SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities Exchange Act
of 1934 (Amendment No. )
Check the appropriate box:
[ ] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
[X] Definitive Information Statement
GUARDIAN INTERNATIONAL, INC.
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(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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THIS INFORMATION STATEMENT IS BEING PROVIDED TO YOU BY THE
MANAGEMENT OF THE COMPANY.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU
ARE REQUESTED NOT TO SEND US A PROXY.
INFORMATION STATEMENT
TO STOCKHOLDERS
OF
GUARDIAN INTERNATIONAL, INC.
3880 North 28th Terrace
Hollywood, Florida 33020
November 3, 1997
GENERAL
This Information Statement is furnished by the Board of Directors of
Guardian International, Inc., a Nevada corporation (the "Company"), to inform
the stockholders of the Company of the approval of certain corporate actions.
This Information Statement will be mailed on or after November 1, 1997 to
holders of record of Class A Voting Common Stock, par value $.001 per share (the
"Class A Common Stock") and to the sole holder of all of the outstanding Class B
Nonvoting Common Stock, par value $.001 per share (the "Class B Common Stock"),
of the Company as of the record date. The record date for determining
stockholders entitled to receive this Information Statement has been established
as the close of business on October 14, 1997 (the "Record Date"). On that date,
the Company had outstanding and entitled to vote 6,496,804 shares of Class A
Common Stock and 484,035 shares of Class B Common Stock.
Specifically, this Information Statement relates to the following
corporate actions (hereinafter referred to as the "Amendments"):
1. Stockholders' approval of an amendment to the Company's Articles
of Incorporation authorizing the Company to issue 30,000,000 shares of
blank-check preferred stock (the "Preferred Stock").
2. Stockholders' approval of an amendment to the Company's Articles
of Incorporation increasing the number of authorized shares of Class B
Common Stock to 1,000,000 shares from 484,035 shares.
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APPROVAL REQUIRED
The affirmative vote of a majority of the outstanding Class A Common
Stock and the affirmative vote of a majority of the outstanding shares of Class
B Common Stock (voting as a separate class) are required to approve each of the
Amendments. The necessary majority vote was obtained during October 1997 and no
additional votes will therefore be required.
Stockholders are urged to carefully review this Information Statement and
the attachments hereto.
AMENDMENTS TO ARTICLES OF INCORPORATION
On October 14, 1997, a special independent committee of the Board of
Directors of the Company (the "Committee") adopted at a special meeting a
proposal declaring the Amendments advisable. On October 14, 1997, the full Board
of Directors of the Company (the "Board") adopted at a special meeting the
proposed recommendation of the Committee. On October 15, 1997, Harold Ginsburg,
Sheilah Ginsburg, Richard Ginsburg and Rhonda Ginsburg (the "Majority
Stockholders"), as the beneficial owners, as of the Record Date, of an aggregate
of 3,565,557 shares of Class A Common Stock (or approximately 54.88% of the
6,496,804 shares of Class A Common Stock entitled to vote on the Amendments and
approximately 51.08% of the sum of 6,980,389 shares of Class A Common Stock
entitled to vote on the Amendments and the 484,035 shares of Class B Common
Stock presently convertible to Class A Common Stock) adopted the Amendments by
written consent in lieu of a meeting. See "Voting Securities and Principal
Holders Thereof." On October 15, 1997, Heller Financial, Inc. ("Heller"), the
Company's primary lender, as the sole holder of all of the outstanding shares of
Class B Common Stock, consented in writing without a meeting to the Amendments.
As a result, the Amendments were approved by the majority vote required by law
and no additional votes will therefore be required.
The Amendments will become effective upon the filing of the Certificate of
Amendment to the Articles of Incorporation and the Certificate of Designations
with the Secretary of State of the State of Nevada (collectively, the "Articles
of Amendment"). It is anticipated that the filing will take place on or about
November 20, 1997. See "Investment from Westar Capital, Inc." for a description
of the terms of the Certificate of Designations. A copy of the form of the
Certificate of Amendment is attached hereto as Attachment A, and a copy of the
Certificate of Designations is attached hereto as Attachment B.
AMENDMENT TO AUTHORIZE BLANK-CHECK PREFERRED STOCK
The Board, the Majority Stockholders and Heller have approved the
amendment to the Company's Articles of Incorporation (the "Preferred Stock
Amendment") which authorizes 30,000,000 shares of "blank-check" preferred stock
(the "Preferred Stock"), issuable in one or
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more series. The term "blank-check" preferred stock refers to stock for which
the designations, preferences, conversion rights, cumulative, relative,
participating, optional rights, voting rights (subject to the limitations
described below), qualifications, limitations or restrictions thereof, or other
rights, are determined by the Board.
Prior to the approval and filing of the Preferred Stock Amendment, the
Company has not been authorized to issue preferred stock. Under the Preferred
Stock Amendment, the Board may authorize the issuance, at any time and from time
to time, of one or more series of Preferred Stock, subject to applicable law.
The authority to issue Preferred Stock will permit the Company to consider
financings, acquisitions or other transactions which may require the issuance of
shares of Preferred Stock. See "Investment from Westar Capital, Inc." In
addition, the Board may determine all designations, preferences, conversion
rights, cumulative relative, participating optional rights, voting rights
(subject to the limitations described below), qualifications, limitations or
restrictions thereof, or other rights of such Preferred Stock, including but not
limited to the following: designation of series and number of shares; dividend
rights; rights upon liquidation or distribution of assets of the Company; and
redemption and sinking fund provisions, if any; provided that the holders of
shares of Preferred Stock will not be entitled to more than one vote per share,
when voting as a class with holders of shares of capital stock generally, and
will not be entitled to vote separately as a class except where such class or
series of Preferred Stock is permitted to do so by law.
The Board is required to make any determination to issues shares of Common
Stock or Preferred Stock based on its judgment as to the best interests of the
stockholders and the Company. The Board could issue shares of Preferred Stock
that could, depending on the terms of such series of shares, make more difficult
an attempt to obtain control of the Company by merger, tender offer, proxy
contest or other means. The issuance of Preferred Stock could have the effect of
discouraging unsolicited takeover attempts.
Issuance of the Preferred Stock by the Board would adversely affect the
rights of the holders of Common Stock. For example, such issuance would result
in a class of securities outstanding which has preferences with respect to
dividends and in liquidation over the Common Stock and may vote as a class on
certain matters, and will (upon conversion or otherwise) enjoy all of the rights
appurtenant to Common Stock. See "Investment from Westar Capital, Inc."
INVESTMENT FROM WESTAR CAPITAL, INC.
The Company executed a Stock Subscription Agreement, dated as of October
14, 1997 (the "Subscription Agreement"), with Westar Capital, Inc., a
Kansas corporation and wholly-owned subsidiary of Western Resources, Inc.
("Westar"), pursuant to which 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 Articles 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
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Preferred Stock, designated as the "Series A 9 3/4% Convertible Cumulative
Preferred Stock, par value $.001 per share" (the "Series A Preferred Stock") 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)
upon filing the Articles of Amendment with the Nevada Secretary of State. The
term "fully diluted basis," at any date as of which the number of shares is to
be determined, includes (a) all outstanding shares of capital stock and (b) the
maximum number of shares of capital stock issuable pursuant to (i) warrants,
options and other rights to purchase securities or (ii) securities convertible
into shares of capital stock outstanding on such date.
The investment banking firm of Raymond James & Associates, Inc. has
rendered a fairness opinion, dated as of October 21, 1997, attached hereto as
Attachment C, stating that the terms and conditions contained in the
Subscription Agreement are fair, from a financial point of view, to the existing
stockholders of the Company.
A summary description of the Series A Preferred Stock follows. The
description is qualified in its entirety by the terms of the Certificate of
Designations.
DESIGNATION AND RANK
The Board has authorized the issuance of 1,875,000 shares of the first
series of the Preferred Stock designated as "Series A 9 3/4% Convertible
Cumulative Preferred Stock, par value $.001 per share," which will be senior to
all equity, including the Common Stock, of the Company as to dividends and upon
liquidation. See "Amendment to Authorize Issuance of Additional Class B Common
Stock" for a description of the Class B Common Stock.
DIVIDENDS
The holders of the Series A Preferred Stock, in preference to the holders
of Common Stock and any other class or classes of stock of the Company ranking
junior in rights and preferences to the Series A Preferred Stock as to payment
of dividends and other distributions, shall be entitled to receive, but only out
of any funds legally available for the declaration of dividends, cumulative,
preferential dividends at the annual rate of 9 3/4%, payable as follows:
(a) Series A Preferred Stock dividends (the "Dividends") shall commence to
accrue on the shares of Preferred Stock and be cumulative from and after the
date of issuance of such shares of Series A Preferred Stock and shall be deemed
to accumulate and accrue thereafter.
(b) The Dividends shall be payable to the holders of the Series A
Preferred Stock quarterly at the Company's option in cash or in additional
shares of Series A Preferred Stock ("Dividend Preferred Shares") during the
first two years after the date of issuance of such shares of Series A Preferred
Stock. Thereafter, Dividends shall be paid quarterly in cash.
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REDEMPTION
The Series A Preferred Stock shall not be redeemable by the Company.
VOTING RIGHTS
The holders of Series A Preferred Stock shall be entitled to vote with the
Common Stock on all matters required or permitted to be submitted to the
stockholders of the Company for their approval, but not as a separate class, and
shall have such other voting rights as specifically provided by Nevada law. Each
issued and outstanding share of the Series A Preferred Stock shall have one
vote. Under certain circumstances, the vote of the holders of Series A Preferred
Stock as a class to approve certain matters may be required by applicable law.
SPECIAL VOTING RIGHTS
(a) ELECTION OF DIRECTORS. Upon the failure of the Company to pay
quarterly Dividends for any four quarters (a "Default Event") and for the
duration of the Default Period (hereafter defined), the holders of the Series A
Preferred Stock, in addition to any other voting rights they may have herein or
by law, shall be entitled to vote (voting as a class by a majority of the
outstanding shares thereof) for the election to the Board of Directors of such
number of members thereof as equals at any given time a majority of the number
of members of the Board of Directors.
(b) EXPIRATION OF RIGHT. Upon termination of the Default Period, the
special voting rights of the holders of the Series A Preferred Stock provided
hereunder shall be immediately divested, but always subject to the recurrence of
such right in the holders of the Series A Preferred Stock upon the occurrence of
any subsequent Default Event.
(c) DEFAULT PERIOD. For purposes hereof, "Default Period" means a period
commencing on the date a Default Event occurs and ending upon the payment of the
next quarterly Dividend in full.
LIQUIDATION
(a) The Series A Preferred Stock shall be preferred upon liquidation over
the Common Stock and any other class or classes of stock of the Company ranking
junior in rights and preferences to the Series A Preferred Stock upon
liquidation. Holders of shares of Series A Preferred Stock shall be entitled to
be paid, after full payment is made on any stock ranking prior to the Series A
Preferred Stock as to rights and preferences (but before any distribution is
made to the holders of the Common Stock and such junior stock), the stated
liquidation value of the Series A Preferred Stock set forth in (b) below upon
the voluntary or involuntary dissolution, liquidation or winding up of the
Company (a "Liquidation").
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(b) The amount payable on each share of Series A Preferred Stock in the
event of the voluntary or involuntary dissolution, liquidation or winding up of
the Company shall be $2.00 per share.
(c) Upon Liquidation, if the net assets of the Company are insufficient to
permit the payment in full of the amounts to which the holders of all
outstanding shares of Series A Preferred Stock are entitled as provided above,
the entire net assets of the Company remaining (after full payment is made on
any stock ranking prior to the Series A Preferred Stock as to rights and
preferences) shall be distributed among the holders of shares of Series A
Preferred Stock in amounts proportionate to the full preferential amounts and
holders of shares of preferred stock ranking in parity with the Series A
Preferred Stock as to rights and preferences to which they are respectively
entitled.
(d) The right to preferential liquidation rights shall be immediately
terminated upon conversion of the Series A Preferred Stock into Common Stock.
CONVERSION PRIVILEGES
(a) Subject to the provisions for adjustment hereinafter set forth, each
share of Series A Preferred Stock shall be convertible at any time at the option
of the holder thereof, upon surrender to the Company of the certificate or
certificates evidencing the shares so to be converted, into one fully paid and
nonassessable share of Class A Common Stock.
(b) Subject to the provisions for adjustment hereinafter set forth, the
Series A Preferred Stock must be converted to Class A Common Stock:
(i) upon a secondary public offering by the Company of at least
2,500,000 shares of Class A Common Stock at not less than $2.00 per share; or
(ii) if, at any time after two years from the date of issuance of
the Series A Preferred Stock, the Class A Common Stock trades above $3.00 per
share for 20 consecutive trading days.
(c) The number of shares of Class A Common Stock into which an issued and
outstanding share of Series A Preferred Stock is convertible shall be subject to
adjustment from time to time if the Company shall at any time (A) declare a
dividend on the Class A Common Stock in shares of its Class A Common Stock, (B)
split or subdivide the outstanding Class A Common Stock or (C) combine the
outstanding Class A Common Stock into a smaller number of shares. No adjustment
in the number of shares of Class A Common Stock issuable upon conversion of a
share of Series A Preferred Stock shall be required unless such adjustment would
require an increase or decrease in the aggregate number of shares of Class A
Common Stock so issuable of at least 100 shares.
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(d) In the event of any capital reorganization of the Company, or of any
reclassification of the Common Stock (other than a subdivision or combination of
outstanding shares of Class A Common Stock), or in case of the consolidation of
the Company with or the merger of the Company with or into any other corporation
or of the sale of the properties and assets of the Company as, or substantially
as, an entirety to any other corporation, each share of Series A Preferred Stock
shall after such capital reorganization, reclassification of Common Stock,
consolidation, merger or sale be convertible upon the terms and conditions
specified herein, for the number of shares of stock or other securities or
assets to which a holder of the number of shares of Class A Common Stock into
which a share of Series A Preferred Stock is then convertible (at the time of
such capital reorganization, reclassification of Class A Common Stock,
consolidation, merger or sale) would have been entitled upon such capital
reorganization, reclassification of Common Stock, consolidation, merger or sale.
The Company shall not effect any such consolidation, merger or sale, unless
prior to or simultaneously with the consummation thereof, the successor
corporation (if other than the Company) resulting from such consolidation or
merger or the corporation purchasing such assets or the appropriate corporation
or entity shall assume by written instrument, the obligation to deliver to the
holder of each share of Series A Preferred Stock the shares of stock, securities
or assets to which, in accordance with the foregoing provisions, such holder may
be entitled upon conversion of such Series A Preferred Stock and effective
provisions are made in the Articles or Certificate of Incorporation of such
successor or transferee corporation providing for conversion privileges relating
to the Series A Preferred Stock equivalent to those set forth herein.
(e) If any question at any time arises with respect to the number of
shares of Class A Common Stock into which a share of Series A Preferred Stock is
convertible following any adjustment, such question shall be determined by
agreement between the holders of a majority of the outstanding shares of Series
A Preferred Stock and the Company or, in the absence of such an agreement by an
independent investment banking firm or an independent appraiser (in either case
the cost of which engagement will be borne by the Company) reasonably acceptable
to the Company and the holders of a majority of outstanding shares of Series A
Preferred Stock and such determination shall be binding upon the Company and the
holders of the Series A Preferred Stock.
(f) The Company will at all times have authorized, and reserve and keep
available, free from preemptive rights, for the purpose of enabling it to
satisfy any obligation to issue shares of Class A Common Stock upon the
conversion of the Series A Preferred Stock, the number of shares of Class A
Common Stock deliverable upon conversion of the Series A Preferred Stock.
TERMS OF THE STOCKHOLDERS AGREEMENT
In connection with the Subscription Agreement, the Majority Stockholders,
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
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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 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 (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:
(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 Majority Stockholders
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 Majority
Stockholders 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
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entity in which Westar, its parent or subsidiaries own or control 50% or more of
the outstanding voting securities.
REGISTRATION RIGHTS AGREEMENT
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 have therefore entered into a Registration Rights Agreement granting
Westar three demand registrations and unlimited piggyback registration rights
with respect to the Common Shares (including Class A Common Stock issued upon
conversion of the Preferred Shares).
AMENDMENT TO AUTHORIZE ISSUANCE OF ADDITIONAL CLASS B COMMON STOCK
The Board, the Majority Stockholders and Heller have approved an increase
in the number of authorized shares of Class B Common Stock to 1,000,000 shares.
The Company is currently authorized to issue 484,035 shares of Class B Common
Stock. All the authorized shares of Class B Common Stock are currently issued
and outstanding and held by Heller, the Company's primary lender, and are
presently convertible to Class A Common Stock. Pursuant to a letter agreement
between Heller and certain stockholders of the Company, dated as of August 8,
1996, Heller is entitled to receive an additional 150,000 shares of the newly
authorized shares of Class B Common Stock. The remaining shares of the newly
authorized Class B Common Stock will be available for use in any acquisition or
other financing or upon the exercise of options, if granted.
VOTING RIGHTS
The holders of Class A Common Stock are entitled to one (1) vote per share
on all matters to be voted on by the Company's stockholders, and except as
otherwise required by law, the holders of Class B Common Stock have no right to
vote their shares of Class B Common Stock on any matters to be voted on by the
Company's stockholders. Under certain circumstances, the vote of the holders of
Class B Common Stock as a class to approve certain matters may be required by
applicable law.
DIVIDENDS
When and as dividends are declared thereon, whether payable in cash,
property or securities of the corporation, the holders of Class A Common Stock
and the holders of Class B Common Stock, after Dividends are paid to holders of
the Series A Preferred Stock (see "Investment from Westar Capital, Inc."), are
entitled to share ratably according to the number of shares of Class A Common
Stock or Class B Common Stock held by them, in such dividends; provided, that if
dividends are declared which are payable in shares of Class A Common Stock or
Class B Common Stock, dividends will be declared which are payable at the same
rate on both
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classes of common stock, and the dividends payable in shares of Class A Common
Stock to holders of Class A Common Stock, and the dividends payable in shares of
Class B Common Stock will be payable to the holders of Class B Common Stock.
CONVERSION OF CLASS B COMMON STOCK
At any time and from time to time, each record holder of Class B Common
Stock is entitled to convert any and all of the shares of such holder's Class B
Common Stock into the same number of shares of Class A Common Stock at the
holder's election, provided, that any holder of Class B Common Stock is only
entitled to convert any share or shares of Class B Common Stock to the extent
that after giving effect to such conversion such holder or its affiliates shall
not directly or indirectly own, control or have power to vote a greater quantity
of securities of any kind issued by the Company than such holder and its
affiliates are permitted to own, control or have power to vote under any law or
under any regulation, rule or other requirement of any governmental authority at
any time applicable to such holder and its affiliates.
Each conversion of shares of Class B Common Stock into shares of Class A
Common Stock will be effected by the surrender of the certificate or
certificates representing the shares to be converted at the principal office of
the Company at any time during normal business hours, together with a written
notice by the holder of such Class B Common Stock stating that such holder
desires to convert the shares, or a stated number of shares, of Class B Common
Stock represented by such certificate or certificates into Class A Common Stock
and a written undertaking that upon such conversion such holder and its
affiliates will not directly or indirectly own, control or have the power to
vote a greater quantity of securities of any kind issued by the Company than
such holders and its affiliates are permitted to own, control or have the power
to vote under any applicable law, regulation, rule or other governmental
requirement. Such conversion will be deemed to have been effected as of the
close of business on the date on which such certificate or certificates have
been surrendered and such notice has been received, and at such time the rights
of the holder of the converted Class B Common Stock as such holder will cease
and the person or persons in whose name or names the certificate or certificates
for shares of Class B Common Stock, upon such conversion, will be deemed to have
become the holder or holders of record of the shares of Class A Common Stock
represented thereby.
Promptly after such surrender and the receipt of such written notice, the
Company will issue and deliver in accordance with the surrendering holder's
instructions (i) the certificate or certificates for the Class A Common Stock
issuable upon such conversion and (ii) a certificate representing any Class B
Common Stock which was represented by the certificate or certificates delivered
to the Company in connection with such conversion but which was not converted.
If the Company in any manner subdivides or combines the outstanding shares
of one class of either Class A Common Stock or Class B Common Stock, the
outstanding shares of the other class will be proportionately subdivided or
combined.
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In the case of, and as a condition to, any capital reorganization of, or
any reclassification of the capital stock of, the Company (other than a
subdivision or combination of shares of Class A Common Stock or Class B Common
Stock into a greater or lesser number of shares (whether with or without par
value) or a change in the par value of Class A Common Stock or Class B Common
Stock or from par value to no par value) or in the case of, and as a condition
to, the consolidation or merger of the Company with or into another corporation
(other than a merger in which the corporation is the continuing corporation and
which does not result in any reclassification of outstanding shares of Class A
Common Stock or Class B Common Stock), each share of Class B Common Stock shall
be convertible or exchangeable into the number of shares of stock or other
securities or property receivable upon such reorganization, reclassification,
consolidation or merger by a holder of the number of shares of Class A Common
Stock of the Company into which such shares of Class B Common Stock were
convertible immediately prior to such reorganization, reclassification,
consolidation or merger; and, in any such case, appropriate adjustment shall be
made in the application of the provisions set forth in this paragraph with
respect to the rights and interests thereafter of the holders of Class B Common
Stock to the end that the provisions set forth in this paragraph (including
provisions with respect to the conversion rate) shall thereafter be applicable,
as nearly as they reasonably may be, in relation to any shares of stock or other
securities or property thereafter deliverable upon the conversion of the shares
of Class B Common Stock.
The shares of Class B Common Stock which are converted into shares of
Class A Common Stock as provided herein shall not be reissued.
The Company will at all times reserve and keep available out of its
authorized but unissued shares of Class A Common Stock or its treasury shares,
solely for the purpose of issue upon conversion of the Class B Common Stock as
provided above, such number of Class A Common Stock as shall then be issuable
upon the conversion of all then outstanding shares of Class B Common Stock
(assuming that all such shares of Class B Common Stock are held by persons
entitled to convert such shares into Class A Common Stock).
The issuance of certificates for Class A Common Stock upon the conversion
of Class B Common Stock will be made without charge to the holders of such
shares for any issuance tax in respect thereof or other cost incurred by the
Company in connection with such conversion and the related issuance of Class A
Common Stock. The Company will not close its books against the transfer of Class
B Common Stock or Class A Common Stock issued or issuable upon the conversion of
Class B Common Stock in any manner which would interfere with the timely
conversion of Class B Common Stock.
LIQUIDATION RIGHTS
Subject to the liquidation preferences which inure to the shares of the
Series A Preferred Stock (see "Investment from Westar Capital, Inc."), in the
event any liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary, the holders of Class A Common
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Stock and Class B Common Stock shall be entitled to share ratably, according to
the number of shares of Class A Common Stock or Class B Common Stock held by
them, in the remaining assets of the Company available for distribution to its
stockholders.
TRANSFERABILITY
The Class A Common Stock and Class B Common Stock are freely transferable,
and except for federal and state securities law restrictions on directors,
officers and other affiliates of the Company and on persons holding "restricted"
stock, Company stockholders will not be restricted in their ability to sell or
transfer shares of Class A Common Stock or Class B Common Stock.
MERGERS AND CONSOLIDATIONS
Each holder of Class A Common Stock and Class B Common Stock is entitled
to receive the same per share consideration in a merger or consolidation of the
Company (whether or not the Company is the surviving corporation), except that
any securities issued in respect of the Class B Common Stock may have different
or lesser voting rights than securities issued in respect of the Class A Common
Stock.
PREEMPTIVE, SUBSCRIPTION AND REDEMPTION RIGHTS
Neither the Class A Common Stock nor the Class B Common Stock carries any
preemptive, subscription or redemption rights enabling a holder to subscribe for
or receive shares of any class of stock of the Company or any other securities
convertible into shares of any class of stock of the Company.
OUTSTANDING VOTING SECURITIES
The Company is presently authorized to issue 100,000,000 shares of Class A
Common Stock, par value $.001 per share, of which 6,496,804 shares were issued
and outstanding as of September 30, 1997. The Company is presently authorized to
issue 484,035 shares of Class B Common Stock, par value $.001 per share, of
which 484,035 shares were issued and outstanding as of September 30, 1997.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth certain information regarding the
beneficial ownership of the Company's Class A Common Stock as of September 30,
1997 by the executive officers and directors of the Company.
12
<PAGE>
NAME OF BENEFICIAL SHARES PERCENTAGE OF
OWNER (1) BENEFICIALLY OUTSTANDING
OWNED VOTING SECURITIES (3)
- --------------------------------------------------------------------------------
Richard Ginsburg (2) 629,246 9.01%
Harold Ginsburg(2) 1,403,533 20.11%
Sheilah Ginsburg(2) 903,533 12.94%
Rhonda Ginsburg(2) 629,245 9.01%
- --------------------------------------------------------------------------------
(1) The address for each person listed in this table is c/o Guardian
International, Inc., 3880 North 28 Terrace, Hollywood, Florida 33020-1118.
(2) Richard Ginsburg and Rhonda Ginsburg are siblings and are the children of
Harold and Sheilah Ginsburg. Harold and Sheilah and are husband and wife,
and each disclaims ownership of the other's shares.
(3) Percentage of outstanding voting securities assumes conversion of Class B
Common Stock.
The following table sets forth certain information regarding each person
known to the Company other than the executive officers and directors of the
Company (similar information regarding executive officers and directors is shown
in the above table) who may be considered a beneficial owner of more than 5% of
the outstanding shares of the Common Stock as of December 31, 1996.
NAME OF BENEFICIAL SHARES PERCENTAGE OF
OWNER (1) BENEFICIALLY OUTSTANDING
OWNED VOTING SECURITIES (2)
- --------------------------------------------------------------------------------
Heller Financial, Inc. (1) 484,035 6.93% (2)
(1) The shares owned by Heller Financial, Inc. ("Heller") are Class B Common
Stock, are nonvoting and are convertible at the option of the holder into
an equal number of shares of Class A Common Stock, provided that any such
conversion will not result in a violation of any applicable law,
regulation, or other restriction. Heller is also entitled to receive an
additional 150,000 shares of Class B Common Stock. See "Amendment to
Authorize Issuance of Additional Class B Common Stock."
13
<PAGE>
(2) Percentage of outstanding voting securities assumes conversion of Class B
Common Stock.
USE OF PROCEEDS FROM THE WESTAR INVESTMENT
The Company will use the proceeds from the investment by Westar primarily
to reduce long-term debt. See "Investment from Westar Capital, Inc." The
investment will provide the Company with the financial capability to borrow
funds to make additional acquisitions in the electronic security industry. A
small percentage of the proceeds will also be used for general corporate
purposes.
INTERESTS OF CERTAIN PERSONS
Pursuant to the Stockholders Agreement, the Majority Stockholders have the
right to designate four of the eight members of the Board. Harold Ginsburg,
Sheilah Ginsburg and Richard Ginsburg, who were members of the Board prior to
the purchase of the Common Shares by Westar, have continued as members of the
reconstituted Board after the purchase of the Common Shares. The fourth member
of the Board nominated by the Majority Stockholders is Darius G. Nevin, Chief
Financial Officer of the Company. Two Board seats are designated by Westar and
the remaining two Board seats are designated mutually by Westar and the Majority
Stockholders.
CHANGE OF CONTROL
Prior to the issuance of the Common Shares, the Majority Stockholders held
voting control of an excess of a majority of the shares of Class A Common Stock
and could, therefore, without obtaining the affirmative vote of any other
stockholders of the Company, effect action of the holders of Common Stock. The
sale of the Common Shares to Westar pursuant to the Subscription Agreement
resulted in the divestiture of this majority control from the Majority
Stockholders, whose percentage ownership decreased from 54.88% to 39.63% of the
issued and outstanding Class A Common Stock (not on a fully diluted basis). The
sale of the Common Shares to Westar resulted in Westar's owning a total of
2,790,300 shares of Class A Common Stock, or approximately 31.01% of the issued
and outstanding Class A Common Stock. Following issuance of the Common Shares to
Westar, no single stockholder or group of stockholders had control of more than
50% of the outstanding voting securities of the Company. Upon consummation of
the issuance and sale of the Preferred Shares to Westar on or about November 20,
1997, the percentage ownership of the Majority Stockholders will have decreased
to 32.80% of the outstanding voting securities of the Company and the percentage
ownership of Westar will have increased to 42.91% of the outstanding voting
securities of the Company.
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By Order of the Board of Directors
/s/ SHEILAH GINSBURG
--------------------------
Sheilah Ginsburg, Secretary
Hollywood, Florida
November 3, 1997
15
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ATTACHMENT A
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
GUARDIAN INTERNATIONAL, INC.
We the undersigned, Richard Ginsburg, President and Chief Executive
Officer, and Sheilah Ginsburg, Secretary of Guardian International, Inc., a
Nevada corporation (the "Corporation"), do hereby certify:
That the Board of Directors of the Corporation at a meeting duly convened,
held on the 14th day of October, 1997, adopted a resolution to amend the
original articles as follows:
RESOLVED, Article FOURTH is deleted in its entirety and the following is
inserted in lieu thereof:
"FOURTH.
1. The amount of the total authorized capital stock of the Corporation is
131,000,000 shares, consisting of (i) 100,000,000 shares of 'Class A Voting
Common Stock,' par value $.001 per share; (ii) 1,000,000 shares of 'Class B
Nonvoting Common Stock,' par value $.001 per share; and (iii) 30,000,000 shares
of Preferred Stock, par value $.001 per share.
2. CLASS B COMMON STOCK.
Except as otherwise provided herein all shares of Class A Voting
Common Stock and Class B Nonvoting Common Stock will be identical and will
entitle the holders thereof to the same rights and privileges.
(a) VOTING RIGHTS. The holders of Class A Voting Common Stock will be
entitled to one (1) vote per share on all matters to be voted on by the
Corporation's stockholders, and except as otherwise required by law, the holders
of Class B Nonvoting Common Stock will have no right to vote their shares of
Class B Nonvoting Common Stock on any matters to be voted on by the
Corporation's stockholders.
(b) DIVIDENDS. When and as dividends are declared thereon, whether
payable in cash, property or securities of the Corporation, the holders of Class
A Voting Common Stock and the holders of Class B Nonvoting Common Stock will be
entitled to share ratably according to the number of shares of Class A Voting
Common Stock or Class B Nonvoting Common Stock held by them, in such dividends;
provided, that if dividends are declared which are payable in shares of Class A
Voting Common Stock or Class B Nonvoting Common Stock, dividends will be
declared which are payable at the same rate on both classes of common stock, and
the dividends payable in shares of Class A Voting Common Stock to holders of
Class A Voting
<PAGE>
Common Stock, and the dividends payable in shares of Class B Nonvoting Common
Stock will be payable to the holders of Class B Nonvoting Common Stock.
(c) LIQUIDATION RIGHTS. In the event of any liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, the holders
of Class A Voting Common Stock and Class B Nonvoting Common Stock shall be
entitled to share ratably, according to the number of shares of Class A Voting
Common Stock or Class B Nonvoting Common Stock held by them, in the remaining
assets of the Corporation available for distribution to its stockholders.
(d) CONVERSION OF CLASS B NONVOTING COMMON STOCK.
i. At any time and from time to time, each record holder of
Class B Nonvoting Common Stock will be entitled to convert any and all of the
shares of such holder's Class B Nonvoting Common Stock into the same number of
shares of Class A Voting Common Stock at holder's election, provided, that each
holder of Class B Nonvoting Common Stock shall only be entitled to convert any
share or shares of Class B Nonvoting Common Stock to the extent that after
giving effect to such conversion such holder or its affiliates shall not
directly or indirectly, own, control or have power to vote a greater quantity of
securities of any kind issued by the Corporation than such holder and its
affiliates are permitted to own, control or have power to vote under any law or
under any regulation, rule or other requirement of any governmental authority at
any time applicable to such holder and its affiliates.
ii. Each conversion of shares of Class B Nonvoting Common Stock
into shares of Class A Voting Common Stock will be effected by the surrender of
the certificate or certificates representing the shares to be converted at the
principal office of the Corporation at any time during normal business hours,
together with a written notice by the holder of such Class B Nonvoting Common
Stock stating that such holder desires to convert the shares, or a stated number
of the shares, of Class B Nonvoting Common Stock represented by such certificate
or certificates into Class A Voting Common Stock and a written undertaking that
upon such conversion such holder and its affiliates will not directly or
indirectly own, control or have the power to vote a greater quantity of
securities of any kind issued by the Corporation than such holders and its
affiliates are permitted to own, control or have the power to vote under any
applicable law, regulation, rule or other governmental requirement. Such
conversion will be deemed to have been effected as of the close of business on
the date on which certificate or certificates have been surrendered and such
notice has been received, and at such time the rights of the holder of the
converted Class B Nonvoting Common Stock as such holder will cease and the
person or persons in whose name or names the certificate or certificates for
shares of Class A Voting Common Stock are to be issued upon such conversion will
be deemed to have become the holder or holders of record of the shares of Class
A Voting Common Stock represented thereby.
iii. Promptly after such surrender and the receipt of such
written notice, the Corporation will issue and deliver in accordance with the
surrendering holder's
2
<PAGE>
instructions (x) the certificate or certificates for the Class A Voting Common
Stock issuable upon such conversion and (y) a certificate representing any Class
B Nonvoting Common Stock which was represented by the certificate or
certificates delivered to the Corporation in connection with such conversion but
which was not converted.
iv. If the Corporation in any manner subdivides or combines the
outstanding shares of one class of either Class A Voting Common Stock or Class B
Nonvoting Common Stock, the outstanding shares of the other class will be
proportionately subdivided or combined.
v. In the case of, and as a condition to, any capital
reorganization of, or any reclassification of the capital stock of, the
Corporation (other than a subdivision or combination of shares of Class A Voting
Common Stock or Class B Nonvoting Common Stock into a greater or lesser number
of shares (whether with or without par value) or a change in the par value of
Class A Voting Common Stock or Class B Nonvoting Common Stock or from par value
to no par value) or in the case of, and as a condition to, the consolidation or
merger of the Corporation with or into another corporation (other than a merger
in which the Corporation is the continuing corporation and which does not result
in any reclassification of outstanding shares of Class A Voting Common Stock or
Class B Nonvoting Common Stock), each share of Class B Nonvoting Common Stock
shall be convertible into the number of shares of stock or other securities or
property receivable upon such reorganization, reclassification, consolidation or
merger by a holder of the number of shares of Class A Voting Common Stock of the
Corporation into which such shares of Class B Nonvoting Common Stock were
convertible immediately prior to such reorganization, reclassification,
consolidation or merger; and, in any such case, appropriate adjustment shall be
made in the application of the provisions set forth in this paragraph with
respect to the rights and interests thereafter of the holders of Class B
Nonvoting Common Stock to the end that the provisions set forth in this
paragraph (including provisions with respect to the conversion rate) shall
thereafter be applicable, as nearly as they reasonably may be, in relation to
any shares of stock or other securities or property thereafter deliverable upon
the conversion of the shares of Class B Nonvoting Common Stock.
vi. The shares of Class B Nonvoting Common Stock which are
converted into shares of Class A Voting Common Stock as provided herein shall
not be reissued.
vii. The Corporation will at all times reserve and keep
available out of its authorized but unissued shares of Class A Voting Common
Stock or its treasury shares, solely for the purpose of issue upon conversion of
the Class B Nonvoting Common Stock as provided above, such number of Class A
Voting Common Stock as shall then be issuable upon the conversion of all then
outstanding shares of Class B Nonvoting Common Stock (assuming that all such
shares of Class B Nonvoting Common Stock are hold by persons entitled to convert
such shares into Class A Voting Common Stock).
3
<PAGE>
viii. The issuances of certificates for Class A Voting Common
Stock upon the conversion of Class B Nonvoting Common Stock will be made without
charge to the holders of such shares for any issuance tax in respect thereof or
other cost incurred by the Corporation in connection with such conversion and
the related issuance of Class A Voting Common Stock. The Corporation will not
close its books against the transfer of Class B Nonvoting Common Stock or Class
A Voting Common Stock issued or issuable upon the conversion of Class B
Nonvoting Common Stock in any manner which would interfere with the timely
conversion of Class B Nonvoting Common Stock.
3. PREFERRED STOCK.
(a) Shares of Preferred Stock may be issued from time to time in one
or more series as may from time to time be determined by the Board of Directors,
each of said series to be distinctly designated. All shares of any one series of
Preferred Stock shall be alike in every particular, except that there may be
different dates from which dividends, if any, thereon shall be cumulative, if
made cumulative. The voting powers and the preferences and relative,
participating, optional and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, if any, may differ from
those of any and all other series at any time outstanding; and the Board of
Directors of the Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any shares of a
particular series of Preferred Stock, the voting powers and the designation,
preferences and relative, optional and other special rights, and the
qualifications, limitations and restrictions of such series, including, but
without limiting the generality of the foregoing, the following:
i. DESIGNATION AND NUMBER. The distinctive designation of, and
the number of shares of Preferred Stock which shall constitute such series,
which number may be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares thereof then
outstanding) from time to time by like action by the Board of Directors;
ii. DIVIDENDS. The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred Stock of such series shall
be paid, the extent of the preference or relation, if any, of such dividends to
the dividends payable on any other class or classes, or series of the same or
other classes of stock and whether such dividends shall be cumulative or
noncumulative;
iii. CONVERSION PRIVILEGES. The right, if any, of the holders of
Preferred Stock of such series to convert the same into or exchange the same
for, shares of any other class or classes, or of any series of the same or any
other class or classes of stock of the Corporation and the terms and conditions
of such conversion or exchange;
4
<PAGE>
iv. REDEMPTION. Whether or not Preferred Stock of such series
shall be subject to redemption, and the redemption price or prices and the time
or times at which, and the terms and conditions on which, Preferred Stock of
such series may be redeemed;
v. LIQUIDATION. The rights, if any, of the holders of Preferred
Stock of such series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or winding up, of the
Corporation;
vi. SINKING FUND REQUIREMENTS. The terms of the sinking fund or
redemption or purchase account, if any, to be provided for the Preferred Stock
of such series; and
vii. VOTING RIGHTS. The voting powers, if any, of the holders,
of such series of Preferred Stock which may, without limiting the generality of
the foregoing, include the right, voting as a series or by itself or together
with other series of Preferred Stock or all series of Preferred Stock as a
class, to elect one or more directors of the Corporation if there shall have
been a default in the payment of dividends on any one or more series of
Preferred Stock or under such other circumstances and on such conditions as the
Board of Directors may determine.
(b) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the powers, preferences and rights of each other
series of Preferred Stock shall, in each case, be as fixed from time to time by
the Board of Directors in the resolution or resolutions adopted pursuant to
authority granted in paragraph 3(a) of this Article FOURTH and the consent, by
class or series vote or otherwise, of the holders of such of the series of
Preferred Stock as are from time to time outstanding shall not be required for
the issuance by the Board of Directors of any other series of Preferred Stock
whether or not the powers, preferences and rights of such other series shall be
fixed by the Board of Directors as senior to, or on a parity with, the powers,
preferences and rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the resolution or
resolutions as to any series of Preferred Stock adopted pursuant to paragraph
3(a) of this Article FOURTH that the consent of the holders of a majority (or
such greater proportion as shall be therein fixed) of the outstanding shares of
such series voting therein shall be required for the issuance of any or all
other series of Preferred Stock.
4. Subject to the provisions of paragraphs 2 and 3, shares of Common Stock
or any series of Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
5. The authorized amount of shares of Common Stock and of Preferred Stock
may, without a class or series vote, be increased or decreased from time to time
by the affirmative vote of the holders of a majority of the stock of the
Corporation entitled to vote thereon.";
5
<PAGE>
That the number of shares of the Corporation outstanding and entitled to
vote on an amendment to the Articles of Incorporation is 6,496,804 shares; that
the said change(s) and amendment have been consented to and approved by a
majority of the stockholders holding at least a majority of each class of stock
outstanding and entitled to vote thereon.
/s/ RICHARD GINSBURG
------------------------------
Richard Ginsburg, President
and Chief Executive Officer
/s/ SHEILAH GINSBURG
------------------------------
Sheilah Ginsburg, Secretary
State of Florida )
)ss
County of Broward )
On 20 Oct. 97, personally appeared before me, a Notary Public,
L. Marlene Crossley, who acknowledged that they executed the above
instrument.
/s/ L. MARLENE CROSSLEY
--------------------------
L. Marlene Crossley
(Notary Stamp or Seal)
6
<PAGE>
ATTACHMENT B
CERTIFICATE OF THE DESIGNATIONS, VOTING POWERS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS AND
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF PREFERRED STOCK OF
GUARDIAN INTERNATIONAL, INC.
The undersigned hereby certify that they are the duly elected and acting
President and Secretary of Guardian International, Inc., a Nevada corporation,
(the "Company"), and pursuant to Nev. Rev. Stat. ss. 78.1955, DO HEREBY CERTIFY:
That, pursuant to the authority conferred upon the Board of Directors of
the Company (the "Board") by Article FOURTH of the Company's Articles of
Incorporation (the "Articles"), the Board by unanimous written consent dated
October 21, 1997 adopted the following resolutions:
RESOLVED, that the amendments to Article FOURTH of the Articles to
be filed with the Nevada Secretary of State on November __, 1997 to (a)
authorize the Company to issue 30,000,000 shares of blank-check preferred
stock, par value $.001 per share (the "Preferred Stock"), and (b) increase
the number of authorized shares of Class B Nonvoting Common Stock of the
Company, par value $.001 per share, from 484,035 shares to 1,000,000
shares are hereby approved; and further
RESOLVED, that the Board hereby establishes and authorizes the
issuance of a first series of the Preferred Stock and hereby fixes the
number of shares to constitute the first series, the annual rate of
dividends payable on such shares and the date from which dividends shall
commence to accrue, the terms and conditions on which the shares may or
shall be converted, as the case may be, and the voting rights and
liquidation preferences of such shares, as follows:
I. DESIGNATION AND RANK.
The first series of Preferred Stock of the Company is
designated "Series A 9 3/4% Convertible Cumulative Preferred Stock,
par value $.001 per share" (the "Series A Preferred Stock"), and the
number of shares which shall constitute such Series shall be
1,875,000 shares. All shares of Series A Preferred Stock shall rank
equally and be identical in all respects. So long as the Series A
Preferred Stock is outstanding, unless consented to by the
affirmative vote of 2/3 of the holders of the outstanding Series A
Preferred Stock, the Company shall not issue additional securities
of any kind, including shares of preferred stock of any class,
(including without limitation additional shares of Series A
Preferred Stock other than Dividend Preferred Shares) series or
designation ranking in priority or in parity as to rights and
preferences with the Series A Preferred Stock now or hereafter
authorized.
<PAGE>
II. DIVIDENDS.
The holders of the Series A Preferred Stock, in preference to
the holders of Common Stock and any other class or classes of stock
of the Company ranking junior in rights and preferences to the
Series A Preferred Stock as to payment of dividends and other
distributions, shall be entitled to receive, but only out of any
funds legally available for the declaration of dividends,
cumulative, preferential dividends at the annual rate of 9 3/4%,
payable as follows:
(a) Series A Preferred Stock dividends (the "Dividends") shall
commence to accrue on the shares of Preferred Stock and be
cumulative from and after the date of issuance of such shares of
Series A Preferred Stock and shall be deemed to accumulate and
accrue from day to day thereafter.
(b) The Dividends shall be payable to the holders of the
Series A Preferred Stock quarterly on the 1st day of January, April,
July and November at the Company's option in cash or in additional
shares of Series A Preferred Stock ("Dividend Preferred Shares")
during the first two years after the date of issuance of such shares
of Series A Preferred Stock. Thereafter, Dividends shall be paid
quarterly on the 1st day of January, April, July and November in
cash. Once issued, any Dividend Preferred Shares shall rank PARI
PASSU and have all of the rights and privileges associated with all
other shares of the Series A Preferred Stock.
III. REDEMPTION.
The Series A Preferred Stock shall not be redeemable by the
Company.
IV. VOTING RIGHTS.
The holders of Series A Preferred Stock shall be entitled to
vote with the Common Stock on all matters required or permitted to
be submitted to the stockholders of the Company for their approval,
but not as a separate class, except to the extent required by Nevada
law, and shall have such other voting rights as specifically
provided under Nevada law.
V. SPECIAL VOTING RIGHTS.
(a) ELECTION OF DIRECTORS. Notwithstanding the other
provisions of this Section V, upon the occurrence of a Default Event
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<PAGE>
(hereafter defined) and for the duration of the Default Period
(hereafter defined) the holders of the Series A Preferred Stock, in
addition to any other voting rights they may have herein or by law,
shall be entitled to vote (voting as a class by a majority of the
outstanding shares thereof) for the election to the Board of
Directors of the smallest number of directors necessary to
constitute at any given time a majority of the number of members of
the Board of Directors, and should such percentage when applied to
the number of the members of the Board of Directors result in a
number that includes a fraction, then such number shall be increased
to the next whole number. In addition, during the Default Period the
holders of the Series A Preferred Stock shall be entitled to
designate (voting as a class as aforesaid) the number of positions
on the Board of Directors, which shall be the smallest number of
directors necessary for the nominees of the holders of Series A
Preferred Stock to constitute a majority of the full Board. In case
the holders of the Series A Preferred Stock become entitled to
exercise such special voting rights, they may call a special meeting
of stockholders during the Default Period, in the manner provided
herein or in the bylaws or otherwise as provided by law, for the
purpose of increasing or decreasing the number of positions on the
Board of Directors and electing such members to the Board of
Directors. In addition, the holders of the Series A Preferred Stock
shall have such special voting rights at any annual or regular
meeting of stockholders (or any other special meeting not called by
the holders of the Series A Preferred Stock) held during the Default
Period. In lieu of the foregoing, the holders of the Series A
Preferred Stock may take any of such actions by a written consent
signed by the holders of at least a majority of the shares of the
Series A Preferred Stock outstanding and entitled to vote thereon.
(b) REMOVAL; VACANCIES. During the Default Period, each
director elected by the holders of the Series A Preferred Stock may
be removed only by the vote of the holders of the majority of the
outstanding shares of the Series A Preferred Stock, voting
separately as a class, at a meeting of the stockholders, or of the
holders of shares of the Series A Preferred Stock, called for that
purpose. During the Default Period, any vacancy in the office of a
director elected by the holders of the Series A Preferred Stock may
be filled by a vote of the remaining directors then in office
elected by the holders of the Series A Preferred Stock, or, if not
so filled, by the holders of the Series A Preferred Stock at any
meeting, annual or special, for the election of directors held
thereafter. A special meeting of stockholders, or of the holders of
shares of the Series A Preferred Stock, may be called for the
purpose of filling any such vacancy. In the case of removal of any
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<PAGE>
such director, the vacancy may be filled at the same meeting at
which such removal shall be voted. Holders of the Series A Preferred
Stock shall be entitled to notice of each meeting of stockholders at
which they shall have any right to vote or notice of which is
otherwise required by law. In lieu of the foregoing, the holders of
the Series A Preferred Stock may take any of such action by a
written consent signed by the holders of at least a majority of the
shares of the Series A Preferred Stock outstanding and entitled to
vote thereon.
(c) EXPIRATION OF RIGHT. Upon termination of the Default
Period, the special voting rights of the holders of the Series A
Preferred Stock provided hereunder shall be immediately divested,
but always subject to the revesting of such right in the holders of
the Series A Preferred Stock upon the occurrence of any subsequent
Default Event. In the event that such rights of the holders of the
Series A Preferred Stock shall cease as provided above, then the
directors elected to the Board of Directors by the holders of the
Series A Preferred Stock under this Section V shall be automatically
removed from office, and their respective positions terminated and
the number of positions on the Board of Directors reduced in
accordance with such termination, without further action on the part
of the holders of the Series A Preferred Stock, the holders of the
Common Stock or the Board of Directors.
(d) DEFAULT EVENT. For purposes hereof, a "Default Event"
occurs on the date that (i) the Company has failed to pay any four
quarterly Dividends when due whether consecutive or not and (ii)
such Dividends remain unpaid.
(e) DEFAULT PERIOD. For purposes hereof, "Default Period"
means a period commencing on the date a Default Event occurs and
ending upon the payment of the next quarterly Dividend in full and
such cumulative Dividends in arrears in full, such that not more
than three quarterly Dividends shall be in arrears.
VI. LIQUIDATION.
(a) The Series A Preferred Stock shall be preferred upon
liquidation over the Common Stock and any other class or classes of
stock of the Company ranking junior in rights and preferences to the
Series A Preferred Stock upon liquidation. Holders of shares of
Series A Preferred Stock shall be entitled to be paid, after full
payment is made on any stock ranking prior to the Series A Preferred
Stock as to rights and preferences (but before any distribution is
made to the holders of the Common Stock and such junior stock) upon
the
4
<PAGE>
voluntary or involuntary dissolution, liquidation or winding up of
the Company (a "Liquidation").
(b) The amount payable on each share of Series A Preferred
Stock in the event of Liquidation shall be $2.00 per share.
(c) Upon Liquidation, if the net assets of the Company are
insufficient to permit the payment in full of the amounts to which
the holders of all outstanding shares of Series A Preferred Stock
are entitled as provided above, the entire net assets of the Company
remaining (after full payment is made on any stock ranking prior to
the Series A Preferred Stock as to rights and preferences) shall be
distributed among the holders of Series A Preferred Stock in amounts
proportionate to the full preferential amounts and holders of shares
of preferred stock ranking in parity with the Series A Preferred
Stock as to rights and preferences to which they are respectively
entitled.
(d) For the purpose of this Section VI, the voluntary sale,
lease, exchange or transfer, for cash, shares of stock, securities
or other consideration, of all or substantially all the Company's
property or assets to, or its consolidation or merger with, one or
more corporations shall not be deemed to be a Liquidation.
(e) Notwithstanding the foregoing, in the event that any
holder of Series A Preferred Stock converts its Series A Preferred
Stock to Common Stock pursuant to Section VII hereof, the right to
preferential liquidation rights pursuant to this Section with
respect to such converted Shares shall be immediately terminated.
VII. CONVERSION.
(a) Subject to the provisions for adjustment hereinafter set
forth, each share of Series A Preferred Stock shall be convertible
at any time at the option of the holder thereof, upon surrender to
the transfer agent for the Series A Preferred Stock or the Company
of the certificate or certificates evidencing the shares so to be
converted, into one fully paid and nonassessable share of Class A
Common Stock of the Company, par value $.001 per share ("Class A
Common Stock").
(b) Subject to the provisions for adjustment hereinafter set
forth, the Series A Preferred Stock must be converted to Class A
Common Stock:
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(i) upon a secondary public offering by the Company of
at least 2,500,000 shares of Class A Common Stock at not less than
$2.00 per share; or
(ii) if, at any time after two years from the date of
issuance of the Series A Preferred Stock, the Class A Common Stock
trades above $3.00 per share for 20 consecutive trading days.
(c) The number of shares of Class A Common Stock into which an
issued and outstanding share of Series A Preferred Stock is
convertible shall be subject to adjustment from time to time only as
follows:
(i) In the event that the Company shall at any time (A)
declare a dividend on the Class A Common Stock in shares of its
Class A Common Stock, (B) split or subdivide the outstanding Class A
Common Stock or (C) combine the outstanding Class A Common Stock
into a smaller number of shares, each share of Series A Preferred
Stock outstanding at the time of the record date for such dividend
or of the effective date of such split, subdivision or combination
shall thereafter be convertible into the aggregate number of shares
of Class A Common Stock which, if such share of Series A Preferred
Stock had been converted immediately prior to such time, the holder
of such share would have owned or have been entitled to receive by
virtue of such dividend, subdivision or combination. Such adjustment
shall be made successively whenever any event listed above shall
occur.
(ii) No adjustment in the number of shares of Class A
Common Stock issuable upon conversion of a share of Series A
Preferred Stock shall be required unless such adjustment would
require an increase or decrease in the aggregate number of shares of
Class A Common Stock so issuable of at least 100 shares; PROVIDED
that any adjustments which by reason of this subsection VII(c)(ii)
are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this
Section VII(c) shall be made to the nearest cent, or to the nearest
hundredth of a share, as the case may be.
(iii) In the event of any capital reorganization of the
Company, or of any reclassification of the Common Stock (other than
a subdivision or combination of outstanding shares of Class A Common
Stock), or in case of the consolidation of the Company with or the
merger of the Company with or into any other corporation or of the
sale of the properties and assets of the Company as, or
6
<PAGE>
substantially as, an entirety to any other corporation, each share
of Series A Preferred Stock shall after such capital reorganization,
reclassification of Common Stock, consolidation, merger or sale be
convertible upon the terms and conditions specified in this Section
VII, for the number of shares of stock or other securities or assets
to which a holder of the number of shares of Class A Common Stock
into which a share of Series A Preferred Stock is then convertible
(at the time of such capital reorganization, reclassification of
Class A Common Stock, consolidation, merger or sale) would have been
entitled upon such capital reorganization, reclassification of
Common Stock, consolidation, merger or sale; and in any such case,
if necessary, the provisions set forth in this Section VII with
respect to the rights of conversion thereafter of the Series A
Preferred Stock shall be appropriately adjusted so as to be
applicable, as nearly as may reasonably be, to any shares of stock
or other securities or assets thereafter deliverable on the
conversion of the Series A Preferred Stock. The Company shall not
effect any such consolidation, merger or sale, unless prior to or
simultaneously with the consummation thereof, the successor
corporation (if other than the Company) resulting from such
consolidation or merger or the corporation purchasing such assets or
the appropriate corporation or entity shall assume by written
instrument, the obligation to deliver to the holder of each share of
Series A Preferred Stock the shares of stock, securities or assets
to which, in accordance with the foregoing provisions, such holder
may be entitled upon conversion of such Series A Preferred Stock and
all other obligations of the Company under this Section VII, and
effective provisions are made in the Articles or Certificate of
Incorporation of such successor or transferee corporation providing
for conversion privileges relating to the Series A Preferred Stock
equivalent to those set forth in this Section VII.
(iv) If any question at any time arises with respect to
the number of shares of Class A Common Stock into which a share of
Series A Preferred Stock is convertible following any adjustment
pursuant to this Section VII, such question shall be determined by
agreement between the holders of a majority of the outstanding
shares of Series A Preferred Stock and the Company or, in the
absence of such an agreement by an independent investment banking
firm or an independent appraiser (in either case the cost of which
engagement will be borne by the Company) reasonably acceptable to
the Company and the holders of a majority of outstanding shares of
Series A Preferred Stock and such determination shall be binding
upon the Company and the holders of the Series A Preferred Stock.
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<PAGE>
(v) Anything in this Section VII to the contrary
notwithstanding, the Company shall be entitled to make such
increases in the number of shares of Class A Common Stock issuable
upon conversion of shares of Series A Preferred Stock, in addition
to those adjustments required by this Section VII, as it in its sole
discretion shall determine to be advisable in order that any
consolidation or subdivision of the Class A Common Stock, or any
issuance wholly for cash of any shares of Class A Common Stock at
less than the current market price, or any issuance wholly for cash
of shares of Class A Common Stock or securities which by their terms
are convertible into or exchangeable for shares of Class A Common
Stock, or any issuance of rights, options or warrants referred to
hereinabove in this Section VII, hereinafter made by the Company to
the holders of its Class A Common Stock shall not be taxable to
them.
(vi) Upon any adjustment of the number of the shares of
Class A Common Stock issuable upon conversion of shares of Series A
Preferred Stock pursuant to this Section VII, the Company shall
promptly but in any event within 20 days thereafter, cause to be
given to each of the registered holders of the Series A Preferred
Stock, at its address appearing on the Register for the Series A
Preferred Stock by registered mail, postage prepaid, return receipt
requested a certificate signed by its chairman, president or chief
financial officer setting forth the number of shares of Class A
Common Stock issuable upon conversion of shares of Series A
Preferred Stock as so adjusted and describing in reasonable detail
the facts accounting for such adjustment and the method of
calculation used. Where appropriate, such certificate may be given
in advance and included as a part of the notice required to be
mailed under the other provisions of this resolution.
(vii) The Company will at all times have authorized, and
reserve and keep available, free from preemptive rights, for the
purpose of enabling it to satisfy any obligation to issue shares of
Class A Common Stock upon the conversion of the Series A Preferred
Stock, the number of shares of Class A Common Stock deliverable upon
conversion of the Series A Preferred Stock.
(viii) The Company shall not be required to issue
fractional shares of Class A Common Stock upon conversion of the
Series A Preferred Stock but shall pay for any such fraction of a
share an amount in cash equal to the current market price per share
of Class A Common Stock of such share multiplied by such fraction.
8
<PAGE>
(ix) The Company will pay all taxes attributable to the
issuance of shares of Class A Common Stock upon conversion of shares
of Series A Preferred Stock; PROVIDED that the Company shall not be
required to pay any tax which may be payable in respect of any
transfer involved in the issue of any shares of Class A Common Stock
in a name other than that of the registered holder of the Series A
Preferred Stock surrendered for conversion, and the Company shall
not be required to issue or deliver such certificate unless or until
the person or persons requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have established
to the satisfaction of the Company that such tax has been paid.
VIII. NOTICES TO HOLDERS OF SERIES A PREFERRED STOCK.
In the event:
(a) of any consolidation or merger to which the Company is a
party and for which approval of any stockholders of the Company is
required, or of the conveyance or transfer of the properties and
assets of the Company substantially as an entirety, or of any
capital reorganization or reclassification or change of the Common
Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a
subdivision or combination); or
(b) of Liquidation; or
(c) that the Company proposes to take any other action which
would require an adjustment in the number of shares of Class A
Common Stock or other securities or assets issuable upon conversion
of shares of Series A Preferred Stock pursuant to Section VII;
then the Company shall cause to be given to each of the registered
holders of the Series A Preferred Stock at its address appearing on
the Register for the Series A Preferred Stock, at least 20 calendar
days prior to the applicable record date hereinafter specified, by
registered mail, postage prepaid, return receipt requested, a
written notice stating (i) the date as of which the holders of
record of Common Stock entitled to participate in the event
contemplated by clause (c) above are to be determined, or (ii) the
date on which any such consolidation, merger, conveyance, transfer
or Liquidation is expected to become effective, and the date as of
which it is expected that holders of record of Common Stock shall be
entitled to exchange
9
<PAGE>
their shares for securities or other property, if any, deliverable
upon such reclassification, consolidation, merger, conveyance,
transfer or Liquidation. The failure to give the notice required by
this Section VIII or any defect therein shall not affect the
legality or validity of any distribution, right, warrant,
consolidation, merger, conveyance, transfer or Liquidation, or the
vote upon any action.
IN WITNESS WHEREOF, the Company has caused this Certificate to be duly
executed in its corporate name on this 21st day of October, 1997.
GUARDIAN INTERNATIONAL, INC.
By: /s/ RICHARD GINSBURG
------------------------------
Richard Ginsburg, President and
Chief Executive Officer
By: /s/ SHEILAH GINSBURG
------------------------------
Sheilah Ginsburg, Secretary
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STATE OF FLORIDA )
)
COUNTY OF BROWARD )
BEFORE ME, the undersigned authority, personally appeared RICHARD GINSBURG
and SHEILAH GINSBURG, to me known to be the President and Chief Executive
Officer and Secretary, respectively, of GUARDIAN INTERNATIONAL, INC., a Nevada
corporation, who acknowledged before me that they have executed the foregoing
Certificate in their respective capacity as officers of the said corporation for
the reasons and purpose therein expressed, and that the statements contained in
the said Certificate are true and correct.
Sworn to and subscribed before me at Broward, Florida this 20 day of
October, 1997.
/s/ L. MARLENE CROSSLEY
-----------------------
L. Marlene Crossley
(Notary Stamp or Seal)
11
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ATTACHMENT C
October 20, 1997
To the Special Independent Committee of the Board of Directors
Guardian International, Inc.
3880 North 28th Terrace
Hollywood, Florida 33020
Members of the Committee:
You have requested our opinion as to the fairness from a financial point of view
to the shareholders of Guardian International, Inc. ("Guardian") of the terms
and conditions of the proposed investment (the "Investment") by Westar Capital,
Inc. ("Westar") in Guardian, pursuant to the Stock Subscription Agreement and
Registration Rights Agreement (collectively, the "Agreement") dated as of
October 14, 1997. Under the terms of the Agreement, Westar will purchase
2,500,000 shares of Guardian Class A Voting Common Stock, par value $.001 per
share, (the "Common Stock") for $1.50 per share and 1,875,000 shares of Guardian
Series A 9 3/4% Convertible Cumulative Preferred Stock (the "Preferred Stock")
for $2.00 per share.
Raymond James and Associates, Inc. as part of its investment banking business
engages in the valuation of securities in connection with mergers and
acquisitions, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements, and valuations for corporations for
other purposes. In the ordinary course of our business as a broker/dealer we may
from time to time purchase securities from and sell securities to Guardian and
as a market maker in securities we may from time to time have a long or short
position in and buy or sell equity securities of Guardian for our own account
and for the accounts of our customers. To the extent we have any such positions
as of the date of this letter, it has been disclosed to Guardian. We have acted
exclusively for Guardian in rendering this fairness opinion, and for our
services, including the rendering of this opinion, Guardian will pay us fees
upon the issuance of this fairness opinion and the closing of the Investment. In
addition, Guardian has agreed to indemnify us against certain liabilities
arising out of our engagement.
In arriving at our opinion, we have reviewed, analyzed and relied upon material
bearing upon the financial and operating condition of Guardian, including, among
other things, the following: (i) the Agreement dated October 14, 1997; (ii)
certain audited and unaudited financial statements of Guardian and its
subsidiaries; (iii) certain internal financial analyses, forecasts and
projections for the Company and its subsidiaries prepared by management and (iv)
certain other public available information on Guardian. Additionally, we have
held discussions with certain members of the senior management of Guardian and
its subsidiaries regarding the foregoing and regarding the past and current
operations and the financial condition and prospects of the Company and have
considered other matters which we have deemed relevant to our inquiry.
In conducting our investigation and analyses and in arriving at our opinion
expressed herein, we have taken into account such accepted financial and
investment banking procedures and considerations as we have deemed relevant,
including the review of (i) historical and projected revenues, operating
earnings, net income and capitalization of Guardian and its subsidiaries and
certain other publicly held companies engaged in the businesses we believe to be
comparable to Guardian; (ii) the current financial position and operating
results of the Company and its subsidiaries and forecasted results of such
entities; (iii) the historical market prices and trading activities of
Guardian's common stock; (iv) reported financial terms
<PAGE>
Special Independent Committee of the Board of Directors
Guardian International, Inc.
October 20, 1997
Page 2
of transactions comparable to the Investment; (v) the general condition of the
securities markets. We have also taken into account our assessment of general
economic, market and financial conditions and our experience in securities
valuation and our knowledge of the electronic protection industry generally. We
have also assumed with your permission that Guardian, its subsidiaries and
affiliates, are not party to any pending material transactions including, but
not limited to, any external financings, recapitalizations, acquisitions or
merger discussions, other than the Agreement. Our opinion is necessarily based
upon conditions as they exist and can be evaluated only on the date hereof and
the information made available to us through the date hereof and any change in
such circumstances would require a re-evaluation of this opinion.
In conducting our review and arriving at our opinion, we have relied upon and
assumed the accuracy and completeness of all of the financial and other
information provided to us by Guardian or publicly available, and we have not
attempted independently to verify such information. We have relied upon the
management of Guardian as to the reasonableness and achieveability of the
financial and operating forecasts and projections (and the assumptions and bases
therefor) provided or discussed with us, and we have assumed with your
permission that such forecasts and projections reflect the best currently
available estimates and judgments of such managements and that such forecasts
and projections will be realized in the amounts and in the time periods
currently estimated by such managements. We have also relied upon Guardian to
advise us promptly if any information previously provided became inaccurate or
was required to be updated during the period of our review. Finally, we express
no opinion as to the underlying business decision of Guardian to effect the
Investment, the availability or advisability of any alternatives to the
Investment or the price at which Guardian common stock will trade subsequent to
the effective time of the Investment.
It is understood that this letter is for the information of the Board of
Directors of Guardian in evaluating the fairness of the proposed Investment.
This letter does not constitute a recommendation of any type to any shareholder
of Guardian and is not meant to be a recommendation of any type to any
shareholder of Guardian and is not meant to be an indication of the price at
which Guardian's stock will trade at any time. This opinion is not to be quoted
or referred to, in whole or in part in any registration statement, prospectus or
proxy statement, or any other document used in connection with the offering or
sale of securities, nor shall this letter be used for any other purpose, without
our prior written consent.
Based upon and subject to the foregoing, and as of the date of this letter, we
are of the opinion that the Investment is fair, from a financial point of view,
to the holders of Guardian Common Stock.
Sincerely,
/s/ JOHN L. FORNEY
- ----------------------
John L. Forney
Vice President
Raymond James & Associates, Inc.
