UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______ TO _______
COMMISSION FILE NUMBER 0-28490
GUARDIAN INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 58-1799634
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3880 N. 28 TERRACE (954) 926-5200
HOLLYWOOD, FLORIDA 33020 (Issuer's telephone number)
(Address of principal executive offices)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the issuer was required to file such reports) and (2) has
been subject to such filing requirements for the past 90 days.
YES X NO
--- ---
As of August 14, 1998, there are 11,280,223 shares of Class A Voting
Common Stock, par value $.001 per share, and 634,035 shares of Class B Nonvoting
Common Stock, par value $.001 per share, immediately convertible into shares of
Class A Common Stock on a one for one basis, of the issuer outstanding.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):
YES NO X
---- ----
<PAGE>
GUARDIAN INTERNATIONAL, INC.
TABLE OF CONTENTS
PAGE NO.
--------
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
As of June 30, 1998 and December 31, 1997 1
Consolidated Statements of Operations
For the Three and Six Month Periods Ended
June 30, 1998 and 1997 2
Consolidated Statements of Cash Flows
For the Six Month Periods Ended
June 30, 1998 and 1997 3
Consolidated Statement of Changes in Shareholders' Equity
For the Six Month Period Ended June 30, 1998 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis 9
PART II OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 18
Item 4. Submission of Matters to a Vote of Shareholders 18
Item 6. Exhibits and Reports on Form 8-K 19
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GUARDIAN INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 333,322 $ 94,313
Accounts receivable, net of allowance for doubtful accounts of
$252,482 and $198,848, respectively 2,025,574 539,512
Other 752,690 121,223
----------- -----------
Total current assets 3,111,586 755,048
----------- -----------
Property and equipment, net 1,508,508 729,058
Customer accounts, net 28,319,710 8,048,495
Goodwill and other intangible assets, net 3,048,883 1,514,951
Deposits and other assets 142,772 27,506
----------- -----------
Total Assets $36,131,459 $11,075,058
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 2,125,002 $ 781,879
Unearned revenue 2,877,738 242,168
Current portion of long term obligations 76,529 73,201
----------- -----------
Total current liabilities 5,079,269 1,097,248
----------- -----------
Unearned revenue 1,407,934 -
Long term obligations, less current portion 12,366,080 961,584
Shareholders' equity:
Preferred stock, $.001 par value, 30,000,000 shares authorized:
Series A preferred stock, 1,987,752 and 1,894,033 shares issued and
outstanding, respectively 1,988 1,894
Series B preferred stock, 1,659,826 and 0 shares issued and outstanding,
respectively 1,660 -
Class A voting common stock, $.001 par value, 100,000,000 shares authorized,
11,280,223 and 9,003,804 shares issued and outstanding, respectively 11,280 9,004
Class B non voting common stock, $.001 par value, 634,035 shares authorized,
issued and outstanding, respectively 634 634
Additional paid-in capital 21,629,964 12,091,050
Accumulated deficit (4,360,912) (3,079,918)
Treasury shares, at cost (6,438) (6,438)
----------- -----------
17,278,176 9,016,226
----------- -----------
Total Liabilities and Shareholders' Equity $36,131,459 $11,075,058
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
<PAGE>
GUARDIAN INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------- -------------------
<S> <C> <C> <C> <C>
1998 1997 1998 1997
---- ---- ---- ----
Revenues:
Monitoring $2,267,675 $ 1,006,509 $3,994,578 $1,819,355
Installation and service 1,354,332 346,039 2,237,319 777,712
---------- ----------- ---------- ----------
Total revenues 3,622,007 1,352,548 6,231,897 2,597,067
---------- ----------- ---------- ----------
Operating expenses:
Monitoring 520,629 201,870 878,343 353,429
Installation and service 805,962 481,475 1,487,882 884,973
General and administrative 1,408,401 406,026 2,261,463 828,412
Amortization of customer contracts 1,101,639 224,011 1,702,703 417,827
Depreciation and amortization 140,372 79,199 263,344 157,564
---------- ----------- ---------- ----------
Total operating expenses 3,977,003 1,392,581 6,593,735 2,642,205
---------- ----------- ---------- ----------
Loss from operations (354,996) (40,033) (361,838) (45,138)
Interest expense 346,884 243,181 582,154 440,120
---------- ----------- ---------- ----------
Loss before income taxes (701,880) (283,214) (943,992) (485,258)
Provision for income taxes
- - - -
---------- ----------- ---------- ----------
Net loss (701,880) (283,214) (943,992) (485,258)
Preferred stock dividends (202,346) - (337,002) -
---------- ----------- ---------- ----------
Net loss applicable to common stock $(904,226) $(283,214) $(1,280,994) $(485,258)
=========== =========== ========== ==========
Loss per common share $ (0.08) $ (0.04) $ (0.11) $ (0.07)
=========== =========== ========== ==========
Weighted average shares outstanding 11,849,753 6,961,762 11,207,383 6,949,867
=========== =========== ========== ==========
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
2
<PAGE>
<TABLE>
<CAPTION>
GUARDIAN INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months
Ended June 30,
--------------
1998 1997
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net loss $(943,992) $(485,258)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 263,344 157,564
Amortization of customer accounts 1,702,703 417,827
Amortization of deferred financing costs 130,850 70,460
Provision for doubtful accounts 295,831 62,870
Changes in assets and liabilities:
Accounts receivable (704,072) (199,754)
Intangible assets, deposits and other assets (596,118) (175,710)
Accounts payable and accrued liabilities 179,193 16,693
Unearned revenue 994,512 127,908
--------- ---------
Net cash provided by (used in) operating activities 1,322,251 (7,400)
--------- ---------
Cash flows used in investing activities:
Purchase of fixed assets (662,614) (80,989)
Business acquisitions, net of cash acquired (14,340,822) -
Purchase and placement of customer accounts (1,414,420) (3,055,666)
--------- ---------
Net cash used in investing activities (16,417,856) (3,136,655)
---------- ---------
Cash flows from financing activities:
Payments of long term obligations (1,346,068) (1,351,372)
Proceeds from line of credit 12,693,681 3,845,149
Issuance of preferred stock, net of issuance costs 3,987,001 (6,438)
--------- ---------
Net cash provided by financing activities 15,334,614 2,487,339
--------- ---------
Net increase (decrease) in cash and cash equivalents 239,009 (656,716)
Cash and cash equivalents, beginning of period 94,313 1,037,861
--------- ---------
Cash and cash equivalents, end of period $ 333,322 $ 381,145
============ ==========
Supplemental disclosures:
Interest paid $ 334,338 $ 364,770
============ ==========
Non cash investing and financing activities:
Financed acquisition of property and equipment $ - 166,168
Recognition of Class B common stock to be issued - 130,500
Accrue commitment fee to senior lender - 112,500
Issuance of common stock to purchase customer contracts - 39,000
Write off of note receivable from sale of stock - 201,358
Issuance of Class A common stock and options in consideration
for business acquisitions 5,205,157 -
Stock dividends on Series A and Series B preferred stock 337,002 -
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
3
<PAGE>
<TABLE>
<CAPTION>
GUARDIAN INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1998
(Unaudited)
PREFERRED STOCK PREFERRED STOCK COMMON STOCK COMMON STOCK
SERIES A SERIES B CLASS A CLASS B
-------- -------- ------- -------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 1,894,033 $ 1,894 - $ - 9,003,804 $ 9,004 634,035 $ 634
Stock dividend on Series A
preferred stock 93,719 94 - - - - - -
Stock dividend on Series B
preferred stock - - 59,826 60 - - - -
Issuance of Series B
preferred stock, net of
issuance costs of $12,999 - - 1,600,000 1,600 - - - -
Issuance of Class A common
stock - - - - 2,276,419 2,276 - -
Issuance of options - - - - - - - -
Net loss - - - - - - - -
--------- ------- --------- ------- ---------- -------- ------- ------
Balance June 30, 1998 1,987,752 $ 1,988 1,659,826 $ 1,660 11,280,223 $ 11,280 634,035 $ 634
========= ======= ========= ======= ========== ======== ======= ======
ADDITIONAL
PAID-IN ACCUMULATED TREASURY
CAPITAL DEFICIT SHARES TOTAL
----------- ----------- -------- ----------
Balance, December 31, 1997 $12,091,050 $(3,079,918) $ (6,438) $9,016,226
Stock dividend on Series A
preferred stock 187,343 (187,437) - -
Stock dividend on Series B
preferred stock 149,505 (149,565) - -
Issuance of Series B
preferred stock, net of
issuance costs of $12,999 3,985,401 - - 3,987,001
Issuance of Class A common
stock 4,584,665 - - 4,586,941
Issuance of options 632,000 - - 632,000
Net loss - (943,992) - (943,992)
----------- ----------- -------- -----------
Balance June 30, 1998 $21,629,964 $(4,360,912) $ (6,438) $17,278,176
=========== =========== ======== ===========
</TABLE>
The accompanying notes to consolidated
financial statements are an integral part of these statements.
4
<PAGE>
GUARDIAN INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
The accompanying unaudited financial statements have been prepared by the
Company pursuant to the rules and regulations of the Securities and
Exchange Commission.
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of Guardian
International, Inc. ("Guardian") and its wholly owned subsidiaries,
(collectively "the Company"). All significant intercompany accounts and
transactions have been eliminated in consolidation.
DESCRIPTION OF BUSINESS
The Company operates a central monitoring alarm station and sells and
installs alarm systems for residential and commercial customers in the
United States (its primary market).
REVENUE RECOGNITION
INSTALLATION REVENUE Customers are billed for installation services when
the installation is completed or on a percentage of completion basis. The
Company defers the excess of installation revenue over estimated selling
costs and amortizes such difference over the initial term of the
non-cancelable customer monitoring/service contract (generally over five
years). Costs attributed to providing the installations, which include
direct labor, direct materials and direct overhead, are capitalized and
amortized over a five year period. All other costs associated with the
installation are charged to income in the period when the installation
occurs.
MONITORING/SERVICE REVENUE Customers are billed for monitoring and
maintenance services primarily on a monthly or quarterly basis in advance
of the period in which such services are provided. Deferred revenues
result from billings in advance of performance of services. Contracts for
monitoring services are generally for an initial non-cancelable term of
five years with automatic renewal on an annual basis thereafter, unless
terminated by either party. A substantial number of contracts are on an
automatic renewal basis.
CASH AND CASH EQUIVALENTS
All highly liquid investments purchased with a remaining maturity of three
months or less at the date acquired are considered cash equivalents.
CUSTOMER ACCOUNTS AND INTANGIBLE ASSETS Customer accounts acquired from
alarm dealers are reflected at cost. The cost of acquired accounts is
based on the estimated fair value at the date of acquisition and included
in "Customer Accounts, net" in the accompanying consolidated balance
sheets. Acquired customer accounts are capitalized and amortized on a
straight-line basis over a 10-year period. Costs applicable to providing
installation of internally generated customer accounts are capitalized and
amortized over the life of the monitoring/service contract (generally five
years). It is the Company's policy to perform monthly evaluations of
acquired customer account attrition and, if necessary, adjust the
remaining useful lives. The Company periodically estimates future cash
flows from customer accounts. Because expected cash flows have exceeded
the unamortized cost of customer accounts, the Company has not recorded an
impairment loss.
5
<PAGE>
Intangible assets are recorded at cost and amortized over their estimated
useful lives. The carrying value of intangible assets is periodically
reviewed and impairments are recognized when expected operating cash flows
derived from such intangibles is less than their carrying value.
PROPERTY AND EQUIPMENT Property and equipment are stated at cost.
Depreciation of property and equipment is provided on the straight-line
method. The estimated useful lives for property and equipment range from
five to seven years and the estimated useful lives for leasehold
improvements is approximately thirty years.
FAIR VALUE OF FINANCIAL INSTRUMENTS Carrying amounts of certain of the
Company's financial instruments including cash and cash equivalents,
accrued payroll and other accrued liabilities approximate fair value
because of their short term maturities.
INCOME TAXES The Company has established deferred tax assets and
liabilities for temporary differences between financial statement and tax
bases of assets and liabilities, using enacted tax rates in effect in the
years in which the differences are expected to reverse. Net deferred tax
assets have been fully reserved as their net realizability is not assured
at the current time.
USE OF ESTIMATES The preparation of financial statements, in conformity
with generally accepted accounting principles, requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
RECLASSIFICATION Certain 1997 amounts in the consolidated statements of
operations have been reclassified to conform to the 1998 presentation.
Such reclassifications have no impact on the net loss reported for 1997.
In the opinion of management, the accompanying unaudited consolidated
financial statements contain adjustments (consisting only of normal and
recurring adjustments) necessary to present fairly the Company's financial
position and the results of operations for the periods presented and the
disclosures herein are adequate to make the information presented not
misleading. Operating results for interim periods are not necessarily
indicative of the results that can be expected for a full year. These
interim financial statements should be read in conjunction with the
Company's audited consolidated financial statements and notes thereto.
2. ACQUISITIONS
In April 1998, the Company acquired Precision Security Systems, Inc.
("Precision"), one of the largest independent security alarm installation
companies in South Florida, for $3,000,000 in cash consideration and
194,269 shares of Class A Common Stock. The Company funded the cash
portion of the acquisition using borrowings under its facility with its
senior lender (see Note 6). The transaction was accounted for under the
purchase method of accounting. The acquisition increased the Company's
customer base by approximately 3,100 subscribers.
6
<PAGE>
In addition to Precision, the Company made two other acquisitions in the
six months ended June 30, 1998. Following is a summary of the Company's
acquisitions, all of which were accounted for under the purchase method of
accounting:
<TABLE>
<CAPTION>
PURCHASE PRICE
-------------------------------
CLASS A NUMBER OF
-------
COMPANY ACQUIRED CASH COMMON STOCK SUBSCRIBERS
---------------- ---- ------------- ------------
<S> <C> <C> <C>
Mutual Central Alarm Services, Inc. ("Mutual") $10,522,713 1,981,700 shares 2,583
Gator Telecom, Inc. ("Gator") 1,478,000 94,937 shares 1,865
Precision 3,000,000 194,269 shares 3,100
----------- ----------------
$15,000,713 2,270,906 shares
=========== ================
</TABLE>
In conjunction with these acquisitions, net cash consideration paid was as
follows:
Assets acquired $24,479,006
Liabilities assumed (4,273,136)
Equity issued (5,205,157)
-----------
Cash paid 15,000,713
Less - cash acquired (659,891)
-----------
Net cash paid $14,340,822
===========
3. CUSTOMER ACCOUNTS
The following is an analysis of the changes in acquired customer accounts
for the six months ended June 30, 1998:
Balance, December 31, 1997 $ 8,048,495
Purchase of customer accounts from dealers 183,694
Customer accounts acquired in acquisitions 20,559,498
Internally generated accounts 1,329,059
Charges against contract holdbacks (98,333)
Amortization of customer accounts (1,702,703)
-----------
Balance, June 30, 1998 $28,319,710
===========
In conjunction with certain purchases of customer contracts and accounts,
the Company withholds a portion of the price as a credit to offset
qualifying attrition of the acquired customer accounts and for purchase
price settlements of assets acquired and liabilities assumed. The Company
had a total balance withheld of $94,972 and $292,297 at June 30, 1998 and
December 31, 1997, respectively, as contract holdbacks in connection with
the acquisition of customer accounts which are included in "Accounts
payable and accrued expenses" in the accompanying consolidated balance
sheets.
7
<PAGE>
4. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets, net, consist of the following:
<TABLE>
AMORTIZATION
PERIOD JUNE 30, 1998 DECEMBER 31, 1997
------------ ------------- -----------------
<S> <C> <C> <C>
At cost:
Goodwill 10 years $2,729,970 $1,223,000
Deferred financing costs 3 years 787,397 695,686
Covenant not to compete, organization costs and
other 5 - 10 years 381,065 203,187
---------- ----------
3,898,432 2,121,873
Accumulated amortization (849,549) (606,922)
---------- ----------
$3,048,883 $1,514,951
========== ==========
</TABLE>
5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
<TABLE>
JUNE 30, DECEMBER 31,
1998 1997
---- ----
<S> <C> <C>
Trade accounts payable $ 458,655 $192,900
Contract holdbacks 94,972 292,297
Accrued commitment fee - 85,266
Other 1,571,375 211,416
---------- --------
$2,125,002 $781,879
========== ========
</TABLE>
6. LONG TERM OBLIGATIONS
Long term obligations consist of the following:
<TABLE>
JUNE 30, DECEMBER 31,
1998 1997
---- ----
<S> <C> <C>
Credit facility with financial institution $12,160,795 $752,898
Obligation for assets under capital lease 123,809 136,267
Equipment notes payable and other 158,005 145,620
----------- ---------
12,442,609 1,034,785
Less current portion (20,000) (73,201)
----------- ---------
$12,422,609 $ 961,584
=========== =========
</TABLE>
In connection with the acquisition of Mutual (see Note 2), the Company
amended its credit facility (the "Renewed Credit Facility") with Heller
Financial, Inc., the Company's senior lender. Under the Renewed Credit
Facility, borrowings will bear interest at floating rates, either at Prime
plus 1 3/4% or, at the Company's election, LIBOR plus 3 1/2%. At June 30,
1998, the debt was bearing interest at floating rates. The Renewed Credit
Facility expires in May 2001 and shall automatically renew from year to
year thereafter, unless terminated by either party. Availability under the
Renewed Credit Facility is subject to certain "Borrowing Base" limitations
(as defined). The Renewed Credit Facility includes customary covenants,
including, but not limited to, restrictions related to the incurring of
other debt, the encumbrance or sale of the Company's assets and the payment
of dividends or making of other distributions to the Company's
shareholders. The Company believes it was in compliance with all such
covenants as of June 30, 1998.
8
<PAGE>
GUARDIAN INTERNATIONAL, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
INTRODUCTORY NOTE
FORWARD-LOOKING STATEMENTS. In connection with the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995 (the "Reform Act"), the Company
is hereby providing cautionary statements identifying important factors that
could cause the Company's actual results to differ materially from those
projected in forward-looking statements (as such term is defined in the Reform
Act) made by or on behalf of the Company herein or orally, whether in
presentations, in response to questions or otherwise. Any statements that
express, or involve discussions as to, expectations, beliefs, plans, objectives,
assumptions or future events or performance (often, but not always, identified
through the use of words or phrases such as the Company or management
"believes," "expects," "anticipates," "hopes," words or phrases such as "will
result," "are expected to," "will continue," "is anticipated," "estimated,"
"projection" and "outlook," and words of similar import) are not historical
facts and may be forward-looking. Such forward-looking statements involve
estimates, assumptions, and uncertainties, and, accordingly, actual results
could differ materially from those expressed in the forward-looking statements.
Such uncertainties include, among others, the following: (i) the ability of the
Company to add additional customer accounts to its account base through
acquisitions from third parties, internally generated new accounts and strategic
alliances which lend to the Company's appeal as an acquirer; (ii) the level of
subscriber attrition, (iii) the availability of capital to the Company relative
to certain larger companies in the security alarm industry which have
significantly greater capital and resources, (iv) increased false alarm fines
and/or the possibility of reduced public response to alarm signals, (v) changes
in local, state and federal regulations, (vi) availability of qualified
personnel, (vii) competitive factors in the industry, including additional
competition from existing competitors or future entrants to the industry, (viii)
social and economic conditions (ix) natural disasters and (x) other risk factors
described in the Company's reports filed with the Commission from time to time.
The Company cautions that the factors described above could cause
actual results or outcomes to differ materially from those expressed in any
forward-looking statements made by or on behalf of the Company. Any
forward-looking statement speaks only as of the date on which such statement is
made, and the Company undertakes no obligation to update any forward-looking
statement or statements to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time and it is not possible for
management to predict all of such factors. Further, management cannot assess the
impact of each such factor on the business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.
OVERVIEW
The majority of the Company's revenues is derived from recurring
payments for the monitoring and maintenance of security systems, pursuant to
contracts with initial terms typically ranging from one to five years. The
remainder of the Company's revenues is derived from the sale and installation of
security systems and the servicing and upgrades of such installed systems.
Monitoring and service revenues are recognized as the service is provided. The
excess of installation revenue over estimated selling costs is amortized over
the initial term of the related service/monitoring contract (generally five
years). All direct installation costs, which include equipment, labor and
installation overhead are capitalized and amortized over a five year period. In
most cases, since the Company maintains
9
<PAGE>
ownership of the equipment, the costs of such equipment is capitalized to
property and equipment and amortized over seven to ten years.
Alarm monitoring revenues generate significant gross margins, whereas
installation and service activity may result in direct costs exceeding revenues.
Management believes, however, that such installation and service activity is
necessary for the generation and retention of alarm monitoring subscribers.
All direct external costs associated with purchases of subscriber
accounts (primarily through the acquisition of alarm companies, the Independent
Alarm Acquisition Program and the Dealer Program described in Part I, Item 1.
"Description of Business" in the Company's Form 10-KSB for the fiscal year ended
December 31, 1997) are capitalized and amortized over ten years on a
straight-line basis. In contrast, costs attributed to providing the
installations, which include direct labor, direct materials and direct overhead,
are capitalized and amortized over a five-year period. All other costs
associated with the sales and installation are charged to income in the period
when the installation occurs.
Although no single subscriber represents more than two (2) percent of
the Company's recurring revenue base, the Company is vulnerable to subscribers
canceling their contracts. The Company experiences customer cancellations, i.e.,
attrition, of monitoring and related services as a result of subscriber
relocation, the cancellation of acquired accounts during the process of
integrating such accounts into the Company's operations, unfavorable economic
conditions and other reasons. This attrition is offset to a certain extent by
revenues from the sale of additional services to existing subscribers, the
reconnection of premises previously occupied by subscribers, the conversion of
accounts previously monitored by other alarm companies and guarantees provided
by the sellers of such accounts. The Company defines attrition numerically for a
particular period as a quotient, the numerator of which is equal to the
difference of gross MRR lost as the result of canceled subscriber accounts less
MRR lost that was replaced pursuant to guarantees from sellers of accounts
purchased by the Company, and the denominator of which is the month-end MRR at
the end of such period. Net MRR attrition of the Company's customers during the
six months ended June 30, 1998 and 1997 was less than 10%, on an annualized
basis.
Amounts paid to independent alarm companies and Dealers are capitalized
and amortized over ten years. If a customer signed on by an independent alarm
company or Dealer is lost and not replaced, the unamortized contract amount is
written off. Such write offs are included in amortization of customer contracts
in the accompanying Statements of Operations.
MRR represents the monthly recurring revenue the Company is entitled to
receive under subscriber contracts in effect at the end of the period. Included
in MRR and the number of subscribers are amounts associated with subscribers
with past due balances. The Company maintains the policy and practice of taking
every economically feasible action to preserve the revenue stream associated
with these contractual obligations. To this end, the Company actively works both
towards the collection of amounts owed and the retention of subscribers. In
certain instances, this collection and evaluation period may exceed six months.
When, in the judgment of the Company's collection personnel, all reasonable
efforts have been made to collect balances due and certain legal steps are taken
to ensure proper cancellation of the relevant monitoring contract, nonpaying
subscribers are disconnected from the Company's monitoring center and are
included in the calculation of net subscriber and MRR attrition.
10
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain operating data as a percentage
of total revenues for the periods indicated.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ---------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Monitoring 62.6 74.4 64.1 70.1
Installation and service 37.4 25.6 35.9 29.9
----- ----- ----- -----
Total revenues 100.0 100.0 100.0 100.0
Operating expenses
Monitoring 14.4 14.9 14.1 13.6
Installation and service 22.2 35.6 23.9 34.1
General and administrative 38.9 30.0 36.3 31.9
----- ----- ----- -----
75.5 80.5 74.3 79.6
----- ----- ----- -----
Income before interest expense, amortization and
Depreciation 24.5 19.5 25.7 20.4
----- ----- ----- -----
Interest expense 9.6 18.0 9.3 16.9
Amortization of customer contracts 30.4 16.6 27.3 16.1
Depreciation and amortization 3.9 5.9 4.2 6.1
----- ----- ----- -----
43.9 40.5 40.8 39.1
----- ----- ----- -----
Net loss (19.4) (21.0) (15.1) (18.7)
===== ===== ===== =====
</TABLE>
The Company has never had any net income and has a history of
consistent and sometimes significant net losses. Although no assurance can be
given by the Company as to when or if the Company will realize net earnings, the
Company anticipates that, based on its strategy of continued growth and customer
account expansion, and barring any unforeseen significant changes in the nature
of its business or operations (including its method of financing customer
account acquisitions through its existing and/or any Renewed Credit Facility
with Heller and the accounting for such acquisitions), it will continue to
record such net losses until such time as it has significantly reduced its
indebtedness and has substantially increased its customer base.
Earnings before interest, taxes, depreciation and amortization
("EBITDA") is another important factor in considering profitability. EBITDA does
not represent cash flow from operations as defined by generally accepted
accounting principles, should not be construed as an alternative to net earnings
nor is it indicative of the Company's operating performance or of cash flows
available to fund all the Company's cash needs. Items excluded from EBITDA are
significant components in understanding and assessing the Company's financial
performance. Management believes presentation of EBITDA enhances an
understanding of the Company's financial condition, results of operations and
cash flows because EBITDA is used by the Company to satisfy its debt service
obligations and its capital expenditure and other operational needs as well as
to provide funds for growth. In addition, EBITDA has been used by the investment
community to determine the current borrowing capacity and to estimate the
long-term value of companies with recurring cash flows from operations and net
losses. The
11
<PAGE>
following table provides a calculation of EBITDA for the three month and six
month periods ended June 30, 1998 and 1997:
<TABLE>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------- -------------------
1998 1997 1998 1997
---- ---- ---- ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net loss $(701,880) $(283,214) $(943,992) $(485,258)
Plus:
Amortization of customer contracts 1,101,639 224,011 1,702,703 417,827
Depreciation and amortization 140,372 79,199 263,344 157,564
Interest expense 346,884 243,181 582,154 440,120
--------- --------- --------- ---------
EBITDA $ 887,015 $ 263,177 $1,604,209 $ 530,253
========= ========= ========== =========
</TABLE>
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
Total revenues for the six months ended June 30, 1998 increased 140% to
approximately $6.2 million from approximately $2.6 million during the
corresponding period in the prior year. Monitoring revenues for the six months
ended June 30, 1998 increased to approximately $4.0 million, or 120%, from
approximately $1.8 million during the corresponding period of the prior fiscal
year. Installation and service revenues for the six months ended June 30, 1998
increased by 197% to approximately $2.2 million, compared to approximately
$778,000 during the corresponding period of the prior fiscal year. Total retail
subscribers approximated 19,800 at June 30, 1998, compared to 10,900 at June 30,
1997, a net increase of 82%. The increase in revenues and number of subscribers
in 1998 from 1997 is primarily attributable to the Company's 1998 acquisitions
of Mutual, Gator and Precision (see Note 2 to the Consolidated Financial
Statements).
Total operating expenses for the six months ended June 30, 1998
increased 150% to approximately $6.6 million compared to approximately $2.6
million during the corresponding period in the prior year. Monitoring expenses
increased 148% to approximately $878,000, compared to approximately $353,000
during the corresponding period in the prior year. As a percentage of monitoring
revenues during the six months ended June 30, 1998, monitoring expenses were
22%, compared to 19% during the corresponding period in the prior year. The
increase in monitoring costs, in absolute as well as on a percentage basis, from
1997 to 1998 was a result of the significant increase in monitoring revenues and
number of subscriber accounts, as well as the acquisition of Mutual, which
operates its own central monitoring station. Installation and service costs
during the six months ended June 30, 1998 increased by 68% to approximately $1.5
million, compared to approximately $885,000 during the corresponding period in
the prior year. The increase in total installation and service costs in 1998
from 1997 was partly the result of increases in related revenues in 1998 from
1997. As a percentage of installation and service revenue, installation and
service costs were 67% during the six months ended June 30, 1998, compared to
114%, during the corresponding period in the prior fiscal year, due to the
larger gross margins Mutual derives from its large commercial security system
sales.
Total gross profit, defined as total revenues less monitoring and
installation and service costs, increased by 184% to approximately $3.9 million
during the six months ended June 30, 1998, compared to approximately $1.3
million during the corresponding period in the prior year. Gross profit from
monitoring revenues increased by 113% to approximately $3.1 million during the
six months ended June 30, 1998, compared to approximately $1.5 million during
the corresponding period in the prior year. The
12
<PAGE>
increase in gross profit from monitoring revenues is primarily attributable to
the Company's recent acquisitions of Mutual, Gator and Precision and the May
1997 purchase of 2,200 retail customers from Alarm Controls, Inc. Gross profit
from installation and service activities increased by 799% to approximately
$749,000 during the six months ended June 30, 1998, compared to a loss of
approximately $107,000 during the corresponding period in the prior year, due to
the profitability Mutual derives from its large commercial security system
sales.
General and administrative costs ("G&A") increased by 173% to
approximately $2.3 million during the six months ended June 30, 1998, compared
to approximately $828,000 during the corresponding period in the prior year. The
increase in G&A costs in 1998 from 1997 is related primarily to the Company's
acquisitions of Mutual (a comparably sized company), Gator and Precision and its
growth in revenue, resulting in an increase in the Company's overhead cost
structure. As a percentage of total revenues, G&A increased to 36% during the
six months ended June 30, 1998, as compared to 32% in the corresponding period
in the prior year.
Amortization of customer contracts increased by 308% to approximately
$1.7 million during the six months ended June 30, 1998, compared to
approximately $418,000 during the corresponding period in the prior year. The
increase in such costs resulted from the increase in the amount of capitalized
customer contracts, which increased to a net balance of $28,319,710 at June 30,
1998 from $7,801,288 at June 30, 1997.
Depreciation and amortization increased by 67% to approximately
$263,000 during the six months ended June 30, 1998, compared to approximately
$158,000 during the corresponding period in the prior year. Such costs include
depreciation of property and equipment (the gross balance of which increased to
approximately $2.5 million at June 30, 1998 from approximately $1.0 million at
June 30, 1997 as a result of (i) the Company's continued expansion activities
and (ii) the acquisitions of Mutual, Gator and Precision (which resulted in
additional property and equipment being acquired), goodwill amortization (a
gross balance of approximately $1.5 million in goodwill was recorded in
connection with the acquisitions, which is being amortized over 10 years), and
amortization of certain other intangible assets.
Interest expense increased 32% to approximately $582,000 during the six
months ended June 30, 1998, compared to approximately $440,000 during the
corresponding period in the prior year. The increase in interest expense
resulted from additional debt incurred primarily in connection with acquiring
subscriber accounts. The majority of such subscriber acquisition costs were
financed by Heller. Total borrowings under the Renewed Credit Facility increased
to approximately $12.2 million at June 30, 1998 from approximately $7.4 million
at June 30, 1997.
Net loss applicable to common stock for the six months ended June 30,
1998 was approximately $1.3 million, or $(0.11) per share, compared to a net
loss of approximately $485,000, or $(0.07) per share, during the corresponding
period of the prior fiscal year.
13
<PAGE>
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
Total revenues for the three months ended June 30, 1998 increased 168%
to approximately $3.6 million from approximately $1.4 million during the
corresponding period in the prior year. Monitoring revenues for the three months
ended June 30, 1998 increased to approximately $2.3 million, or 125% from
approximately $1.0 million during the corresponding period of the prior fiscal
year. Installation and service revenues for the three months ended June 30, 1998
increased by 291% to approximately $1.4 million, compared to approximately
$346,000 during the corresponding period of the prior fiscal year. Total retail
subscribers approximated 19,800 at June 30, 1998, compared to 10,900 at June 30,
1997, a net increase of 82%. The increase in revenues and number of subscribers
in 1998 from 1997 is primarily attributable to the Company's recent acquisitions
of Mutual, Gator and Precision (see Note 2 to the Consolidated Financial
Statements).
Total operating expenses for the three months ended June 30, 1998
increased 186% to approximately $4.0 million compared to approximately $1.4
milion during the corresponding period in the prior year. Monitoring expenses
increased 158% to approximately $521,000, compared to approximately $202,000
during the corresponding period in the prior fiscal year. As a percentage of
monitoring revenues during the three months ended June 30, 1998, monitoring
expenses were 23%, compared to 20% during the corresponding period in the prior
year. The increase in monitoring costs, in absolute as well as on a percentage
basis, from 1997 to 1998 was a result of the significant increase in monitoring
revenues and number of subscriber accounts, as well as the acquisition of
Mutual, which operates its own central monitoring station. Installation and
service costs during the three months ended June 30, 1998 increased by 67% to
approximately $806,000, compared to approximately $481,000 during the
corresponding period in the prior year. The increase in total installation and
service costs in 1998 from 1997 was partly the result of increases in related
revenues in 1998 from 1997. As a percentage of installation and service revenue,
installation and service costs were 60% during the three months ended June 30,
1998, compared to 139%, during the corresponding period in the prior fiscal
year, due to the larger gross margins Mutual derives from its large commercial
security system sales.
Total gross profit, defined as total revenues less monitoring and
installation and service costs, increased by 243% to approximately $2.3 million
during the three months ended June 30, 1998, compared to approximately $669,000
during the corresponding periods in the prior year. Gross profit from monitoring
revenues increased by 117% to approximately $1.7 million during the three months
ended June 30, 1998, compared to approximately $805,000 during the corresponding
period in the prior year. The increase in gross profit from monitoring revenues
is primarily attributable to the Company's recent acquisitions of Mutual, Gator
and Precision. Gross profit from installation and service activities increased
by 437% to approximately $525,000 during the three months ended June 30, 1998,
compared to a loss of approximately $156,000 during the corresponding period in
the prior year. This increase is due to the profitability Mutual derives from
its large commercial security system sales.
General and administrative costs ("G&A") increased by 247% to
approximately $1.4 million during the three months ended June 30, 1998, compared
to approximately $406,000 during the corresponding period in the prior year. The
increase in G&A costs in 1998 from 1997 is related primarily to the Company's
acquisition of Mutual (a comparably sized company), Gator and Precision and its
growth in revenue, resulting in an increase in the Company's overhead cost
structure. As a percentage of total revenues, G&A increased to 39% during the
three months ended June 30, 1998, as compared to 30% during the corresponding
period in the prior year.
Amortization of customer contracts increased by 392% to approximately
$1.1 million during the three months ended June 30, 1998, compared to
approximately $224,000 during the corresponding period
14
<PAGE>
in the prior year. The increase in such costs resulted from the increase in the
amount of capitalized customer contracts, which increased to a net balance of
$28,319,710 at June 30, 1998 from $7,801,288 at June 30, 1997.
Depreciation and amortization increased by 77% to approximately
$140,000 during the three months ended June 30, 1998, compared to approximately
$79,000 during the corresponding period in the prior year. Such costs include
depreciation of property and equipment (the gross balance of which increased to
approximately $2.5 million at June 30, 1998 from approximately $1.0 million at
June 30, 1997 as a result of (i) the Company's continued expansion activities
and (ii) the acquisitions of Mutual, Gator and Precision (which resulted in
additional property and equipment being acquired), goodwill amortization (a
gross balance of approximately $1.5 million in goodwill was recorded in
connection with the acquisitions, which is being amortized over 10 years), and
amortization of certain other intangible assets.
Interest expense increased 43% to approximately $347,000 during the
three months ended June 30, 1998, compared to approximately $243,000 during the
corresponding period in the prior year. The increase in interest expense
resulted from additional debt incurred primarily in connection with acquiring
subscriber accounts. The majority of such subscriber acquisition costs were
financed by Heller. Total borrowings under the Renewed Credit Facility increased
to approximately $12.2 million at June 30, 1998 from approximately $7.4 million
at June 30, 1997.
Net loss applicable to common stock for the three months ended June 30,
1998 was approximately $(904,000), or $(0.08) per share, compared to a net loss
of approximately $(283,000), or $(0.04) per share, during the corresponding
period of the prior fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
In May 1997, the Company refinanced its existing credit facility with
Heller. Under the Renewed Credit Facility, the maximum credit facility available
to the Company was increased from an existing $7,000,000 to $15,000,000. In
connection with the acquisition of Mutual (see Note 2), the Renewed Credit
Facility was further amended to increase the maximum available to $20,000,000.
The Renewed Credit Facility expires in May 2001 and shall automatically renew
from year to year thereafter, unless terminated by either party. Availability
under the Renewed Credit Facility is subject to certain "Borrowing Base"
limitations (as defined). The Renewed Credit Facility includes customary
covenants, including, but not limited to, restrictions related to the incurring
of other debt, the encumbrance or sale of the Company's assets, and the payment
of dividends or making of other distributions to the Company's shareholders and
other financial performance covenants. The Company believes it was in compliance
with all such covenants as of June 30, 1998.
The Renewed Credit Facility will be used primarily for acquisitions of
subscriber accounts. The Company's continued plan of growth through acquisitions
of subscriber accounts is contingent upon its ability to borrow under the
Renewed Credit Facility.
15
<PAGE>
Net cash provided by operating activities during the six months ended
June 30, 1998 was approximately $1.3 million. The Company incurred a net loss of
approximately $944,000 during such period; however, included in such loss was
depreciation and amortization expense, amortization of customer contracts
expense and amortization of deferred financing costs totaling approximately $2.1
million, bad debt provision of approximately $296,000, cash outflows of
approximately $1.3 million related to increases in accounts receivable and other
assets and cash inflows of approximately $1.2 million related to net increases
in liabilities.
Net cash used in investing activities was approximately $16.4 million
during the six months ended June 30, 1998 and was comprised of approximately
$14.3 million used in the acquisitions of Mutual, Gator and Precision, the
purchase and placement of customer accounts of approximately $1.4 million and
the purchases of fixed assets of approximately $663,000.
Net cash provided by financing activities was approximately $15.3
million during the six months ended June 30, 1998, consisting of net proceeds
from issuance of preferred stock of approximately $4.0 million, proceeds under
borrowings from Heller of approximately $12.7 million reduced by repayments to
Heller and other long-term debt of approximately $1.3 million. The Company's
cash balance was $333,322 at June 30, 1998.
Total shareholders' equity was $17,278,176 at June 30, 1998, increasing
by a net amount of $8,261,950 during the six months ended June 30, 1998. The net
increase resulted from the investment in the Company by Westar Security, Inc.
("Westar") and the issuance of Class A Stock in connection with the acquisitions
of Mutual, Gator and Precision less the net loss of approximately $944,000.
As discussed in the Company's 1997 Form 10-KSB, in Part I, Item I
"Recent Developments", Westar is a wholly-owned subsidiary of Protection One,
Inc. which is a majority-owned subsidiary of Western Resources, Inc. The Company
believes that its strategic alliance with affiliates of Western Resources, Inc.
will help the Company's competitive position by (i) improving the Company's
financial strength by increasing the Company's equity; (ii) lowering its cost of
capital; (iii) improving its appeal to potential sellers of alarm accounts or
alarm companies and (iv) improving and expanding acquisition and investment
opportunities made available to the Company.
The Company does not currently have any significant commitments for
capital outlays.
YEAR 2000 COMPLIANCE
The Company had previously received assurance from Monitoring
Automation Systems (MAS), the supplier of the Company's monitoring and financial
software, that all applications in its software are Year 2000 compliant. In a
recent technical bulletin received from MAS, the Company was informed that all
of the MAS monitoring, database and billing systems are Year 2000 compliant,
however, its general ledger and accounts payable programs are not. The Company
is in the final stages of selecting Year 2000 compliant general ledger and
accounts payable software, which it intends to install by early 1999.
The Year 2000 compliance status of no other supplier will materially
affect the Company's business.
The Company believes that any costs incurred in connection with the
Year 2000 compliance will not have a material adverse effect.
16
<PAGE>
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade receivables from a
large number of customers, including both residential and commercial customers.
The Company extends credit to its customers in the normal course of business,
performs periodic credit evaluations and maintains allowances for potential
credit losses.
17
<PAGE>
GUARDIAN INTERNATIONAL, INC.
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The following issuances were exempt pursuant to Section 4(2) of the
Securities Act of 1933, as amended:
On April 27, 1998, the Company issued 194,269 shares of Class A Stock,
pursuant to a Stock Purchase Agreement dated April 27, 1998, as partial
consideration in acquiring all of the outstanding common stock of Precision (see
Note 2 to the Consolidated Financial Statements).
DATE OF NUMBER OF
PURCHASER PURCHASE COMMON SHARES
--------- -------- -------------
David Weston 4/27/98 194,269
On May 4, 1998, the Company issued 5,513 shares of Class A Stock, for
services performed in connection with an acquisition by the Company in December
1997.
DATE OF NUMBER OF
PURCHASER PURCHASE COMMON SHARES
--------- -------- -------------
Terry E. Akins 5/4/98 5,513
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
Effective April 15, 1998 a majority of the Class A Voting Common Stock
of the Company executed a Written Consent (the "Consent") in lieu of a meeting.
All directors nominated were elected in the Consent. For the election of
directors, results were as follows:
Harold Ginsburg For: 6,125,557 Against: 0
Sheilah Ginsburg For: 6,125,557 Against: 0
Richard Ginsburg For: 6,125,557 Against: 0
Darius G. Nevin For: 6,125,557 Against: 0
William Remington For: 6,125,557 Against: 0
18
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT NO. DESCRIPTION
----------- -----------
3(i) Articles of Incorporation dated October 30, 1986 incorporated
by reference to Exhibit 3(i) of the Company's Form 10-SB filed
May 6, 1996
3(i)(a) Amendment to the Articles of Incorporation incorporated by
reference to Exhibit 3(i)(a) the Company's Form 10-SB filed
May 6, 1996
3(i)(b) Amendment to the Articles of Incorporation incorporated by
reference to Exhibit 3(i)(b) of the Company's Form 10-SB filed
May 6, 1996
3(i)(c) Amendment to the Articles of Incorporation incorporated by
reference to Exhibit 3(i)(c) of the Company's Form 10-SB/A
filed January 24, 1997
3(ii) Amended and Restated By-Laws of the Company incorporated by
reference to Exhibit 3(ii) of the Company's Quarterly Report
on Form 10-QSB filed as of November 14, 1997
4(a) Specimen Stock Certificate incorporated by reference to
Exhibit 4 of the Company's Form 10-SB12G as of June 18, 1996
4(b) Certificate of the Designations, Voting Power, Preferences and
Relative, Participating, Optional and Other Special Rights and
Qualifications, Limitations or Restrictions of Preferred
Stock, of Guardian International, Inc., filed in the Office of
the Secretary of State of the State of Nevada on February 23,
1998 designating the second series of Preferred Stock of the
Company as Series B 10 1/2% Convertible Cumulative Preferred
Stock, par value $.001 per share, incorporated by reference to
Exhibit 4(c) of the Company's Form 10-KSB filed March 31,
1998.
4(c) Amendment to Certificate of the Designations, Voting Power,
Preferences and Relative, Participating, Optional and Other
Special Rights and Qualifications, Limitations or Restrictions
of the Series A 9 3/4% Convertible Cumulative Preferred Stock,
par value $.001 per share, of Guardian International, Inc.,
filed in the Office of the Secretary of State of the State of
Nevada on March 13, 1998, incorporated by reference to Exhibit
4(d) of the Company's Form 10-KSB filed March 31, 1998.
4(d) Amendment to Certificate of the Designations, Voting Power,
Preferences and Relative, Participating, Optional and Other
Special Rights and Qualifications, Limitations or Restrictions
of the Series B 10 1/2% Convertible Cumulative Preferred
Stock, par value $.001 per share, of Guardian International,
Inc., filed in the Office of the Secretary of State of the
State of Nevada on March 13, 1998, incorporated by reference
to Exhibit 4(e) of the Company's Form 10-KSB filed March 31,
1998.
10(a) Stock Purchase Agreement dated as of April 27, 1998.
10(b) Employment Agreement with David Weston between Precision and
the Company dated as of April 27, 1998.
10(c) Indemnification Agreement between sellers of Precision and the
Company dated April 27, 1998.
10(d) Confidentiality, Noncompetition and Nonsolicitation Agreement
with Alan Dubow dated April 27, 1998.
10(e) Confidentiality, Noncompetition and Nonsolicitation Agreement
with Richard Clark dated April 27, 1998.
10(f) Confidentiality, Noncompetition and Nonsolicitation Agreement
with Jeff Chivers dated April 27, 1998.
27 Financial Data Schedule (for SEC use only)
19
<PAGE>
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended June
30, 1998.
20
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, as of the 14th day of August, 1998.
GUARDIAN INTERNATIONAL, INC.
By: /S/ DARIUS G. NEVIN
------------------------
Darius G. Nevin
Chief Financial Officer
21
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- ------------
10(a) Stock Purchase Agreement dated as of April 27, 1998.
10(b) Employment Agreement with David Weston between Precision and the
Company dated as of April 27, 1998.
10(c) Indemnification Agreement between sellers of Precision and the Company
dated April 27, 1998.
10(d) Confidentiality, Noncompetition and Nonsolicitation Agreement with Alan
Dubow dated April 27, 1998.
10(e) Confidentiality, Noncompetition and Nonsolicitation Agreement with
Richard Clark dated April 27, 1998.
10(f) Confidentiality, Noncompetition and Nonsolicitation Agreement with Jeff
Chivers dated April 27, 1998.
27 Financial Data Schedule (for SEC use only) E-1
EXHIBIT 10(A)
STOCK PURCHASE AGREEMENT
AGREEMENT effective as of April 17, 1998 by and among Guardian
International, Inc., a Nevada corporation (the "Buyer"), and Richard Clark
("Clark"), David Weston ("Weston"), Jeff Chivers ("Chivers") and Alan Dubow
("Dubow" and together with Clark, Weston and Chivers, the "Sellers" or each, a
"Seller"). Clark and Weston are hereinafter collectively referred to as the
"Principal Shareholders" or each, as a "Principal Shareholder."
RECITALS
A. Sellers are the owners of all of the outstanding shares (the
"Shares") of common stock, $.15 par value per share (the "Common Stock"), of
Precision Security Systems, Inc., a Florida corporation (the "Company").
B. Buyer desires to buy from Sellers, and Sellers desire to sell to
Buyer, all of the Shares, at the price and subject to the terms and conditions
as more fully described in this Agreement.
C. In connection with the purchase and sale of the Shares pursuant to
this Agreement, each of Sellers shall enter into a Noncompetition and
Nonsolicitation Agreement with the Buyer.
AGREEMENT
1. PURCHASE AND SALE OF SHARES.
1.1 CLOSING. The consummation of the transaction contemplated
by this Agreement (the "Closing") shall take place at the offices of Steel
Hector & Davis LLP at 1900 Phillips Point West, 777 South Flagler Drive, West
Palm Beach, FL 33401 on April 27, 1998 (the "Closing Date") or on such earlier
date as the parties may agree.
1.2 PURCHASED SHARES. The Sellers agree to sell and transfer
to the Buyer, and the Buyer agrees to purchase all of the Sellers' right, title
and interest in the Shares for an aggregate purchase price (the "Purchase
Price") of $3,500,000, which shall consist of the sum of (i) $2,800,000 in
payment for the Shares and (ii) $200,000 in payment for the notes listed on
Schedule 1.2 attached hereto, which cash sums shall be paid to Marilyn Clark,
Weston and Chivers by certified or cashier's check at the Closing (collectively,
the "Cash Purchase Price") in the amounts set forth on Schedule 1.2 and (iii) a
number of newly-issued shares ("Guardian Shares") of Class A Voting Common
Stock, $.001 par value, of Buyer ("Guardian Common Stock") issued to Weston
equal to $500,000 as determined by dividing $500,000 by the average of the last
trade price of the Guardian Common Stock for the twenty trading days preceding
the Closing Date; PROVIDED, HOWEVER, the foregoing
<PAGE>
formula shall permit rounding (whether up or down) so that Weston shall not
receive a fractional share of Guardian Common Stock.
1.3 DELIVERIES. At the Closing, the Sellers shall deliver the Shares to
the Buyer, free and clear of all liens, encumbrances, claims, pledges, security
interests, options and other agreements or restrictions (collectively, "Liens"),
either duly endorsed in blank or accompanied by duly executed stock powers. At
the Closing, the Sellers shall also deliver to the Buyer the books and records
of the Company. At the Closing, Buyer shall deliver to each of Clark, Weston,
Chivers and Dubow a certified check in an amount equal to the applicable portion
of the Cash Purchase Price due in accordance with Schedule 1.2 and shall deliver
a stock certificate for the Guardian Shares issued to Weston determined pursuant
to the formula and subject to the stipulations in Section 1.2 above.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLERS.
The Principal Shareholders, and, to the extent expressly
provided herein, the Sellers, jointly and severally, hereby represent and
warrant to the Buyer as follows:
2.1 CORPORATE ORGANIZATION AND GOOD STANDING. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida, and has full corporate power and authority to carry on
its business as it is now being conducted (the "Business") and to own the
properties and assets it now owns. Except as set forth on Schedule 2.1, the
Company is duly qualified as a foreign corporation or authorized to transact
business in and is in good standing under the laws of each jurisdiction in which
the conduct of its Business or the ownership of its assets requires such
qualification or authorization, unless non-qualification or lack of
authorization to transact business in any jurisdiction will not have a material
adverse effect on the Company, which jurisdictions are set forth in Schedule
2.1. The Principal Shareholders, simultaneously herewith shall deliver to Buyer
complete and correct copies of the Articles of Incorporation and Bylaws of the
Company as presently in effect. True, complete and correct copies of the minute
books of the Company have been previously delivered to the Buyer. Except as set
forth on Schedule 2.1, the minute books are current as required by law, contain
the minutes of all meetings of the incorporators, Board of Directors and the
shareholders of the Company from the respective dates of incorporation to the
date hereof, and accurately reflect all material actions taken by the Board of
Directors and shareholders of the Company. Except as set forth on Schedule 2.1,
the Company has no subsidiaries and owns no capital stock or other securities or
interests of or in any other entity, partnership or joint venture. The
transactions contemplated herein have been approved by all necessary corporate
action on the part of the Company and its shareholders.
2.2 CAPITALIZATION. The authorized capital stock of the
Company consists of (i) 10,000 shares of Common Stock, par value $.15 per share,
of which 10,000 shares are issued and outstanding and (ii) 1,000 shares of
preferred stock, par value $1.50 per share (the "Preferred Stock"), of which
1,000 shares are issued and outstanding. All of the issued and outstanding
shares of Preferred Stock will be redeemed by the Company prior to the Closing
Date. Schedule 2.2 sets forth a true, accurate and complete listing of the
shareholders of the Company and the number of shares of Common Stock held by
each of them.
2
<PAGE>
All issued and outstanding shares of capital stock of the
Company are validly issued, fully paid, non-assessable, free of preemptive
rights and are not subject to any restriction on transfer under the Articles of
Incorporation or Bylaws of the Company or under any agreement or otherwise,
except as otherwise set forth on Schedule 2.2. Except as set forth on Schedule
2.2, no shares of capital stock of the Company are held in the treasury of the
Company, and there are no outstanding (i) securities convertible into or
exchangeable for any of the capital stock of the Company; (ii) options, warrants
or other rights to purchase or subscribe to capital stock of the Company; or
(iii) commitments, agreements or understandings of any kind relating to the
issuance, redemption or repurchase by the Company or others of any capital stock
thereof, any such convertible or exchangeable securities or any options,
warrants or rights. Except as listed on Schedule 2.2, neither the Sellers nor
the Company have entered into any agreement or commitment to register its equity
or debt securities under the Securities Act of 1933, as amended (the "Securities
Act").
2.3 TITLE OF STOCK. The Sellers are the record and beneficial
owners of the Shares, free and clear of any and all Liens, which Shares
represent one hundred percent (100%) of the authorized, issued and outstanding
Common Stock of the Company and, upon the sale of the Shares in accordance with
this Agreement, the Buyer will acquire good, valid and indefeasible title to the
Shares, free and clear of any and all Liens.
2.4 AUTHORIZATION; VALIDITY. Each of the Sellers has full
power, capacity and authority to enter into this Agreement and to carry out the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of the Sellers and is the legal, valid and
binding obligation of each of the Sellers, enforceable in accordance with its
terms, except as such terms may be limited by bankruptcy, insolvency,
moratorium, reorganization and other laws of general application affecting the
enforcement of creditors' rights generally and by the availability of equitable
remedies.
2.5 NO VIOLATION. Neither the execution and delivery of this
Agreement nor the performance by the Sellers of their obligations hereunder will
(a) violate any provision of the Articles of Incorporation or By-laws of the
Company, (b) with or without the giving of notice or the passage of time,
violate, or be in conflict with, or constitute a breach or default under (or
would constitute a default or result in a breach with the giving of notice,
lapse of time or both), or require the consent of any other party to, or result
in the creation or imposition of any Lien upon any of the assets of the Company
under, any agreement or commitment to which the Company is a party or by which
it is bound, or (c) violate any material authorization, consent, approval or
license or any statute, law, judgment, decree, order, regulation or rule of any
court, administrative agency or any federal, state, local, municipal, or foreign
government, governmental or quasi-governmental agency or authority, or body
exercising any administrative, executive, or regulatory authority (each, a
"Governmental Authority") or arbitrator to which the Company, the Sellers or the
Shares is subject. Without limiting the generality of the foregoing, to the
knowledge of the Principal Shareholders, the sale and delivery of the Shares is
exempt from the registration requirements of the Securities Act and any
applicable state securities laws.
3
<PAGE>
2.6 CONSENT AND APPROVALS OF GOVERNMENTAL AUTHORITIES. No
consent, approval or authorization of, or declaration, filing or registration
with, any federal, state, local or other Governmental Authority (including,
based in part upon representations of the Buyer, the Federal Trade Commission
and the Antitrust Division of the Department of Justice pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) is required to
be made or obtained by the Company or the Sellers in connection with the
execution, delivery and performance of this Agreement.
2.7 BROKERS. No broker, finder or other similar intermediary
has been engaged by the Company in connection with the transaction contemplated
by this Agreement.
2.8 LICENSES; COMPLIANCE. Schedule 2.8 sets forth separately
as to the Company all material authorizations, consents, approvals, licenses and
permits required under applicable law or regulation for the ownership or
operation of the assets owned or operated by the Company or for the conduct of
the Business of the Company. All such authorizations, consents, approvals,
licenses and permits (collectively, the "Authorizations") have been duly issued
or obtained, are in full force and effect and are in accordance therewith in all
material respects. Except as otherwise set forth in Schedule 2.8, the Company is
in compliance with (i) the terms and conditions of all such Authorizations, (ii)
all laws, statutes, regulations and ordinances affecting the Company and its
Business and assets, the lack of compliance with which will have a material
adverse effect on the Company, and (iii) all judgments, orders, decrees, rulings
or other decisions of any Governmental Authority, court or arbitrator having
jurisdiction over the Company. The Principal Shareholders have no reason to
believe that such Authorizations will not be renewed by the issuing Governmental
Authority in the ordinary course. None of such Authorizations is subject to any
restriction or condition which would limit in any material respect the Business
and operations of the Company.
2.9 FINANCIAL STATEMENTS. The unaudited financial statements
of the Company for the fiscal years ending as of March 31, 1998 and March 31,
1997 including, without limitation, the balance sheets, statements of income,
changes in financial position and shareholders' equity of the Company, including
related notes, if any, (collectively, the "Financial Statements"), are complete
and correct and fairly present the financial condition of the Company and the
results of its operations for the periods ending on such dates, respectively.
True and complete copies of the Financial Statements are attached as Schedule
2.9. Except as provided in the Financial Statements, or as fully disclosed in
Schedule 2.9, the Company has no material liabilities or obligations (whether
accrued, absolute, contingent, mature, unmatured, whether due or to become due
or otherwise) which might be or become a charge against the Company or its
assets, including any "loss contingencies" considered "probable" or "reasonably
possible" within the meaning of the Financial Accounting Standard Board's
Statement of Financial Accounting Standards No. 5, except trade payables and
similar liabilities and obligations incurred in the ordinary course of business
since the date of the Financial Statements. The Company has maintained its books
and records in accordance with sound business practices including, without
limitation, the maintenance of an adequate system of internal controls.
4
<PAGE>
2.10 ABSENCE OF CHANGES. Except as set forth in Schedule 2.10,
since March 31, 1998, the Company has not suffered or taken any of the following
actions: (i) suffered any material adverse effect in its financial condition,
assets, liabilities (absolute, accrued, contingent or otherwise), reserves,
Business or operations; (ii) incurred any material liabilities or obligations
(whether absolute, accrued, contingent or otherwise), except items incurred in
the ordinary course of business; (iii) increased, or experienced any material
change in any assumptions underlying, or methods of calculating, any bad debt,
contingency or other reserves; (iv) permitted or allowed any of its assets to be
subjected to any Liens of any kind, except for Liens for Taxes not yet due or
other minor encumbrances; (v) leased, sold, transferred or otherwise disposed of
any of its assets except in the ordinary course of business; (vi) made any
capital expenditure or commitment for replacements or additions or structural
improvements or maintenance to property, plant, equipment or other capital
assets in excess of $50,000; (vii) declared, paid or set aside for payment any
dividend or other distribution with respect to its capital stock, or redeemed,
purchased or otherwise acquired, directly or indirectly, any shares of capital
stock or other securities of the Company; (viii) made any change in its method
of accounting or accounting practice; (ix) issued, sold or delivered or agreed
to issue, sell or deliver any shares of capital stock of the Company or any
options, warrants or rights to acquire capital stock or securities convertible
into or exchangeable for capital stock; (x) increased the salaries,
compensation, pension or other benefits payable to any manager or employee of
the Company or entered into any employment agreement with any officer or
salaried employee that is not terminable by the employer, without cause and
without penalty on 30 days notice or less, except in the ordinary course of
business; (xi) forgiven or canceled any claims or waived any rights of material
value; (xii) suffered any casualty, damage, destruction or property loss
(whether or not covered by insurance) materially adversely affecting the
Company; (xiii) suffered any loss of employees due to resignation or customers
that materially adversely affect the Company, except in the ordinary course of
business; or (xiv) agreed, whether in writing or otherwise, to take any of the
actions described in this Section 2.10.
2.11 UNDISCLOSED LIABILITIES. Except as set forth in Schedule
2.11, the Company has no liabilities, obligations or unrealized or anticipated
losses (whether accrued, absolute, contingent, mature, unmatured, whether due or
to become due or otherwise) that are not fairly and adequately reflected or
reserved against on the Financial Statements in excess of $5,000, and, to the
knowledge of the Principal Shareholders, there is no circumstance, condition,
event or arrangement that hereafter is likely to give rise to any such
liabilities, obligations or losses.
2.12 LITIGATION; DISPUTES. Except as set forth in Schedule
2.12, there is no action, suit, proceeding, mediation or investigation pending,
or to the knowledge of the Principal Shareholders, threatened against or
relating to the Company or its assets or against the Sellers relating to the
Company before any court, Governmental Authority, mediator or arbitrator, nor,
to the knowledge of the Principal Shareholders, are there any facts or
circumstances creating a factual basis for the institution of any such action,
suit, proceeding, mediation or investigation. All the actions, suits,
proceedings, mediation or investigations described on Schedule 2.12 are being
diligently prosecuted and, except as set forth in Schedule 2.12, are adequately
covered by insurance or adequate reserves have been set aside therefor on the
Financial Statements.
5
<PAGE>
2.13 TAXES; TAX ELECTIONS. "Tax" as used herein shall mean any
tax (including any income tax, capital gains tax, value-added tax, sales tax,
property tax, gift tax or estate tax), levy, assessment, tariff, duty,
deficiency, or other fee, and any related charge or amount (including any fine,
penalty, interest, or addition to tax), imposed, assessed, or collected by or
under the authority of any Governmental Authority. The Company has filed, caused
to be filed or has obtained extensions to file all foreign, federal, state and
local Tax returns which are required to be filed by it, and which returns are
true, complete and correct, and has paid or caused to be paid, or has reserved
on its books amounts sufficient for the payment of, all Taxes as shown on said
returns or on any assessment received by it and all penalties and interest. The
federal income Tax returns of the Company have never been examined by the United
States Internal Revenue Service or any successor agency (the "IRS"). The Tax
returns of the Company are not presently being audited by any foreign, federal,
state or local authorities, nor are there currently in effect with respect to
the Company any agreements for the extension or waiver of any statute of
limitations on the assessment or collection of any Tax. No Tax liens have been
filed against the assets of the Company, no claim for any additional Tax or
assessment is being asserted against the Company by any Tax authority, and
neither the Sellers nor the Company has been notified of, and, to the knowledge
of the Principal Shareholders, there are no facts or circumstances that could
result in, any claim being asserted with respect to any Taxes. There is no
action, suit, proceeding, investigation or audit pending or, to the best
knowledge of the Principal Shareholders, threatened against the Company in
respect of any Tax or assessment. All foreign, federal, state, county and local
Taxes and assessments or contributions (including interest and penalties, if
any) payable by the Company on or prior to the date hereof were paid when due,
and will be paid to the extent they become due and payable after the date
hereof, and there are no unpaid Taxes which are or could become a Lien on the
properties, Business or assets of the Company. The Company has not filed a
consent to the application of Section 341(f)(2) of the Internal Revenue Code of
1986, as amended (the "Code"), with regard to any property held, acquired or to
be acquired at any time. The Company has not been a member of an affiliated
group filing a consolidated income Tax return nor has any liability for Taxes of
any Person under Treasury Regulation Section 1-1502-6 or any similar provision
of state, local or foreign law. The Company is not obligated nor is it a party
under any agreements pursuant to which it may be obligated to make payments
which are not deductible under Section 280G of the Code. To the knowledge of the
Principal Shareholders, all individuals that the Company treats as independent
contractors are not "employees" (within the meaning of Section 3121(d)(2)(1) of
the Code or Section 3(6) of the Employee Retirement Income Security Act of 1974
or any successor law, and regulations and rules issued pursuant to that Act or
any successor law (collectively, "ERISA") for purposes of any federal, state or
local Taxes.
2.14 BANK ACCOUNTS. Attached hereto as Schedule 2.14 is a true
and complete list of the names and addresses of all banks and other financial
institutions in which the Company has any accounts, deposits or safe deposit
boxes, and the names of all persons authorized to draw on such accounts or
deposits or to have access to such safe deposit boxes. Except as listed on
Schedule 2.14, as of the Closing, no person will hold a power of attorney on
behalf of the Company. The books of account of the Company show all checks and
drafts outstanding, and, except as disclosed on Schedule 2.14, there are
sufficient funds in the accounts listed on Schedule 2.14 to pay any and all
checks or drafts presented or outstanding but not yet presented on said
accounts.
6
<PAGE>
2.15 REAL PROPERTY. The Company owns no real property.
2.16 LEASED PROPERTY. The Sellers have previously delivered to
Buyer true and complete copies of the leases of the Company with respect to both
leased real property and leased personal property (respectively, the "Real
Property Leases" and the "Personal Property Leases" and, collectively, the
"Leases" and such property, the "Leased Property"). Schedule 2.16 sets forth a
list of the Leases and separately designates which Leases contain change in
control provisions or otherwise require the consent, waiver or approval of the
other parties thereto with respect to the consummation of the transactions
contemplated by this Agreement. The Leases are the valid and legally binding
obligations of the Company and the lessors thereunder, enforceable in accordance
with their respective terms, and are in full force and effect. None of the real
property leased under the Real Property Leases (the "Leased Real Property") is
affected by, subject to or, to the knowledge of the Principal Shareholders,
threatened by any condemnation or eminent domain proceedings or any assessments
for public improvements. Except as set forth on Schedule 2.16 (which omits any
default or invalid leasehold interest which will not have a material adverse
effect on the Company), (a) the Company has valid leasehold interests in all of
the leased real and personal property subject to the Leases; and (b) neither the
Company nor the Principal Shareholders have received any notice of default or
breach under any of the Leases, (c) none of the Leases are in default, and (d)
no event has occurred which, with the passage of time or the giving of notice or
both, would constitute a default thereunder. The Company has, or will have on or
before the Closing Date, delivered all notices to, and obtained all consents,
waivers and approvals from, all parties that are required in connection with the
transactions contemplated by this Agreement including, without limitation,
estoppel letters from the landlords with respect to the Real Property Leases, in
form and substance satisfactory to the Buyer. The Company enjoys peaceful and
undisturbed possession of the Leased Property. None of the Leased Property is
affected or threatened by or subject to any condemnation or eminent domain
proceeding or any assessments for public improvements, which would have a
material adverse effect on the Business or operations of the Company.
2.17 TITLE. The Company has valid leasehold interests in all
of its leased property and assets, and good and marketable title to all of its
other property and assets, tangible or intangible, reflected in the Financial
Statements or purported to have been acquired by the Company subsequent to the
date of such statements. Except as set forth in Schedule 2.17 and in the
Financial Statements, such property and assets are free and clear of limitations
on transfer or assignment, and are free and clear of all Liens, other than Liens
for current Taxes not yet due and payable or which are being contested in good
faith by appropriate proceedings (and for which adequate reserves have been
established) and other minor encumbrances arising in the ordinary course of
business, that are not substantial in amount, do not, in any case or in the
aggregate, detract from or interfere in, the current or, to the knowledge of the
Principal Shareholders, future operations of the Company. Except as set forth on
Schedule 2.17, there are no shared or jointly owned assets or facilities between
or among the Company and those of the Sellers' Affiliates. "Affiliates" shall be
defined in this Agreement to mean, as to any person, any other person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such person. The term "control," as applied to any person, means
the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of such person, whether through the
ownership of voting securities or other
7
<PAGE>
ownership interest, by contract or otherwise. A true, accurate and complete copy
of the asset list of the Company, setting forth a description of all the
tangible and intangible assets of the Company is attached hereto as Schedule
2.17. Such assets constitute all of the assets necessary to operate the Business
in the ordinary course consistent with past practices as of the Closing Date.
The Principal Shareholders shall deliver to the Buyer such additional assurances
as the Buyer may reasonably request with respect to the assets of the Company.
2.18 CONDITION OF PROPERTIES. The plants, structures, and
equipment of the Company and all other property and assets owned or used by the
Company are in good and operating condition, are in condition to pass safety and
health examinations under applicable laws and are available for immediate use in
the Business and operations of the Company or will be in such condition after
repairs or replacement, the total cost of which will not have a material adverse
effect on the Business or the operations of the Company. The Leased Real
Property and the plants, structures, equipment and other improvements located
thereon, and the present use thereof, comply with all material zoning, land use
and other laws, ordinances and regulations of all Governmental Authorities
having jurisdiction thereof. To the knowledge of the Principal Shareholders,
there is no asbestos-containing material in any of the buildings or facilities
on the Leased Real Property.
2.19 INTELLECTUAL PROPERTY; TRADE SECRETS. Except as set forth
in Schedule 2.19, the Company neither owns nor licenses Intellectual Property
(which is defined to include the name of the Company, all fictional business
names, trading names, registered and unregistered trademarks, service marks and
applications, all patents and patent applications, and all copyrights in both
published works and unpublished works) in the conduct of its Business. Neither
the Company nor the Principal Shareholders have received any notice of any
claims, controversies, lawsuits or judgments that affect the use or availability
of the Company's name. All account encryption codes and associated software
(collectively, "Trade Secrets") of the Company are current, accurate, and
sufficient in detail and content to identify and explain them and to allow their
full and proper use without reliance on the special knowledge or memory of
others. The Company has taken all reasonable precautions to protect the secrecy,
confidentiality, and value of its Trade Secrets. The Trade Secrets are not part
of the public knowledge or literature, and, to the knowledge of the Principal
Shareholders, have not been used, divulged, or appropriated either for the
benefit of any Person (other than the Company) or to the detriment of the
Company. "Person" shall mean any individual, corporation, general or limited
partnership, limited liability company, joint venture, estate, trust,
association, organization or other entity. To the knowledge of the Principal
Shareholders, no Trade Secret is subject to any adverse claim or has been
challenged or threatened in any way. The Company licenses all software used by
the Company pursuant to valid and binding license agreements. All license
agreements are in full force and effect and there are no defaults (or events
which with notice, lapse of time or both, could constitute defaults) under such
license agreements. The consummation of the transactions contemplated by this
Agreement will not alter, impact on or otherwise affect any of the rights
granted to the Company pursuant to such license agreements. None of the software
has manifested any significant operating problems, other than such problems that
have been corrected or are correctable in the ordinary course of business. To
the knowledge of the Principal Shareholders, all of the Company's computer
software and systems are Year 2000 compliant. No third party vendor with whom
the Company does business has given
8
<PAGE>
notice to the Company or the Principal Shareholders that such vendor will not be
Year 2000 compliant. "Year 2000 compliant" means that abnormal, invalid or
incorrect results are not produced by processing matters computed with reference
to calendar year 2000 and years thereafter including, but is not limited to,
date data century recognition (i.e., ability to properly recognize and address
the applicable century in any data that includes a date), calculations that
accommodate same-century and multi-century formulas, date-related user interface
values and data fields that in each case reflect the century, and date-related
functions that in each case reflect the century.
2.20 PATENTS. The Company neither owns nor licenses any
patents in the conduct of its Business.
2.21 CONTRACTS. Schedule 2.21 sets forth a complete and
correct list of each of the following types of contracts (whether oral or
written) to which the Company is a party (collectively, the "Contracts") each of
which is in excess of $5,000: (i) contracts for the employment of any officer or
employee; (ii) contracts for the purchase of materials, supplies, services,
merchandise or equipment; (iii) management agreements, franchise agreements,
license agreements, advertising agreements and contracts for the purchase and
sale of inventory; (iv) agreements or arrangements for the sale or lease of any
of the Company's assets other than in the ordinary course of business; (v)
mortgages, pledges, conditional sales contracts, security agreements or other
similar agreements; (vi) leases of machinery or equipment; (vii) loan
agreements, promissory notes, guarantees, letters of credit, subordination or
similar type agreements; (viii) agreements or arrangements for the acquisition
or sale of real or personal property; (ix) all consulting and independent
contractor contracts; (x) all contracts and policies for insurance coverage;
(xi) all joint venture, strategic alliance and partnership agreements; and (xii)
any contract not otherwise covered by clauses (i) through (xi) above which
involves annual or aggregate payments or receipts in excess of $5,000. Schedule
2.21 sets forth a complete and correct list of the customers with whom the
Company has agreements. The Company has materially performed all of the
obligations required to be performed by it to date under such Contracts, is not
in default under any such Contracts, and no event has occurred which with the
passage of time, the giving of notice or both would constitute a default under
any such Contracts. Except as set forth in Schedule 2.21, all of such Contracts
shall remain in full force and effect after the date of the Closing and none of
such Contracts contain change in control provisions. The Sellers will obtain all
necessary consents with respect to any change of control or other such
provisions from the other parties to the Contracts with respect to the
transactions contemplated by this Agreement. To the knowledge of the Principal
Shareholders, none of the agreements between the Company and its customers will
be terminated prior to their stated expiration date and all the agreements
between the Company and its customers will be renewed in the ordinary course of
business subject to nonrenewal rates customary in the business of the Company.
The Sellers have delivered to the Buyer true and complete copies of the
Contracts described in Schedule 2.21 and all amendments thereto, PROVIDED,
HOWEVER, that in the case of customer agreements, the Sellers have delivered to
the Buyer true and complete copies of the forms of customer agreements and
hereby represent and warrant that all customer agreements conform to one of such
forms in all material respects. The Principal Shareholders represent and warrant
that all customer agreements which contain provisions giving the customer the
right to terminate as a result
9
<PAGE>
of the transactions contemplated hereby do not exceed recurring monthly revenue
(defined in Section 5.3 below) in excess of $5,000 in the aggregate.
2.22 INSURANCE POLICIES. The Company has in full force and
effect, with responsible insurance companies, policies of insurance with respect
to its employees, assets and Business insuring the Company against such
casualties and contingencies and of such types and amounts as are reasonably
adequate, as of the Closing Date, for the size and scope of the Business
conducted and properties held by the Company, and the Company maintains such
other insurance as may be required by law and by all contracts to which it is a
party. Schedule 2.22 sets forth a description of all policies of insurance that
the Company has and maintains in full force and effect, the annual premiums
therefor, the limits of liability, whether such policies are on an occurrence or
"claims made" basis and all performance bonds and letters of credit securing
such obligations. True and complete copies of all such policies have previously
been delivered to the Buyer. If the Company has any self-insurance arrangement
by or affecting the Company, such arrangement is also described on Schedule
2.22, including any reserves established thereunder. All premiums due on such
policies have been paid and, to the knowledge of the Principal Shareholders, the
aggregate amount of all claims under such policies do not exceed policy limits.
Neither the Company nor the Sellers have received any notification from any
insurance carrier denying or disputing any claim made by or on behalf of the
Company denying or disputing any coverage for any claim, denying or disputing
the amount of any claim, or regarding the possible cancellation of any policies.
Except as set forth in Schedule 2.22, neither Principal Shareholder has received
notice that any of such policies will not be renewed by the respective insurance
carriers with substantially the same coverage. The Company has not received (i)
any notice of cancellation of any policy, (ii) any notice that any issuer of
such policy has filed for protection under applicable bankruptcy laws or is
otherwise in the process of liquidating or has been liquidated, (iii) any other
indication that such policies are no longer in full force and effect or that the
issuer of any such policy is no longer willing or able to perform its
obligations thereunder, or (iv) any refusal of coverage or any notice that a
defense will be afforded with reservation of rights. All premiums due on such
policies have been paid, and the aggregate amount of all claims under such
policies do not exceed policy limits. The Company has given notice to the
insurers of all material claims that may be insured thereunder.
2.23 CUSTOMERS. No customer of the Company accounts for more
than 5% of the Company's gross revenues during the year ended December 31, 1997,
ranked by revenues. The Principal Shareholders have not received notice that any
material relationship of the Company with customers will not continue to be
available to the Company or that any material relationship of the Company with
customers will be changed in an adverse manner as a result of the transactions
contemplated by this Agreement.
2.24 ERISA AND OTHER COMPENSATION PLANS. Except as set forth
in Schedule 2.24, the Company does not maintain or participate in any
arrangements or policies, deferred compensation arrangements, stock purchase,
stock option, employee benefit plan (as defined in Section 3(3) of ERISA), or
any other employee benefit policies, programs or arrangements maintained
currently or in the past by ERISA Employer (as defined under ERISA), under which
ERISA Employer has any current or future obligation or under which any former or
present
10
<PAGE>
employee of ERISA Employer has any current or future rights to benefits (the
"Benefit Plans"). ERISA Employer does not contribute and has not contributed to
any multi-employer pension plan (as defined in Section 4001(a)(3) of ERISA). The
ERISA Employer does not participate and has not participated in any employee
benefit plan maintained, or subscribed to, by any other employer.
2.25 LABOR MATTERS. Except as set forth in Schedule 2.25(a),
the Company is not a party to or bound by any collective bargaining agreement or
any other agreement with a labor union relating to the Company's employees, and,
to the knowledge of the Sellers, there has been no effort by any labor union
during the twenty-four (24) months prior to the date of this Agreement to
organize any of such employees into one or more collective bargaining units.
Except as set forth in Schedule 2.25(b), to the knowledge of the Principal
Shareholders, (i) the Company is in compliance with all federal, state and local
laws regarding employment and employment practices, conditions of employment,
wages and hours (including, without limitation, the Immigration Reform and
Control Act of 1986, as amended and supplemented, and Sections 212(n) and 274A
of the Immigration and Nationality Act, as amended and supplemented, and all
implementing regulations relating thereto), and the Company does not employ any
unauthorized aliens (as such term is defined under 8 CFR /Section/ 274a.1(a)),
(ii) the Company is not engaged in unfair labor practices, and there are no
unfair labor practice complaints pending or, to the knowledge of the Sellers,
threatened against the Company before the National Labor Relations Board or
otherwise, (iii) there are no EEOC violations or age, sex, racial
discrimination, occupation safety or health standards claims charged, pending
or, to the knowledge of the Sellers, threatened against the Company and, to the
knowledge of the Sellers, no actions have been taken or practices followed by
any employee of the Company that would give rise to any such claims, (iv) there
is no labor strike or dispute pending or, to the knowledge of the Sellers,
threatened against or involving the Company or at the current customer locations
that may affect the Business of the Company, and (v) none of the employees of
the Company are presently subject to collective bargaining agreements or are
engaged in organizing, or are members of, any union or other employee group that
is seeking recognition as a bargaining unit.
2.26 EMPLOYEES. The Company has 19 employees. Schedule 2.26
lists the names, job descriptions and annual salary rates, length of service,
commissions, benefits and other compensation for all present officers,
directors, managers, and employees of the Company and also contains a complete
and correct copy of the permanent payroll of the Company as of March 31, 1998.
None of the Company's employees has any employment agreement (written or oral).
2.27 ENVIRONMENTAL MATTERS. Except with respect to the matters
set forth in Schedule 2.27, (i) the Company is in compliance with (A) all legal
requirements designed to minimize, prevent, punish or remedy the consequences of
actions that damage or threaten the environment or public health and safety
("Environmental Laws") relating to the generation, management, handling,
transportation, treatment, disposal, storage, delivery, discharge, release or
emission of any waste, pollutant or toxic or hazardous substance (collectively,
"Hazardous Materials"), and (B) all regulations and requirements promulgated by
the Occupational Safety and Health Administration that may be applicable to the
Company; (ii) there is no proceeding, suit or investigation pending or, to the
knowledge of the Principal Shareholders, threatened with respect to any
violation or alleged violation of the Environmental Laws relating to the Leased
Real Property,
11
<PAGE>
and there is no reasonable basis known to the Principal Shareholders for the
institution of any such proceeding, suit or investigation relating to the Leased
Real Property; (iii) there has been no spillage, leakage, contamination or
release of any Hazardous Materials in violation of Environmental Laws for which
appropriate remedial action has not been completed, and no transportation of
Hazardous Materials in violation of Environmental Laws to any other location;
(iv) the Leased Real Property is not contaminated with any Hazardous Materials
in violation of Environmental Laws, and the waters below and adjacent thereto
have not received any Hazardous Materials from the operations of the Company;
and (v) there are no underground storage tanks or, to the knowledge of the
Principal Shareholders, other underground facilities on the Leased Real
Property.
2.28 RECEIVABLES. All accounts, notes and mortgages receivable
and premiums due and uncollected as reflected on the latest balance sheet
included in the Financial Statements and all accounts, notes and mortgages
receivable and premiums due and uncollected arising subsequent to the date of
such balance sheet, (i) to the knowledge of the Principal Shareholders,
represent valid obligations due to the Company enforceable in accordance with
their respective terms and conditions, (ii) to the knowledge of the Principal
Shareholders, are not subject to any defense, offset or counterclaim, and (iii)
subject only to customary write-offs for bad debts in a manner consistent with
past practice, have been collected or are collectible in the ordinary course of
Business.
2.29 AFFILIATED TRANSACTIONS. Except as set forth on Schedule
2.29, to the knowledge of Sellers, none of the Sellers is an owner, partner,
officer, director, employee, agent, investor or consultant in any business
competitive with that of the Company. Except as set forth on Schedule 2.29,
there are no loans, guarantees, leases or commitments from or to any of the
Sellers or any Affiliate thereof, on the one hand, and the Company, on the other
hand. Except as set forth in Schedule 2.29, there are no outstanding
transactions between any of the Sellers or any Affiliate thereof and the
Company, nor do any of the Sellers or Affiliates have any interest in any
property (whether real, personal or mixed, tangible or intangible), used in or
pertaining to the Business. Except as set forth on Schedule 2.29, the Company
has at all times been operated as a separate business.
2.30 CONSENTS; APPROVALS. Except as set forth on Schedule
2.30, no consents, approvals, waivers or other authorizations of any
Governmental Authority or other third party are required to be obtained by the
Sellers to consummate the transactions contemplated hereby, nor is any
corporate, shareholder or board of directors action required.
2.31 DISCLOSURE. No representation or warranty of the
Principal Shareholders or the Sellers herein and no information disclosed by the
Sellers to the Buyer in connection herewith contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
contained herein or therein not misleading. Except as otherwise disclosed in
this Agreement or the Schedules to this Agreement, there is no fact presently
known to the Principal Shareholders that would or could reasonably be expected
to have a material adverse effect on the Business, financial condition or
results of the Company.
12
<PAGE>
2.32 NO DISTRIBUTION. Weston is acquiring the Guardian Shares
for his own account with the present intention of holding such securities for
purposes of investment, and he has no intention of selling such securities in a
public distribution in violation of the federal securities laws or any
applicable state securities laws. Weston understands that the Guardian Shares
are "restricted securities" as defined in Rule 144 under the Securities Act, and
have not been registered pursuant to the provisions of the Securities Act,
inasmuch as the proposed purchase of the Guardian Shares is taking place in a
transaction not involving any public offering.
2.33 SOPHISTICATION. Weston is knowledgeable, experienced and
sophisticated in financial and business matters and is able to evaluate the
risks and benefits of the investment in the Guardian Shares.
2.34 ECONOMIC RISK. Weston is able to bear the economic risk
of the investment in the Guardian Shares for an indefinite period of time
because the Guardian 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.
2.35 ACCESS TO INFORMATION. Weston has been furnished or
otherwise had full access to such other information concerning Buyer and its
subsidiaries as he has requested and that was necessary to enable him to
evaluate the merits and risks of an investment in Buyer, and after a review of
this information, has had an opportunity to ask questions and receive answers
concerning the financial condition and business of Buyer and the terms and
conditions of the securities purchased hereunder, and has had access to and has
obtained such additional information concerning Buyer and the securities as he
deemed necessary.
2.36 ACCREDITED INVESTOR. Weston represents and warrants that
he is an "accredited investor" as defined in Rule 501(a) of Regulation D
promulgated under the Securities Act.
Each of the representations and warranties shall survive
Closing for a period of one (1) year, and each of which shall be deemed to be
material and relied upon by the Buyer regardless of any investigation made by or
information known to the Buyer, PROVIDED, HOWEVER, that the representation
contained in Section 2.13 (Taxes; Tax Election) shall survive for the applicable
statute of limitations, and any tolling or extensions thereof. If any claim for
indemnification under Section 4 in connection with any representation or
warranty is made prior to the termination of its period of survival, the
termination of such survival period for such representation or warranty shall be
tolled until the final resolution of such claim.
3. REPRESENTATIONS AND WARRANTIES OF THE BUYER.
3.1 CORPORATE ORGANIZATION. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada. Buyer has full corporate power and authority to enter into this
Agreement and to carry out the transactions contemplated hereby. The Board of
Directors of Buyer has duly authorized the execution and delivery of this
Agreement and the performance by the Buyer of its obligations hereunder. No
other corporate proceedings
13
<PAGE>
on the part of Buyer are necessary to authorize the execution and delivery of
this Agreement and the performance by Buyer of its obligations hereunder.
3.2 NO VIOLATION. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (a)
violate any provisions of the Certificate of Incorporation or Bylaws of Buyer,
(b) violate or be in conflict with, or constitute a default under, or require
the consent of any other party to, any agreement or commitment to which Buyer is
a party or by which Buyer is bound, or (c) to the best knowledge of Buyer
violate any statute or law or any judgment, decree, order, regulation or rule of
any court or Governmental Authority to which Buyer is subject.
3.3 BROKERS. No broker, finder or other similar intermediary
has been engaged by Buyer in connection with the transaction contemplated by
this Agreement.
3.4 CONSENT AND APPROVALS OF GOVERNMENTAL AUTHORITIES. No
consent, approval or authorization of or declaration, filing or registration
with, any Governmental Authority (including, based in part upon representations
of the Sellers, the Federal Trade Commission and the Antitrust Division of the
Department of Justice pursuant to the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended) is required to be made or obtained by the Buyer in
connection with the execution, delivery and performance of this Agreement.
3.5 NO DISTRIBUTION. The Buyer is acquiring the Shares for its
own account with the present intention of holding such securities for 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 Buyer understands that the Shares are "restricted
securities" as defined in Rule 144 under the Securities Act and have not been
registered pursuant to the provisions of the Securities Act, inasmuch as the
proposed purchase of the Shares is taking place in a transaction not involving
any public offering.
3.6 SOPHISTICATION. The Buyer is knowledgeable, experienced
and sophisticated in financial and business matters and is able to evaluate the
risks and benefits of the investment in the Shares.
3.7 ECONOMIC RISK. The Buyer is able to bear the economic risk
of its investment in the Shares for an indefinite period of time because the
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.
3.8 ACCESS TO INFORMATION. The Buyer 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 Buyer
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
14
<PAGE>
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.
3.9 ACCREDITED INVESTOR. The Buyer is an "accredited investor"
as defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
4. INDEMNIFICATION.
4.1 GENERAL INDEMNITY. The Principal Shareholders, jointly and
severally, agree to indemnify and hold harmless the Buyer from and against any
and all liabilities, damages, claims, deficiencies, assessments, losses, suits,
proceedings, actions, investigations, penalties, interest, costs and expenses
including, without limitation, reasonable fees and expenses of counsel, amounts
paid in settlement and reasonable costs of investigation (whether suit is
instituted or not and, if instituted, whether at the trial or appellate level)
(collectively, the "Liabilities"), whether in law or equity, arising from or in
connection with (A) the failure of any representation of the Principal
Shareholders contained in this Agreement or in any document delivered in
connection herewith to be true and correct, (B) any breach or violation of any
of the warranties, covenants or agreements of the Principal Shareholders
contained in this Agreement or in any document delivered in connection herewith
or (C) any acts of the Company or the Principal Shareholders taken or omitted
prior to Closing. The Principal Shareholders shall indemnify the Buyer up to $7
million for Liabilities for which Buyer is entitled to indemnification from the
Principal Shareholders under this Section.
The Sellers, jointly and severally, agree to
indemnify and hold harmless the Buyer from and against any and all Liabilities,
whether in law or equity, arising from or in connection with (A) the failure of
any representation of the Sellers (as opposed to the Principal Shareholders)
contained in this Agreement or in any document delivered in connection herewith
to be true and correct, (B) any breach or violation of any of the warranties,
covenants or agreements of the Sellers (as opposed to the Principal
Shareholders) contained in this Agreement or in any document delivered in
connection herewith or (C) any acts of the Sellers (as opposed to the Principal
Shareholders) taken or omitted prior to Closing. The Sellers shall indemnify the
Buyer up to $7 million for Liabilities for which Buyer is entitled to
indemnification from Sellers under this Section.
Notwithstanding anything to the contrary contained herein, the
first $25,000 (the "Basket") in aggregate amount for all Liabilities under this
Section 4.1 for which the Principal Shareholders or the Sellers, as the case may
be, would be liable will be borne by Buyer; PROVIDED, HOWEVER, that the Basket
shall not apply to (i) any Liabilities arising from or relating to Taxes (as
such term is defined in Section 2.13 hereof), and (ii) the extent that any such
Liability is found, in a final unappealable judgment by a court of competent
jurisdiction, to have arisen from or related to one or more of the Principal
Shareholders' or Sellers', as the case may be, willful bad faith, willful
misconduct or gross negligence with an intent to defraud. A materiality
qualification in any representation or warranty will not be taken into account
in determining whether the Basket has been met.
15
<PAGE>
4.2 SURVIVAL OF INDEMNIFICATION. The indemnification covenant
contained in Section 4.1 shall survive the consummation of the transactions
contemplated hereby for a period of one year from the Closing Date; PROVIDED,
HOWEVER, in the case of Liabilities arising from or in connection with the
representations contained in Section 2.13 (Taxes; Tax Election), such
indemnification covenant shall survive for the applicable statute of
limitations, and any tolling or extensions thereof.
4.3 PROCEDURE. In the event any person or entity not a party
to this Agreement shall make any demand or claim or file or threaten to file or
continue any lawsuit, which demand, claim or lawsuit may result in Liabilities
to any party pursuant to the indemnification provisions of this Agreement, then,
in any such event, within 10 days after notice by the indemnified party (the
"Notice") to the indemnifying party of such demand, claim or lawsuit (provided,
however, that the failure to give such Notice shall not relieve the indemnifying
party of its obligations hereunder unless, and only to the extent that, such
failure caused the damages for which the indemnifying party is obligated to be
greater than they would otherwise have been had the indemnified party given
prompt notice hereunder), the indemnifying party shall have the option, at its
cost and expense, to retain counsel for the indemnified party (which counsel
shall be selected by or be reasonably satisfactory to the indemnified party), to
defend any such demand, claim or lawsuit. Thereafter, the indemnified party
shall be permitted to participate in such defense at its own expense, provided
that, if the named parties to any such proceeding (including any impleaded
parties) include both the indemnifying party and the indemnified party or if the
indemnifying party proposes that the same counsel represent both the indemnified
party and the indemnifying party and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them, then the indemnified party shall have the right to retain its own
counsel at the cost and expense of the indemnifying party. In the event that the
indemnifying party shall fail to respond within 10 days after receipt of the
Notice, the indemnified party may retain counsel and conduct the defense of such
demand, claim or lawsuit, as it may in its sole discretion deem proper, at the
sole cost and expense of the indemnifying party.
5. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER. The obligation
of the Buyer to consummate the purchase and sale of the Shares is subject to the
fulfillment, at or before the Closing, of all of the following conditions:
5.1 DUE PERFORMANCE. The Sellers shall have fully performed
and complied with all agreements and conditions required by this Agreement to be
performed or complied with by them on or prior to the Closing.
5.2 ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of the Principal Shareholders and the Sellers set
forth in this Agreement shall be true and correct at the Closing in all
respects, as though made at and as of the Closing.
5.3 RECURRING MONTHLY REVENUE. The Sellers shall have provided
evidence satisfactory to Buyer that recurring monthly revenue is a minimum of
$85,000. For purposes of this Section 5.3, the term "recurring monthly revenue"
shall mean the average monthly revenue during
16
<PAGE>
the 12-month period ending on March 31, 1998 (net of any direct wire telephone
line charges and other direct pass-through charges) from customers for the
monitoring, leasing, inspection and maintenance of burglar, fire, sprinkler and
other monitoring systems (not to include guard, patrol or armed response
revenues) under valid, unmodified, standard form, written customer contracts and
valid, unmodified, standard form written municipal and governmental purchase
orders which are (i) assignable to Buyer without the consent of a third party
and (ii) reasonably acceptable to Buyer's counsel and the carrier of Buyer's
Errors and Omission insurance policy.
5.4 SUPPORTING DOCUMENTS. The Buyer shall have received and
approved:
(a) True copies of the Articles of Incorporation and current
Bylaws of the Company; a certificate of good standing with regard to the
Company, together with appropriate corporate resolutions (of the Board of
Directors and the shareholders) and incumbency certificates reasonably
satisfactory to Buyer's counsel;
(b) Certificate(s) evidencing the Shares, duly endorsed or
with appropriate stock powers;
(c) A certificate of each of the Principal Shareholders that
the conditions set forth in Sections 5.1 and 5.2 have been satisfied as of the
Closing; and
(d) Such other documents as the Buyer or its counsel may
reasonably request.
5.5 OPINION OF COUNSEL. The Buyer shall have received the
opinion of Sellers' counsel substantially in the form attached as Exhibit A.
5.6 SATISFACTION OF COUNSEL. All actions, proceedings,
instruments, documents and other relevant legal matters in connection with the
transactions contemplated by this Agreement shall be reasonably satisfactory to
counsel for the Buyer.
5.7 THIRD PARTY CONSENTS. All necessary third party consents
of both Buyer (including the consent of Heller Financial, Inc. and Westar
Capital, Inc.) and Sellers (including the release by the landlord of the office
space leased by the Company) shall have been obtained by the Closing Date.
5.8 FINANCIAL STATEMENTS. Buyer shall have received from the
Company's accountant compiled financial statements for fiscal year ended March
31, 1998 and audited financial statements for the fiscal year ended March 31,
1997.
5.9 BOARD APPROVAL; SHAREHOLDER APPROVAL. The transactions
contemplated hereby shall have been approved the Board of Directors of Buyer and
such approvals shall not have been withdrawn or adversely modified. The
transactions contemplated hereby shall have been approved by the full Board of
Directors of the Company and its shareholders and such approvals shall not have
been withdrawn or adversely modified.
17
<PAGE>
5.10 SECURITIES LAWS. Weston shall have completed and returned
to counsel to Buyer a Qualified Investor Questionnaire and the Representations
and Warranties of Shareholders substantially in the forms of Exhibit B and
Exhibit C, respectively, in a manner which does not adversely affect the
exemption from registration under Section 4(2) of the Securities Act.
5.11 AFFILIATE LOANS. Evidence that the Sellers have caused
the Company to collect all principal, interest and other amounts on all
outstanding loans made by the Company, except as set forth in Schedule 5.11, to
Affiliates of the Company as listed on Schedule 5.11 ("Affiliate Loans") such
that all such Affiliate Loans shall be repaid (and, if necessary, prepaid) in
full.
5.12 NON-COMPETITION AND NON-SOLICITATION AGREEMENT. The
Sellers, other than Weston, shall each have signed a four year non-competition
agreement limited to Dade County, Broward County and Palm Beach County, Florida,
and a perpetual non-solicitation agreement, including a prohibition on
acceptance, covering the customers transferred to Buyer under this Agreement. A
form of the Noncompetition and Nonsolicitation Agreement is attached hereto as
Exhibit D. The Noncompetition and Nonsolicitation Agreement for Clark will
contain a covenant of Clark to assist Buyer during a six-month transition period
commencing as of the Closing Date at a daily rate to be negotiated by the
parties prior to execution by Buyer and Clark of Clark's Noncompetition and
Nonsolicitation Agreement.
5.13 EMPLOYMENT AGREEMENT. Weston shall have executed an
Employment Agreement substantially in the form of Exhibit E.
5.14 GENERAL RELEASES. Sellers shall have delivered to Buyer
General Releases in favor of the Company, the Buyer and the Sellers from Marilyn
Clark, Weston, Chivers, Clark and Dubow.
6. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLERS. The
obligation of the Sellers to consummate the purchase and sale of the Shares is
subject to the fulfillment, at or before the Closing, of all of the following
conditions:
6.1 DUE PERFORMANCE. The Buyer shall have fully performed and
complied with all agreements and conditions required by this Agreement to be
performed or complied with by it on or prior to the Closing.
6.2 ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of the Buyer set forth in this Agreement shall be
true and correct at the Closing, in all respects, as though made at and as of
the Closing.
6.3 SUPPORTING DOCUMENTS. Counsel for the Sellers shall have
received and approved:
18
<PAGE>
(a) True copies of the Certificate of Incorporation and
current Bylaws of the Buyer; a certificate of good standing with regard to the
Buyer, together with appropriate corporate resolutions of the Board of Directors
and incumbency certificates reasonably satisfactory to Sellers' counsel;
(b) A stock certificate evidencing the Guardian Shares issued
to Weston;
(c) A certificate of the Buyer that the conditions set forth
in Sections 6.1 and 6.2 have been satisfied as of the Closing;
(d) Four certified checks in an amount equal to the Cash
Purchase Price as set forth in Section 1.2; and
(e) Such other documents as the counsel to the Sellers may
reasonably request.
6.4 OPINION OF COUNSEL. The Sellers shall have received the
opinion of Buyer's counsel substantially in the form attached as Exhibit F.
6.5 SATISFACTION OF COUNSEL. All actions, proceedings,
instruments, documents and other relevant legal matters in connection with the
transactions contemplated by this Agreement shall be reasonably satisfactory to
counsel for the Buyer.
6.6 THIRD PARTY CONSENTS. All necessary third party consents
of both Buyer and Sellers shall have been obtained by the Closing Date.
6.7 BOARD APPROVAL. The transactions contemplated hereby shall
have been approved by the full Board of Directors of the Company and its
shareholders and such approvals shall not have been withdrawn or adversely
modified.
7. WAIVER OF CONDITIONS. The Buyer and the Sellers shall have the right
to waive any part or all of any one or more of the conditions to their
performance set forth in this Agreement and, upon such waiver, the waiving party
may proceed with the consummation of the transactions contemplated hereby. It is
expressly understood that a waiver shall not constitute a waiver of any rights
which that party may have by reason of the breach by the other party of any
other warranty, covenant or agreement or by reason of any misrepresentation made
by the other party.
8. TERMINATION.
8.1 TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned, but not later than the
Closing Date:
(i) by mutual written consent of the Buyer and the Sellers;
19
<PAGE>
(ii) by the Buyer, in its sole discretion, if any of the
representations or warranties of the Sellers or the Principal Shareholders, as
the case may be, contained herein are not in all material respects true,
accurate and complete or if the Sellers or the Principal Shareholders breach any
covenant or agreement contained herein;
(iii) by the Buyer, if any required third party consents of
the Company or the Sellers are not obtained or become unobtainable;
(iv) by the Sellers, if any required third party consents of
the Buyer are not obtained or become unobtainable;
(v) by the Sellers, in their sole discretion, if any of the
representations or warranties of the Buyer contained herein are not in all
material respects true, accurate and complete or if the Buyer breaches any
covenant or agreement contained herein; or
(vi) by either the Buyer or the Sellers, if the Closing has
not taken place on or before April 30, 1998, unless the failure to consummate
the Closing on or prior to such date is solely due to such party's fault.
8.2 EFFECT OF TERMINATION. In the event of a termination of
this Agreement pursuant to Section 8.1, written notice thereof shall promptly be
given to the other party hereto and this Agreement shall terminate and the
transactions contemplated hereby shall be abandoned without further action by
the other party hereto, and this Agreement shall forthwith become void and have
no further effect, without any liability on the part of any party hereto or its
affiliates, directors, officers or shareholders, other than with respect to
Section 4 and Section 8.3 hereof. Notwithstanding such termination and anything
contained to the contrary herein, each party shall have the right to seek
damages in the event of a breach by the other party of its obligations under
this Agreement.
8.3 BREAKUP FEE. In the event of the termination of this
Agreement by the Buyer pursuant to Section 8.1(ii) or Section 8.1(iii), or the
Sellers' refusal to consummate the transactions contemplated hereby which
refusal is not permitted by Section 8.1, a breakup fee of $300,000 shall be
paid, within one business day following termination, by the Sellers to the
Buyer. In the event of the termination of this Agreement by the Sellers pursuant
to Section 8.1(iv) or Section 8.1(v), or the Buyer's refusal to consummate the
transactions contemplated hereby which refusal is not permitted by Section 8.1,
a breakup fee of $300,000 shall be paid, within one business day following
termination, by the Buyer to the Company.
9. COVENANTS OF THE SELLERS AND THE PRINCIPAL SHAREHOLDERS.
9.1 CONDUCT OF BUSINESS OF THE COMPANY PRIOR TO CLOSING.
Except as may otherwise be contemplated by this Agreement or otherwise consented
to or approved in writing by the Buyer, after the execution hereof: (a) the
Business of the Company shall be conducted only in the ordinary course of
business consistent with past practices; (b) the Sellers will (i) use their best
20
<PAGE>
efforts to preserve the good will of and contractual relationships with their
respective customers, distributors, franchisors, dealers, licensees, suppliers
and others having business relations with the Company, and (ii) maintain the
Company's properties in customary repair, working order and condition; and (c)
the Sellers will not, and will cause the Company not to, (i) amend the Company's
Articles of Incorporation or Bylaws, (ii) issue or agree to issue any additional
shares of capital stock of any class or series or securities convertible into or
exchangeable for shares of capital stock or issue any options, warrants or other
rights to acquire any shares of capital stock, (iii) merge or consolidate with
or acquire all or substantially all of the assets or business of any other
company or entity, (iv) incur, assume or guarantee any indebtedness for money
borrowed other than in the ordinary course of business, (v) settle any claims,
actions or proceedings by paying an amount which, in the aggregate, is in excess
of $5,000, (vi) make any management fee, wage or salary increase not in the
ordinary course of business but in any event not in excess of $1,000 or agree to
pay any pension or retirement allowance not required by existing plans or
agreements or enter into any employment or consulting agreement (not terminable
at will), bonus or employee benefit plan, (vii) permit or allow any of the
Company's assets to be subjected to any Liens, except for Liens for Taxes not
yet due or as otherwise incurred in the ordinary course of business, (viii)
lease, sell, transfer or otherwise dispose of any of the Company's material
assets, except in the ordinary course of business and consistent with past
practice, (ix) make any material capital expenditure or commitment for
replacements or additions or structural improvements or maintenance to the
Company's property, plant, equipment or other capital assets, (x) declare, pay
or set aside for payment any dividend or other distribution in respect to the
Company's capital stock or redeem, purchase or otherwise acquire, directly or
indirectly, any shares of capital stock or other securities of the Company, (xi)
amend or revise any agreement the Company may have with any third party or (xii)
agree, whether in writing or otherwise, to take any action described in this
Section 9.1.
9.2 INSPECTIONS. Immediately subsequent to the execution of
this Agreement, the Sellers shall cause the Company to make available to Buyer
and its authorized employees and agents during normal business hours upon prior
notice and mutually convenient scheduling, for the purpose of facilitating
inspections by the Buyer of the Company's Business, affairs, properties, and
assets, all books and records and information, permits, licenses, approvals,
reports, studies and any and all other documents which the Company may have
pertaining to the Business and its assets including without limitation,
monitoring contracts. Buyer, its authorized agents and employees, shall have the
right of access to such books and records and all other documents and
instruments pertaining to the Company's Business and its assets at all
reasonable times subsequent to the date of the execution of this Agreement with
full right to: (i) inspect the assets and operations of the Company's Business;
and (ii) inspect on all books and records, and all other documents and
instruments, studies, surveys and tests on the assets and operations of the
Company's Business as Buyer, its authorized agents and employees shall deem
necessary or desirable (collectively, the foregoing are hereinafter referred to
as "Inspections"). Such rights of Inspections, or the exercise or non-exercise
of same, shall not constitute a waiver by Buyer of the breach of any
representation or warranty of the Principal Shareholders or the Sellers, as the
case may be, which were or might have been disclosed by such Inspections.
21
<PAGE>
9.3 COMPANY AND SHAREHOLDER APPROVAL. As soon as practicable
following the date hereof, the Sellers shall cause the Company to take the steps
necessary to approve the transactions contemplated hereby. Each of the Sellers
covenants that, from the date of this Agreement to the Closing Date, he (i) will
vote all Shares as to which he has voting power against any other transaction
relating to the issuance or transfer of equity securities by, the sale of assets
by, or a change of control of, the Company and to grant proxies to designees of
the Buyer to that effect, and (ii) will not sell or otherwise dispose of any
interest in any Shares beneficially owned by him.
9.4 NOTICE OF CERTAIN EVENTS. The Sellers shall promptly
notify the Buyer 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;
b. any notice of 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 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.
10. RESTRICTION ON TRANSFER OF SHARES. Weston shall not sell, transfer,
assign, pledge or otherwise dispose of (whether with or without consideration
and whether voluntarily or involuntarily) any interest in his Guardian Shares to
a third party (a "Transfer"), except in compliance with the provisions of this
Section 10 and any other restrictions on Transfer contained in this Agreement.
10.1 FIRST OFFER RIGHT OF BUYER.
a. At least 15 days prior to effecting a Private Sale
(defined as any sale of Guardian Shares other than 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) of any Guardian Shares to a third party, Weston shall
deliver a written notice (an "Offer Notice") to the President of Buyer who shall
forward it to an independent committee established by the Board of Directors of
Buyer (a "Committee"). The Offer Notice shall disclose in reasonable detail the
proposed number of Guardian Shares to be transferred, the proposed terms and
conditions of the Transfer and the identity of the prospective transferee(s) (if
known). Buyer shall have the sole responsibility for compliance with the
provisions of this Section 10.1(a) requiring Committee approval.
b. Buyer may, by recommendation of the Committee,
elect to purchase all, but not less than all, of the number of Guardian Shares
specified in the Offer Notice at the price
22
<PAGE>
and on the terms specified therein by delivering written notice (the "Purchase
Notice") of such election to Weston as soon as practical but in any event within
15 days after the delivery of the Offer Notice (the "Election Period"). The
closing of such purchase by Buyer shall be held within 15 days after delivery of
the Purchase Notice to Weston.
10.2 TRANSFER TO THIRD PARTIES.
a. If Buyer has elected not to purchase all of the
Guardian Shares being offered in a Private Sale, Weston may, within 90 days
after the expiration of the Election Period, Transfer that number of Guardian
Shares that Buyer elected not to purchase to one or more third parties at a
price not less than 100% of the price per share offered to Buyer and on other
terms no more favorable to the transferees thereof than offered to Buyer in the
Offer Notice.
b. Any Shares not transferred within such 90-day
period shall be re-offered to Buyer under this Section 10 prior to any
subsequent Transfer.
10.3 PURCHASE PRICE. 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.
10.4 PERMITTED TRANSFERS. The restrictions set forth in this
Section 10 shall not apply with respect to any Transfer of Guardian Shares by
Weston pursuant to applicable laws of descent and distribution or among Weston's
Family Group ("Permitted Transferees"). For purposes of this Agreement, "Family
Group" means Weston'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 Weston and/or Weston's spouse and/or
descendants and/or spouses of their descendants. Except as set forth in Section
12 hereof, nothing in this Agreement shall prohibit a Public Sale (defined as
any sale of Guardian 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) of Guardian Shares by Weston in accordance with applicable securities laws.
11. LEGENDS.
11.1 RESTRICTIVE LEGEND. Each certificate evidencing Guardian
Shares or securities convertible into Guardian Shares and each certificate
issued in exchange for or upon the Transfer of any such securities (a
"Certificate" or "Certificates") (if such securities remain Guardian Shares or
remain convertible into Guardian Shares after such Transfer) shall be stamped or
otherwise imprinted with a legend in substantially the following form (the
"Restrictive Legend"):
Some or all of the securities represented by this certificate
may be subject to transfer restrictions and certain other
restrictions and obligations set forth in a Stock Purchase
Agreement effective as of April 15, 1998, by and among the
issuer of such securities (the
23
<PAGE>
"Company") and the shareholders of Precision Security Systems,
Inc., as amended and modified from time to time (the "Stock
Purchase Agreement"). A copy of such Stock Purchase Agreement
shall be furnished without charge by the Company to the holder
hereof upon written request to the Company at its principal
executive office.
Buyer shall imprint the Restrictive Legend on Certificates outstanding as of the
Closing Date, in addition to imprinting on such Certificates a legend stating
that the Guardian Shares evidenced by such Certificate are not registered under
the Securities Act (the "Securities Law Legend").
11.2 TRANSFER OF UNREGISTERED GUARDIAN SHARES. Guardian 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 holder of Guardian Shares (the "Transferring
Shareholder") has satisfied the conditions specified in Section 11.3 below.
11.3 REMOVAL OF SECURITIES LAW LEGEND. In connection with the
Transfer of any Guardian Shares (other than a Transfer in a public offering
registered under the Securities Act), a Transferring Shareholder shall deliver
(a) written notice to Buyer describing in reasonable detail the Transfer or
proposed Transfer (the "Notice of Transfer") and (b) an opinion (the "Opinion")
of counsel, which (to Buyer's reasonable satisfaction) is knowledgeable in
securities laws matters, to the effect that such Transfer of Guardian Shares may
be effected without registration of such Guardian Shares under the Securities
Act. Upon delivery of the Notice of Transfer and the Opinion to Buyer by a
Transferring Shareholder, Buyer shall instruct its transfer agent to remove the
Securities Law Legend from the Certificate(s) evidencing such Guardian Shares.
11.4 REMOVAL OF RESTRICTIVE LEGENDS. The Restrictive Legend
shall be removed from (i) certificates representing Guardian Shares sold in
accordance with the terms of this Agreement and (ii) all certificates
representing the Guardian Shares upon the third anniversary of the Closing Date.
11.5 TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or
attempted Transfer of any Guardian Shares in violation of any provision of this
Agreement shall be void, and Buyer shall not record such Transfer on its books
or treat any purported Transferee of such Guardian Shares as the owner of such
Guardian Shares for any purpose.
12. LOCK-UP AND VOLUME CAP. Notwithstanding anything to the contrary
contained herein, (a) Weston agrees that he shall not Transfer (i) any of his
Guardian Shares for one year from the Closing Date, and (ii) beginning on the
first anniversary of the Closing Date and ending on the third anniversary of the
Closing Date, in excess of a one-half of his Guardian Shares during any one-year
period thereof, except that if Weston does not sell up to one-half of his
Guardian Shares in any given one-year period, he may cumulate the remainder of
the one-half of his unsold Guardian Shares with the amount permitted to be sold
during the following one-year period ("Volume Cap"), and (b) in the event
Transfers in any one-year period exceed the Volume Cap, such Transfers shall be
null and void and Buyer shall not record such Transfer on its books or treat any
purported Transferee of
24
<PAGE>
such Guardian Shares as the owner of such Guardian Shares for any purpose. The
restrictions set forth in this Section 12 shall not restrict any Transfer of
Guardian Shares by Weston pursuant to applicable laws of descent and
distribution or among his Family Group.
13. USE OF LEASED REAL PROPERTY. The Buyer shall be entitled to use the
Leased Real Property at no charge for a period of 14 days after the losing Date
and for a period of up to 30 days thereafter at a rate of $150 per day.
14. MISCELLANEOUS PROVISIONS.
14.1 FEES AND EXPENSES. Except in the event of a default,
and/or as otherwise set forth herein, each party will pay its own expenses in
connection with the execution and delivery of this Agreement and the performance
of its obligations hereunder, including attorneys' fees whether or not the
transactions contemplated hereby are consummated.
14.2 RESERVED.
14.3 NOTICES. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given if delivered by certified mail, return receipt
requested with postage prepaid, or by overnight guaranteed delivery service, or
by facsimile (upon confirmation of receipt):
(a) if to the Sellers, to:
Richard Clark
8525 S. W. 58th Street
Miami, FL 33143
David Weston
10411 S. W. 123rd Street
Miami, FL 33176
Phone: 305-254-6911
Fax: 305-254-6911
Jeff Chivers
1810 Valley Highway
Acme, WA 90220
Phone: 360-595-0914
Fax: 360-595-1197
Alan Dubow
P. O. Box 1670
Alexandria, VA 22317
Phone: 703-684-7411
25
<PAGE>
Fax: 703-549-3187
with copy to:
Marshall R. Pasternak, Esq.
Greenberg Traurig et al.
1221 Brickell Avenue
Miami, Florida 33131
Phone: 305-579-0500
Fax: 305-579-0717
(b) if to the Buyer, to:
Guardian International, Inc.
3880 N. 28th Terrace
Hollywood, Florida 33020-1118
Attention: Richard Ginsburg, President
with 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
14.4 SUCCESSION OF AGREEMENT.This Agreement and the rights and
obligations contained herein shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and assigns.
14.5 TIME IS OF THE ESSENCE. For purposes herein, the parties
agree that time shall be of the essence of this Agreement and the
representations and warranties made are all material and of the essence of this
Agreement.
14.6 CAPTIONS AND PARAGRAPH HEADINGS. Captions and paragraph
headings contained in this Agreement are for convenience and reference only and
in no way define, describe, extend or limit the scope or intent of this
Agreement, nor the intent of any provision hereof.
14.7 NO WAIVER. No waiver of any provision of this Agreement
shall be effective unless it is in writing, signed by the party against whom it
is asserted and any such written waiver shall only be applicable to the specific
instance to which it relates and shall not be deemed to be a continuing or
future waiver.
26
<PAGE>
14.8 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which shall constitute one and the same Agreement.
14.9 GENDER. All terms and words used in this Agreement
regardless of the number and gender in which used, shall be deemed to include
any other gender or number as the context or the use thereof may require.
14.10 ENTIRE AGREEMENT AND MODIFICATION. This Agreement and
the exhibits and schedules constitute the entire understanding and agreement
between the parties and may not be changed, altered or modified except by an
instrument in writing signed by all parties against whom enforcement of such
change would be sought. In the event any term or provision of this Agreement be
determined by appropriate judicial authority to be illegal or otherwise invalid,
such provision shall be given its nearest legal meaning or be construed as
deleted as such authority determines, and the remainder of this Agreement shall
be construed to be in full force and effect.
14.11 EXHIBITS. All exhibits and schedules attached hereto
contain additional terms of this Agreement. Typewritten or handwritten
provisions inserted in this form or attached hereto shall control all printed
provisions in conflict therewith.
14.12 GOVERNING LAW. This Agreement shall be construed and
interpreted according to the laws of the State of Florida (conflict of laws
provisions notwithstanding), and venue with respect to any litigation shall be
Broward County, Florida.
14.13 FURTHER ASSURANCES. Each of the parties shall execute
all documents and other papers and take such further actions as may be
reasonably required or desirable to carry out the provisions hereof and the
transactions contemplated hereby. Each party shall use their respective best
efforts to fulfill or obtain the fulfillment of the conditions to the closing.
14.14 PUBLIC ANNOUNCEMENTS. Upon the closing of the
transactions contemplated by this Agreement, the Buyer and the Sellers may issue
a press release with respect to the consummation of the transactions
contemplated by this Agreement in a mutually acceptable form. Except with
respect to such press release and the information contained therein, each of the
Sellers, on the one hand, and the Buyer, on the other hand, will consult with
the other and mutually approve all public announcements before issuing any press
release or otherwise making any public statements with respect to this Agreement
and the transactions contemplated hereby, and shall not issue any such press
release or make any such public statement prior to such consultation.
Notwithstanding the above, any party required by law to disclose the existence
of or the terms of this Agreement shall use its best efforts to provide prior
notice to the other party giving such other party an opportunity to comment on
the content of such disclosure, but shall in any event be permitted to make such
disclosure.
27
<PAGE>
14.15 SURVIVAL. All agreements contained in Sections 2, 3, 4,
10, 11 and 12 shall survive the execution and delivery of this Agreement, the
delivery of the Shares and the issuance and delivery of the Guardian Shares.
14.16 REMEDIES. Buyer shall be entitled to enforce its 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 its
favor.
28
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
duly executed as of the ____ day of April, 1998.
GUARDIAN INTERNATIONAL, INC.
By: __________________________
Richard Ginsburg, President
and Chief Executive Officer
__________________________
Richard Clark, Individually
__________________________
David Weston, Individually
__________________________
Jeff Chivers, Individually
__________________________
Alan Dubow, Individually
EXHIBIT 10(B)
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into
this 27th day of April, 1998, by and between Guardian International, Inc., a
Nevada corporation ("Employer"), and David C. Weston ("Employee").
WITNESSETH
WHEREAS, the Board of Directors of Employer (the "Board") recognizes
that Employee will contribute to the future growth and success of the security
business of Employer, consisting of burglar alarm, fire alarm, closed circuit
television and electronic access and control and central station monitoring
services to residential and commercial customers (the "Business"), and the Board
therefore desires to assure Employer of Employee's services as an employee of,
and for the benefit of, Employer; and
WHEREAS, in order to induce Employee to remain in the employ of
Employer, this Agreement sets forth employment and other benefits which Employer
shall pay to Employee in connection with his employment, provides for Employee's
employment for a term of one year and provides for Employee's agreement not to
compete with the Business in the event of his termination of employment on the
terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the receipt and sufficiency of which
are mutually acknowledged, the parties hereto hereby agree as follows:
1. EMPLOYMENT. Employer hereby employs Employee, and Employee hereby
accepts such employment, upon the terms and conditions set forth in this
Agreement.
2. TERM. Subject to the provisions for termination contained in Section
9 hereof, the term of this Agreement, and the employment of Employee hereunder,
shall commence on April 27, 1998 and continue for a one-year term ending on
April 26, 1999. Thereafter, this Agreement shall renew automatically for
one-year terms unless one month advance written notice of termination is given
by either party.
3. DUTIES. During the term of his employment hereunder, Employee shall
serve as Regional Manager of Employer in the region of Florida comprising Dade
County. In such capacity, Employee (i) shall perform those reasonable duties as
directed by the President of Employer, (ii) shall report to the President of
Employer, and (iii) shall perform such other duties as shall be usual and
customary for such officer in accordance with the Bylaws of Employer. Employee
agrees to maintain his status as the "qualifier" for the license(s) (the
"Licenses") listed on Acquired Assets Schedule of the Stock Purchase Agreement
effective as of April 17, 1998 by and among Employer, Employee, Richard Clark,
Jeff Chivers and Allen Dubow, which require an individual to serve as a
"qualifier" and not to do anything that would disqualify Employee from acting as
a "qualifier" under the applicable Licenses.
<PAGE>
The places of Employee's employment shall be Miami and Hollywood, Florida and
Employee shall travel as is necessary in the furtherance of his duties under
this Agreement.
4. EXCLUSIVITY OF SERVICES. Employee shall devote his full business
time, energy and ability exclusively to the business, affairs and interests of
Employer and matters related thereto, shall use Employee's best efforts and
abilities to promote Employer's interests, and shall perform the services
contemplated by this Agreement in accordance with policies established by and
under the direction of the Board. During the term hereof, Employee shall not
serve as an officer, director, employee, consultant or advisor to any other
business, and shall not engage in any other business activities other than the
Permitted Activities, as herein defined. The Employee may (i) make and manage
personal business investments of his choice, provided, that the Employee shall
hold no investment in any entity which competes in any way with Employer or its
subsidiaries, other than an investment representing less than a 5% interest in
any publicly held entity; and (ii) serve in any capacity with any civic,
educational or charitable organization without seeking or obtaining approval by
the Board, provided, that the activities and services described in clauses (i)
and (ii) (collectively, the "Permitted Activities") do not interfere or conflict
with the performance of duties hereunder or create any conflict of interest with
such duties. Employee hereby confirms that he is under no contractual
commitments inconsistent with his obligations set forth in this Agreement.
5. COMPENSATION.
a. During the term of his employment hereunder, Employee shall
receive a salary of One Hundred Twenty Thousand Dollars ($120,000) per annum
(the "Salary"), payable in equal installments no less frequently than
semi-monthly. Salary increases may be considered annually by the President of
Employer.
b. Employee may be entitled to a bonus ("Bonus") from time to
time during the Term pursuant to Schedule 5(b).
c. During the term of the Employee's employment hereunder, the
Company shall pay an automobile allowance of $500 per month to the Employee.
d. Employee shall be entitled, in addition to the above, to
any benefits and perquisites to which officers of Employer may be or may
generally become entitled to receive under any present or future employment
benefit and perquisite plans or programs, or contingent compensation plans, of
Employer, and Employee shall be eligible to receive, during the period of his
employment under this Agreement, benefits and emoluments for which officers are
eligible under every plan or program to the extent permissible under the general
terms and provisions thereof. The foregoing notwithstanding, Employer may change
or discontinue any such benefits in its sole discretion.
6. EXPENSE REIMBURSEMENT . During the term of Employee's employment
hereunder, Employer, upon the submission of proper proof by Employee, shall
promptly reimburse Employee for reasonable business expenses actually and
necessarily paid or incurred by Employee in connection with the discharge of his
duties hereunder.
2
<PAGE>
7. VACATION. During the term of his employment hereunder, Employee,
during each year of the term of this Agreement, shall be entitled to three weeks
of vacation time as selected in consecutive or nonconsecutive periods or any
combination thereof by Employee in his reasonable discretion consistent with his
duties and responsibilities hereunder, during which vacation time Employee shall
be paid the applicable portion of his Salary provided, however, Employee shall
not take a vacation for longer than one week without the prior consent of his
direct supervisor. Vacation shall not accumulate or carry over from year to
year.
8. INSURANCE. During the term of his employment hereunder, Employer
shall at all times pay the reasonable premiums of medical insurance policies for
Employee and his immediate family and shall further provide and pay the premiums
of group term life insurance and group disability insurance.
9. TERMINATION.
a. Notwithstanding anything contained in this Agreement,
Employer by written notice to Employee shall at all times in its sole discretion
have the right to terminate this Agreement, and Employee's employment hereunder,
"for cause" effective upon delivery of such notice to Employee. For purposes of
this Agreement, "for cause" shall mean: (i) any conviction of Employee of a
felony or any conduct which if proved would support conviction of a felony; (ii)
conduct amounting to a material act of fraud, misconduct or dishonesty involving
Employer; (iii) a material act of fraud or dishonesty not involving Employer
which has a material adverse effect upon the Business or reputation of Employer;
(iv) material violation by Employee of his obligations under this Agreement
after written notice thereof to Employee and failure to cure such violation
within fifteen (15) days following such notice; (v) misuse of alcohol that
materially impairs Employee's ability to perform the duties of his employment as
determined by a physician retained by Employer or, if Employee refuses to submit
to appropriate examinations by such physician at the request of the Board, then
by at least three members of the Board of Directors of Employer; or (vi) the
unlawful use of drugs or other controlled substances.
b. Employer by written notice to Employee shall have the right
to terminate this Agreement and Employee's employment upon Employee's lack of
capacity to perform the essential functions of his duties under this Agreement,
with or without reasonable accommodation, because of physical or mental
disability ("Disability") of Employee (i) for a period of 90 or more days if
such disability occurs as a result of Employee's performance of his duties under
this Agreement or (ii) for a period 30 or more days if such disability occurs as
a result of Employee's activities outside the scope of this Agreement, either
consecutively or in the aggregate during any six-month period, as determined by
an impartial reputable physician agreed upon by the Board and Employee (or his
representative, as the case may be).
c. If Employee dies during the term of his employment
hereunder, this Agreement shall terminate automatically upon the date of
Employee's death.
10. PAYMENTS UPON TERMINATION OR EXPIRATION.
3
<PAGE>
a. In the event that this Agreement, and Employee's employment
hereunder, is terminated pursuant to Section 9 hereof, then, in such event, (i)
Employer shall have no obligation whatsoever to make any payment, including,
without limitation, any payment of Salary, Bonus, or any insurance premium, to
or on behalf of Employee for any period subsequent to the date of such
termination; and (ii) Employer may, subject to the terms of such plans and
applicable law, remove Employee from coverage under any medical, life,
disability or other insurance plans or programs made available to Employee by
Employer.
b. In the event that this Agreement, and Employee's employment
hereunder, is terminated by Employer without cause during the term set forth in
Section 2 hereof, then, in such event, in addition to such amounts as have
accrued prior to the date of termination and have not previously been paid,
Employer shall pay to Employee, payable at such time as such payments would
otherwise be payable hereunder, Employee's Salary and benefits that would have
accrued to him, and any Bonus the Board has otherwise approved prior to
termination, for the remaining term of this Agreement.
11. CONFIDENTIALITY.
a. For good consideration and as an inducement for Employer to
employ Employee, Employee agrees that, both during the term of this Agreement
and after the termination of this Agreement, Employee will hold in a fiduciary
capacity for the benefit of Employer, and shall not, directly or indirectly, use
or disclose, except as authorized by Employer in connection with the performance
of his duties, any Confidential Information (as defined below) that Employee may
have or acquire (whether or not developed or compiled by Employee and whether or
not Employee has been authorized to have access to such Confidential
Information) prior to or during the term of this Agreement. The term
"Confidential Information" as used in this Agreement shall mean and include any
material information, data and know-how relating to the Business of Employer
that is disclosed to Employee by Employer or known by him as a result of his
relationship with Employer (or a company acquired by Employer) and not generally
within the public domain (whether constituting a trade secret or not) including,
without limitation, the following: financial information, supply and service
information, marketing information, personnel information, customer information
and information with respect to any corporate affairs that Employer treats as
confidential.
The term "Confidential Information" does not include information that
has become generally available to the public by the act of Employer or by the
act of one who has the right to disclose such information without violating any
right of Employer or the customer to which such information pertains.
Nothing in this Section 11 shall prevent Employee from disclosing any
Confidential Information to the extent such disclosure is required by law or any
order of a court or government authority with jurisdiction, provided, however,
that Employee agrees to give Employer advance written notice as soon as possible
of the Confidential Information required to be disclosed, and at Employer's
request, to use his best efforts to obtain assurances that the Confidential
Information required
4
<PAGE>
to be disclosed will be maintained on a confidential basis and will not be
disclosed to a greater degree than required by law.
b. These rights of Employer are in addition to those rights
Employer has under the common law or applicable statutes for the protection of
trade secrets.
12. COVENANT NOT TO COMPETE. For good consideration and as an
inducement for Employer to employ Employee, Employee agrees that he will not
engage or participate, directly or indirectly, in any business that competes
with the Business of Employer in any county in which the Employee has
supervisory responsibility over the business, affairs and operations of the
Employer in such county, whether as employee, employer, consultant, agent,
principal, partner, stockholder, corporate officer, director, or other
representative capacity, at any time during Employee's employment with Employer
and for a period of two (2) years after the date of termination (for any reason)
of Employee's employment with Employer. Notwithstanding the foregoing, Employee
may (i) hold an investment representing less than a 5% interest in any publicly
held entity engaging in a business that competes with the Business and (ii) be
an employee, employer, consultant, agent, principal, partner, stockholder,
corporate officer, director or other representative of an entity that does not
engage in burglar alarm, fire alarm, closed circuit television and electronic
access and control and central monitoring services; provided, however, that
Employee agrees to refer customers seeking monitoring services to Employer. In
the event any court shall refuse to enforce any portion of the covenant set
forth in this Section 12, then such unenforceable portion shall be deemed
eliminated and severed from said contract for the purposes of said court's
proceedings to the extent necessary to permit the remaining portions of the
covenant to be enforced.
13. COVENANTS AGAINST OTHER ACTIONS DAMAGING TO EMPLOYER. Employee
agrees that he will not, at any time during his employment with Employer and
forever thereafter, for himself or on behalf of or in conjunction with any third
party solicit any employee of Employer or its subsidiaries to leave such
employment; provided that the posting by Employee or any entity with which
Employee is involved of general advertisements soliciting employees shall not
constitute the solicitation of any employee of Employer or its subsidiaries.
Employee further agrees that, during his employment with Employer and for an
unlimited period thereafter, he will not directly or indirectly, on his own
behalf or in the service of or on behalf of others, solicit, divert or
appropriate, or attempt to solicit, divert or appropriate, to any competing
business, any customers of Employer or its subsidiaries existing as of the date
of termination. If, during the term of this Agreement, Employee is engaged in or
associated with the planning or implementing of any project, program or venture
involving Employer and a third party or parties (a "Venture"), or any
discussions, analysis or negotiations with respect to an investment in, merger,
acquisition or purchase, directly or indirectly, of the stock, assets, or
business of any entity (an "Acquisition"), all rights in the Venture and the
Acquisition and any opportunity to make any investment in the entity to be so
acquired (the "Target") shall belong to Employer and shall constitute a
corporate opportunity belonging exclusively to Employer. Except as approved by
the Board, Employee shall not be entitled to any interest in any such Venture or
to invest or solicit any third party to invest in the Target or consummate the
Acquisition, or to any commission, finder's fee or other compensation in
connection therewith other than any Salary paid to Employee for performance of
his duties in the ordinary course of business. In the event any court shall
refuse to enforce any portion of the covenants set forth in this Section 13,
then such unenforceable portion shall be deemed
5
<PAGE>
eliminated and severed from said contract for the purposes of said court's
proceedings to the extent necessary to permit the remaining portions of the
covenant to be enforced.
14. ARBITRATION. All disputes or controversies between the parties
arising from or related to any matter that pertains to this Agreement, to the
employment of Employee by Employer, or to the termination Employee's employment
which otherwise would allow or require resort to a court, administrative, or
other governmental dispute resolution forum (whether the claim is legal or
equitable in nature, whether it is based on any tort, contract, or common law
theory of recovery, and whether it is based on any federal, state, or local
employment discrimination or civil rights statute, executive order, law,
regulation, or ordinance including, without limitation, the Age Discrimination
in Employment Act of 1967, the Americans with Disabilities Act, Title VII of the
Civil Rights Act of 1964, and the Florida Civil Rights Act of 1992 shall be
referred to binding, non-appealable arbitration in accordance with the
procedures set forth in Exhibit A hereto and without recourse to any litigation
except as set forth in Exhibit A. Each party hereby submits to personal
jurisdiction in Broward County, Florida for the purpose of such arbitration
proceedings, and/or any suits to confirm same. Pending completion of any
arbitration proceedings, payments not in dispute shall continue to be made and
obligations not in dispute shall continue to be performed.
15. ASSIGNMENT. This Agreement is personal to Employee, and Employee
may not assign or transfer any of its benefits or obligations. Upon written
notice by Employer to Employee, Employer may assign its rights under this
Agreement to any entity (i) that controls or acquires control of Employer, (ii)
that is controlled by, is under common control with, or acquires an interest in
Employer, or (iii) in which Employer acquires a financial interest, provided
that such entity assumes Employer's obligations under this Agreement or that
Employer remains liable for its obligations under the Agreement. Upon written
notice by Employer to Employee, Employer may assign its rights to any entity
that acquires substantially all of Employer's assets, provided that such entity
assumes Employer's obligations under this Agreement.
16. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida, without reference to the
conflicts of laws principles thereof.
17. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, understandings
and arrangements, both oral and written, between the parties hereto with respect
to the subject matter hereof. This Agreement may not be modified in any way
unless in writing signed by both Employer and Employee.
18. NOTICES. Any notices required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been duly given when
delivered by hand and receipted or when received or refused if delivered by
United States mail, by registered or certified mail, return receipt requested,
postage prepaid, or overnight courier (such as Federal Express) as follows:
If to Employer: Guardian International, Inc.
3880 North 28th Terrace
Hollywood, Florida 33020
6
<PAGE>
If to Employee: David C. Weston
10411 S. W. 123rd Street
Miami, FL 33176
or to such other addresses as either party hereto may from time to time give
notice of to the other on five days prior notice in the manner aforesaid.
19. BENEFITS; BINDING EFFECT. This Agreement shall be for the benefit
of and binding upon the parties hereto and their respective legal
representatives, successors and, where applicable, assigns.
20. SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part hereof, all of which are inserted conditionally on their being valid in
law, and, in the event that any one or more of the words, phrases, sentences,
clauses or sections contained in this Agreement is declared invalid, this
Agreement shall be construed as if such invalid word or words, phrase or
phrases, sentence or sentences, clause or clauses, or section or sections had
not been inserted.
21. WAIVERS. The waiver by either party hereto of a breach of any
provision of this Agreement shall not be construed as a waiver of any subsequent
breach.
22. SECTION HEADINGS. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
23. EQUITABLE REMEDIES. Employee acknowledges that Employer would not
have an adequate remedy at law for money damages if Employee breaches Sections
11, 12 or 13. Therefore, in addition to all other remedies to which Employer may
be entitled for a breach or threatened breach of this Agreement, Employer will
be entitled to specific enforcement of this Agreement and to injunctive or other
equitable relief as a remedy for a breach or threatened breach. In the event of
legal proceedings in connection with this Agreement, the non-prevailing party
shall pay all reasonable attorneys' fees and costs of the prevailing party at
arbitration, at trial and on appeal.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written.
EMPLOYER:
GUARDIAN INTERNATIONAL, INC.,
a Nevada corporation
By:_______________________________
Richard Ginsburg, President and
Chief Executive Officer
7
<PAGE>
EMPLOYEE:
_________________________________
David C. Weston
8
<PAGE>
SCHEDULE 5(b)
BONUS
The Employee shall receive a bonus upon achievement of the performance
goals and in the amounts described below.
ATTRITION
Overall Performance Goal: Maintain or reduce current customer
attrition rate (as defined in
Employer's senior borrowing
agreement)
Base Line: Maximum attrition permitted is 9%
Attrition Calculation: Total MRI for the applicable
calendar year divided by average
MRI for the applicable calendar year
Specific Targets and Applicable Annual Bonus Amount:
Target Bonus Amount
(% of Attrition)
6.1%-7.0% $20,000
7.1%-8.0% $15,000
8.1%-9.0% $10,000
Date Payable: Not later than January 31 in the year following the
year in which the bonus is earned
MANAGEMENT FEE
A management fee of $.50 per monitored account (under contract,
producing not less than $20 MRI, and with no receivable more than 90
days past due) at the end of each month IN EXCESS OF the number of
monitored accounts assigned to Employee to manage as of the Closing
Date. Eligible monitored accounts shall be those monitored accounts
under the direct supervision of Employee, including monitored accounts
acquired during the term of Employee's employment.
The management fee shall be added to payroll and shall be paid at the
same intervals as the Employee is paid the Salary.
EXHIBIT A
<PAGE>
ARBITRATION PROCEDURES
a. If a dispute or controversy arises, the parties hereto shall attempt
in good faith to resolve such dispute or controversy promptly by negotiation.
Any such dispute or controversy which has not been resolved by negotiation
within thirty (30) days after the initiation of discussions shall be resolved by
binding arbitration in accordance with the then current CPR Rules for
Non-Administered Arbitration of Business Disputes. Unless the parties agree
otherwise, the arbitration shall be conducted in Broward County, Florida, by a
panel of three arbitrators. The disputing parties shall each select one
arbitrator, and the arbitrators so selected shall select an attorney as the
third arbitrator. If the arbitrators selected by the disputing parties fail to
agree on the third arbitrator within thirty (30) days of the date this
arbitration provision becomes operative, any person involved may request CPR to
make the appointment in accordance with its applicable rules.
b. The arbitrators shall decide the issues submitted to them in
accordance with the provisions and commercial purposes of this Agreement;
provided that, all substantive questions of law shall be determined under the
laws of the State of Florida (without regard to its principles of conflicts of
laws).
c. The arbitration shall be governed by the United States Arbitration
Act, 9 U.S.C. /Section/ 1, ET SEQ., and judgment upon the award rendered by the
arbitrators may be entered by any court having jurisdiction thereof. The
arbitrators may grant any remedy or relief which is just and equitable,
including injunctive relief or specific performance.
d. The parties hereto agree to facilitate the arbitration by: (i)
making available to one another and to the arbitrators for examination,
inspection and extraction all documents, books, records and personnel under
their control if determined by the arbitrators to be relevant to the dispute;
(ii) participating in reasonable discovery, including oral depositions; (iii)
conducting arbitration hearings to the greatest extent possible on successive
days; and (iv) observing strictly the time periods established by the Rules or
by the arbitrators for submission of evidence or briefs.
e. Initially, the disputing parties shall each pay one-half of the
costs (excluding attorneys' fees) of any arbitration; provided, however, that
the arbitrators shall divide all costs (excluding attorneys' fees) incurred in
conducting the arbitration in their final award in accordance with what they
deem just and equitable under the circumstances, and any party who is allocated
in excess of one-half of such costs shall reimburse the other for such excess
costs.
f. Notwithstanding the exclusivity of the dispute resolution procedures
specified herein, a party hereto, without prejudice to such procedures, may file
a complaint or seek a preliminary injunction or other provisional judicial
relief if in its sole judgment such action is necessary to avoid irreparable
damage or to preserve the status quo. Despite any such action, the parties shall
continue to participate in good faith in the procedures specified herein.
EXHIBIT 10(C)
INDEMNIFICATION AGREEMENT
REGARDING PERSONAL GUARANTIES BY SELLERS
Indemnification Agreement ("Agreement") dated April 27, 1998 among
Guardian International, Inc. (the "Buyer") and David Weston, Richard Clark, Jeff
Chivers and Alan Dubow (collectively, the "Sellers").
RECITALS
A. Buyer and Sellers are parties to a Stock Purchase Agreement
effective as of April 17, 1998 pursuant to which Buyer agreed to purchase all of
the outstanding common stock, $.15 par value, of Precision Security Systems,
Inc. (the "Company") from Sellers.
B. Some or all of Sellers have executed personal guaranties with
respect to obligations of the Company.
C. Buyer has agreed to indemnify Sellers for any claims asserted
against them pursuant to personal guaranties made by Sellers on behalf of the
Company for claims arising from and after April 28, 1998.
AGREEMENT
1. INDEMNIFICATION FOR PERSONAL GUARANTIES. Buyer agrees to indemnify
and hold harmless the Sellers from and against any and all liabilities, damages,
claims, deficiencies, assessments, losses, suits, proceedings, actions,
investigations, penalties, interest, costs and expenses including, without
limitation, reasonable fees and expenses of counsel, amounts paid in settlement
and reasonable costs of investigation (whether suit is instituted or not and, if
instituted, whether at the trial or appellate level), whether in law or equity,
arising from or in connection with any liability of Sellers arising from and
after April 28, 1998 as personal guarantors with respect to obligations of the
Company.
2. ASSURANCES. The parties agree to execute, acknowledge, deliver and
file, or cause to be executed, acknowledged, delivered and filed, all further
instruments, agreements or documents as may be necessary to consummate the
transactions provided for in this Agreement and to do all further acts necessary
to carry out the purpose and intent of this Agreement.
3. WAIVER. No term or condition of this Agreement shall be deemed to
have been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with the waiver or estoppel. No written waiver shall be deemed a continuing
waiver unless specifically stated therein, and each waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
the term or condition for the future or as to any act other than that
specifically waived.
<PAGE>
4. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without reference to its
conflicts of law principles.
5. LITIGATION; PREVAILING PARTY. If litigation is brought concerning
this Agreement, the prevailing party shall be entitled to receive from the
non-prevailing party, and the non-prevailing party shall immediately pay upon
demand, all reasonable attorneys' fees and expenses for the prevailing party.
6. ASSIGNMENT. This Agreement shall inure to the benefit of and be
legally binding upon all successors and assigns of the parties.
7. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding of the parties and supersedes all prior discussions, negotiations,
agreements and understandings, whether oral or written, with respect to its
subject matter. This Agreement may be modified only by a written instrument
properly executed by all parties to this Agreement.
8. SEVERABILITY. If any one or more of the provisions of this Agreement
is held invalid, illegal or unenforceable, the remaining provisions of this
Agreement shall be unimpaired, and the invalid, illegal or unenforceable
provision shall be replaced by a mutually acceptable valid, legal and
enforceable provision which comes closest to the intent of the parties.
IN WITNESS WHEREOF, this Agreement has been executed as of the date
first written above.
GUARDIAN INTERNATIONAL, INC.
By: _______________________________
Richard Ginsburg, President and
Chief Executive Officer
_______________________________
David Weston, Individually
_______________________________
Richard Clark, Individually
_______________________________
Jeff Chivers, Individually
_______________________________
Alan Dubow, Individually
2
EXHIBIT 10(D)
CONFIDENTIALITY, NONCOMPETITION AND
NONSOLICITATION AGREEMENT
Confidentiality, Noncompetition and Nonsolicitation Agreement (the
"Agreement") effective as of April 27, 1998 among Guardian International, Inc.,
a Nevada corporation (the "Company"), and Alan Dubow ("Dubow").
RECITALS
A. The Company, Richard Clark ("Clark"), David Weston ("Weston"), Jeff
Chivers ("Chivers") and Dubow ("Dubow" and together with Clark, Weston and
Chivers, the "Sellers") entered into a Stock Purchase Agreement (the "Stock
Agreement") effective as of April 17, 1998 pursuant to which the Company agreed
to purchase all of the outstanding common stock, $.15 par value per share (the
"Common Stock") of Precision Security Systems, Inc., a Florida corporation, from
Sellers.
B. Dubow acknowledges that he will obtain confidential and proprietary
information relating to the business of the Company as a result of consummation
of the transactions contemplated by the Stock Agreement, and acknowledges that
the covenants not to compete and confidentiality provisions in this Agreement
are reasonable.
AGREEMENT
l. CONFIDENTIALITY.
a. Dubow agrees that he will hold in a fiduciary capacity for
the benefit of the Company, and shall not, directly or indirectly, use or
disclose, except as authorized by the Company, any Confidential Information (as
defined below) that Dubow may have or acquire (whether or not developed or
compiled by Dubow and whether or not Dubow has been authorized to have access to
such Confidential Information). The term "Confidential Information" as used in
this Agreement shall mean and include any material information, data and
know-how relating to the business of the Company that is disclosed to Dubow by
the Company or known by him as a result of his relationship with the Company (or
a company acquired by the Company) and not generally within the public domain
(whether constituting a trade secret or not) including, without limitation, the
following: financial information, supply and service information, marketing
information, personnel information, customer information and information with
respect to any corporate affairs that the Company treats as confidential.
b. The term "Confidential Information" does not include
information that has become generally available to the public by the act of the
Company or by the act of one who has the right to disclose such information
without violating any right of the Company or the customer to which such
information pertains.
<PAGE>
c. Nothing in this Section 1 shall prevent Dubow from
disclosing any Confidential Information to the extent such disclosure is
required by law or any order of a court or government authority with
jurisdiction, provided, however, that Dubow agrees to give the Company advance
written notice as soon as possible of the Confidential Information required to
be disclosed, and at the Company's request, to use his best efforts to obtain
assurances that the Confidential Information required to be disclosed will be
maintained on a confidential basis and will not be disclosed to a greater degree
than required by law.
d. These rights of the Company are in addition to those rights
the Company has under the common law or applicable statutes for the protection
of trade secrets.
2. COVENANT NOT TO COMPETE. Dubow agrees that he will not engage or
participate, directly or indirectly, in any business that competes with the
business of the Company in Dade County, Broward and Palm Beach County, Florida,
whether as an employee, employer, consultant, agent, principal, partner,
stockholder, corporate officer, director, or other representative capacity, for
a period of four (4) years after the date of this Agreement. Notwithstanding the
foregoing, Dubow may (i) hold an investment representing less than a 5% interest
in any publicly held entity engaging in a business that competes with the
business of the Company and (ii) be an employee, employer, consultant, agent,
principal, partner, stockholder, corporate officer, director or other
representative of an entity that does not engage in burglar alarm, fire alarm,
closed circuit television and electronic access and control and central
monitoring services; PROVIDED, HOWEVER, that Dubow agrees to refer customers
seeking monitoring services to Company. In the event any court shall refuse to
enforce any portion of the covenant set forth in this Section 2, then such
unenforceable portion shall be deemed eliminated and severed from said contract
for the purposes of said court's proceedings to the extent necessary to permit
the remaining portions of the covenant to be enforced.
3. NONSOLICITATION. Dubow agrees that he will not, from the date of
this Agreement and forever thereafter, for himself or on behalf of or in
conjunction with any third party solicit any employee of the Company or its
subsidiaries to leave such employment; PROVIDED, that the posting by Dubow or
any entity with which Dubow is involved of general advertisements soliciting
employees shall not constitute the solicitation of any employee of the Company
or its subsidiaries. Dubow further agrees that, from the date of this Agreement
and for an unlimited period thereafter, he will not directly or indirectly, on
his own behalf or in the service of or on behalf of others, solicit, divert or
appropriate, or attempt to solicit, divert or appropriate, to any competing
business, any customers of the Company or its subsidiaries existing as of the
date of this Agreement. If, as of the date of this Agreement, Dubow is engaged
in or associated with the planning or implementing of any project, program or
venture involving the Company and a third party or parties (a "Venture"), or any
discussions, analysis or negotiations with respect to an investment in, merger,
acquisition or purchase, directly or indirectly, of the stock, assets, or
business of any entity (an "Acquisition"), all rights in the Venture and the
Acquisition and any opportunity to make any investment in the entity to be so
acquired (the "Target") shall belong to the Company and shall constitute a
corporate opportunity belonging exclusively to the Company. Except as approved
by the Board of Directors of the Company, Dubow shall not be entitled to any
interest in any such Venture or to invest or solicit any third party to invest
in the Target or
2
<PAGE>
consummate the Acquisition, or to any commission, finder's fee or other
compensation in connection therewith. In the event any court shall refuse to
enforce any portion of the covenants set forth in this Section 3, then such
unenforceable portion shall be deemed eliminated and severed from said contract
for the purposes of said court's proceedings to the extent necessary to permit
the remaining portions of the covenant to be enforced.
4. REMEDIES. The parties acknowledge that the Company would not have an
adequate remedy at law for money damages if the covenants contained in Sections
1, 2 or 3 were not complied with in accordance with their terms. The parties
therefore agree that in the event of an anticipated breach or actual breach by
Dubow of the provisions of Sections 1, 2 or 3, the Company shall be entitled to
inform in writing all of Dubow's potential or new employers, partners,
shareholders, officers, directors or borrowers of the terms of this Agreement.
Because the breach or threatened breach of any of the covenants in Sections 1, 2
or 3 will result in immediate and irreparable injury to the Company, Dubow
agrees that the Company shall be entitled to an injunction restraining Dubow
from violating Sections 1, 2 and 3 to the fullest extent allowed by law. Dubow
covenants and agrees that if he violates any of the covenants and agreements in
Sections 1, 2 or 3, the Company shall be entitled to an accounting and repayment
of all profits, compensation, commissions, remuneration or benefits which Dubow
directly or indirectly realizes or may realize as a result of or in connection
with a violation. Nothing in this Agreement shall prohibit the Company from
pursuing all other legal or equitable remedies that may be available to it for a
breach or threatened breach, including the recovery of damages.
5. ASSURANCES. The parties agree to execute, acknowledge, deliver and
file, or cause to be executed, acknowledged, delivered and filed, all further
instruments, agreements or documents as may be necessary to consummate the
transactions provided for in this Agreement and to do all further acts necessary
to carry out the purpose and intent of this Agreement.
6. WAIVER. No term or condition of this Agreement shall be deemed to
have been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with the waiver or estoppel. No written waiver shall be deemed a continuing
waiver unless specifically stated therein, and each waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
the term or condition for the future or as to any act other than that
specifically waived.
7. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without reference to its
conflicts of law principles.
8. LITIGATION; PREVAILING PARTY. If litigation is brought concerning
this Agreement, the prevailing party shall be entitled to receive from the
non-prevailing party, and the non-prevailing party shall immediately pay upon
demand, all reasonable attorneys' fees and expenses for the prevailing party.
9. NOTICES. All notices and other communication required or permitted
under this Agreement shall be in writing and delivered personally or sent by
certified or registered mail,
3
<PAGE>
postage prepaid, return receipt requested (deemed delivered 5 business days
after the date sent) or by telecopy (deemed delivered on the next business day
after transmission), addressed as follows:
(a) If to the Company, to:
Guardian International, Inc.
3880 North 28th Terrace
Hollywood, FL 33020-1118
Attention: Richard Ginsburg
with a copy to:
Harvey Goldman, Esq.
Steel Hector & Davis LLP
200 South Biscayne Boulevard
41st Floor
Miami, FL 33131-2398
(b) If to Dubow, to:
Alan Dubow
P. O. Box 1670
Alexandria, VA 22317
with a copy to:
Marshall R. Pasternak, Esq.
Greenberg, Traurig, et al.
1221 Brickell Avenue
Miami, FL 33131
10. ASSIGNMENT. This Agreement shall inure to the benefit of and be
legally binding upon all successors and assigns of the parties.
11. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding of the parties and supersedes all prior discussions, negotiations,
agreements and understandings, whether oral or written, with respect to its
subject matter. This Agreement may be modified only by a written instrument
properly executed by all parties to this Agreement.
12. SEVERABILITY. If any one or more of the provisions of this
Agreement is held invalid, illegal or unenforceable, the remaining provisions of
this Agreement shall be unimpaired, and the invalid, illegal or unenforceable
provision shall be replaced by a mutually acceptable valid, legal and
enforceable provision which comes closest to the intent of the parties.
4
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as of the date
first written above.
GUARDIAN INTERNATIONAL, INC.
By: __________________________
Richard Ginsburg, President and
Chief Executive Officer
_______________________________
Alan Dubow, Individually
EXHIBIT 10(e)
CONFIDENTIALITY, NONCOMPETITION AND
NONSOLICITATION AGREEMENT
Confidentiality, Noncompetition and Nonsolicitation Agreement (the
"Agreement") effective as of April 27, 1998 among Guardian International, Inc.,
a Nevada corporation (the "Company"), and Richard Clark ("Clark").
RECITALS
A. The Company, Clark, David Weston ("Weston"), Jeff Chivers
("Chivers") and Alan Dubow ("Dubow" and together with Clark, Weston and Chivers,
the "Sellers") entered into a Stock Purchase Agreement (the "Stock Agreement")
effective as of April 17, 1998 pursuant to which the Company agreed to purchase
all of the outstanding common stock, $.15 par value per share (the "Common
Stock") of Precision Security Systems, Inc., a Florida corporation, from
Sellers.
B. Clark acknowledges that he will obtain confidential and proprietary
information relating to the business of the Company as a result of consummation
of the transactions contemplated by the Stock Agreement, and acknowledges that
the covenants not to compete and confidentiality provisions in this Agreement
are reasonable.
AGREEMENT
l. CONFIDENTIALITY.
a. Clark agrees that he will hold in a fiduciary capacity for
the benefit of the Company, and shall not, directly or indirectly, use or
disclose, except as authorized by the Company, any Confidential Information (as
defined below) that Clark may have or acquire (whether or not developed or
compiled by Clark and whether or not Clark has been authorized to have access to
such Confidential Information). The term "Confidential Information" as used in
this Agreement shall mean and include any material information, data and
know-how relating to the business of the Company that is disclosed to Clark by
the Company or known by him as a result of his relationship with the Company (or
a company acquired by the Company) and not generally within the public domain
(whether constituting a trade secret or not) including, without limitation, the
following: financial information, supply and service information, marketing
information, personnel information, customer information and information with
respect to any corporate affairs that the Company treats as confidential.
b. The term "Confidential Information" does not include
information that has become generally available to the public by the act of the
Company or by the act of one who has the right to disclose such information
without violating any right of the Company or the customer to which such
information pertains.
<PAGE>
c. Nothing in this Section 1 shall prevent Clark from
disclosing any Confidential Information to the extent such disclosure is
required by law or any order of a court or government authority with
jurisdiction, provided, however, that Clark agrees to give the Company advance
written notice as soon as possible of the Confidential Information required to
be disclosed, and at the Company's request, to use his best efforts to obtain
assurances that the Confidential Information required to be disclosed will be
maintained on a confidential basis and will not be disclosed to a greater degree
than required by law.
d. These rights of the Company are in addition to those rights
the Company has under the common law or applicable statutes for the protection
of trade secrets.
2. COVENANT NOT TO COMPETE. Clark agrees that he will not engage or
participate, directly or indirectly, in any business that competes with the
business of the Company in Dade County, Broward and Palm Beach County, Florida,
whether as an employee, employer, consultant, agent, principal, partner,
stockholder, corporate officer, director, or other representative capacity, for
a period of four (4) years after the date of this Agreement. Notwithstanding the
foregoing, Clark may (i) hold an investment representing less than a 5% interest
in any publicly held entity engaging in a business that competes with the
business of the Company and (ii) be an employee, employer, consultant, agent,
principal, partner, stockholder, corporate officer, director or other
representative of an entity that does not engage in burglar alarm, fire alarm,
closed circuit television and electronic access and control and central
monitoring services; PROVIDED, HOWEVER, that Clark agrees to refer customers
seeking monitoring services to Company. In the event any court shall refuse to
enforce any portion of the covenant set forth in this Section 2, then such
unenforceable portion shall be deemed eliminated and severed from said contract
for the purposes of said court's proceedings to the extent necessary to permit
the remaining portions of the covenant to be enforced.
3. NONSOLICITATION. Clark agrees that he will not, from the date of
this Agreement and forever thereafter, for himself or on behalf of or in
conjunction with any third party solicit any employee of the Company or its
subsidiaries to leave such employment; PROVIDED, that the posting by Clark or
any entity with which Clark is involved of general advertisements soliciting
employees shall not constitute the solicitation of any employee of the Company
or its subsidiaries. Clark further agrees that, from the date of this Agreement
and for an unlimited period thereafter, he will not directly or indirectly, on
his own behalf or in the service of or on behalf of others, solicit, divert or
appropriate, or attempt to solicit, divert or appropriate, to any competing
business, any customers of the Company or its subsidiaries existing as of the
date of this Agreement. If, as of the date of this Agreement, Clark is engaged
in or associated with the planning or implementing of any project, program or
venture involving the Company and a third party or parties (a "Venture"), or any
discussions, analysis or negotiations with respect to an investment in, merger,
acquisition or purchase, directly or indirectly, of the stock, assets, or
business of any entity (an "Acquisition"), all rights in the Venture and the
Acquisition and any opportunity to make any investment in the entity to be so
acquired (the "Target") shall belong to the Company and shall constitute a
corporate opportunity belonging exclusively to the Company; PROVIDED, HOWEVER,
that this Section shall not apply to any Venture or Acquisition involving Clark
and Green Balance Company, Inc. Except as approved by the Board of Directors of
the
2
<PAGE>
Company, Clark shall not be entitled to any interest in any such Venture or to
invest or solicit any third party to invest in the Target or consummate the
Acquisition, or to any commission, finder's fee or other compensation in
connection therewith. In the event any court shall refuse to enforce any portion
of the covenants set forth in this Section 3, then such unenforceable portion
shall be deemed eliminated and severed from said contract for the purposes of
said court's proceedings to the extent necessary to permit the remaining
portions of the covenant to be enforced.
4. REMEDIES. The parties acknowledge that the Company would not have an
adequate remedy at law for money damages if the covenants contained in Sections
1, 2 or 3 were not complied with in accordance with their terms. The parties
therefore agree that in the event of an anticipated breach or actual breach by
Clark of the provisions of Sections 1, 2 or 3, the Company shall be entitled to
inform in writing all of Clark's potential or new employers, partners,
shareholders, officers, directors or borrowers of the terms of this Agreement.
Because the breach or threatened breach of any of the covenants in Sections 1, 2
or 3 will result in immediate and irreparable injury to the Company, Clark
agrees that the Company shall be entitled to an injunction restraining Clark
from violating Sections 1, 2 and 3 to the fullest extent allowed by law. Clark
covenants and agrees that if he violates any of the covenants and agreements in
Sections 1, 2 or 3, the Company shall be entitled to an accounting and repayment
of all profits, compensation, commissions, remuneration or benefits which Clark
directly or indirectly realizes or may realize as a result of or in connection
with a violation. Nothing in this Agreement shall prohibit the Company from
pursuing all other legal or equitable remedies that may be available to it for a
breach or threatened breach, including the recovery of damages.
5. TRANSITION PERIOD. For a period of six months after the date of this
Agreement, Clark agrees to provide assistance to the Company upon the request of
the Company at a rate of $300 per day, plus reasonable out-of-pocket expenses.
6. ASSURANCES. The parties agree to execute, acknowledge, deliver and
file, or cause to be executed, acknowledged, delivered and filed, all further
instruments, agreements or documents as may be necessary to consummate the
transactions provided for in this Agreement and to do all further acts necessary
to carry out the purpose and intent of this Agreement.
7. WAIVER. No term or condition of this Agreement shall be deemed to
have been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with the waiver or estoppel. No written waiver shall be deemed a continuing
waiver unless specifically stated therein, and each waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
the term or condition for the future or as to any act other than that
specifically waived.
8. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without reference to its
conflicts of law principles.
3
<PAGE>
9. LITIGATION; PREVAILING PARTY. If litigation is brought concerning
this Agreement, the prevailing party shall be entitled to receive from the
non-prevailing party, and the non-prevailing party shall immediately pay upon
demand, all reasonable attorneys' fees and expenses for the prevailing party.
10. NOTICES. All notices and other communication required or permitted
under this Agreement shall be in writing and delivered personally or sent by
certified or registered mail, postage prepaid, return receipt requested (deemed
delivered 5 business days after the date sent) or by telecopy (deemed delivered
on the next business day after transmission), addressed as follows:
(a) If to the Company, to:
Guardian International, Inc.
3880 North 28th Terrace
Hollywood, FL 33020-1118
Attention: Richard Ginsburg
with a copy to:
Harvey Goldman, Esq.
Steel Hector & Davis LLP
200 South Biscayne Boulevard
41st Floor
Miami, FL 33131-2398
(b) If to Clark, to:
Richard Clark
4521 P.G.A. Boulevard #350
Palm Beach Gardens, FL 33418
with a copy to:
Marshall R. Pasternak, Esq.
Greenberg, Traurig, et al.
1221 Brickell Avenue
Miami, FL 33131
11. ASSIGNMENT. This Agreement shall inure to the benefit of and be
legally binding upon all successors and assigns of the parties.
12. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding of the parties and supersedes all prior discussions, negotiations,
agreements and understandings,
4
<PAGE>
whether oral or written, with respect to its subject matter. This Agreement may
be modified only by a written instrument properly executed by all parties to
this Agreement.
13. SEVERABILITY. If any one or more of the provisions of this
Agreement is held invalid, illegal or unenforceable, the remaining provisions of
this Agreement shall be unimpaired, and the invalid, illegal or unenforceable
provision shall be replaced by a mutually acceptable valid, legal and
enforceable provision which comes closest to the intent of the parties.
IN WITNESS WHEREOF, this Agreement has been executed as of the date
first written above.
GUARDIAN INTERNATIONAL, INC.
By: __________________________
Richard Ginsburg, President and
Chief Executive Officer
_______________________________
Richard Clark, Individually
5
EXHIBIT 10(F)
CONFIDENTIALITY, NONCOMPETITION AND
NONSOLICITATION AGREEMENT
Confidentiality, Noncompetition and Nonsolicitation Agreement (the
"Agreement") effective as of April 27, 1998 among Guardian International, Inc.,
a Nevada corporation (the "Company"), and Jeff Chivers ("Chivers").
RECITALS
A. The Company, Richard Clark ("Clark"), David Weston ("Weston"),
Chivers and Alan Dubow ("Dubow" and together with Clark, Weston and Chivers, the
"Sellers") entered into a Stock Purchase Agreement (the "Stock Agreement")
effective as of April 17, 1998 pursuant to which the Company agreed to purchase
all of the outstanding common stock, $.15 par value per share (the "Common
Stock") of Precision Security Systems, Inc., a Florida corporation, from
Sellers.
B. Chivers acknowledges that he will obtain confidential and
proprietary information relating to the business of the Company as a result of
consummation of the transactions contemplated by the Stock Agreement, and
acknowledges that the covenants not to compete and confidentiality provisions in
this Agreement are reasonable.
AGREEMENT
l. CONFIDENTIALITY.
a. Chivers agrees that he will hold in a fiduciary capacity
for the benefit of the Company, and shall not, directly or indirectly, use or
disclose, except as authorized by the Company, any Confidential Information (as
defined below) that Chivers may have or acquire (whether or not developed or
compiled by Chivers and whether or not Chivers has been authorized to have
access to such Confidential Information). The term "Confidential Information" as
used in this Agreement shall mean and include any material information, data and
know-how relating to the business of the Company that is disclosed to Chivers by
the Company or known by him as a result of his relationship with the Company (or
a company acquired by the Company) and not generally within the public domain
(whether constituting a trade secret or not) including, without limitation, the
following: financial information, supply and service information, marketing
information, personnel information, customer information and information with
respect to any corporate affairs that the Company treats as confidential.
b. The term "Confidential Information" does not include
information that has become generally available to the public by the act of the
Company or by the act of one who has the right to disclose such information
without violating any right of the Company or the customer to which such
information pertains.
<PAGE>
c. Nothing in this Section 1 shall prevent Chivers from
disclosing any Confidential Information to the extent such disclosure is
required by law or any order of a court or government authority with
jurisdiction, provided, however, that Chivers agrees to give the Company advance
written notice as soon as possible of the Confidential Information required to
be disclosed, and at the Company's request, to use his best efforts to obtain
assurances that the Confidential Information required to be disclosed will be
maintained on a confidential basis and will not be disclosed to a greater degree
than required by law.
d. These rights of the Company are in addition to those rights
the Company has under the common law or applicable statutes for the protection
of trade secrets.
2. COVENANT NOT TO COMPETE. Chivers agrees that he will not engage or
participate, directly or indirectly, in any business that competes with the
business of the Company in Dade County, Broward and Palm Beach County, Florida,
whether as an employee, employer, consultant, agent, principal, partner,
stockholder, corporate officer, director, or other representative capacity, for
a period of four (4) years after the date of this Agreement. Notwithstanding the
foregoing, Chivers may (i) hold an investment representing less than a 5%
interest in any publicly held entity engaging in a business that competes with
the business of the Company and (ii) be an employee, employer, consultant,
agent, principal, partner, stockholder, corporate officer, director or other
representative of an entity that does not engage in burglar alarm, fire alarm,
closed circuit television and electronic access and control and central
monitoring services; PROVIDED, HOWEVER, that Chivers agrees to refer customers
seeking monitoring services to Company. In the event any court shall refuse to
enforce any portion of the covenant set forth in this Section 2, then such
unenforceable portion shall be deemed eliminated and severed from said contract
for the purposes of said court's proceedings to the extent necessary to permit
the remaining portions of the covenant to be enforced.
3. NONSOLICITATION. Chivers agrees that he will not, from the date of
this Agreement and forever thereafter, for himself or on behalf of or in
conjunction with any third party solicit any employee of the Company or its
subsidiaries to leave such employment; PROVIDED, that the posting by Chivers or
any entity with which Chivers is involved of general advertisements soliciting
employees shall not constitute the solicitation of any employee of the Company
or its subsidiaries. Chivers further agrees that, from the date of this
Agreement and for an unlimited period thereafter, he will not directly or
indirectly, on his own behalf or in the service of or on behalf of others,
solicit, divert or appropriate, or attempt to solicit, divert or appropriate, to
any competing business, any customers of the Company or its subsidiaries
existing as of the date of this Agreement. If, as of the date of this Agreement,
Chivers is engaged in or associated with the planning or implementing of any
project, program or venture involving the Company and a third party or parties
(a "Venture"), or any discussions, analysis or negotiations with respect to an
investment in, merger, acquisition or purchase, directly or indirectly, of the
stock, assets, or business of any entity (an "Acquisition"), all rights in the
Venture and the Acquisition and any opportunity to make any investment in the
entity to be so acquired (the "Target") shall belong to the Company and shall
constitute a corporate opportunity belonging exclusively to the Company. Except
as approved by the Board of Directors of the Company, Chivers shall not be
entitled to any interest in any such Venture or to invest or solicit any third
party to invest in the Target or
2
<PAGE>
consummate the Acquisition, or to any commission, finder's fee or other
compensation in connection therewith. In the event any court shall refuse to
enforce any portion of the covenants set forth in this Section 3, then such
unenforceable portion shall be deemed eliminated and severed from said contract
for the purposes of said court's proceedings to the extent necessary to permit
the remaining portions of the covenant to be enforced.
4. REMEDIES. The parties acknowledge that the Company would not have an
adequate remedy at law for money damages if the covenants contained in Sections
1, 2 or 3 were not complied with in accordance with their terms. The parties
therefore agree that in the event of an anticipated breach or actual breach by
Chivers of the provisions of Sections 1, 2 or 3, the Company shall be entitled
to inform in writing all of Chivers' potential or new employers, partners,
shareholders, officers, directors or borrowers of the terms of this Agreement.
Because the breach or threatened breach of any of the covenants in Sections 1, 2
or 3 will result in immediate and irreparable injury to the Company, Chivers
agrees that the Company shall be entitled to an injunction restraining Chivers
from violating Sections 1, 2 and 3 to the fullest extent allowed by law. Chivers
covenants and agrees that if he violates any of the covenants and agreements in
Sections 1, 2 or 3, the Company shall be entitled to an accounting and repayment
of all profits, compensation, commissions, remuneration or benefits which
Chivers directly or indirectly realizes or may realize as a result of or in
connection with a violation. Nothing in this Agreement shall prohibit the
Company from pursuing all other legal or equitable remedies that may be
available to it for a breach or threatened breach, including the recovery of
damages.
5. ASSURANCES. The parties agree to execute, acknowledge, deliver and
file, or cause to be executed, acknowledged, delivered and filed, all further
instruments, agreements or documents as may be necessary to consummate the
transactions provided for in this Agreement and to do all further acts necessary
to carry out the purpose and intent of this Agreement.
6. WAIVER. No term or condition of this Agreement shall be deemed to
have been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with the waiver or estoppel. No written waiver shall be deemed a continuing
waiver unless specifically stated therein, and each waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
the term or condition for the future or as to any act other than that
specifically waived.
7. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without reference to its
conflicts of law principles.
8. LITIGATION; PREVAILING PARTY. If litigation is brought concerning
this Agreement, the prevailing party shall be entitled to receive from the
non-prevailing party, and the non-prevailing party shall immediately pay upon
demand, all reasonable attorneys' fees and expenses for the prevailing party.
9. NOTICES. All notices and other communication required or permitted
under this Agreement shall be in writing and delivered personally or sent by
certified or registered mail,
3
<PAGE>
postage prepaid, return receipt requested (deemed delivered 5 business days
after the date sent) or by telecopy (deemed delivered on the next business day
after transmission), addressed as follows:
(a) If to the Company, to:
Guardian International, Inc.
3880 North 28th Terrace
Hollywood, FL 33020-1118
Attention: Richard Ginsburg
with a copy to:
Harvey Goldman, Esq.
Steel Hector & Davis LLP
200 South Biscayne Boulevard
41st Floor
Miami, FL 33131-2398
(b) If to Chivers, to:
Jeff Chivers
1810 Valley Highway
Acme, WA 90220
with a copy to:
Marshall R. Pasternak, Esq.
Greenberg, Traurig, et al.
1221 Brickell Avenue
Miami, FL 33131
10. ASSIGNMENT. This Agreement shall inure to the benefit of and be
legally binding upon all successors and assigns of the parties.
11. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding of the parties and supersedes all prior discussions, negotiations,
agreements and understandings, whether oral or written, with respect to its
subject matter. This Agreement may be modified only by a written instrument
properly executed by all parties to this Agreement.
12. SEVERABILITY. If any one or more of the provisions of this
Agreement is held invalid, illegal or unenforceable, the remaining provisions of
this Agreement shall be unimpaired, and the invalid, illegal or unenforceable
provision shall be replaced by a mutually acceptable valid, legal and
enforceable provision which comes closest to the intent of the parties.
4
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as of the date
first written above.
GUARDIAN INTERNATIONAL, INC.
By: __________________________
Richard Ginsburg, President and
Chief Executive Officer
_______________________________
Jeff Chivers, Individually
5
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 333,322
<SECURITIES> 0
<RECEIVABLES> 2,278,056
<ALLOWANCES> 252,482
<INVENTORY> 0
<CURRENT-ASSETS> 3,111,586
<PP&E> 2,458,752
<DEPRECIATION> 950,244
<TOTAL-ASSETS> 36,131,459
<CURRENT-LIABILITIES> 5,079,269
<BONDS> 12,366,080
0
3,648
<COMMON> 11,914
<OTHER-SE> 17,262,614
<TOTAL-LIABILITY-AND-EQUITY> 36,131,459
<SALES> 2,237,319
<TOTAL-REVENUES> 6,231,897
<CGS> 1,487,882
<TOTAL-COSTS> 2,366,225
<OTHER-EXPENSES> 1,966,047
<LOSS-PROVISION> 295,833
<INTEREST-EXPENSE> 582,154
<INCOME-PRETAX> (943,992)
<INCOME-TAX> 0
<INCOME-CONTINUING> (943,992)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (943,992)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> 0
</TABLE>
