated Preferred Share or Common Share
certificate.
10.1 SURVIVAL. All agreements, representations and warranties contained
herein or made in writing by or on behalf of the Company or by or on behalf of
the Purchaser in connection with the transactions contemplated hereby shall
survive the execution and delivery of this Agreement, all investigations made by
Purchaser or on Purchaser's behalf, and the issue and delivery of the Preferred
Shares and the Common Shares.
11.01 TERMINATION. This Agreement may be terminated:
(a) by the mutual written consent of the Purchaser and the
Company;
(b) by either party if the Common Closing has not occurred on
or before November 30, 1997, or such later date as the parties may agree upon
(the "Termination Date"); provided that the party electing termination pursuant
to this clause (b) is not in material breach of any of its representations,
warranties, covenants or agreements contained in this Agreement;
(c) by the Purchaser if the Preferred Stock Closing has not
occurred on or before December 31, 1997, or such later date as the parties may
agree upon.
(d) (i) by the Purchaser if any of the conditions in Section 3
have not been satisfied as of the Common Closing Date or if satisfaction of such
a condition is or becomes impossible (other than through the failure of the
Purchaser to comply with its obligations under this Agreement) and the Purchaser
has not waived such condition on or before the Common Closing Date;
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(ii) by the Company, if any of the conditions in
Section 4 have not been satisfied as of the Common Closing Date or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of the Company to comply with its obligations under this Agreement)
and the Company has not waived such condition on or before the Common Closing
Date;
(iii) by either party, if any of the conditions in
Section 5 have not been satisfied as of the Preferred Closing Date or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of the electing party to comply with its obligations under this
Agreement) and such condition has not been waived on or before the Preferred
Closing Date; or
(e) by either party if a breach of any provision of this
Agreement has been committed by the other party or any representation or
warranty made by the other party shall have been incorrect when made and such
breach, failure or misrepresentation has not been cured within 20 days after
notice thereof or waived.
11.02 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 11.01, this Agreement shall forthwith become
void and there shall be no liability on the part of either party hereto except
(a) as set forth in Section 9, 13 and 15 and (b) that nothing herein shall
relieve either party from liability for any breach of this Agreement.
12. NO BROKER. Each party hereto represents and warrants that it has
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement.
13. BREAK-UP FEE . In the event that this Agreement is terminated as a
result of a breach of this Agreement by the Company, failure of the Company to
obtain any required consents or approvals, or in connection with the Company
entering into another transaction, the Company will pay Purchaser in same day
funds a cash fee of $300,000 immediately upon termination.
14. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
hand delivered or sent by first class registered or certified mail (return
receipt requested), postage prepaid, to the respective addresses of the Company
and the Purchaser set forth below, unless subsequently changed by written
notice. Any notice shall be deemed to be effective when it is received.
To the Purchaser:
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Westar Capital, Inc.
818 South Kansas Avenue
P.O. Box 889
Topeka, Kansas 66601
Attention: President
Phone: 785-575-6322
Fax: 785-575-1788
With a copy to:
John K. Rosenberg, Esq.
818 South Kansas Avenue
P.O. Box 889
Topeka, Kansas 66601
Phone: 785-575-6322
Fax: 785-224-1788
To the Company:
Guardian International, Inc.
3880 North 28th Terrace
Hollywood, Florida 33020-1118
Attention: Richard Ginsburg, President
Phone: 954-926-5200
Fax: 954-926-1822
With a copy to:
Harvey Goldman, Esq.
Steel Hector & Davis LLP
200 South Biscayne Boulevard
41st Floor
Miami, FL 33131-2398
Phone: 305-577-7011
Fax: 305-577-7001
15. COSTS AND EXPENSES. Whether or not the transactions contemplated
hereby close, each party will bear its own costs and expenses for due diligence
and for the preparation and negotiation of this Agreement and the agreements
referenced herein. The Company agrees to pay, or cause to be paid, all
documentary and similar taxes levied under the laws of the United States of
America or any state or local taxing authority thereof or therein in connection
with the issuance and sale of the Preferred Shares and the Common Shares and the
execution and delivery
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of the other agreements and documents contemplated hereby and any modification
of any of such documents and will hold the Purchaser harmless without limitation
as to time against any and all liabilities with respect to all such taxes.
16. RESERVED.
17. MUTUAL COVENANTS. Each of the Company and Purchaser agrees to
promptly use its best efforts to secure such consents as may be necessary to
effect the transactions contemplated hereunder.
18. PRESS RELEASES. Simultaneously with the execution of this
Agreement, the parties hereto shall issue a press release in mutually acceptable
form (the "Press Release"). The parties hereto agree to consult with each other
prior to any press release regarding the transactions contemplated herein.
19. ASSIGNMENT, SUCCESSORS AND NO THIRD-PARTY RIGHTS. Neither party may
assign any of its rights under this Agreement without the prior consent of the
other party, except that the Purchaser may assign any of its rights under this
Agreement to any "affiliate" of the Purchaser as defined in Regulation D of the
Act including, but not limited to, Protection One, Inc. following the closing of
the proposed transaction in which Western Resources, Inc. shall acquire not less
than 50% of the outstanding equity of Protection One, Inc. Subject to the
preceding sentence, this Agreement will apply to, be binding in all respects
upon, and inure to the benefit of the successors and permitted assigns of the
parties. Nothing expressed or referred to in this Agreement will be construed to
give any person other than the parties to this Agreement any legal or equitable
right, remedy or claim under or with respect to this Agreement or any provision
of this Agreement. This Agreement and all of its provisions and conditions are
for the sole and exclusive benefit of the parties to this Agreement and their
successors and assigns.
20. SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable. In the
event any provision of this Agreement shall be held invalid, the parties agree
to enter into such further agreements as may be necessary in order to carry out
the intent and purposes of the parties herein.
21. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Florida without regard
to conflict of law principles thereunder.
22. ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the
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agreement between the parties with respect to its subject matter. This Agreement
may be not amended except by a written agreement executed by the party to be
charged with the Amendment.
23. WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor the delay by any
party in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. To the maximum
extent permitted by applicable law, (a) no claim or right arising out of this
Agreement or the documents referred to in this Agreement can be discharged by
any party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of an obligation of such party or of the right of the party giving such
notice or demand to take further notice or demand as provided in this Agreement
or the documents referred to in this Agreement.
24. ACQUISITION PROPOSALS. The Company will not, and will use its best
efforts to cause its officers, directors, employees, representatives and agents
not to, initiate, encourage or solicit, directly or indirectly, any inquiries or
the making of any proposal with respect to, or, except to the extent advised in
writing by outside counsel that said disclosure is required by their fiduciary
duties, engage in negotiations concerning, provide any confidential information
or data to, or have any discussions with, any person relating to, any
acquisition, or purchase of all or any significant portion of the assets of, or
any equity interest in, such party or any of its subsidiaries or any merger,
consolidation or other business combination of such party or any of its
subsidiaries with any other Person. The Company represents that as of the date
hereof it has ceased any and all existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing. The Company agrees to notify the Purchaser immediately if any such
negotiations, provision of confidential information or data or discussions are
entered into or made or any such inquiries are received in respect thereof, and
shall provide details with respect thereto. Notwithstanding the above, the
Company may engage in such described behavior with respect to any proposal
meeting the above definition of acquisition proposal pursuant to which the
Company shall acquire the stock or assets of another entity for an aggregate
purchase price not to exceed $4,000,000.
25. NOTICE OF CERTAIN EVENTS. The Company and the Purchaser shall
promptly notify the other of:
(a) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
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<PAGE>
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement; and
(c) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge threatened against, relating to or
involving or otherwise affecting any party which, if pending on the date of this
Agreement, would have been required to have been disclosed pursuant to this
Agreement or which relate to the consummation of the transactions contemplated
by this Agreement.
26. SECTION HEADINGS; COUNTERPARTS. The headings in this Agreement are
for purposes of reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument.
27. DISPUTE RESOLUTION. Any dispute arising from, relating to, or in
connection with the matters contained herein shall be resolved in accordance
with procedures set forth in Schedule B hereto.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on their behalf as of the date first written above.
GUARDIAN INTERNATIONAL, INC.
By: /s/ RICHARD GINSBURG
---------------------------------------
Richard Ginsburg,
President and Chief Executive Officer
WESTAR CAPITAL, INC.
By: /s/ RITA A. SHARPE
---------------------------------------
Rita A. Sharpe
President
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EXHIBIT 4
GUARDIAN INTERNATIONAL, INC.
STOCKHOLDERS AGREEMENT
This Stockholders Agreement (this "Agreement"), dated as of
October 21, 1997, is made by and among Guardian International, Inc., a Nevada
corporation (the "Company"), Harold Ginsburg, Sheilah Ginsburg, Richard Ginsburg
and Rhonda Ginsburg (the "Ginsburgs"), and Westar Capital, Inc., a Kansas
corporation ("Westar"). The Ginsburgs and Westar are referred to collectively as
the "Stockholders" and individually as a "Stockholder." Capitalized terms used
herein and not defined in the text are defined in Section 1 hereof.
Simultaneously with the execution hereof, Westar shall
subscribe to shares (the "Shares") of Common Stock and Preferred Stock pursuant
to the Stock Subscription Agreement between Westar and the Company dated as of
October 14, 1997 (the "Subscription Agreement").
The Company and the Stockholders desire to enter into this
Agreement for the purposes, among others, of (i) establishing the composition of
the Company's Board of Directors (the "Board") and certain other voting
agreements, (ii) assuring continuity in the management and ownership of the
Company and (iii) limiting the manner and terms by which the Stockholder Shares
may be transferred. The execution and delivery of this Agreement is a condition
to Westar's subscription and the Company's sale of the Shares pursuant to the
Subscription Agreement.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement
hereby agree as follows:
1. Definitions.
"AFFILIATE" has the meaning set forth in Section 8(e).
"BOARD" has the meaning set forth in the preamble.
"CERTIFICATE OF DESIGNATIONS," means the Certificate of
Designations to the Articles of Incorporation of the Company dated as of
_________ ___, 1997 defining the rights and preferences of the Preferred Stock.
"COMMON SHARES" means the 2,500,000 shares of Common Stock
subscribed by Westar pursuant to the Subscription Agreement.
<PAGE>
"COMMON SHARES CLOSING" has the meaning set forth for such
term in the Subscription Agreement.
"COMMITTEE" has the meaning set forth in Section 8(b).
"COMMON STOCK" means the Company's Class A Common Stock, par
value $.001 per share.
"COMPANY" has the meaning set forth in the preamble.
"DEFAULT" has the meaning set forth for such term in the
Certificate of Designations.
"FAMILY GROUP" has the meaning set forth in Section 8(e).
"FULLY DILUTED BASIS" means, at any date as of which the
number of shares is to be determined, (a) all shares of capital stock
outstanding at such date, and (b) the maximum number of shares of capital stock
issuable pursuant to warrants, options or other rights to purchase or acquire
(whether or not such warrants, options or other rights are then exercisable), or
pursuant to securities convertible into or exchangeable (whether or not such
securities are then convertible or exchangeable) for, shares of capital stock
outstanding on such date (including any shares issuable pursuant to any
outstanding warrants).
"NON-AFFILIATE" means any entity other than one of which
Westar, its parent or its subsidiaries own or control more than 20% of the
voting securities or one which Westar, its parent or its subsidiaries control,
are controlled by or are under common control with. For purposes of this
definition and the definition of "Affiliate", "control" means the power to
direct the management and policies of an entity whether through the ownership of
voting securities, contract or otherwise.
"OFFER NOTICE" has the meaning set forth in Section 8(b).
"OTHER STOCKHOLDER" means the Stockholder other than the
Transferring Stockholder.
"PERMITTED TRANSFEREE" has the meaning forth in Section 8(e).
"PERSON" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
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"PREFERRED SHARES" means the 1,875,000 shares of Preferred
Stock of the Company to be sold to Westar pursuant to the terms of the
Subscription Agreement.
"PREFERRED STOCK" means the Company's Series A 9 3/4%
Convertible Cumulative Preferred Stock, par value $.001 per share, having the
rights and preferences set forth in the Certificate of Designations.
"PUBLIC SALE" means any sale of Stockholder Shares to the
public pursuant to an offering registered under the Securities Act or to the
public through a broker, dealer or market maker pursuant to the provisions of
Rule 144 promulgated under the Securities Act.
"SALE NOTICE" has the meaning set forth in Section 8(c).
"SALE OF THE COMPANY" has the meaning set forth in Section
9(a).
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated pursuant thereto.
"STOCKHOLDER SHARES" means (i) any Common Stock or Preferred
Stock held, purchased or otherwise acquired by any Stockholder, (ii) any Common
Stock issued or issuable directly or indirectly upon conversion of the Preferred
Stock and (iii) any Common Stock or Preferred Stock issued or issuable with
respect to the securities referred to in clauses (i) or (ii) above. For purposes
of this Agreement, any Person who holds Preferred Stock shall be deemed to be
the holder of the Stockholder Shares issuable directly or indirectly upon
conversion of the Preferred Stock in connection with the transfer thereof or
otherwise and regardless of any restriction or limitation on the conversion
thereof.
"STOCKHOLDERS" has the meaning set forth in the preamble.
"SUBSCRIPTION AGREEMENT" has the meaning set forth in the
preamble.
"TRANSFER" has the meaning set forth in Section 8(a).
"TRANSFERRING STOCKHOLDER" has the meaning set forth in
Section 8(b).
2. BOARD OF DIRECTORS.
a. COMPOSITION OF THE BOARD.
i. From and after the Common Shares Closing and until the
conversion of the Preferred Shares into Common Stock pursuant to the
terms of the Certificate of Designations (the "Conversion"), each
Stockholder shall vote all of its Stockholder Shares which are voting
shares and any other voting securities of the
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Company over which such Stockholder has voting control and shall take
all other necessary or desirable actions within its control (whether in
its capacity as a stockholder, director, member of a board committee or
officer of the Company or otherwise, and including, without limitation,
attendance at meetings in person or by proxy for purposes of obtaining
a quorum and execution of written consents in lieu of meetings), and
the Company shall take all necessary or desirable actions within its
control (including, without limitation, calling special board and
stockholder meetings), so that, subject to the remainder of this
Section 2:
(1) The authorized number of directors on the Board
shall be estblished at eight directors; and
(2) The following individuals shall be elected to the
Board:
(a) four representatives nominated by the
Ginsburgs, who shall initially be Harold Ginsburg,
Sheilah Ginsburg, Richard Ginsburg and one
additional representative to be nominated by the
Ginsburgs.
(b) two representatives nominated by Westar, and
(c) two representatives who shall not be officers or
employees of the Company or of Westar or related by
blood or marriage to or affiliated with any of the
Ginsburgs (the "Independent Directors") nominated
mutually by the Stockholders; and
(3) If at any time prior to the Conversion, Westar
Transfers Shares to a Non-Affiliate, Westar shall forfeit the
right to nominate
(a) one Board seat if it Transfers 40% or more but
less than 75% of the Shares, which Board seat shall
thereafter become an Independent Director seat, and
(b) two Board seats if it Transfers 75% or more of
the Shares.
ii. After the Conversion, each Stockholder shall
vote all of its Stockholder Shares which are voting shares and any
other voting securities of the Company over which such Stockholder has
voting control and shall take all other necessary or desirable actions
within its control (whether in its capacity as a stockholder, director,
member of a board committee or officer of the Company or otherwise, and
including, without limitation, attendance at meetings in person or by
proxy for purposes of obtaining a quorum and execution of written
consents in lieu of meetings), and the
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<PAGE>
Company shall take all necessary or desirable actions within its
control (including, without limitation, calling special board and
stockholder meetings), so that, subject to the remainder of this
Section 2:
(1) The authorized number of directors on the Board
shall be established at nine directors; and
(2) The following individuals shall be elected to the
Board:
(a) three representatives nominated by the Ginsburgs,
(b) three representatives nominated by Westar,
(c) three representatives who shall be Independent
Directors nominated mutually by the Stockholders;
and
(3) If at any time after the Conversion, Westar
Transfers Shares of Common Stock (including those acquired
upon Conversion) to a Non-Affiliate, Westar shall forfeit the
right to nominate
(a) one Board seat if it Transfers 25% or more but
less than 45% of the Shares, which Board seat shall
thereafter become an Independent Director seat,
(b) two Board seats if it Transfers 45% or more but
less than 70% of the Shares, which Board seats
shall thereafter become Independent Director seats,
and
(c) three Board seats if it Transfers 70% of more
of the Shares.
iii. Any committees of the Board shall be created and the
composition thereof determined only upon the approval of not less than
one Ginsburg nominee, one Westar nominee and one Independent Director.
iv. The removal from the Board (with or without cause)
of any representative nominated hereunder shall be at the written
request of the Person nominating such representative, but only upon
such written request and under no other circumstances, subject to
applicable law.
v. In the event that any representative nominated
hereunder resigns, is removed or otherwise ceases to serve as a member
of the Board during his term of office, the resulting vacancy on the
Board shall be filled by a representative nominated by the Person
nominating such representative as provided hereunder.
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<PAGE>
vi. No transferee of Stockholder Shares (including
Common Stock issued upon Conversion), other than Permitted Transferees,
shall have any right hereunder to cause any representatives to be
appointed to the Board.
vii. The Company agrees to include each such designated
nominee to be added to or retained on the Board pursuant to this
Agreement in the slate of nominees recommended by the Board to the
Company's stockholders for election as directors and shall use its best
efforts to cause the election or reelection of each such nominee to the
Board, including soliciting proxies in favor of the election of such
persons.
b. LIMITATIONS ON BOARD COMPOSITION. Notwithstanding the provisions
contained in Section 2(a),
i. in the event of a Default, Westar shall have the
right to elect a majority of the Board until such time as the Default
is cured; and
ii. the election of directors to the Board shall be
subject at all times to applicable law.
c. BOARD EXPENSES. The Company shall pay the reasonable out-of-pocket
expenses incurred by each director in connection with attending the meetings of
the Board and any committee thereof, and each Board member shall otherwise be
compensated as determined from time to time by the Board. The Company shall use
its best efforts to obtain and to maintain directors and officers indemnity
insurance coverage at a commercially reasonable price, and the Company's
articles of incorporation and bylaws shall provide for indemnification and
exculpation of directors to the fullest extent permitted under applicable law.
d. WRITTEN CONSENT. Each director entitled to vote at a meeting of the
Board or to express consent or dissent to corporate action in writing without a
meeting may authorize another director to act for him or her by proxy, but no
such proxy shall be noted or acted upon after six months from its date or if
such proxy is not permitted by applicable law.
3. EXECUTIVE EMPLOYMENT AGREEMENTS. In order to provide for continuity
of operations and management of the Company, Westar agrees that it will, and
will cause its nominees to the Board to, subject to exercise of such directors'
fiduciary duties to all the stockholders of the Company, vote and take any and
all action necessary or appropriate as a stockholder of the Company to cause the
Company to uphold and comply with those certain Employment Agreements dated as
of October __, 1997 between the Company and Richard Ginsburg, between the
Company and Darius G. Nevin and between the Company and Harold Ginsburg (the
"Employment Agreements") pursuant to the terms thereof for the duration set
forth in such Employment Agreements or its earlier termination thereof as
provided therein.
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<PAGE>
4. INCENTIVE STOCK OPTION PLAN. Westar agrees to vote in favor of the
establishment of a management incentive stock option plan (the "Plan") pursuant
to which options not to exceed 5% of the Common Stock outstanding on the date of
adoption on a Fully Diluted Basis may be issued. The Plan will contain terms
customary to such incentive stock option plans, including provisions governing
change of control. Options granted under the Plan will vest one-fifth each year
over a five-year period.
5. FUTURE FINANCING. Westar agrees to vote in favor of a secondary
public offering by the Company of up to 4,000,000 shares of Common Stock at not
less than $2.00 per share in connection with an offering of Common Stock,
convertible debt or debt-with-equity securities.
6. REPRESENTATIONS AND WARRANTIES. Each Stockholder represents and
warrants that (i) such Stockholder is the record owner of the number of shares
of the Company's capital stock set forth opposite its name on the Schedule A
attached hereto, (ii) this Agreement has been duly authorized executed and
delivered by such Stockholder and constitutes the valid and binding obligation
of such Stockholder, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, liquidation, moratorium receivership,
conservatorship, readjustment of debts, fraudulent conveyance or other laws
affecting the enforcement of creditors' rights generally, and (iii) such
Stockholder has not granted and is not a party to any proxy, voting trust or
other agreement which is inconsistent with, conflicts with or violates any
provision of this Agreement. No holder of Stockholder Shares shall grant any
proxy or become party to any voting trust or other agreement which is
inconsistent with, conflicts with or violates any provision of this Agreement.
7. LIMITATION ON OWNERSHIP. For a period commencing on the Common
Shares Closing and ending on the earlier of (a) the fifth anniversary thereof,
(b) the occurrence of a Default, (c) a Sale of the Company, and (d) the date of
a third party offer which could result in the sale of the Company to a third
party, or an unsolicited tender offer or proxy contest for control of the
Company by a third party, Westar agrees to limit its ownership of the Common
Stock to 45% of the Common Stock of the Company outstanding at any time on a
Fully Diluted Basis, unless Westar receives the prior written consent of the
Company to exceed that limit.
8. RESTRICTIONS ON TRANSFER OF STOCKHOLDER SHARES.
a. TRANSFER OF STOCKHOLDER SHARES. No Stockholder shall sell, transfer,
assign, pledge or otherwise dispose of (whether with or without consideration
and whether voluntarily or involuntarily) any interest in its Stockholder Shares
(a "Transfer"), except in compliance with the provisions of this Section 8 or
pursuant to a Public Sale. Each Stockholder agrees not to consummate any such
Transfer (other than a Public Sale) until 45 days after the later of the
delivery to the Company and the Other Stockholder of such Stockholder's Offer
Notice or Sale Notice (if any) (the "Election Period").
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<PAGE>
b. FIRST OFFER RIGHT.
i. FIRST OFFER RIGHT OF THE COMPANY.
(1) At least 45 days prior to making any Transfer of any
Stockholder Shares (other than a Public Sale), the transferring
Stockholder (the "Transferring Stockholder") shall deliver a written
notice (an "Offer Notice") to an independent committee established by
the Board (a "Committee") and the Other Stockholder(s). The Offer
Notice shall disclose in reasonable detail the proposed number of
Stockholder Shares to be transferred, the proposed terms and conditions
of the Transfer and the identity of the prospective transferee(s) (if
known).
(2) The Company may, by recommendation of the Committee, elect
to purchase all, but not less than all of the Stockholder Shares
specified in the Offer Notice at the price and on the terms specified
therein by delivering written notice of such election to the
Transferring Stockholder and the Other Stockholder(s) as soon as
practical but in any event within 15 days after the delivery of the
Offer Notice.
ii. FIRST OFFER RIGHT OF THE OTHER STOCKHOLDER.
(1) If the Company has not elected to purchase the Stockholder
Shares within such 15-day period, the Other Stockholder(s) may elect to
purchase all or any portion of its pro rata share (based on the number
of Stockholder Shares held by such Person on a Fully Diluted Basis) of
the Stockholder Shares specified in the Offer Notice for a price not
less than 105% of the price and on the terms offered by the Company by
delivering written notice of such election to the Transferring
Stockholder as soon as practical but in any event within 45 days after
delivery of the Offer Notice; provided, however, that the Transferring
Stockholder shall not be required to sell any of the Stockholder Shares
specified in the Offer Notice to any Other Stockholder(s) unless all
such offered Shares are elected to be and are so purchased.
(2) If the Company or the Other Stockholder(s) have elected to
purchase the Stockholder Shares offered in the Offer Notice from the
Transferring Stockholder, the Transfer of such shares shall be
consummated as soon as practicable after the delivery of the election
notice to the Transferring Stockholder, but in any event within 30 days
after the expiration of the Election Period.
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<PAGE>
iii. TRANSFER TO THIRD PARTIES.
(1) If the Company and the Other Stockholder have not elected
to purchase all of such Stockholder Shares being offered, the
Transferring Stockholder may, within 120 days after the expiration of
the Election Period and subject to the provisions of subsection (c)
below, Transfer all such Stockholder Shares to one or more third
parties at a price not less than 110% of the price offered by the Other
Stockholder(s) and on other terms no more favorable to the transferees
thereof than offered to the Company and the Other Stockholder(s) in the
Offer Notice.
(2) Any Stockholder Shares not transferred within such 120-
day period shall be re-offered to the Company and the Other
Stockholder(s) under this Section 8(b) prior to any subsequent
Transfer.
iv. The purchase price specified in any Offer Notice shall be
payable solely in cash at the closing of the transaction or, if provided in the
Offer Notice, in installments over time.
c. TAG-ALONG RIGHTS.
i. In the event the Ginsburgs shall Transfer more than 50% of their
aggregate Stockholder Shares (other than pursuant to a Public Sale), at least 30
days prior to such Transfer, the Ginsburgs will deliver a written notice (the
"Sale Notice") to the Company and to Westar, specifying in reasonable detail the
identity of the prospective transferee(s) and the terms and conditions of the
Transfer. Westar may elect to participate in the contemplated Transfer by
delivering written notice to the Ginsburgs within 30 days after delivery of the
Sale Notice.
ii. If Westar has elected to participate in such Transfer, the
Ginsburgs and Westar will be entitled to sell in the contemplated Transfer, at
the same price and terms, a number of Stockholder Shares equal to the product of
(i) the quotient determined by dividing the percentage of the class of
Stockholder Shares held by such person by the aggregate percentage of the class
of Stockholder Shares owned by the Ginsburgs and Westar participating in such
sale and (ii) the number of Stockholder Shares of such class to be sold in the
contemplated Transfer.
For example, if the Sale Notice contemplated a sale of 100
shares of Common Stock by the Ginsburgs (assuming such 100
shares represents more than 50% of the Ginsburgs' stock
holdings), and if the Ginsburgs at such time owns 30% of all
shares of Common Stock and if Westar elects to participate and
owns 20% of all
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shares of Common Stock, the Transferring Stockholder would be
entitled to sell 60 shares [(30% / 50%) x 100 shares] and the
Other Stockholder wold be entitled to sell 40 shares [(20% /
50%) x 100 shares].
iii. The Ginsburgs shall use best efforts to obtain the agreement of
the prospective transferee(s) to the participation of Westar in any contemplated
Transfer, and the Ginsburgs shall not Transfer any of its Stockholder Shares to
the prospective transferee(s) if the prospective transferee(s) declines to allow
the participation of Westar as provided herein.
d. PREEMPTIVE RIGHTS.
i. If (1) the Company authorizes the issuance or sale of any equity
securities (other than as a dividend on the outstanding Common Stock) to any
Person and if, and only if, (2) such issuance or sale (individually or in the
aggregate) would reduce Westar's equity ownership percentage of the Company to
less than 35% of the outstanding Common Stock as of the date or dates of such
authorization on a Fully Diluted Basis, the Company shall first offer to sell to
Westar a portion of such equity securities equal to the quotient determined by
dividing (a) the number of shares of Common Stock held by Westar on a Fully
Diluted Basis by (b) the total number of shares of outstanding Common Stock on a
Fully Diluted Basis (prior to giving effect to any anti-dilution adjustments
with respect to any such options, warrants or convertible securities). Westar
shall be entitled to purchase such equity securities for the same price and on
the same terms as such equity securities are to be offered to such Person. The
purchase price for all equity securities offered to Westar shall be payable in
cash by wire transfer of immediately available funds.
ii. To exercise its purchase rights hereunder, Westar must within 30
days after receipt of written notice from the Company describing in reasonable
detail the equity securities being offered, the purchase price thereof, the
payment terms and Westar's percentage allotment, deliver a written notice to the
Company describing its election hereunder.
iii. Upon the expiration of the offering period described above, the
Company shall be entitled to sell such equity securities which Westar has not
elected to purchase during the 90 days following such expiration on terms and
conditions no more favorable to the purchasers thereof than those offered to
Westar. Any equity securities offered or sold by the Company to any other Person
after such 90-day period must be re- offered to Westar pursuant to the terms of
this subsection 8(d).
e. PERMITTED TRANSFERS. The restrictions set forth in this Section 8
shall not apply with respect to any Transfer of Stockholder Shares by any
Stockholder (i) in the case of the
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Ginsburgs, pursuant to applicable laws of descent and distribution or among the
Ginsburgs' Family Group or (ii) in the case of Westar, among its Affiliates
(collectively referred to herein as "Permitted Transferees"); provided that the
restrictions contained in this Section 8 shall continue to be applicable to the
Stockholder Shares after any such Transfer and provided further that the
transferees of such Stockholder Shares shall have agreed in writing to be bound
by the provisions of this Agreement affecting the Stockholder Shares so
transferred. For purposes of this Agreement, "Family Group" means an
individual's spouse and descendants (whether natural or adopted) and spouses of
descendants and any trust, family limited partnership or similar entity solely
for the benefit of the individual and/or the individual's spouse and/or
descendants and/or spouses of their descendants, and "Affiliate" or "subsidiary"
of Westar means each Person as to which Westar, directly or indirectly, (i) owns
or controls 50% or more of the aggregate capital stock, partnership interests or
other equity interests or (ii) any Person which controls, is controlled by or is
under common control with Westar. For purposes hereof "Affiliate" shall
specifically include, but not be limited to, Westar's parent, Western Resources,
Inc., and any of such parent's subsidiaries including, but not limited to,
Protection One, Inc., following closing of the pending acquisition by Western
Resources, Inc. of not less than 50% of the outstanding equity of Protection
One, Inc.
9. SALE OF THE COMPANY.
a. If a Committee shall approve a cash sale of all or substantially
all of the Company's assets determined on a consolidated basis or a cash sale of
all of the Company's outstanding capital stock to any other person or entity
(collectively, a "Sale of the Company"), Westar shall either (i) vote for,
consent to and raise no objections against, such Sale of the Company or (ii)
purchase the shares of outstanding Common Stock it does not then own on
substantially the same terms and conditions as approved by the Committee. Westar
shall have thirty days from the date of notice from the Committee of approval of
any such sale to agree to such purchase. If the Sale of Company is structured as
a sale of stock, each Stockholder shall agree to sell all of its shares of
capital stock of the Company and rights to acquire shares of capital stock of
the Company on the terms and conditions approved by the Committee. Each
Stockholder shall take all necessary or desirable actions in connection with the
consummation of the Sale of the Company as reasonably requested by the Company.
b. The obligations of the Stockholders with respect to the Sale of
the Company are subject to the satisfaction of the following conditions:
i. If any holders of a class of the Company's capital stock are
given an option as to the form and amount of consideration to be
received, each holder of such class of capital stock shall be given the
same option; and
ii. Each holder of then currently exercisable rights to acquire
shares of a class of the Company's capital stock shall be given an
opportunity to either
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(1) exercise such rights prior to the consummation of the Sale
of the Company and participate in such sale as holders of such class of
capital stock, or
(2) upon the consummation of the Sale of the Company, receive
in exchange for such rights consideration equal to the amount
determined by multiplying (a) the same amount of consideration per
share of the Company's capital stock received by holders of such class
of capital stock in connection with the Sale of the Company less the
exercise price per share of such capital stock of such rights to
acquire such class of capital stock by (b) the number of shares of such
class of capital stock represented by such rights.
iii. The Stockholder shall not be required to make any
unqualified representations or warranties to any Person in connection with
such sale, except as to (i) good title to the stock being sold, (ii) the
absence of encumbrances with respect to the Stock being sold, (iii) the
valid existence and good standing of the Stockholder (if applicable), (iv)
the authority for, and validity and binding effect of (as against such
Stockholder), any agreement entered into by such Stockholder in connection
with such sale, (v) all required material consents to such Stockholder's
sale and material governmental approvals having been obtained (excluding
any securities laws) and (vi) the fact that no broker's commission is
payable by the such Stockholder as result of Stockholder's conduct in
connection with the sale; and
c. The Stockholder shall not be required to provide any indemnities in
connection with such sale except for breach of the representations and
warranties contained in Section 9(b)(iii).
10. LEGEND. Each certificate evidencing Stockholder Shares or
securities convertible into Stockholder Shares and each certificate issued in
exchange for or upon the Transfer of any such securities (if such securities
remain Stockholder Shares or remain convertible into Stockholder Shares after
such Transfer) shall be stamped or otherwise imprinted with a legend in
substantially the following form:
The securities represented by this certificate are subject to
voting obligations, transfer restrictions and certain other
provisions set forth in a Stockholders Agreement dated as of
October ____, 1997, among the issuer of such securities (the
"Company") and certain of the Company's stockholders, as
amended and modified from time to time. A copy of such
Stockholders Agreement shall be furnished without charge by
the Company to the holder hereof upon written request to the
Company at its principal executive office.
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The Company shall imprint such legend on certificates evidencing Stockholder
Shares and securities convertible into Stockholder Shares outstanding as of the
date hereof. The legend set forth above shall be removed from the certificates
evidencing any shares which cease to be Stockholder Shares in accordance with
Section 11 hereof.
11. REMOVAL OF RESTRICTIONS ON TRANSFERS.
a. RESTRICTIONS. Stockholder Shares are transferable in (i) a public
offering registered under the Securities Act or (ii) in a transaction pursuant
to Rule 144 or any other legally available means of Transfer after the
Transferring Stockholder has satisfied the conditions specified in subsection
(b) below.
b. REMOVAL OF LEGEND. In connection with the Transfer of any
Stockholder Shares (other than a Transfer in a public offering registered under
the Securities Act), a Stockholder shall deliver written notice to the Company
describing in reasonable detail the Transfer or proposed Transfer, together with
an opinion of counsel which (to the Company's reasonable satisfaction) is
knowledgeable in securities laws matters, to the effect that such Transfer of
Stockholder Shares may be effected without registration of such Stockholder
Shares under the Securities Act.
c. TRANSFERS. If the Company is not required to deliver new
certificates for such Stockholder Shares without the legend described in Section
10, a Stockholder shall not Transfer any Stockholder Shares to any Person until
the prospective transferee has agreed to be bound by this Agreement and to
execute and deliver to the Company and the Other Stockholder a counterpart of
this Agreement.
12. TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or attempted
Transfer of any Stockholder Shares in violation of any provision of this
Agreement shall be void, and the Company shall not record such Transfer on its
books or treat any purported transferee of such Stockholder Shares as the owner
of such shares for any purpose.
13. TERMINATION. Notwithstanding anything to the contrary contained
herein,
a. This Agreement shall terminate automatically and be of no further
force or effect upon the fifteenth anniversary of the date hereof unless
extended by the parties hereto in accordance with applicable law.
b. Sections 8 and 9 of this Agreement shall terminate and be of no
further force or effect upon a Sale of the Company or the consummation of a
Public Sale with respect to the Stockholder Shares sold in such Public Sale.
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c. This Agreement shall terminate and be of no further force and
effect upon Westar's ownership of Shares being less than 10% of the outstanding
Shares on a Fully Diluted Basis.
14. NEGATIVE COVENANTS. Without the prior approval of Westar, the
Company will not so long as Preferred Shares are outstanding: (a) authorize or
issue any equity securities equal to or senior as to dividends or upon
liquidation to the Preferred Stock; or (b) authorize or make any dividends or
other distributions to the holders of Common Stock. Without the prior approval
of Westar, the Company will not, so long as Westar or its Affiliates own or
control at least 15% of the outstanding equity securities of the Company, issue
any equity security senior to the Common Stock.
15. DIVIDEND DEDUCTION.
a. The purchase of the Shares by Westar has been entered into on the
assumption that for federal income tax purposes the dividends on Westar's
Preferred Shares will be eligible for the 80% dividends received deduction
provided by Section 243 of the Internal Revenue Code of 1986, as amended to the
date hereof (the "Code") (the "Dividends Received Deduction").
b. If (i) by reason of any change in the Code or the regulations
thereunder as in effect on the date hereof or (ii) as a result of any change in
the interpretation thereof by any Court, administrative body or the Internal
Revenue Service and Westar shall not be eligible to claim the Dividends Received
Deduction with respect to dividends on the Preferred Shares (other than partly
or wholly as a result of Westar's failure to meet the current requirements of
Section 243 of the Code), then (A) the Company shall pay to Westar, not later
than 60 days following written notice to the Company by Westar of such
ineligibility, such sums as, when taken together with the dividends paid to
Westar as of the date of such notice of ineligibility with respect to the
Preferred Shares, shall be required to cause Westar's effective after-tax yield
with respect to such dividends to be the same as Westar's effective after-tax
yield with respect to such dividends would have been had such ineligibility not
occurred, (B) the Company shall pay to Westar, on each dividend payment date
with respect to the Preferred Shares, commencing with the first such date
following written notice of such ineligibility to the Company by Westar, such
sums as, when taken together with the dividends paid to Westar on such dates
with respect to the Preferred Shares, shall be required to cause Westar's
effective after-tax yield with respect to such dividends to be the same as
Westar's effective after-tax yield with respect to such dividends would have
been had such ineligibility not occurred and (C) the sum due to Westar shall be
calculated as follows: if X is the face amount of the Preferred Stock then
outstanding, Y is the new Dividends Received Deduction rate expressed as a
decimal (which shall not be less than 0.50), and Z is the number of days for
which the calculation is being performed, then the sum due to Westar equals ((X
*.0975) * (0.80 - Y) * (0.40) * (Z / 360)) / (0.60); PROVIDED, however, that if
the Company shall have received any such notice of ineligibility, then, in lieu
of making any indemnity payments described in the foregoing clause (B) of this
sentence, the Company, upon
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written notice to Westar not later than 60 days after receipt of such notice of
ineligibility, shall have the right to purchase all the Preferred Shares
(subject to Westar's right to convert the Preferred Shares to Common Stock) then
outstanding on the date specified in such notice (which date shall not be more
than 120 days from the date of such notice) at a price equal to the greater of
the average closing stock price for Common Stock for the 20 consecutive trading
days immediately preceding the date of such notice and $2.00 per share plus (i)
the dividends accrued but unpaid to the date of purchase, and (ii) such sums, as
when taken together with the dividends paid or accrued to the date of
repurchase, as shall be required to cause Westar's effective after-tax yield
with respect to such dividends to be the same as Westar's effective after-tax
yield with respect to such dividends would have been had such ineligibility not
occurred.
c. The indemnity payments provided for herein shall not been deemed to
represent amounts payable on or with respect to the Preferred Shares or to
Westar, as the holder of the Preferred Shares, and shall represent a separate
obligation of the Company to Westar and its Permitted Transferees.
16. MISCELLANEOUS.
a. AMENDMENT AND WAIVER. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company or the Stockholders unless such modification,
amendment or waiver is approved in writing by the Company and the Stockholders.
The failure of any party to enforce any of the provisions of this Agreement
shall in no way be construed as a waiver of such provisions and shall not affect
the right of such party thereafter to enforce each and every provision of this
Agreement in accordance with its terms.
b. SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this
Agreement in such jurisdiction or affect the validity, legality or
enforceability of any provision in any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein. In
the event any provision of this Agreement shall be held invalid, the parties
agree to enter into such further agreements as may be necessary in order to
carry out the intent and purposes of the parties herein.
c. ENTIRE AGREEMENT. Except as otherwise expressly set forth herein,
this Agreement embodies the complete agreement and understanding among the
parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
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d. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, this
Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Stockholders (including Permitted
Transferees) and any subsequent holders of Stockholder Shares and the respective
successors and assigns of each of them, so long as they hold Stockholder Shares;
PROVIDED, HOWEVER, that the rights of Westar set forth in Sections 8(c) and 8(d)
shall not be assignable or Transferable (whether in connection with the Transfer
of its Stockholder Shares or otherwise) other than to an Affiliate of Westar in
connection with the Transfer of its Stockholder Shares, and any assignment of
such rights other than pursuant to the terms of this section shall be null and
void.
e. REMEDIES. The Company and the Stockholders shall be entitled to
enforce their rights under this Agreement specifically, to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights existing in their favor. The parties hereto agree and acknowledge
that money damages would not be an adequate remedy for any breach of the
provisions of this Agreement and that the Company or any Stockholder may in its
sole discretion apply to any court of law or equity of competent jurisdiction
for specific performance and/or injunctive relief (without posting a bond or
other security) in order to enforce or prevent any violation of the provisions
of this Agreement.
f. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
hand delivered or sent by first class registered or certified mail (return
receipt requested), postage prepaid, to the respective addresses of Westar and
the Company set forth below, unless subsequently changed by written notice. Any
notice shall be deemed to be effective when it is received.
To Westar: Westar Capital, Inc.
818 South Kansas Avenue
P.O. Box 889
Topeka, Kansas 66601
Attention: President
Phone: 785-575-6322
Fax: 785-575-1788
With a copy to:
John K. Rosenberg, Esq.
818 South Kansas Avenue
P.O. Box 889
Topeka, Kansas 66601
Phone: 785-575-6322
Fax: 785-575-8136
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To the Company: Guardian International, Inc.
3880 North 28th Terrace
Hollywood, Florida 33020-1118
Attention: Richard Ginsburg, President
Phone: 954-926-5200
Fax: 954-926-1822
With a copy to:
Harvey Goldman, Esq.
Steel Hector & Davis LLP
200 South Biscayne Boulevard
41st Floor
Miami, FL 33131-2398
Phone: 305-577-7011
Fax: 305-577-7001
g. VISITATION RIGHTS. The Stockholders may, during normal business
hours, at the Stockholders' expense, and upon reasonable prior notice to a
member of the senior management of the Company (i) visit and inspect the
properties of the Company and its subsidiaries, (ii) examine and copy their
books of record and account, and (iii) discuss their affairs, finances and
accounts with its officers, employees and independent public accountants,
subject, in each case, to any confidentiality agreements to which the Company is
a party; PROVIDED, however, that no such visit, inspection, examination or
discussion shall unreasonably disrupt normal operations of the Company and
PROVIDED, however, that such Stockholder will hold, and will cause its
affiliates, representatives and advisors to hold, in strict confidence, all
confidential documents and information (the "Information") provided by the
Company, its officers, employees and independent public accountants, and will
not release or disclose the Information to any other Person except to any Person
who such Stockholder demonstrates has a need to know such Information, except
that the Stockholder will have no obligation to protect any portion of the
Information which is (i) publicly available, (ii) previously known to the
receiving party without an obligation to keep it confidential or (iii) is
required to be disclosed by law, rule, regulation or as a result of any legal
process.
h. AMENDMENT TO ARTICLES AND BY-LAWS. The Stockholders shall not vote
to amend the Articles of Incorporation of the Company, nor shall the Company
amend its by-laws in any manner which conflicts with the provisions of this
Agreement.
i. GOVERNING LAW. All issues and questions concerning the
construction, validity, interpretation and enforceability of this Agreement and
the exhibits and schedules hereto shall be governed by, and construed in
accordance with, the laws of the State of Florida, without giving effect to any
choice of law or conflict of law rules or provisions (whether of the State of
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Florida or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Florida.
j. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN
CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THIS AGREEMENT.
k. PREVAILING PARTY. If a party commences an action against another
party to interpret or enforce any of the terms of this Agreement or exhibits
hereto or as a result of a breach by another party of any terms hereof or of the
exhibits, the non-prevailing (or defaulting) party shall pay to the prevailing
party reasonable attorneys' fees, costs and expenses incurred in connection with
the prosecution or defense of such action (including at any appellate level).
l. BUSINESS DAYS. If any time period for giving notice or taking
action hereunder expires on a day which is a Saturday, Sunday or legal holiday
in the states of Florida, Kansas, Nevada, or New York the time period shall
automatically be extended to the business day immediately following such
Saturday, Sunday or legal holiday.
m. DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
n. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
GUARDIAN INTERNATIONAL, INC.
By: /s/ RICHARD GINSBURG
------------------------------------
Richard Ginsburg, President and Chief
Executive Officer
/s/ HAROLD GINSBURG
------------------------------------
Harold Ginsburg
/s/ SHEILAH GINSBURG
------------------------------------
Sheilah Ginsburg
/s/ RICHARD GINSBURG
------------------------------------
Richard Ginsburg
/s/ RHONDA GINSBURG
------------------------------------
Rhonda Ginsburg
WESTAR CAPITAL, INC.
By: /s/ RITA A. SHARPE
------------------------------------
Name: Rita A. Sharpe
Title: President
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SCHEDULE A
SCHEDULE OF STOCKHOLDERS
NAME NUMBER OF SHARES AND CLASS OF CAPITAL STOCK
- ---- -------------------------------------------
Harold Ginsburg 1,403,533 shares
Sheilah Ginsburg 903,533 shares
Richard Ginsburg 629,246 shares
Rhonda Ginsburg 629,245 shares
Westar Capital, Inc. Common Stock: 2,790,300 shares *
Preferred Stock: 1,875,000 shares **
* As of the date of the Common Shares Closing.
** As of the date of the Closing of the Preferred Shares.
20
EXHIBIT 5
REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement dated October 21, 1997 between
Guardian International, Inc., a Nevada corporation (the "Company"), and Westar
Capital, Inc., a Kansas corporation (the "Stockholder").
RECITALS
The Company has sold to the Stockholder 2,500,000 shares (the
"Common Shares") of the Company's Class A Voting Common Stock, par value $.001
per share (the "Common Stock") and has agreed to sell to the stockholders
1,875,000 shares (the "Preferred Shares") of Series A 9 3/4% Convertible
Cumulative Preferred Stock (the "Preferred Stock"), par value $.001 per share,
which is convertible into Common Stock. In this Agreement, the Common Shares and
the Common Stock issuable by the Company upon conversion of the Preferred
Shares, together with any stock dividends, distributions, or splits or any
shares issued or issuable in connection with any reclassification,
recapitalization, merger or consolidation or reorganization ("Adjustments"),
shall be collectively referred to as the "Shares."
AGREEMENT
1. REGISTRATION RIGHTS.
(a) INCIDENTAL RIGHTS. If at any time or from time to time the Company
proposes to file with the Securities and Exchange Commission (the "Commission")
a registration statement (other than a registration statement on Form S-8
covering solely an employee benefit plan or a registration statement on Form S-3
covering solely offers pursuant to a dividend or interest reinvestment plan) for
the registration under the Securities Act of 1933, as amended (the "Securities
Act") of any shares of Common Stock for sale to the public by the Company or on
behalf of a stockholder of the Company for cash (excluding shares of Common
Stock issuable by the Company upon the exercise of employee stock options or in
connection with the merger or consolidation of the Company with one or more
other corporations), the Company shall give the Stockholder and Heller
Financial, Inc. ("Heller") so long as Heller has Heller Registration Rights as
later defined, at least 30 days' prior written notice of the filing of the
proposed registration statement. The notice shall include a list of the states
and foreign jurisdictions, if any, in which the Company intends to qualify such
shares, the number of shares so proposed to be registered, the proposed date of
filing of such registration statement, any proposed means of distribution of
such shares, any proposed managing underwriter or underwriters, and a good faith
estimate by the Company or managing underwriter of the maximum offering price
thereof, as such price is proposed to appear on the facing page of such
registration statement. On written request of the Stockholder (and Heller, if
applicable) received by the Company within 15 days after the date of the
Company's delivery of its notice of intention, the Company shall, subject to the
conditions and in accordance with the procedures set forth in Sections
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1(c) and 1(d), and at its own expense as provided in Section 3, include in the
coverage of such registration statement and qualify for sale under the blue sky
or securities laws of the various states, the aggregate number of Shares
proposed to be registered (the "Registrable Shares").
Notwithstanding any other provision in this Section 1(a), if in
connection with an underwritten offering the managing underwriter (which shall
be a nationally recognized independent investment banking firm or such firm as
the parties shall mutually agree) for the Company indicates its reasonable
belief in writing that the effect of including all or part of the Registrable
Shares in such underwritten offering will materially and adversely affect the
sale of the Registrable Shares (which statement of the managing underwriter
shall also state the maximum number of shares (the "Maximum Shares"), if any,
which can be sold without materially adversely affecting the sale of the
Registrable Shares), then the number of Registrable Shares to be included in the
offering shall be reduced to the Maximum Shares and such Maximum Shares shall be
allocated (i) first, to the Company; and (ii) second, between the Stockholder
and Heller, in proportion, as nearly as practicable, as such Person's
Registrable Shares bears to the aggregate number of Registrable Shares.
If the managing underwriter has not limited the number of Shares to be
underwritten, the Company and other holders of the Company's securities, in
addition to Heller, may include securities for its (or their) own account in
such registration if (A) the managing underwriter so agrees and (B) the number
of shares which would otherwise have been included in such registration and
underwriting will not thereby be limited and (C) such other securities are then
registrable on Form S-3.
No registration statement effected under this Section 1(a) shall
release the Company of its obligations to file registration statements on behalf
of Stockholder under Section 1(b).
Notwithstanding any request for inclusion in any registration statement
under this Section 1(a), the Stockholder may elect to reduce or withdraw its
request for inclusion of its Shares at any time prior to execution of the
underwriting agreement with respect thereto by the Stockholder.
The Company shall have the right to select all underwriters, including
the managing underwriter, of all public offerings of shares of Common Stock
subject to the provisions of this Section 1(a). The Stockholder shall enter into
(together with the Company) an underwriting agreement with the underwriter or
underwriters, provided that such underwriting agreement is in a customary form
and is reasonably acceptable to the Stockholder. Nothing in this Section 1(a)
shall create any liability on the part of the Company to the Stockholder if the
Company for any reason decides not to file such a registration statement.
(b) MANDATORY RIGHTS. Upon written request by the Stockholder, the
Company shall, subject to the conditions, and in accordance with the procedures,
set forth in this Section 1(b) and Sections 1 (c) and 1(d), file a registration
statement, including, without limitation, by means of a shelf registration
pursuant to Rule 415 under the Securities Act (a "Shelf Registration") if so
requested by the Stockholder, (and use its best efforts to cause such
registration statement to become effective) and use its best efforts to qualify
Shares owned by the Stockholder for sale under the blue
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sky or securities laws of such states as may be reasonably requested by the
Stockholder. The request for registration pursuant to this Section 1(b) shall
specify the number of Shares to be registered. The Stockholder shall have the
right to select the underwriters and managers to administer the offering,
subject to approval of the Company, which approval may not be unreasonably
withheld. The Company shall enter into (together with the Stockholder) an
underwriting agreement with the underwriter or underwriters, provided that such
underwriting agreement is in a customary form and is reasonably acceptable to
the Company and the Stockholder.
The Company shall be permitted to delay the filing of any registration
statement requested pursuant to this Section 1(b) or to delay its effectiveness
for a reasonable period of time (in no event to exceed 45 days) if, in the good
faith and reasonable judgment of the Board of Directors of the Company, such
registration would have a material adverse effect on pending financing
transactions, corporate reorganizations or other material events involving the
Company, or if the Company, in the good faith judgment of its Board of
Directors, reasonably believes that the filing thereof at the time requested
would require disclosure of material confidential information which would
materially and adversely affect the business or prospects of the Company.
Notwithstanding anything herein to the contrary, the Company shall not exercise
its right to delay the effectiveness of a registration statement more than twice
in any twelve (12) month period. Once the cause of such delay is eliminated, the
Company shall promptly notify the Stockholder, and as soon as the Stockholder
notifies the Company to proceed, the Company shall file a registration statement
and use its best efforts to cause such sale to be registered under the
Securities Act and qualified under the securities laws of such states as may be
reasonably requested by the Stockholder, all as provided above.
Notwithstanding any other provision in this Section 1(b), if the
managing underwriter indicates its reasonable belief in writing that the effect
of including all or part of the securities requested to be registered by the
Stockholder, together with the number of shares to be registered on behalf of
Heller or the Company, if any, in the coverage of such registration statement
will materially and adversely affect the sale of such Registrable Shares (which
statement of the managing underwriter shall also state the number of Maximum
Shares, if any), then the number of Registrable Shares shall be reduced to the
Maximum Shares and such Maximum Shares shall be allocated (i) first, to the
Stockholder and (ii) second, between the Company and Heller, in proportion, as
nearly as practicable, as such Person's Registrable Shares bears to the
aggregate number of Registrable Shares.
If the managing underwriter has not limited the number of Shares to be
underwritten, the Company and other holders of the Company's securities, in
addition to Heller, may include securities for its (or their) own account in
such registration if (A) the managing underwriter so agrees and (B) the number
of shares which would otherwise have been included in such registration and
underwriting will not thereby be limited and (C) such other securities are then
registrable on Form S-3.
The Stockholder shall be entitled to request three registrations
pursuant to this Section 1(b). The Company shall be obligated to maintain the
effectiveness of each such registration statement until the earlier of (A) the
sale of all shares registered pursuant thereto, or (B) the date that is two
years after the date on which the registration statement is declared effective.
The Company shall not
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be required by this Section 1(b) to effect a registration of Shares unless (A)
Form S-3, or another equivalent short-form registration statement, is then
available to the Company for such registration, and (B) the aggregate number of
the Shares requested to be registered exceeds 500,000 Shares as adjusted for any
Adjustments.
The Stockholder may withdraw a request under this Section 1(b) in
circumstances where the Company is in material breach of its obligations
hereunder and has not cured such breach after notice thereof and a reasonable
opportunity to do so, or the withdrawal occurs in connection with a delay by the
Company or inability of Stockholder to include all of its Shares requested by
Stockholder to be so registered or the failure of any requested registration to
become or remain effective as provided herein. Any request so withdrawn prior to
such registration statement being declared effective shall not constitute a
request for determining the number of requests to which Stockholder is entitled.
(c) CERTAIN REGISTRATION CONDITIONS. The Company shall not be required
to effect a registration of any Shares of the Stockholder pursuant to Section
1(a) or 1(b), or file any post-effective amendment thereto:
(1) unless the Stockholder agrees (w) that it has a present
intention to sell (other than in connection with a Shelf Registration) its
Shares so requested (x) to sell and distribute a portion or all of its Shares in
accordance with the plan or plans of distribution adopted by and through
underwriters, if any, acting for the Company with respect to any request under
Section 1(a), and (y) to bear a pro rata share of underwriter's discounts and
commissions;
(2) if, in the case of a request for registration under the
provisions of Section 1(b), in the opinion of counsel for the Company and
counsel for the Stockholder, the Shares for which registration has been
requested may be disposed of within a comparable time frame without registration
under the Securities Act and upon such disposition all legends on certificates
representing such Shares which restrict transfer under the Securities Act and
applicable state securities laws may be removed from such certificates and any
such restriction and legends are so removed;
(3) if, in the case of a request for registration of an
underwritten offering under the provisions of Section 1(b), (x) a registration
statement requested by the Stockholder with respect to an underwritten offering
covering Common Stock became effective in the same calendar quarter in which
such request was made, (y) the Company in good faith anticipates filing a
registration statement for an offering of Common Stock for the Company's account
within thirty (30) days after such demand date and has not abandoned such
proposed offering; or (z) the Company has received a request for a demand
registration from the holders of other registration rights pursuant to which the
Company is effecting a registration of Common Stock within thirty (30) days of
the date of the Stockholder's request;
(4) unless the Company has received from the Stockholder all
such information the Company reasonably requests from the Stockholder concerning
the Stockholder and its intended method of distribution of the Shares to enable
the Company to include in the registration statement all material facts required
to be disclosed therein; or
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(5) if the particular Shares for which registration has been
requested have been distributed to the public pursuant to an offering registered
under the Securities Act, sold to the public through a broker, dealer or market
maker in compliance with Rule 144 under the Securities Act (or any similar rule
then in force), or repurchased by the Company or any affiliate thereof.
(d) COVENANTS AND PROCEDURES. If and whenever the Company is required
hereunder to effect the registration of Shares under the Securities Act, the
Company, at its expense as provided in Section 3 hereof and as expeditiously as
possible, shall:
(1) In accordance with the Securities Act and all applicable
rules and regulations, promptly, and in any event within forty-five (45) days of
the request, prepare and file with the Commission a registration statement
covering the Shares requested to be registered and use its best efforts to cause
such registration statement to become and remain effective. The Company will
file such post-effective amendments to such registration statement (and use its
best efforts to cause them to become effective) and such supplements as are
necessary so that current prospectuses are at all times available until the
earlier of the completion of the distribution of all shares under the
registration statement or two (2) years after the effective date of the
registration statement; PROVIDED that before filing a registration statement or
prospectus or any amendments or supplements thereto, the Company will furnish to
counsel selected by the Stockholder, and the sales or placement agent or agents,
if any, for the Shares and the managing underwriter or underwriters, if any,
draft copies of all such documents proposed to be filed at least seven (7) days
prior to such filing, which documents will be subject to the reasonable review
of the Stockholder, the sales or placement agent or agents, if any, for the
Shares and the managing underwriter or underwriters, if any, and their
respective agents and representatives and (x) the Company will not include in
any registration statement information concerning or relating to the Stockholder
to which the Stockholder shall reasonably object in writing (unless in the
reasonable opinion of outside counsel the inclusion of such information is
required by applicable law or the regulations of any securities exchange to
which the Company may be subject), and (y), the Company will not file any
registration statement pursuant to Section 1(b) or amendment thereto or any
prospectus or any supplement thereto to which the Stockholder and managing
Underwriter shall reasonably object in writing;
If the offering is to be underwritten, in whole or in part,
enter into a written underwriting agreement in form and substance reasonably
satisfactory to the managing underwriter of the public offering, the Stockholder
and the Company;
If the Shares to be covered by the registration statement are
not to be sold to or through underwriters acting for the Company, the Company
shall: (w) deliver to the Stockholder, the sales or placement agent or agents,
if any, and the managing underwriter or underwriters, if any, ("Underwriter or
Underwriters") as promptly as practicable as many copies of preliminary
prospectuses as the Stockholder reasonably requests, and the Stockholder shall
keep, or cause to be kept, a written record of the distribution of such
preliminary prospectuses and shall refrain from delivery of such preliminary
prospectuses in any manner or under any circumstances which would violate the
Securities Act or the securities laws of any other jurisdiction, including the
various states of the United States, (x) deliver to the Stockholder, and the
Underwriters as soon as practicable after the effective date of the registration
statement, and from time to time thereafter as many copies of
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the prospectuses required to be delivered in connection with the sale of Shares
registered under the registration statement as the Stockholder or Underwriter
reasonably request, (y) in case of the happening, after the effective date of
such registration statement, of any event or occurrence which is required or may
be advisable, in the judgment of the Company, the Stockholder, any Underwriter
and their counsel to be set forth in an amendment of or supplement to such
prospectus to make any statements therein not misleading, give the Stockholder
and Underwriter written notice thereof and prepare and furnish to the
Stockholder, and Underwriters in such quantities as it may reasonably request,
copies of such amended prospectus or of such supplement to be attached to the
prospectus in order that the prospectus, as so amended or supplemented, will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading and
to comply with the Securities Act, and (z) deliver to the Company and the
Underwriters upon reasonable request copies of any documents incorporated into
any such registration statement, prospectus, amendment or supplement.
(2) On or prior to the date on which the registration
statement is declared effective, the Company shall use its best efforts to
register or qualify, and cooperate with the Stockholder, the Underwriter or
Underwriters, if any, and their counsel, in connection with the registration or
qualification of the Shares covered by the registration statement for offer and
sale under the securities or blue sky laws of each state and other jurisdiction
of the United States as the Stockholder or Underwriter reasonably requests, to
use its best efforts to keep each such registration or qualification effective,
including through new filings, or amendments or renewals, during the period such
registration statement is required to be kept effective and to do any and all
other acts or things necessary or advisable to enable the disposition in all
such jurisdictions of the Shares covered by the applicable registration
statement; provided that the Company will not be required to qualify generally
to do business in any jurisdiction where it is not then so qualified.
(3) The Company shall use its best efforts to cause all of the
Stockholder's Shares included in such registration statement to be listed, by
the date of the first sale of such Common Stock pursuant to such registration
statement, on each securities exchange on which the Common Stock of the Company
is then listed or proposed to be listed, if any.
(4) The Company shall make generally available to the
Stockholder and any underwriter participating in the offering conducted pursuant
to the registration statement an earnings statement satisfying the provisions of
Section 11(a) of the Securities Act no later than forty-five (45) days after the
end of the 12-month period beginning with the first day of the Company's first
fiscal quarter commencing after the effective date of the registration
statement, which earnings statement shall cover said 12-month period, which
requirement will be deemed to be satisfied if the Company timely files complete
and accurate information on Forms 10-QSB, 10-KSB, and (if needed) 8-K under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and otherwise
complies with Rule 158 under the Securities Act.
(5) The Company shall cooperate with the Stockholder and the
managing Underwriter or Underwriters, if any, to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive legends)
representing the Shares to be sold under the registration
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statement, and enable such securities to be in such denominations and registered
in such names as the managing Underwriter or Underwriters, if any, or the
Stockholder requests, subject to the obligation to return any certificates
representing securities not sold.
(6) The Company shall use its best efforts to cause the
Stockholder's Shares covered by the registration statement to be registered with
or approved by such other governmental agencies or authorities within the United
States as may be necessary to enable the Stockholder or the Underwriter or
Underwriters, if any, to consummate the disposition of such Shares.
(7) The Company shall make available for inspection by the
Stockholder and each Underwriter participating in any disposition pursuant to
such registration statement, and any attorney, accountant or other agent
retained by the Stockholder or any such Underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate documents
and properties of the Company, as shall be reasonably necessary to enable them
to exercise their due diligence responsibility, and cause the Company's
officers, directors, employees, and independent public accountants to supply all
information reasonably requested by any such Inspector in connection with such
registration statement, in each case to the extent necessary to enable the
Stockholder and any Underwriter to conduct a "reasonable investigation" for
purposes of Section 11(a) of the Securities Act.
(8) The Company shall obtain a "cold comfort" letter from the
Company's independent public accountants, and an opinion of counsel for the
Company, each in customary form and covering such matters of the type
customarily covered by cold comfort letters and opinions of counsel in
connection with public offerings of securities, as the Stockholder or
Underwriters may reasonably request.
(9) If requested by the Stockholder, the Company shall
promptly incorporate in a prospectus, prospectus supplement or post-effective
amendment such information as the Stockholder reasonably specifies should be
included therein, including, without limitation, information relating to the
planned distribution of Shares, the number of Shares being sold by the
Stockholder, the name and description of the Stockholder, the offering price of
such Shares and any discount, commission or other compensation payable in
respect of the Shares being sold, the purchase price being paid therefor to the
Stockholder and information with respect to any other terms of the offering of
the Shares to be sold in such offering, except to the extent that the Company is
advised in a written opinion of outside counsel that the inclusion of such
information is reasonably likely to violate applicable securities laws; and make
all required filings of such prospectus, prospectus supplement or post-effective
amendment promptly after notification of the matters to be incorporated in such
prospectus, prospectus supplement or post-effective amendment.
(10) If requested by the Stockholder the Company shall use
reasonable efforts to participate in and assist with a "road show" any other
customary marketing efforts in connection with the sale of Shares pursuant to
such registration statement, at such times and in such manner as the Company and
the Stockholder mutually may determine.
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(11) The Company shall promptly notify the Stockholder and
Underwriters, after becoming aware thereof, when the registration statement or
any related prospectus or any amendment or supplement has been filed, and, with
respect to the registration statement or any post-effective amendment, when the
same has become effective, (A) of any request by the Commission for amendments
or supplements to the registration statement or the related prospectus or for
additional information, (B) of the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement or the initiation of
any proceedings for that purpose, (C) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the Shares
for sale in any jurisdiction or the initiation of any proceeding for such
purpose or (D) of the happening of any event which makes any statement in the
registration statement or any post-effective amendment thereto, prospectus or
any amendment or supplement thereto, or any document incorporated therein by
reference untrue in any material respect or which requires the making of any
changes in the registration statement or post-effective amendment thereto or any
prospectus or amendment or supplement thereto so that they will not contain any
untrue statement or a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein (in light of
the circumstances under which they were made) not misleading.
(12) In the case of a Block Trade (defined below), the Company
shall: (1) obtain an opinion of counsel addressed to the Stockholder and the
other party to the "block trade" covering matters that are no more extensive in
scope than would be customarily covered in opinions obtained in secondary
underwritten offerings by issuers with similar market capitalization and
reporting and financial histories; (2) obtain a "cold comfort" letter from the
independent public accountants of the Company and covering matters that are no
more extensive in scope than would be customarily covered in "cold comfort"
letters and updates obtained in secondary underwritten offerings by issuers with
similar market capitalization and reporting and financial histories, provided
that the letter described in this clause (2) shall only be required to the
extent such letters are being issued in respect of non-underwritten secondary
offerings under then prevailing accounting practices; and (3) deliver a
certificate of a senior executive officer of the Company to cover matters no
more extensive in scope than those matters customarily underwritten offerings by
issuers with similar market capitalization and reporting and financial
histories. "Block Trade" shall mean the disposition, in connection with a Shelf
Registration, at a single time in a single transaction, including through one or
more placement agents, by the Stockholder, of any or all of the Registrable
Shares to one or more Institutional Investors. "Institutional Investor" shall
mean any insurance company, pension fund, mutual fund, investment company,
commercial bank, savings bank, savings and loan association, investment banking
company, trust company or any finance or credit company, or any portfolio or
investment fund managed by any of the foregoing.
(13) If any person becomes a holder of shares that were
included in a Shelf Registration statement subsequent to the time that the Shelf
Registration statement became effective, the Company shall add such holder to
the Shelf Registration statement, on a timely basis, through a post-effective
amendment or a supplement to the Prospectus, as shall be necessary in accordance
with the rules of the Commission under the Securities Act to include such holder
as a selling stockholder in a distribution under the Shelf Registration
statement.
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(e) HELLER REGISTRATION RIGHTS. The Stockholder acknowledges that
Heller has certain incidental registration rights with respect to equity
securities of the Company owned by it pursuant to that certain Agreement dated
August 15, 1996 between Heller and the Company (the "Heller Registration
Rights"). Accordingly, the Stockholder acknowledges that pursuant to the Heller
Registration Rights, Heller has the right to participate in any registration
effected pursuant to Section 1.
(f) COMPANY COVENANTS.
(1) The Company covenants to and with the Stockholder that to the
extent it shall be required to do so under the Exchange Act, the Company shall
timely file the reports required to be filed by it under the Exchange Act or the
Securities Act (including, but not limited to, the reports under Sections 13 and
15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 adopted
by the Commission under the Securities Act and the rules and regulations adopted
by the Commission thereunder) and shall take such further action as the
Stockholder may reasonably request, all to the extent required from time to time
to enable the Stockholder to sell Shares without registration under the
Securities Act within the limitations of the exemption provided by Rule 144
under the Securities Act, as such rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission and for the
Company to qualify for use of Form S-3. Upon the request of the Stockholder, the
Company shall deliver to the Stockholder a written statement as to whether it
has complied with such requirements.
(2) If at any time the Company is not subject to Section 13 or 15(d)
of the Exchange Act and is exempt from reporting pursuant to Rule 12g3-2(b)
under the Exchange Act, the Company agrees, upon the request of the Stockholder
seeking to transfer Shares in conformity with Rule 144A under the Securities
Act, to furnish to the Stockholder or prospective purchasers of the Shares from
the Stockholder the information required by Rule 144A(d)(4)(i) under the
Securities Act in the manner and at the times contemplated by such Rule.
(3) The Company covenants to make available "adequate current public
information" concerning the Company within the meaning of Rule 144(c) under the
Securities Act.
(4) The Company represents and covenants that it will qualify for use
of Form S-3 on November 1, 1998 for transactions involving secondary offerings
and that it will preserve such eligibility for so long as the Company is
obligated to file and maintain the effectiveness of registration statements
hereunder.
(5) The Company will avoid taking any action which would cause the
Common Stock to cease to be eligible for inclusion on the OTC Bulletin Board
Service.
2. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. If Shares are registered under the
Securities Act pursuant to this Agreement, the Company will indemnify and hold
harmless the Stockholder and each underwriter of such Shares and their
respective officers and directors and each other person,
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<PAGE>
if any, who controls the Stockholder or such underwriter within the meaning of
the Securities Act, against any losses, claims, damages, actions (actual or
threatened), liabilities, costs and expenses (including legal fees and costs of
court), joint or several, to which the Stockholder or such underwriter,
director, officer, or controlling person may become subject under the Securities
Act or otherwise, if and to the extent that such losses, claims, damages, costs,
expenses or liabilities arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained, in any registration
statement under which such Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; and will reimburse the
Stockholder, each such underwriter, and each such controlling person for any
legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage or liability; provided,
however, that the Company shall not be liable to the Stockholder or its
underwriters or controlling persons in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement, preliminary prospectus or final prospectus or such
amendment or supplement in reliance upon and in conformity with information
furnished to the Company through a written instrument duly executed by the
Stockholder or such underwriter specifically for use in the preparation thereof.
(b) INDEMNIFICATION BY THE STOCKHOLDER. In connection with any
registration statement in which the Stockholder is participating, Stockholder
shall indemnify and hold harmless (in the same manner and to the same extent as
set forth in Section 2(a)) the Company, each director of the Company, each
officer of the Company who signs such registration statement and all persons who
control the Company within the meaning of the Securities Act, with respect to
any statement or omission from such registration statement, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, to the extent, but only to the extent, such statement or omission was
made in reliance upon and in conformity with information furnished to the
Company through a written instrument duly executed by the Stockholder
specifically for use in the preparation of such registration statement,
preliminary prospectus or final prospectus or such amendment or supplement
thereto, and provided that the liability of the Stockholder shall be limited to
the amount of proceeds received by Stockholder in the offering giving rise to
the indemnification claim.
(c) INDEMNIFICATION PROCEDURES. Promptly after receipt by an
indemnified party of notice of the commencement of any action involving a claim
referred to in the preceding paragraphs of this Section 2, such indemnified
party shall, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the indemnifying party of the commencement of such
action; but the omission so to notify the indemnifying party will not relieve it
from any liability which it may have to the indemnified party unless such
indemnifying party is prejudiced by such omission. If any such action is brought
against an indemnified party, the indemnifying party will be entitled to
participate in and to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such
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<PAGE>
indemnified party for any legal or other expenses incurred by the latter in
connection with the defense thereof unless (i) in the reasonable opinion of
counsel for the indemnification party a conflict of interest exists between the
indemnified party and indemnifying party, (ii) the indemnified party reasonably
objects to such assumption on the basis that there may be defenses available to
it which are different from or in addition to the defenses available to the
indemnifying party, (iii) the indemnifying party has failed to timely assume the
defense of any such action or proceeding or (iv) the indemnifying party and its
counsel do not actively and vigorously pursue the defense of such action .
Whether or not such defense is assumed by the indemnifying party, the
indemnifying party will not be subject to any liability for any settlement made
without its consent. No indemnifying party will consent to entry of any judgment
or enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect of such claim or litigation. An
indemnifying party who elects not to assume the defense of an action or where a
potential conflict of interest or other defenses may be available, shall not be
obligated to pay the fees and expenses of more than one counsel and local
counsel where appropriate for all parties indemnified by such indemnifying party
with respect to such action, unless in the reasonable judgment of any
indemnified party a conflict of interest may exist between such indemnified
party and any other of such indemnified parties with respect to such action.
Cost and expenses incurred by the indemnified party shall be reimbursed, from
time to time, by the Company as and when bills are received or expenses are
incurred.
(d) CONTRIBUTION. If the indemnification provided for in this Section 2
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the 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 expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact, has been made by, or relates to information supplied by,
such indemnifying party or indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities, and expenses referred to above shall be deemed to
include all legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 2(d) were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
3. EXPENSES. All expenses incurred by the Company and the Stockholder
in connection with any registration statement covering Shares offered by the
Stockholder, including, without
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<PAGE>
limitation, all registration and filing fees (including all expenses incident to
filing with the National Association of Securities Dealers, Inc.), printing
expenses, fees and disbursements of counsel (including the reasonable fees and
disbursements of one counsel for the Stockholder) and of the independent
certified public accountants, and the expense of qualifying such Shares under
state blue sky laws (including reasonable fees and disbursements of counsel in
connection with such qualification), messenger, telephone and delivery expenses,
fees and expenses of counsel for the underwriters, costs of preparation,
printing, distribution and reproduction of the registration statement, each
prospectus, and each amendment and supplement thereto, the cost and charges of
any transfer agent and registrar, and the premiums and other costs of insurance
against liability arising out of such offering, if any, shall be borne by the
Company; provided, however, that the Stockholder shall bear its pro rata share
of (A) underwriter's discounts and commissions and (B) any transfer taxes
related to the sale of Shares. To the extent any such expenses are incurred or
paid by the Stockholder, any sales or placement agent or underwriter, if any,
thereof, the Company shall reimburse such person for the full amount thereof
promptly after a request therefor.
4. DISPOSITIONS DURING REGISTRATION. (a) The Stockholder shall not
effect any public sale or distribution (including sales pursuant to Rule 144) of
equity securities of the Company, or any securities convertible or exchangeable
or exercisable for such securities, during the fifteen days prior to and the
90-day period beginning on the effective date of any underwritten demand
registration or underwritten incidental registration (or such longer period as
the Stockholder may agree with the underwriter). The Stockholder agrees to
comply with the foregoing requirements even if its Shares are not being included
in such registration.
(b) RESTRICTIONS ON PUBLIC SALE BY THE COMPANY. The Company
shall not effect any public or non-public sale or distribution of any securities
similar to those being registered, or any securities convertible into or
exchangeable or exercisable for any such securities or similar securities,
during the fifteen (15) day period prior to, and during the 90-day period
beginning on, the effective date of any registration statement in which the
Stockholder is participating or the commencement of a public distribution of
Shares pursuant to any such registration statement (except (i) as part of such
registration or pursuant to registrations on Commission Forms S-4 or S-8 or any
similar or successor form, or on any form filed in connection with an exchange
offer or an offering of securities solely to the existing stockholders or
employees of the Company or (ii) for sales or other issuances of securities
pursuant to outstanding options, warrants, rights or similar obligations).
5. TRANSFER OF RIGHTS. No registration rights and benefits set forth in
this Agreement, including indemnification by the Company, shall be transferable
by the Stockholder in connection with the transfer of Shares except to an
"affiliate" as defined in Regulation D of the Securities Act, including but not
limited to, Protection One., Inc. following acquisition by Western Resources,
Inc., Westar's parent, of not less than 50% of the outstanding equity of
Protection One, Inc., or to any party pursuant to a Block Trade. In case of any
partial assignment to more than one affiliate or Block Trade party, the
affiliates or Block Trade parties who have the rights and benefits of the
"Stockholder" under this Agreement shall not, as a group, have the right to any
greater number of registrations than provided herein as if no such assignment
occurred.
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6. TERM. The obligations of the Company to register Shares hereunder
shall terminate on the fifth anniversary of the date of this Agreement with
respect to the registration of Shares not otherwise demanded or effected by such
date provided that at the end of such period all Shares held by the Stockholder
or any of its assigns hereunder, shall be freely and publicly tradable without
an effective registration statement. Section 2 shall survive the termination of
this Agreement.
7. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
hand delivered or sent by first class registered or certified mail (return
receipt requested), postage prepaid, to the respective addresses of the Company
and the Stockholders set forth below, unless subsequently changed by written
notice. Any notice shall be deemed to be effective when it is received.
To the Stockholder:
Westar Capital, Inc.
818 South Kansas Avenue
P.O. Box 889
Topeka, Kansas 66601
Attention: President
Phone: 785-575-6322
Fax: 785-224-1788
With a copy to:
John K. Rosenberg, Esq.
818 South Kansas Avenue
P.O. Box 889
Topeka, Kansas 66601
Phone: 785-575-6322
Fax: 785-224-1788
To the Company:
Guardian International, Inc.
3880 North 28th Terrace
Hollywood, Florida 33020-1118
Attention: Richard Ginsburg, President
Phone: 954-926-5200
Fax: 954-926-1822
With a copy to:
Harvey Goldman, Esq.
Steel Hector & Davis LLP
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200 South Biscayne Boulevard
41st Floor
Miami, FL 33131-2398
Phone: 305-577-7011
Fax: 305-577-7001
8. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF FLORIDA WITHOUT REGARD
TO CONFLICT OF LAW PRINCIPLES THEREUNDER.
9. AMENDMENTS. This Agreement may be amended only by an instrument in
writing executed by all the parties hereto.
10. COUNTERPARTS. This Agreement may be executed in multiple original
counterparts, each of which shall be deemed an original, but all of which
together shall constitute the same instrument.
11. SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable. In the
event any provision of this Agreement shall be held invalid, the parties agree
to enter into such further agreements as may be necessary in order to carry out
the intent and purposes of the parties herein.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
GUARDIAN INTERNATIONAL, INC.
By: /s/ RICHARD GINSBURG
-------------------------------------
Richard Ginsburg
President and Chief Executive Officer
WESTAR CAPITAL, INC.
By: /s/ RITA A. SHARPE
-------------------------------------
Rita A. Sharpe
President
ACKNOWLEDGED AND AGREED:
HELLER FINANCIAL, INC.
By: /s/ JOAN HEGGEN
-------------------
Joan Heggen
Vice President
Date: Oct. 21, 1997
15
