SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported): October 21, 1998
GUARDIAN INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
NEVADA 0-28490 58-1799634
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
3880 N. 28TH TERRACE
HOLLYWOOD, FLORIDA 33020-1118
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (954) 926-5200
NOT APPLICABLE
(Former name or former address, if changed since last report)
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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.
ITEM 5. OTHER EVENTS
WESTAR SECURITY, INC. INVESTMENT
Guardian International, Inc. (the "Company") announced that Westar Security,
Inc. ("Westar"), a subsidiary of Protection One, Inc. and Western Resources,
Inc., has purchased 10,000 shares of Series D 6% Convertible Cumulative
Preferred Stock, par value $.001 per share ("Series D Preferred Stock"), of the
Company for $10 million.
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The Series D Preferred Stock is non-convertible until the third anniversary of
the date of issuance, after which date, the shares are convertible at a rate of
333.3333 shares of Class A Voting Common Stock, par value $.001 per share
("Class A Common Stock"), of the Company for each share of Series D Preferred
Stock. Dividends are payable annually either in cash or in additional shares of
Series D Preferred Stock. The holders of Series D Preferred Stock have no voting
rights until such shares are converted into Class A Common Stock except that the
holders of Series D Preferred Stock are allowed to vote on an as-converted basis
with the holders of Class A Common Stock under the following circumstances: (i)
until the third anniversary of the date of issuance, upon a Change in Control
as that capitalized term is defined in the Certificate of Designations; (ii) or
at any time the Series D Preferred Stock is outstanding, under an Event of
Default by the Company, as that capitalized term is defined in the Certificate
of Designations. The holders of Series D Preferred Stock have no redemption
rights except upon a Change in Control. After the third anniversary of issuance,
the Company can elect to redeem the Series D Preferred Stock for a premium.
The proceeds of the sale of the Series D Preferred Stock will be used to pay
down long-term debt, which will position the Company to make further
acquisitions and to carry out other corporate purposes including a stock
repurchase program.
In addition, Westar has exchanged its existing equity holdings in Guardian
(2,980,000 million shares of Class A Common Stock, 2,037,133 million shares of
Guardian Series A 9 3/4% Convertible Cumulative Preferred Stock, par value $.001
per share, and 1,704,232 million shares of Guardian Series B 10 1/2% Convertible
Cumulative Preferred Stock, par values $.001 per share) for 16,397 shares of
Series C 7% Redeemable Preferred Stock, par value $.001 ("Series C Preferred
Stock"), of the Company. After giving effect to the transactions, Guardian will
have approximately 9.2 million shares Common Stock outstanding, including
634,035 shares of Class B Non-Voting Common Stock, par value $.001 per share.
The Series C Preferred Stock is non-voting and is redeemable on the sixth
anniversary of the date of issuance at a liquidation value of $1,000 per share.
Dividends are payable quarterly either in cash or in shares of Class A Common
Stock. The holders of Series C Preferred Stock have the right to optional
redemption upon a Change in Control. At any time after issuance, the Company can
elect to redeem the Series C Preferred Stock for a premium.
Westar does not have any right to nominate directors unless and until conversion
of the Series D Preferred Stock. After giving effect to the transaction, Westar
will own approximately 26% of the outstanding capital stock on an as-converted
basis.
STOCK REPURCHASE PROGRAM
The Company's Board of Directors also has authorized the repurchase of up to $1
million of Guardian Class A Common Stock in the open market over the next
eighteen months. Repurchase decisions will be based on comparisons of Guardian's
trading price as a multiple of common industry performance measurements compared
to the selling prices of private security monitoring companies as a multiple of
those same parameters.
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In addition to the above-mentioned items, the Company's credit facility with
Heller Financial, Inc. ("Heller") was amended to include Heller's consents (i)
to improve the Company's borrowing base calculation; (ii) to allow for the
payment of cash dividends on the Series C Preferred Stock; and (iii) to allow
for use of funds drawn on the credit facility for the Company's stock repurchase
program.
ITEM 7. EXHIBITS
4.(a) Amendment to Certificate of the Designations, Voting Powers,
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 the State of Nevada on October 19,
1998.
4.(b) Amendment to Certificate of the Designations, Voting Powers,
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 the State of Nevada on October 19,
1998.
4.(c) Certificate of the Designations, Voting Powers, Preferences and
Relative, Participating, Optional and Other Special Rights and
Qualifications, Limitations or Restrictions of Series C Preferred
Stock, filed in the Office of the Secretary of the State of Nevada
on October 21, 1998 designating the third series of Preferred
Stock of the Company as "Series C 7.00% Redeemable Cumulative
Preferred Stock, par value $.001 per share".
4.(d) Certificate of the Designations, Voting Powers, Preferences and
Relative, Participating, Optional and Other Special Rights and
Qualifications, Limitations or Restrictions of Series D Preferred
Stock, filed in the Office of the Secretary of the State of Nevada
on October 21, 1998 designating the third series of Preferred
Stock of the Company as "Series D 6.00% Convertible Cumulative
Preferred Stock, par value $.001 per share".
10.(a) Stock Subscription Agreement dated as of October 21, 1998.
10.(b) Stockholders Agreement dated as of October 21, 1998.
10.(c) Registration Rights Agreement dated as of October 21, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
GUARDIAN INTERNATIONAL, INC.
DATED: November 3, 1998 By: /S/ RICHARD GINSBURG
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Richard Ginsburg
President and Chief Executive Officer
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
4.(a) Amendment to Certificate of the Designations, Voting Powers,
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 the State of Nevada on October 19,
1998.
4.(b) Amendment to Certificate of the Designations, Voting Powers,
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 the State of Nevada on October 19,
1998.
4.(c) Certificate of the Designations, Voting Powers, Preferences and
Relative, Participating, Optional and Other Special Rights and
Qualifications, Limitations or Restrictions of Series C Preferred
Stock, filed in the Office of the Secretary of the State of Nevada
on October 21, 1998 designating the third series of Preferred
Stock of the Company as "Series C 7.00% Redeemable Cumulative
Preferred Stock, par value $.001 per share".
4.(d) Certificate of the Designations, Voting Powers, Preferences and
Relative, Participating, Optional and Other Special Rights and
Qualifications, Limitations or Restrictions of Series D Preferred
Stock, filed in the Office of the Secretary of the State of Nevada
on October 21, 1998 designating the third series of Preferred
Stock of the Company as "Series D 6.00% Convertible Cumulative
Preferred Stock, par value $.001 per share".
10.(a) Stock Subscription Agreement dated as of October 21, 1998.
10.(b) Stockholders Agreement dated as of October 21, 1998.
10.(c) Registration Rights Agreement dated as of October 21, 1998.
EXHIBIT 4.(a)
AMENDMENT TO CERTIFICATE OF THE DESIGNATIONS, VOTING POWERS,
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.
("Amended Certificate of Designation")
The undersigned hereby certify that they are the duly elected and
acting President and Secretary, respectively, of Guardian International, Inc., a
Nevada corporation (the "Company"), and pursuant to NRS 78.1955, DO HEREBY
CERTIFY THAT:
I. A certificate of designations creating a series of preferred stock of
the Company designated as Series A 9 3/4% Convertible Cumulative
Preferred Stock (the "Series A Preferred Stock") was filed with the
Nevada Secretary of State on November 24, 1997, (the "Original
Designation").
II. The Company's board of directors has duly adopted the following resolution:
RESOLVED that the Series A Preferred Stock be amended by
adding the following to the Certificate of Designations
creating that series of stock:
When all shares of Series A Preferred Stock have been
purchased, redeemed, exchanged or converted by the
Company, all such shares shall be immediately deemed
retired and cancelled and all authorized shares of
Series A Preferred Stock shall be deemed restored to
the status of authorized but unissued preferred
shares without designation as to series.
III. The approval of this amendment by the holders of Series A Preferred
Stock, required by NRS 78.1955(3), has been obtained and no class or
series of stock is senior to the Series A Preferred Stock prior to or
on the date of this amendment.
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IN WITNESS WHEREOF, the Company has caused this Amended Certificate of
Designation to be duly executed in its corporate name on this 19 day of October
1998.
GUARDIAN INTERNATIONAL, INC.
By:/S/ RICHARD GINSBURG
---------------------------------------
Name: Richard Ginsburg
Its: President and Chief Executive Officer
By:/S/ SHEILAH GINSBURG
---------------------------------------
Name: Sheilah Ginsburg
Its: Secretary
This instrument was acknowledged before me on Oct. 19, 1998 by Richard
Ginsburg, as President and Chief Executive Officer of Guardian International,
Inc.
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L. Marlene Crossley
Notary Public, State of Florida
Commission No. CC 570109
My Commission Expires: 8/11/2000
EXHIBIT 4.(b)
AMENDMENT TO CERTIFICATE OF THE DESIGNATIONS, VOTING POWERS,
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.
("Amended Certificate of Designation")
The undersigned hereby certify that they are the duly elected and
acting President and Secretary, respectively, of Guardian International, Inc., a
Nevada corporation (the "Company"), and pursuant to NRS 78.1955, DO HEREBY
CERTIFY THAT:
I. A certificate of designations creating a series of preferred stock of
the Company designated as Series B 10 1/2% Convertible Cumulative
Preferred Stock (the "Series B Preferred Stock") was filed with the
Nevada Secretary of State on February 23, 1998, (the "Original
Designation").
II. The Company's board of directors has duly adopted the following resolution:
RESOLVED that the Series B Preferred Stock be amended by
adding the following to the Certificate of Designations
creating that series of stock:
When all shares of Series B Preferred Stock have been
purchased, redeemed, exchanged or converted by the
Company, all such shares shall be immediately deemed
retired and cancelled and all authorized shares of
Series B Preferred Stock shall be deemed restored to
the status of authorized but unissued preferred
shares without designation as to series.
III. The approval of this amendment by the holders of Series B Preferred
Stock, required by NRS 78.1955(3), has been obtained and no class or
series of stock is senior to the Series B Preferred Stock prior to or
on the date of this amendment.
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IN WITNESS WHEREOF, the Company has caused this Amended Certificate of
Designation to be duly executed in its corporate name on this 19 day of October
1998.
GUARDIAN INTERNATIONAL, INC.
By:/S/ RICHARD GINSBURG
------------------------------------------
Name: Richard Ginsburg
Its: President and Chief Executive Officer
By:/S/ SHEILAH GINSBURG
------------------------------------------
Name: Sheilah Ginsburg
Its: Secretary
This instrument was acknowledged before me on Oct. 19, 1998 by Richard
Ginsburg, as President and Chief Executive Officer of Guardian International,
Inc.
/S/ L. MARLENE CROSSLEY
---------------------------------------------
L. Marlene Crossley
Notary Public, State of Florida
Commission No. CC 570109
My Commission Expires: 8/11/2000
EXHIBIT 4.(c)
CERTIFICATE OF THE DESIGNATIONS, VOTING POWERS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS AND QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS OF SERIES C PREFERRED STOCK OF GUARDIAN
INTERNATIONAL, INC.
The undersigned hereby certify that they are the duly elected and
acting President and Secretary of Guardian International, Inc., a Nevada
corporation, (the "Company"), and pursuant to Nev. Rev. Stat. ss. 78.1955, DO
HEREBY CERTIFY:
That, pursuant to the authority conferred upon the Board of Directors
of the Company (the "Board") by Article FOURTH of the Company's Articles of
Incorporation (the "Articles"), the Board at a meeting held on October 12, 1998
adopted the following resolution:
RESOLVED, that the Board hereby establishes and authorizes the
issuance of a third series of the blank-check preferred stock, par
value $.001 per share (the "Preferred Stock"), and hereby fixes the
number of shares to constitute the third series, the annual rate of
dividends payable on such shares and the date from which dividends
shall commence to accrue, the terms and conditions on which the shares
may or shall be redeemed and the voting rights and liquidation
preferences of such shares, as follows:
I. DESIGNATION AND RANK.
The third series of Preferred Stock of the Company is
designated "Series C 7.00% Redeemable Cumulative Preferred
Stock, par value $.001 per share" (the "Series C Preferred
Stock"), and the number of shares which shall constitute such
Series shall be 16,397 shares. All shares of Series C
Preferred Stock shall rank equally and be identical in all
respects. So long as the Series C Preferred Stock is
outstanding, unless consented to by the affirmative vote of
2/3 of the holders of the outstanding Series C Preferred
Stock, the Company shall not authorize or issue additional
equity securities of any kind, including shares of Preferred
Stock of any class, series or designation ranking in priority
or in parity as to rights and preferences (including in
respect of dividends or rights upon liquidation, dissolution
or winding-up of the Company) with the Series C Preferred
Stock now or hereafter authorized including, without
limitation, additional shares of Series C Preferred Stock
(except for up to 30,000 shares of Series D 6.00% Convertible
Cumulative Preferred Stock, par value $0.001 per share, with a
liquidation value of $1,000.00 per share (the "Series D
Preferred Stock")).
<PAGE>
II. DIVIDENDS.
The holders of the Series C Preferred Stock, in
preference to the holders of Class A Voting Common Stock, par
value $.001 per share (the "Class A Common Stock"), of the
Company and the Class B Non-Voting Common Stock, par value
$.001 per share (collectively, with the Class A Common Stock,
the "Common Stock"), of the Company and any other class or
classes of stock of the Company ranking junior in rights and
preferences to the Series C Preferred Stock as to payment of
dividends and other distributions shall be entitled to
receive, but only out of any funds legally available for the
declaration of dividends, cumulative, preferential dividends
at the annual rate of 7.00% of the Liquidation Value (as
hereinafter defined), in parity with the holders of Preferred
Stock ranking in parity with the Series C Preferred Stock,
payable as follows:
(a) Series C Preferred Stock dividends (the
"Dividends") shall commence to accrue on the shares of Series
C Preferred Stock and be cumulative from and after the date of
issuance of such shares of Series C Preferred Stock (the
"Issuance Date") and shall be deemed to accumulate and accrue
from day to day thereafter. Dividends for any partial period
shall be computed on the basis of a 360-day year of twelve
30-day months and the actual number of days elapsed in the
period for which payable.
(b) The Dividends shall be payable to the holders of
the Series C Preferred Stock quarterly on the 1st day of
January, April, July and October commencing January 1, 1999.
The Company shall pay Dividends in cash; provided, however,
that if the provisions of the current credit agreement to
which the Company is a party, or any replacements thereof,
prohibit the Company from paying Dividends in cash, the
Dividends shall be paid in shares ("Dividend Common Shares")
of Class A Common Stock; provided further that in no event
shall the Company pay cash dividends with respect to any stock
of the Company ranking junior in rights or preferences to the
Series C Preferred Stock during any period in which cash
dividends may not be paid or have not been paid with respect
to the Series C Preferred Stock. Once issued, any Dividend
Common Shares shall rank PARI PASSU and have all of the rights
and privileges associated with all other shares of the Class A
Common Stock. If Dividends are paid in Dividend Common Shares,
the price per share of the Class A Common Stock for
determining the number of Dividend Common Shares to be issued
shall be equal to the average of the daily bid and asked
prices as of closing of the Class A Common Stock averaged over
the twenty (20) trading days prior to and including the last
day
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of the quarter immediately preceding the date on which
Dividends are payable. The Company shall at all times keep
reserved such number of shares of its authorized and unissued
Class A Common Stock as necessary to pay all Dividends
remaining to be paid with respect to the Series C Preferred
Stock in shares of Class A Common Stock as contemplated by
this Section II(b).
(c) So long as any share of Series C Preferred Stock
remains outstanding, the Company shall not declare, pay or set
aside for payment any dividend on any stock ranking junior in
rights or preferences to the Series C Preferred Stock or make
any payment or set apart any fund for payment with respect to
the purchase, redemption or other retirement of any stock
ranking junior in rights or preferences to the Series C
Preferred Stock unless all accrued and unpaid dividends with
respect to the Series C Preferred Stock have been paid in
full.
III. REDEMPTION.
(a) MANDATORY REDEMPTION. The Company shall redeem
all outstanding shares of Series C Preferred Stock on the
sixth anniversary of the Issuance Date for an amount in cash
equal to the sum of (1) $1,000.00 per share (the "Liquidation
Value") for each such share of Series C Preferred Stock to be
redeemed plus (2) any accrued and unpaid Dividends thereon.
(b) OPTIONAL REDEMPTION. The Company may redeem the
Series C Preferred Stock, in whole or in part, at any time and
from time to time, upon not less than 30 days' written notice,
after the Issuance Date for an amount in cash equal to the sum
of (1) the Liquidation Value for each such share of Series C
Preferred Stock to be redeemed plus (2) any accrued and unpaid
Dividends thereon plus (3) a premium equal to the product of
(i) the Liquidation Value, (ii) 7.00% and (iii) a fraction,
the numerator of which is of the number of days remaining
until (and excluding) the sixth anniversary of the Issuance
Date and the denominator of which is 2,160 (the "Optional
Redemption Price Calculation").
(c) REDEMPTION UPON A CHANGE OF CONTROL. A holder of
Series C Preferred Stock may elect to cause the Company to
redeem all or any part of its shares of Series C Preferred
stock upon a Change of Control (as defined below) for an
amount in cash equal to the amount determined by the Optional
Redemption Price Calculation (the "Redemption Price").
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(d) PROCEDURES FOR REDEMPTION.
(i) In the event that the Company redeems
shares of Series C Preferred Stock pursuant to Section III(a)
or Section III(b) above, at least fifteen (15) days and not
more than sixty (60) days prior to the date fixed for any
redemption of the Series C Preferred Stock, written notice
(the "Redemption Notice") shall be given by first class mail,
postage prepaid, to each holder of record on the record date
fixed for such redemption of the Series C Preferred Stock at
such holder's address as it appears on the stock books of the
Company; PROVIDED, HOWEVER, that no failure to give such
notice nor any deficiency therein shall affect the validity of
the procedure for the redemption of any shares of Series C
Preferred Stock to be redeemed except as to the holder or
holders to whom the Company has failed to give said notice or
except as to the holder or holders whose notice was defective.
The Redemption Notice shall state:
(1) the Redemption Price;
(2) whether all or less than all
the outstanding shares of the Series C Preferred Stock are to
be redeemed and the total number of shares of the Series C
Preferred Stock being redeemed;
(3) the date fixed for redemption
(the "Redemption Date");
(4) that the holder is to surrender
to the Company, in the manner, at the place or places and at
the price designated, his certificate or certificates
representing the shares of Series C Preferred Stock to be
redeemed; and
(5) that dividends on the shares of
the Series C Preferred Stock to be redeemed shall cease to
accumulate on such Redemption Date unless the Company defaults
in the payment of the Redemption Price.
(ii) (1) In the event that a holder of
Series C Preferred Stock (the "Redeeming Series C Holder")
elects to redeem its shares of Series C Preferred Stock
pursuant to Section III(c) above, at least fifteen (15) days
and not more than sixty (60) days prior to the date of any
such redemption of the Series C Preferred Stock, written
notice (the "Holder's Redemption Notice") shall be given by
first class mail, postage prepaid, to the Company. The
Redemption Notice shall state:
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(A) whether all or less
than all the outstanding shares of the Series C Preferred
Stock are to be redeemed and the total number of shares of the
Series C Preferred Stock being redeemed; and
(B) the date of the
redemption (the "Redemption Date").
(2) The Company shall, within 10
days of receipt of the Holder's Redemption Notice, send a
notice to the Redeeming Series C Holder (the "Company's
Redemption Notice"), stating:
(A) the Redemption Price;
and
(B) that the Redeeming
Series C Holder is to surrender to the Company, in the manner,
at the place or places and at the price designated, his
certificate or certificates representing the shares of Series
C Preferred Stock to be redeemed; and
(C) that Dividends on the
shares of Series C Preferred Stock to be redeemed shall cease
to accumulate on the Redemption Date unless the Company
defaults in the payment of the Redemption Price.
(iii) Each holder of Series C Preferred
Stock redeemed pursuant to the provisions of Section III(a),
(b) or (c) hereof shall surrender the certificate or
certificates representing such shares of Series C Preferred
Stock to the Company, duly endorsed (or otherwise in proper
form for transfer, as determined by the Company), in the
manner and at the place designated in the Company's Redemption
Notice, and on the Redemption Date the full Redemption Price
for such shares shall be payable in cash to the person whose
name appears on such certificate or certificates as the owner
thereof, and each surrendered certificate shall be canceled
and retired. In the event that less than all of the shares
represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed
shares.
(iv) On and after the Redemption Date,
unless the Company defaults in the payment in full of the
Redemption Price, Dividends on the Series C Preferred Stock
called for redemption shall cease to accumulate on the
Redemption Date, and all rights of the
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holders of redeemed shares shall terminate with respect
thereto on the Redemption Date, other than the right to
receive the Redemption Price, without interest; PROVIDED,
HOWEVER, that if notices of redemption shall have been given
as provided in Section III (d)(i) and (ii) above and the funds
necessary for redemption (including an amount in respect of
all dividends that will accrue to the Redemption Date) shall
have been irrevocably deposited in trust for the equal and
ratable benefit for the holders of the shares to be redeemed,
then, at the close of business on the day on which such funds
are segregated and set aside, the holders of the shares to be
redeemed shall cease to be stockholders of the Company, shall
have no interest in or claims against the Company by virtue
thereof and shall have no rights with respect thereto, except
the right to receive the Redemption Price, without interest,
upon surrender (and endorsement, if required by the Company)
of their certificates, and the shares evidenced thereby shall
no longer be outstanding.
(e) For purposes of Section III(c) above, "Change of
Control" means (i) the acquisition directly or indirectly, by
any "person" or "group" (as used in Section 13(d) of the
Securities Exchange Act of 1934, as amended) of beneficial
ownership (as defined in Section 13(d)) of in excess of 35% of
the Company's combined voting power of all then-outstanding
voting securities, provided, however, that any acquisition or
disposition (whether by sale, transfer, assignment, pledge,
hypothecation, gift, placement in trust (voting or otherwise)
or transfer by operation of law of, creation of a security
interest in or lien on, or any other encumbering or disposal,
directly or indirectly, whether with or without consideration
and whether voluntarily or involuntarily) of voting securities
by Wester Security, Inc., a Kansas corporation, Western
Resources, Inc., a Kansas corporation, or Protection One,
Inc., a Delaware corporation, or any "affiliate" of any of
such entities (as the term "affiliate" is defined by Rule 405
promulgated under the Securities Act of 1933, as amended)
(collectively, the "Westar Group") shall not be deemed to be a
"Change of Control"; (ii) the consummation of a merger,
consolidation, or other business combination of the Company
with any other person (as defined immediately above), other
than a merger, consolidation or other business combination
that would result in the outstanding Common Stock immediately
prior thereto continuing to represent (either by remaining
outstanding or by being converted into common stock of the
surviving entity or a parent or affiliate thereof) at least
65% of the outstanding Common Stock or stock of the surviving
entity or parent or affiliate thereof outstanding immediately
after such transaction; (iii) any sale, lease, exchange or
other transfer (in one transaction or a series of related
transactions) of
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all or substantially all of the assets of the Company; or (iv)
a majority of the Board of Directors of the Company shall
consist of persons other than persons who (V) are members of
the Board on the Issuance Date, (W) are nominated by David C.
Wittig, at any time and from time to time, (X) are elected or
appointed to serve as Independent Directors (as defined below)
prior to December 31, 1998, including but not limited to, Joel
A. Cohen, (Y) were elected to the Board by a majority vote of
directors on the Board on the Issuance Date or their
successors elected pursuant to this clause (Y), or (Z) are
elected by holders of either the Series C Preferred Stock or
the Series D Preferred Stock in accordance with Section 5(c)
hereof or are nominated by holders of the Series D Preferred
Stock pursuant to Section 2(a) of that certain Stockholders
Agreement dated as of October 21, 1998 by and among the
Company, Westar Security, Inc., a Kansas corporation
("Westar") and Harold Ginsburg, Sheilah Ginsburg, Richard
Ginsburg and Rhonda Ginsburg (collectively, the "Ginsburgs").
For purposes of this Section III(e), the term "Independent
Director" shall mean a person who is not (i) an officer or
employee of the Company or its Affiliates or of Westar or its
Affiliates, or (ii) related by blood or marriage to any of the
Ginsburgs.
IV. VOTING RIGHTS.
The holders of Series C Preferred Stock shall not be
entitled to vote or consent on any matters required or
permitted to be submitted to the stockholders of the Company
for their approval, except to the extent that voting rights
are specifically provided by Nevada law or Section I or V
hereof.
V. SPECIAL VOTING RIGHTS
(a) AMENDMENT TO CERTIFICATE OF DESIGNATIONS. The
Company shall not amend the Articles or this Certificate of
Designations so as to adversely affect in any manner the
specified rights, preferences, privileges or voting rights of
the Series C Preferred Stock or to authorize additional shares
of Series C Preferred Stock unless consented to by the
affirmative vote of 2/3 of the holders of the outstanding
Series C Preferred Stock.
(b) ELECTION OF DIRECTORS.
(i) Subject to the provisions of Section
V(b)(ii) below, upon the occurrence of a Default Event
(hereafter defined) with respect to the Series C Preferred
Stock and for the duration of the Default Period (hereafter
defined), the holders of
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the Series C Preferred Stock, in addition to any other voting
rights they may have by law, shall be entitled to vote (voting
separately as a series by a majority of the outstanding shares
thereof) for the election to the Board of Directors of the
smallest number of additional directors necessary to
constitute at any given time a majority of the total number of
members of the Board of Directors (after giving effect to such
election), and should such percentage when applied to the
number of the members of the Board of Directors result in a
number that includes a fraction, then such number shall be
increased to the next whole number. In addition, during the
Default Period, the holders of the Series C Preferred Stock
shall be entitled to designate (voting as a series as
aforesaid) the number of positions on the Board of Directors,
which shall be the smallest number of directors necessary for
the nominees of the holders of the Series C Preferred Stock to
constitute a majority of the full Board. In case the holders
of the Series C Preferred Stock become entitled to exercise
such special voting rights, they may call a special meeting of
stockholders during the Default Period, in the manner provided
in the bylaws or otherwise as provided by law, for the purpose
of increasing or decreasing the number of positions on the
Board of Directors and electing such members to the Board of
Directors. In addition, the holders of the Series C Preferred
Stock shall have such special voting rights at any annual or
regular meeting of stockholders (or any other special meeting
not called by the holders of the Series C Preferred Stock)
held during the Default Period. In lieu of the foregoing, the
holders of the Series C Preferred Stock may take any of such
actions by a written consent signed by the holders of at least
a majority of the shares the Series C Preferred Stock
outstanding and entitled to vote thereon.
(ii) Notwithstanding the provisions of
Section V(b)(i) above, if during the Default Period, a Default
Event occurs and is continuing with respect to the Series D
Preferred Stock, the holders of the Series D Preferred Stock,
in addition to any other voting rights they may have by law,
shall be entitled to vote (together, as a class, with the
Series C Preferred Stock) for the election of additional
directors to the Board of Directors, as described in Section
V(b)(i) above.
(iii) REMOVAL; VACANCIES. During the Default
Period, each director elected by the holders of the Series C
Preferred Stock may be removed only by the vote of the holders
of the majority of the outstanding shares of such series of
Preferred Stock, voting separately as a series, at a meeting
of the stockholders, or of the
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holders of the Series C Preferred Stock, called for that
purpose. During the Default Period, any vacancy in the office
of a director elected by the holders of the Series C Preferred
Stock may be filled by a vote of the remaining directors then
in office elected by the holders of such series of Preferred
Stock, or, if not so filled, by the holders of such series of
Preferred Stock at any meeting, annual or special, for the
election of directors held thereafter. A special meeting of
stockholders, or of the holders of shares of Series C
Preferred Stock, may be called for the purpose of filling any
such vacancy. In the case of removal of any such director, the
vacancy may be filled at the same meeting at which such
removal shall be voted. Holders of the Series C Preferred
Stock shall be entitled to notice of each meeting of
stockholders at which they shall have any right to vote or
notice of which is otherwise required by law. In lieu of the
foregoing, the holders of the Series C Preferred Stock may
take any of such actions by a written consent signed by the
holders of at least a majority of the shares of such series of
Preferred Stock outstanding and entitled to vote thereon.
(iv) EXPIRATION OF RIGHT. Upon termination
of the Default Period, the special voting rights of the
holders of the Series C Preferred Stock in default provided
hereunder shall be immediately divested, but always subject to
the revesting of such right in the holders of the Series C
Preferred Stock upon the occurrence of any subsequent Default
Event. In the event that such rights of the holders of the
Series C Preferred Stock shall cease as provided above, then
the directors elected to the Board of Directors by the holders
of the Series C Preferred Stock under this Section V shall be
automatically removed from office, and their respective
positions terminated and the number of positions on the Board
of Directors reduced in accordance with such termination,
without further action on the part of the holders of Preferred
Stock, the holders of Common Stock or the Board of Directors.
(v) DEFAULT EVENT. For purposes hereof, a
"Default Event" occurs on the date that (A) (i) the Company
has failed to pay a Dividend when due and (ii) such Dividend
remains unpaid for 30 days or (B) the Company fails to
discharge any redemption obligation with respect to the Series
C Preferred Stock.
(vi) DEFAULT PERIOD. For purposes hereof,
"Default Period" means a period commencing on the date a
Default Event occurs and ending (i) with respect to a Dividend
default upon the payment of the next quarterly Dividend in
full and any cumulative
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<PAGE>
Dividends in arrears in full and (ii) with respect to a
redemption default, upon the discharge in full by the Company
of its obligations with respect to such redemption.
VI. LIQUIDATION.
(a) The Series C Preferred Stock shall rank PARI
PASSU upon liquidation with the Series D Preferred Stock and
shall be preferred upon liquidation over the Common Stock and
any other class or classes of stock of the Company which does
not expressly rank senior in rights and preferences to the
Series C Preferred Stock or on a parity with the Series C
Preferred Stock upon liquidation. Holders of shares of Series
C Preferred Stock shall be entitled to be paid, after full
payment is made on any stock ranking prior to the Series C
Preferred Stock as to rights and preferences (but before any
distribution is made to the holders of the Common Stock and
any junior stock), pro rata based on the Liquidation Value
PARI PASSU with the holders of shares of the Series D
Preferred Stock upon the voluntary or involuntary dissolution,
liquidation or winding up of the Company (a "Liquidation").
(b) The amount payable on each share of Series C
Preferred Stock in the event of Liquidation shall be the
Liquidation Value plus any accrued and unpaid Dividends.
(c) Upon Liquidation, if the net assets of the
Company are insufficient to permit the payment in full of the
amounts to which the holders of all outstanding shares of
Series C Preferred Stock are entitled as provided above, the
entire net assets of the Company remaining (after full payment
is made on any stock ranking prior to the Series C Preferred
Stock as to rights and preferences) shall be distributed among
the holders of Series C Preferred Stock and the holders of
shares of Preferred Stock ranking in parity with the Series C
Preferred Stock as to rights and preferences to which they are
respectively entitled in amounts proportionate to the full
preferential amounts.
(d) For purposes of this Section VI, the voluntary
sale, lease, exchange or transfer, for cash, shares of stock,
securities or other consideration, of all or substantially all
the Company's property or assets to, or its consolidation or
merger with, one or more corporations shall not be deemed to
be a Liquidation.
VII. NOTICES TO HOLDERS OF SERIES C PREFERRED STOCK.
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In the event:
(a) of any consolidation or merger to which the
Company is a party and for which approval of any stockholders
of the Company is required, or of the conveyance or transfer
of the properties and assets of the Company substantially as
an entirety, or of any capital reorganization or
reclassification or change of the Common Stock (other than a
change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a
subdivision or combination);
(b) of Liquidation;
(c) of a Change of Control
then the Company shall cause to be given to each of the
registered holders of the Series C Preferred Stock at its
address appearing on the Register for the Series C Preferred
Stock, at least 20 calendar days prior to the applicable
record date hereinafter specified, by registered mail, postage
prepaid, return receipt requested, a written notice stating
the date on which any such consolidation, merger, conveyance,
transfer or Liquidation or Change of Control is expected to
become effective, and the date as of which it is expected that
holders of record of Common Stock shall be entitled to
exchange their shares for securities or other property, if
any, deliverable upon such reclassification, consolidation,
merger, conveyance, transfer or Liquidation.
* * * *
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Certificate to be duly
executed in its corporate name on this 21st day of October, 1998.
GUARDIAN INTERNATIONAL, INC.
By: /S/ RICHARD GINSBURG
---------------------------------
Richard Ginsburg, President and
Chief Executive Officer
By: /S/SHEILAH GINSBURG
---------------------------------
Sheilah Ginsburg, Secretary
STATE OF FLORIDA )
)
COUNTY OF BROWARD )
BEFORE ME, the undersigned authority, personally appeared RICHARD GINSBURG and
SHEILAH GINSBURG, to me known to be the President and Chief Executive Officer
and Secretary, respectively, of GUARDIAN INTERNATIONAL, INC., a Nevada
corporation, who acknowledged before me that they have executed the foregoing
Certificate in their respective capacity as officers of the said corporation for
the reasons and purpose therein expressed, and that the statements contained in
the said Certificate are true and correct.
Sworn to and subscribed before me at Hollywood, Florida this 21st day of
October, 1998.
12
EXHIBIT 4.(d)
CERTIFICATE OF THE DESIGNATIONS, VOTING POWERS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS AND QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS OF SERIES D PREFERRED STOCK OF GUARDIAN
INTERNATIONAL, INC.
The undersigned hereby certify that they are the duly elected and
acting President and Secretary of Guardian International, Inc., a Nevada
corporation, (the "Company"), and pursuant to Nev. Rev. Stat. ss. 78.1955, DO
HEREBY CERTIFY:
That, pursuant to the authority conferred upon the Board of Directors
of the Company (the "Board") by Article FOURTH of the Company's Articles of
Incorporation (the "Articles"), the Board at a meeting held on October 12, 1998
adopted the following resolution:
RESOLVED, that the Board hereby establishes and authorizes the
issuance of a fourth series of the blank-check preferred stock, par
value $.001 per share (the "Preferred Stock") and hereby fixes the
number of shares to constitute the fourth series, the annual rate of
dividends payable on such shares and the date from which dividends
shall commence to accrue, the terms and conditions on which the shares
may or shall be converted or redeemed, as the case may be, and the
voting rights and liquidation preferences of such shares, as follows:
I. DESIGNATION AND RANK.
The fourth series of Preferred Stock of the Company
is designated "Series D 6.00% Convertible Cumulative Preferred
Stock, par value $.001 per share" (the "Series D Preferred
Stock"), and the number of shares which shall constitute such
Series shall be 30,000 shares. All shares of Series D
Preferred Stock shall rank equally and be identical in all
respects. So long as the Series D Preferred Stock is
outstanding, unless consented to by the affirmative vote of
2/3 of the holders of the outstanding Series D Preferred
Stock, the Company shall not authorize or issue additional
equity securities of any kind, including shares of Preferred
Stock of any class, series or designation ranking in priority
or in parity as to rights and preferences (including in
respect of dividends or rights upon liquidation, dissolution
or winding-up of the Company) with the Series D Preferred
Stock now or hereafter authorized including, without
limitation, additional shares of Series D Preferred Stock
other than Dividend Preferred Shares, as defined below (except
for up to 16,397 shares of Series C 7.00% Redeemable
Cumulative Preferred Stock, par value $0.001 per share, with a
liquidation value of $1,000.00 per share (the "Series C
Preferred Stock")).
II. DIVIDENDS.
<PAGE>
The holders of the Series D Preferred Stock, in
preference to the holders of Class A Voting Common Stock, par
value $.001 per share (the "Class A Common Stock"), of the
Company and the Class B Non-Voting Common Stock, par value
$.001 per share (collectively, with the Class A Common Stock,
the "Common Stock"), of the Company and any other class or
classes of stock of the Company ranking junior in rights and
preferences to the Series D Preferred Stock as to payment of
dividends and other distributions, shall be entitled to
receive, but only out of any funds legally available for the
declaration of dividends, cumulative, preferential dividends
at the annual rate of 6.00%, of the Liquidation Value (as
hereinafter defined) in parity with the holders of Preferred
Stock ranking in parity with the Series D Preferred Stock,
payable as follows:
(a) Series D Preferred Stock dividends (the
"Dividends") shall commence to accrue on the shares of Series
D Preferred Stock and be cumulative from and after the date of
issuance of such shares of Series D Preferred Stock (the
"Issuance Date") and shall be deemed to accumulate and accrue
from day to day thereafter. Dividends for any partial period
shall be computed on the basis of a 360-day year of twelve
30-day months and the actual number of days elapsed in the
period for which payable.
(b) The Dividends shall be payable to the holders of
the Series D Preferred Stock annually on the 1st day of
January commencing January 1, 1999 at the Company's option in
cash or in additional shares of Series D Preferred Stock
("Dividend Preferred Shares"). Once issued, any Dividend
Preferred Shares shall rank PARI PASSU and have all of the
rights and privileges associated with all other shares of the
Series D Preferred Stock, including the right to receive
dividends.
(c) Notwithstanding the foregoing, in the event that
any holder of Series D Preferred Stock converts its shares of
Series D Preferred Stock to shares of Class A Common Stock
pursuant to Section VII hereof, the right to preferential
dividend rights pursuant to this Section II with respect to
such converted shares shall terminate upon conversion.
(d) So long as any share of Series D Preferred Stock
remains outstanding, the Company shall not declare, pay or set
aside for payment any dividend on any stock ranking junior in
rights or preferences to the Series D Preferred Stock or make
any payment or set apart any fund for payment with respect to
the purchase,
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redemption or other retirement of any stock ranking junior in
rights or preferences to the Series D Preferred Stock unless
all accrued and unpaid dividends with respect to the Series D
Preferred Stock have been paid in full.
III. OPTIONAL REDEMPTION.
(a) OPTIONAL REDEMPTION. The Series D Preferred Stock
shall not be redeemable by the Company at any time prior to
the third anniversary of the Issuance Date. After the third
anniversary of the Issuance Date, the Series D Preferred Stock
shall be redeemable at the option of the Company, in whole or
in part, at any time and from time to time, upon not less than
30 days' written notice, for an amount in cash equal to the
sum of (1) $1,000.00 per share (the "Liquidation Value") for
each such share of Series D Preferred Stock (including
Dividend Preferred Shares) to be redeemed and (2) a premium
equal to the product of (i) the Liquidation Value, (ii) 6.00%
and (iii) a fraction, the numerator of which is the number of
days remaining until (and excluding) the sixth anniversary of
the Issuance Date and the denominator of which is 2,160 (the
"Redemption Price Calculation").
(b) REDEMPTION UPON A CHANGE OF CONTROL. A holder of
Series D Preferred Stock may elect to cause the Company to
redeem its shares of Series D Preferred Stock upon a Change of
Control (as defined below) for an amount in cash equal to the
amount determined by the Redemption Price Calculation.
(c) PROCEDURES FOR REDEMPTION.
(i) In the event that the Company redeems
shares of Series D Preferred Stock pursuant to Section III(a)
above, at least fifteen (15) days and not more than sixty (60)
days prior to the date fixed for any redemption of the Series
D Preferred Stock, written notice (the "Redemption Notice")
shall be given by first class mail, postage prepaid, to each
holder of record on the record date fixed for such redemption
of the Series D Preferred Stock at such holder's address as it
appears on the stock books of the Company; PROVIDED, HOWEVER,
that no failure to give such notice nor any deficiency therein
shall affect the validity of the procedure for the redemption
of any shares of Series D Preferred Stock to be redeemed
except as to the holder or holders to whom the Company has
failed to give said notice or except as to the holder or
holders whose notice was defective. The Redemption Notice
shall state:
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<PAGE>
(1) the Redemption Price;
(2) whether all or less than
all the outstanding shares of the Series D Preferred Stock are
to be redeemed and the total number of shares of the Series D
Preferred Stock being redeemed;
(3) the date fixed for
redemption (the "Redemption Date");
(4) that the holder is to
surrender to the Company, in the manner, at the place or
places and at the price designated, his certificate or
certificates representing the shares of Series D Preferred
Stock to be redeemed; and
(5) that dividends on the
shares of the Series D Preferred Stock to be redeemed shall
cease to accumulate on such Redemption Date unless the Company
defaults in the payment of the Redemption Price.
(ii) (1) In the event that a holder of
Series D Preferred Stock (the "Redeeming Series D Holder")
elects to redeem its shares of Series D Preferred Stock
pursuant to Section III(b) above, at least fifteen (15) days
and not more than sixty (60) days prior to the date of any
such redemption of the Series D Preferred Stock, written
notice (the "Holder's Redemption Notice") shall be given by
first class mail, postage prepaid, to the Company. The
Redemption Notice shall state:
(A) whether all or
less than all the outstanding shares of the Series D Preferred
Stock are to be redeemed and the total number of shares of the
Series D Preferred Stock being redeemed; and
(B) the date of the
redemption (the "Redemption Date").
(2) The Company shall, within
10 days of receipt of the Holder's Redemption Notice, send a
notice to the Redeeming Series D Holder (the "Company's
Redemption Notice"), stating:
(A) the Redemption
Price;
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<PAGE>
(B) that the Redeeming
Series D Holder is to surrender to the Company, in the manner,
at the place or places and at the price designated, his
certificate or certificates representing the shares of Series
D Preferred Stock to be redeemed; and
(C) that Dividends on the
shares of Series D Preferred Stock to be redeemed shall cease
to accumulate on the Redemption Date unless the Company
defaults in the payment of the Redemption Price.
(iii) Each holder of Series D Preferred
Stock redeemed pursuant to the provisions of Section III(a) or
(b) hereof shall surrender the certificate or certificates
representing such shares of Series D Preferred Stock to the
Company, duly endorsed (or otherwise in proper form for
transfer, as determined by the Company), in the manner and at
the place designated in the Company's Redemption Notice, and
on the Redemption Date the full Redemption Price for such
shares shall be payable in cash to the person whose name
appears on such certificate or certificates as the owner
thereof, and each surrendered certificate shall be canceled
and retired. In the event that less than all of the shares
represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed
shares.
(iv) On and after the Redemption Date,
unless the Company defaults in the payment in full of the
Redemption Price, dividends on the Series D Preferred Stock
called for redemption shall cease to accumulate on the
Redemption Date, and all rights of the holders of redeemed
shares shall terminate with respect thereto on the Redemption
Date, other than the right to receive the Redemption Price,
without interest; PROVIDED, HOWEVER, that if notices of
redemption shall have been given as provided in Section III
(c)(i) and (ii) above and the funds necessary for redemption
(including an amount in respect of all dividends that will
accrue to the Redemption Date) shall have been irrevocably
deposited in trust for the equal and ratable benefit for the
holders of the shares to be redeemed, then, at the close of
business on the day on which such funds are segregated and set
aside, the holders of the shares to be redeemed shall cease to
be stockholders of the Company, shall have no interest in or
claims against the Company by virtue thereof and shall have no
rights with respect thereto, except the right to receive the
Redemption Price, without interest, upon surrender (and
endorsement, if required by the Company) of their
certificates, and the shares evidenced thereby shall no longer
be outstanding.
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<PAGE>
(d) For purposes of Section III(b) above, "Change of
Control" means (i) the acquisition directly or indirectly, by
any "person" or "group" (as used in Section 13(d) of the
Securities Exchange Act of 1934, as amended) of beneficial
ownership (as defined in Section 13(d)) of in excess of 35% of
the Company's combined voting power of all then-outstanding
voting securities, provided, however, that any acquisition or
disposition (whether by sale, transfer, assignment, pledge,
hypothecation, gift, placement in trust (voting or otherwise)
or transfer by operation of law of, creation of a security
interest in or lien on, or any other encumbering or disposal,
directly or indirectly, whether with or without consideration
and whether voluntarily or involuntarily) of voting securities
by Westar Security, Inc., a Kansas corporation, Western
Resources, Inc., a Kansas corporation, or Protection One,
Inc., a Delaware corporation, or any "affiliate" of any of
such entities (as the term "affiliate" is defined by Rule 405
promulgated under the Securities Act of 1933, as amended)
(collectively, the "Westar Group") shall not be deemed to be a
"Change of Control"; (ii) the consummation of a merger,
consolidation, or other business combination of the Company
with any other person (as defined immediately above), other
than a merger, consolidation or other business combination
that would result in the outstanding Common Stock immediately
prior thereto continuing to represent (either by remaining
outstanding or by being converted into common stock of the
surviving entity or a parent or affiliate thereof) at least
65% of the outstanding Common Stock or stock of the surviving
entity or parent or affiliate thereof outstanding immediately
after such transaction; (iii) any sale, lease, exchange or
other transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of the
Company; or (iv) a majority of the Board of Directors of the
Company shall consist of persons other than persons who (V)
are members of the Board on the Issuance Date, (W) are
nominated by David C. Wittig, at any time and from time to
time, (X) are elected or appointed to serve as Independent
Directors (as defined below) prior to December 31, 1998,
including but not limited to, Joel A. Cohen, (Y) were elected
to the Board by a majority vote of directors on the Board on
the Issuance Date or their successors elected pursuant to this
clause (Y), or (Z) are elected by holders of either the Series
C Preferred Stock or the Series D Preferred Stock in
accordance with Section 5(c) hereof or are nominated by
holders of the Series D Preferred Stock pursuant to Section
2(a) of that certain Stockholders Agreement dated as of
October __, 1998 (the "Stockholders Agreement") by and among
the Company, Westar Security, Inc., a Kansas corporation
("Westar") and Harold Ginsburg, Sheilah Ginsburg, Richard
Ginsburg and Rhonda
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<PAGE>
Ginsburg (collectively, the "Ginsburgs"). For purposes of this
Section III(e), the term "Independent Director" shall mean a
person who is not (i) an officer or employee of the Company or
its Affiliates or of Westar or its Affiliates, or (ii) related
by blood or marriage to any of the Ginsburgs.
IV. VOTING RIGHTS.
The holders of Series D Preferred Stock shall not be
entitled to vote or consent on any matters required or
permitted to be submitted to the stockholders of the Company
for their approval, except to the extent that voting rights
are specifically provided by Nevada law or Section I or V
hereof.
V. SPECIAL VOTING RIGHTS.
(a) AMENDMENT TO CERTIFICATE OF DESIGNATION. The
Company shall not amend the Articles or this Certificate of
Designations so as to adversely affect in any manner the
specified rights, preferences, privileges or voting rights of
the Series D Preferred Stock or to authorize additional shares
of Series D Preferred Stock UNLESS consented to by the
affirmative vote of 2/3 of the holders of the outstanding
Series D Preferred Stock.
(b) CHANGE OF CONTROL. Until the third anniversary of
the Issuance Date, so long as any shares of Series D Preferred
Stock are outstanding, the holders of the Series D Preferred
Stock shall be entitled to vote with the Common Stock, as a
single class, on an "as converted" basis in accordance with
Section VII hereof, on any Change of Control which is
submitted to a vote of the holders of the Common Stock for
their approval.
(c) ELECTION OF DIRECTORS.
(i) Subject to the provisions of Section
V(c)(ii) below, upon the occurrence of a Default Event
(hereafter defined) with respect to the Series D Preferred
Stock and for the duration of the Default Period (hereafter
defined), the holders of the Series D Preferred Stock, in
addition to any other voting rights they may have by law,
shall be entitled to vote (voting separately as a series by a
majority of the outstanding shares thereof) for the election
to the Board of Directors of the smallest number of additional
directors necessary to constitute at any given time a majority
of the total number of members of the Board of Directors
(after giving effect to such election), and should such
percentage when applied to the
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<PAGE>
number of the members of the Board of Directors result in a
number that includes a fraction, then such number shall be
increased to the next whole number. In addition, during the
Default Period the holders of the Series D Preferred Stock
shall be entitled to designate (voting as a series as
aforesaid) the number of positions on the Board of Directors,
which shall be the smallest number of directors necessary for
the nominees of the holders of the Series D Preferred Stock to
constitute a majority of the full Board. In case the holders
of the Series D Preferred Stock become entitled to exercise
such special voting rights, they may call a special meeting of
stockholders during the Default Period, in the manner provided
in the bylaws or otherwise as provided by law, for the purpose
of increasing or decreasing the number of positions on the
Board of Directors and electing such members to the Board of
Directors. In addition, the holders of the Series D Preferred
Stock shall have such special voting rights at any annual or
regular meeting of stockholders (or any other special meeting
not called by the holders of the Series D Preferred Stock)
held during the Default Period. In lieu of the foregoing, the
holders of the Series D Preferred Stock may take any of such
actions by a written consent signed by the holders of at least
a majority of the shares of the Series D Preferred Stock
outstanding and entitled to vote thereon.
(ii) Notwithstanding the provisions of
Section V(c)(i) above, if during the Default Period, a Default
Event occurs and is continuing with respect to the Series C
Preferred Stock, the holders of the Series C Preferred Stock,
in addition to any other voting rights they may have by law,
shall be entitled to vote (together, as a class, with the
Series D Preferred Stock) for the election of additional
directors to the Board of Directors, as described in Section
V(c)(i) above.
(iii) REMOVAL; VACANCIES. During the Default
Period, each director elected by the holders of the Series D
Preferred Stock may be removed only by the vote of the holders
of the majority of the outstanding shares of such series of
Preferred Stock, voting separately as a series, at a meeting
of the stockholders, or of the holders of shares of such
series of Preferred Stock, called for that purpose. During the
Default Period, any vacancy in the office of a director
elected by the holders of the Series D Preferred Stock in
default may be filled by a vote of the remaining directors
then in office elected by the holders of the Series D
Preferred Stock, or, if not so filled, by the holders of such
series of Preferred Stock at any meeting, annual or special,
for the election of directors held thereafter. A special
meeting of stockholders, or of the holders of
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shares of Series D Preferred Stock, may be called for the
purpose of filling any such vacancy. In the case of removal of
any such director, the vacancy may be filled at the same
meeting at which such removal shall be voted. Holders of the
Series D Preferred Stock shall be entitled to notice of each
meeting of stockholders at which they shall have any right to
vote or notice of which is otherwise required by law. In lieu
of the foregoing, the holders of the Series D Preferred Stock
may take any of such actions by a written consent signed by
the holders of at least a majority of the shares of such
series of Preferred Stock outstanding and entitled to vote
thereon.
(iv) EXPIRATION OF RIGHT. Upon termination
of the Default Period, the special voting rights of the
holders of the Series D Preferred Stock in default provided
hereunder shall be immediately divested, but always subject to
the revesting of such right in the holders of the Series D
Preferred Stock upon the occurrence of any subsequent Default
Event. In the event that such rights of the holders of the
Series D Preferred Stock shall cease as provided above, then
the directors elected to the Board of Directors by the holders
of the series of the Series D Preferred Stock in default under
this Section V shall be automatically removed from office, and
their respective positions terminated and the number of
positions on the Board of Directors reduced in accordance with
such termination, without further action on the part of the
holders of Preferred Stock, the holders of Common Stock or the
Board of Directors.
(v) DEFAULT EVENT. For purposes hereof, a
"Default Event" occurs on the date that (A)(i) the Company has
failed to pay a Dividend when due and (ii) such Dividend
remains unpaid for 30 days or (B) the Company fails to
discharge any redemption obligation with respect to the Series
D Preferred Stock.
(vi) DEFAULT PERIOD. For purposes hereof,
"Default Period" means a period commencing on the date a
Default Event occurs and ending (i) with respect to a Dividend
default, upon the payment of the next annual Dividend in full
and any cumulative Dividends in arrears in full and (ii) with
respect to a redemption default, upon the discharge in full by
the Company of its obligations with respect to such
redemption.
VI. LIQUIDATION.
(a) The Series D Preferred Stock shall be rank PARI
PASSU upon liquidation with the Series C Preferred Stock and
shall be
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preferred upon liquidation over the Common Stock and any other
class or classes of stock of the Company which does not
expressly rank senior in rights and preferences to the Series
D Preferred Stock or on a parity with the Series D Preferred
Stock upon liquidation. Holders of shares of Series D
Preferred Stock shall be entitled to be paid, after full
payment is made on any stock ranking prior to the Series D
Preferred Stock as to rights and preferences (but before any
distribution is made to the holders of the Common Stock and
any junior stock), pro rata based on the Liquidation Value
PARI PASSU with the holders of shares of the Series C
Preferred Stock upon the voluntary or involuntary dissolution,
liquidation or winding up of the Company (a "Liquidation").
(b) The amount payable on each share of Series D
Preferred Stock in the event of Liquidation shall be the
Liquidation Value plus any accrued and unpaid Dividends.
(c) Upon Liquidation, if the net assets of the
Company are insufficient to permit the payment in full of the
amounts to which the holders of all outstanding shares of
Series D Preferred Stock are entitled as provided above, the
entire net assets of the Company remaining (after full payment
is made on any stock ranking prior to the Series D Preferred
Stock as to rights and preferences) shall be distributed among
the holders of Series D Preferred Stock and holders of shares
of Preferred Stock ranking in parity with the Series D
Preferred Stock as to rights and preferences to which they are
respectively entitled in amounts proportionate to the full
preferential amounts.
(d) For purposes of this Section VI, the voluntary
sale, lease, exchange or transfer, for cash, shares of stock,
securities or other consideration, of all or substantially all
the Company's property or assets to, or its consolidation or
merger with, one or more corporations shall not be deemed to
be a Liquidation.
(e) Notwithstanding the foregoing, in the event that
any holder of Series D Preferred Stock converts its shares of
Series D Preferred Stock to shares of Class A Common Stock
pursuant to Section VII hereof, the right to preferential
liquidation rights pursuant to this Section VI with respect to
such converted shares shall terminate upon conversion.
VII. CONVERSION.
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(a) OPTIONAL CONVERSION. Subject to the provisions
for adjustment hereinafter set forth, all, and not less than
all, of the outstanding shares of Series D Preferred Stock
(including any Dividend Preferred Shares then outstanding and
all Dividend Preferred Shares which would be issued with
respect to all accrued and unpaid Dividends as of the date of
conversion) held by a holder of the Series D Preferred Stock
shall be convertible into Class A Common Stock of the Company
at any time after the third anniversary of the Issuance Date
at the option of such holder thereof, upon surrender to the
transfer agent for the Series D Preferred Stock or the Company
of the certificate or certificates evidencing the shares so to
be converted, at the rate of 333.3333 fully paid and
nonassessable shares of Class A Common Stock for each share of
Series D Preferred Stock. In the case of shares of Series D
Preferred Stock called for redemption, conversion rights will
expire at the close of business on the date on which the
redemption is consummated.
(b) MANDATORY CONVERSION. Subject to the provisions
for adjustment hereinafter set forth, the Series D Preferred
Stock (including any Dividend Preferred Shares then
outstanding and all Dividend Preferred Shares which would be
issued with respect to all accrued and unpaid Dividends as of
the date of conversion) shall be converted to Class A Common
Stock at the rate of 333.3333 fully paid and nonassessable
shares of Class A Common Stock for each share of Series D
Preferred Stock:
(i) upon a firm commitment underwritten
public offering by the Company of Class A Common Stock, which
results in net proceeds to the Company of in excess of $20
million in cash at $4.00 per share or more; or
(ii) if, at any time after the third
anniversary of the Issuance Date, the average of the daily bid
and asked prices as of closing of the Class A Common Stock
exceeds $4.00 per share for twenty (20) consecutive trading
days on which trades actually occurred.
(c) The number of shares of Class A Common Stock into
which an issued and outstanding share of Series D Preferred
Stock is convertible shall be subject to adjustment from time
to time only as follows:
(i) In the event that the Company shall at
any time (A) declare a dividend on the Class A Common Stock in
shares of its Class A Common Stock, (B) split or subdivide the
outstanding
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Class A Common Stock or (C) combine the outstanding Class A
Common Stock into a smaller number of shares, each share of
Series D Preferred Stock outstanding at the time of the record
date for such dividend or of the effective date of such split,
subdivision or combination shall thereafter be convertible
into the aggregate number of shares of Class A Common Stock
which, if such share of Series D Preferred Stock had been
converted immediately prior to such time, the holder of such
share would have owned or have been entitled to receive by
virtue of such dividend, subdivision or combination. Such
adjustment shall be made successively whenever any event
listed above shall occur.
(ii) No adjustment in the number of shares
of Class A Common Stock issuable upon conversion of a share of
Series D Preferred Stock shall be required unless such
adjustment would require an increase or decrease in the
aggregate number of shares of Class A Common Stock so issuable
of at least 100 shares; PROVIDED that any adjustments which by
reason of this subsection VII(c)(ii) are not required to be
made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section
VII(c) shall be made to the nearest cent, or to the nearest
hundredth of a share, as the case may be.
(iii) In the event of any capital
reorganization of the Company, or of any reclassification of
the Common Stock (other than a subdivision or combination of
outstanding shares of Class A Common Stock), or in case of the
consolidation of the Company with or the merger of the Company
with or into any other corporation or of the sale of the
properties and assets of the Company as, or substantially as,
an entirety to any other corporation, each share of Series D
Preferred Stock shall after such capital reorganization,
reclassification of Common Stock, consolidation, merger or
sale be convertible upon the terms and conditions specified in
this Section VII, for the number of shares of stock or other
securities or assets to which a holder of the number of shares
of Class A Common Stock into which a share of Series D
Preferred Stock is then convertible (at the time of such
capital reorganization, reclassification of Class A Common
Stock, consolidation, merger or sale) would have been entitled
upon such capital reorganization, reclassification of Common
Stock, consolidation, merger or sale; and in any such case, if
necessary, the provisions set forth in this Section VII with
respect to the rights of conversion thereafter of the Series D
Preferred Stock shall be appropriately adjusted so as to be
applicable, as nearly as may reasonably be, to any shares of
stock or other securities or assets thereafter deliverable on
the conversion of the Series D Preferred
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Stock. The Company shall not effect any such consolidation,
merger or sale, unless prior to or simultaneously with the
consummation thereof, the successor corporation (if other than
the Company) resulting from such consolidation or merger or
the corporation purchasing such assets or the appropriate
corporation or entity shall assume by written instrument the
obligation to deliver to the holder of each share of Series D
Preferred Stock the shares of stock, securities or assets to
which, in accordance with the foregoing provisions, such
holder may be entitled upon conversion of such Series D
Preferred Stock and all other obligations of the Company under
this Section VII, and effective provisions are made in the
Articles or Certificate of Incorporation of such successor or
transferee corporation (or other governing document of any
successor entity which is not a corporation) providing for
conversion privileges relating to the Series D Preferred Stock
equivalent to those set forth in this Section VII.
(iv) If any question at any time arises with
respect to the number of shares of Class A Common Stock into
which a share of Series D Preferred Stock is convertible
following any adjustment pursuant to this Section VII, such
question shall be determined by agreement between the holders
of a majority of the outstanding shares of Series D Preferred
Stock and the Company or, in the absence of such an agreement
by an independent investment banking firm or an independent
appraiser (in either case the cost of which engagement will be
borne by the Company) reasonably acceptable to the Company and
the holders of a majority of outstanding shares of Series D
Preferred Stock and such determination shall be binding upon
the Company and the holders of the Series D Preferred Stock.
(v) Anything in this Section VII to the
contrary notwithstanding, the Company shall be entitled to
make such increases in the number of shares of Class A Common
Stock issuable upon conversion of shares of Series D Preferred
Stock, in addition to those adjustments required by this
Section VII, as it in its sole discretion shall determine to
be advisable in order that any consolidation or subdivision of
the Class A Common Stock, or any issuance wholly for cash of
any shares of Class A Common Stock at less than the current
market price, or any issuance wholly for cash of shares of
Class A Common Stock or securities which by their terms are
convertible into or exchangeable for shares of Class A Common
Stock, or any issuance of rights, options or warrants referred
to hereinabove in this Section VII, hereinafter made by the
Company to the holders of its Class A Common Stock shall not
be taxable to them.
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<PAGE>
(vi) Upon any adjustment of the number of
the shares of Class A Common Stock issuable upon conversion of
shares of Series D Preferred Stock pursuant to this Section
VII, the Company shall promptly but in any event within 20
days thereafter, cause to be given to each of the registered
holders of the Series D Preferred Stock, at its address
appearing on the Register for the Series D Preferred Stock by
registered mail, postage prepaid, return receipt requested a
certificate signed by its chairman, president or chief
financial officer setting forth the number of shares of Class
A Common Stock issuable upon conversion of shares of Series D
Preferred Stock as so adjusted and describing in reasonable
detail the facts accounting for such adjustment and the method
of calculation used. Where appropriate, such certificate may
be given in advance and included as a part of the notice
required to be mailed under the other provisions of this
resolution.
(vii) The Company will at all times have
authorized, and reserve and keep available, free from
preemptive rights, for the purpose of enabling it to satisfy
any obligation to issue shares of Class A Common Stock upon
the conversion of the Series D Preferred Stock, the number of
shares of Class A Common Stock deliverable upon conversion of
the Series D Preferred Stock.
(viii) The Company shall not be required to
issue fractional shares of Class A Common Stock upon
conversion of the Series D Preferred Stock but shall pay for
any such fraction of a share an amount in cash equal to the
current market price per share of Class A Common Stock of such
share multiplied by such fraction.
(ix) The Company will pay all taxes
attributable to the issuance of shares of Class A Common Stock
upon conversion of shares of Series D Preferred Stock;
PROVIDED that the Company shall not be required to pay any tax
which may be payable in respect of any transfer involved in
the issuance of any shares of Class A Common Stock in a name
other than that of the registered holder of the Series D
Preferred Stock surrendered for conversion, and the Company
shall not be required to issue or deliver such certificate
unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax
or shall have established to the satisfaction of the Company
that such tax has been paid.
VIII. NOTICES TO HOLDERS OF SERIES D PREFERRED STOCK.
In the event:
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<PAGE>
(a) of any consolidation or merger to which the
Company is a party and for which approval of any stockholders
of the Company is required, or of the conveyance or transfer
of the properties and assets of the Company substantially as
an entirety, or of any capital reorganization or
reclassification or change of the Common Stock (other than a
change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a
subdivision or combination); or
(b) of Liquidation; or
(c) that the Company proposes to take any other
action which would require an adjustment in the number of
shares of Class A Common Stock or other securities or assets
issuable upon conversion of shares of Series D Preferred Stock
pursuant to Section VII;
then the Company shall cause to be given to each of the
registered holders of the Series D Preferred Stock at its
address appearing on the Register for the Series D Preferred
Stock, at least 20 calendar days prior to the applicable
record date hereinafter specified, by registered mail, postage
prepaid, return receipt requested, a written notice stating
(i) the date as of which the holders of record of Common Stock
entitled to participate in the event contemplated by clause
(c) above are to be determined, or (ii) the date on which any
such consolidation, merger, conveyance, transfer or
Liquidation is expected to become effective, and the date as
of which it is expected that holders of record of Common Stock
shall be entitled to exchange their shares for securities or
other property, if any, deliverable upon such
reclassification, consolidation, merger, conveyance, transfer
or Liquidation.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Certificate to be duly
executed in its corporate name on this 21st day of October, 1998.
GUARDIAN INTERNATIONAL, INC.
By: /S/RICHARD GINSBURG
--------------------------------
Richard Ginsburg, President and
Chief Executive Officer
By: /S/SHEILAH GINSBURG
--------------------------------
Sheilah Ginsburg, Secretary
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<PAGE>
STATE OF FLORIDA )
)
COUNTY OF BROWARD )
BEFORE ME, the undersigned authority, personally appeared RICHARD GINSBURG and
SHEILAH GINSBURG, to me known to be the President and Chief Executive Officer
and Secretary, respectively, of GUARDIAN INTERNATIONAL, INC., a Nevada
corporation, who acknowledged before me that they have executed the foregoing
Certificate in their respective capacity as officers of the said corporation for
the reasons and purpose therein expressed, and that the statements contained in
the said Certificate are true and correct.
Sworn to and subscribed before me at Hollywood, Florida this 21st day of
October, 1998.
EXHIBIT 10.(a)
STOCK SUBSCRIPTION AGREEMENT
STOCK SUBSCRIPTION AGREEMENT dated as of October 21, 1998, between
Guardian International, Inc., a Nevada corporation (the "Company"), and Westar
Security, Inc., a Kansas corporation (the "Purchaser").
RECITALS
1. Westar Capital, Inc., a Kansas corporation ("Westar Capital") and
affiliate of the Purchaser, acquired 2,500,000 shares (the "Acquired Common
Stock") of the Company's Class A Voting Common Stock, $.001 par value per share
(the "Common Stock") and 1,875,000 shares of the Company's Series A 9 3/4%
Convertible Cumulative Preferred Stock, $.001 par value per share (the "Series A
Preferred Stock"), pursuant to the Stock Subscription Agreement dated as of
October 14, 1997 between Westar Capital and the Company (the "Prior Subscription
Agreement"). On November 24, 1997, Westar Capital assigned its rights and
obligations under the Prior Subscription Agreement, and all of its right, title
and interest in and to the Acquired Common Stock and Series A Preferred Stock,
to the Purchaser. The Purchaser later acquired 1,600,000 shares of Series B 10
1/2% Convertible Cumulative Preferred Stock, $.001 par value per share (the
"Series B Preferred Stock") pursuant to the Stock Subscription Agreement dated
as of February 23, 1998 between the Company and the Purchaser. To date, the
Company has issued 162,132 shares of Series A Preferred Stock as PIK dividends
on the Series A Preferred Stock and 104,232 shares of Series B Preferred Stock
as PIK dividends on the Series B Preferred Stock (collectively, the "PIK
Shares"). From time to time, the Purchaser has acquired in the open market, and
as of the date hereof currently owns, an aggregate of 480,000 shares of Common
Stock (the "Open Market Common Stock"). Collectively, the Open Market Common
Stock, the Acquired Common Stock, the Series A Preferred Stock, the Series B
Preferred Stock and the PIK Shares are hereinafter collectively referred to as
the "Exchange Securities."
2. The Purchaser desires to acquire from the Company, and the Company
wishes to sell to the Purchaser, a series of redeemable preferred stock to be
issued by the Company in exchange for the Exchange Securities, on the terms and
conditions set forth below.
3. In addition, the Purchaser desires to acquire from the Company, and
the Company wishes to sell to the Purchaser, a series of convertible preferred
stock to be issued by the Company for cash, on the terms and conditions set
forth below.
<PAGE>
AGREEMENT
1. AUTHORIZATION OF SECURITIES; PURCHASE PRICE.
1.1 REDEEMABLE PREFERRED STOCK. The Company has authorized the issuance
and sale to the Purchaser of 16,397 shares of Series C 7.00% Redeemable
Cumulative Preferred Stock, par value $.001 per share (the "Redeemable
Preferred"), for the surrender to the Company for cancellation of the Exchange
Securities. The Redeemable Preferred will have the terms and conditions set
forth in the Certificate of Designations attached hereto as EXHIBIT A (the
"Redeemable Preferred Certificate of Designations").
1.2 CONVERTIBLE PREFERRED STOCK. The Company has authorized the
issuance and sale to the Purchaser of 10,000 shares of Series D 6.00%
Convertible Cumulative Preferred Stock, par value $.001 per share (the
"Convertible Preferred" and together with the Redeemable Preferred, the
"Preferred Shares"), for an aggregate cash purchase price of $10,000,000 (the
"Cash Consideration"). The Convertible Preferred will have the terms and
conditions set forth in the Certificate of Designations attached hereto as
EXHIBIT B (the "Convertible Preferred Certificate of Designations," and together
with the Redeemable Preferred Certificate of Designations, the "Certificates of
Designations").
2. CLOSING. The Company will sell to the Purchaser and, subject to the
terms and conditions hereof, the Purchaser will purchase from the Company, at
the closing provided for in this Section 2, the Preferred Shares. The closing of
the sale and purchase of the Preferred Shares (the "Closing") shall take place
on the date hereof at the offices of the Company at 3880 N. 28th Terrace,
Hollywood, Florida, 33020 or by mail if the parties agree, unless otherwise
agreed between the Purchaser and the Company. At the Closing, the Company will
deliver to the Purchaser one or more stock certificates (as the Purchaser may
designate), each dated the date of the Closing (the "Closing Date") and duly
registered in the Purchaser's name (or in the name of any nominee the Purchaser
designates to hold the Preferred Shares for its account), representing (i) the
Redeemable Preferred against the surrender for cancellation to the Company of
all certificates representing the Exchange Securities together with stock powers
duly executed in blank, and (ii) the Convertible Preferred against the receipt
of the Cash Consideration from the Purchaser by wire transfer of immediately
available funds payable to the Company.
3. DELIVERIES AT CLOSING.
3.1 OPINIONS OF COUNSEL. The Purchaser shall have received an opinion
from Steel Hector & Davis LLP, counsel to the Company, dated the Closing Date
and substantially in the form of EXHIBIT C, and an opinion from Lionel Sawyer &
Collins, Nevada counsel to the Company, dated the Closing Date in the form of
EXHIBIT D. The Company shall have received an opinion from Richard D. Terrill,
Esq. and Renee T. Kingsley, Esq., counsel to the Purchaser, dated the Closing
Date and substantially in the form of EXHIBIT E.
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3.2 WAIVERS AND CONSENTS. All waivers and consents required to be
obtained by the Company in connection with the Closing shall be satisfactory in
substance and form to the Purchaser, including but not limited to the consent of
Heller Financial, Inc. ("Heller").
3.3 CORPORATE ACTION.
a. The Company shall have delivered to the Purchaser certified
copies of (a) the resolutions duly adopted by an independent committee (the
"Independent Committee") of the board of directors of the Company (the "Board of
Directors") comprised of directors who shall not be officers or employees of the
Company or its affiliates or of the Purchaser or its affiliates or related by
blood or marriage to or affiliated with any of Harold Ginsburg, Sheilah
Ginsburg, Richard Ginsburg or Rhonda Ginsburg (collectively, the "Ginsburgs")
and by the full board of directors of the Company authorizing the execution,
delivery and performance of this Agreement, the issuance and sale of the
Preferred Shares, the reservation for issuance upon conversion of the
Convertible Preferred of an aggregate of 6,000,000 shares of Common Stock, and
the consummation of all other transactions contemplated by this Agreement, (b)
the Articles of Incorporation (the "Articles") and Bylaws of the Company, each
as amended to date, (c) a certificate executed by an officer of the Company
confirming the incumbency of the Company's officers and (d) such other items as
reasonably requested by the Purchaser or its counsel.
b. The Purchaser shall have delivered to the Company a
secretary's certificate confirming the authority of John W. Hesse,
Secretary/Treasurer of the Purchaser, to execute and deliver this Agreement, all
the agreements referenced herein and any instrument required to consummate the
sale and purchase of the Preferred Shares.
3.4 CERTIFICATES OF DESIGNATIONS. The Certificates of Designations
shall have been filed with the Secretary of State of the State of Nevada and
shall be in full force and effect under the laws of such state.
3.5 SURRENDER AND CANCELLATION OF EXCHANGE SECURITIES. The Purchaser
shall surrender for cancellation to the Company all certificates representing
the Exchange Securities, along with stock powers duly executed in blank. The
Certificate of Amendment to the Articles reflecting the cancellation of the
Series A Preferred Stock, the Series B Preferred Stock and the PIK Shares shall
be filed with the Secretary of State of the State of Nevada and shall be in full
force and effect under the laws of such state.
3.6 FAIRNESS OPINION. Raymond James & Associates, Inc. shall have
delivered a fairness opinion stating that the transactions contemplated hereby
are fair from a financial point of view to the shareholders of the Company. The
Company shall bear all costs associated with such fairness opinion.
3.7 OTHER AGREEMENTS.
(a) The Stockholders Agreement attached hereto as EXHIBIT F
(the "Stockholders Agreement") shall have been executed and delivered by the
Company, the Ginsburgs and the
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<PAGE>
Purchaser, and the Stockholders Agreement dated as of October 21, 1997 by and
among the Company, Westar Capital and the Ginsburgs shall have been terminated
and of no further force and effect.
(b) The Registration Rights Agreement attached hereto as
EXHIBIT G (the "Registration Rights Agreement") shall have been executed and
delivered by the Company and the Purchaser, and the Registration Rights
Agreement dated October 21, 1997 between the Company and Westar Capital, as
amended by the Amendment to Registration Rights Agreement dated as of February
23, 1998, shall have been terminated and of no further force and effect.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants that:
4.1 ORGANIZATION; GOOD STANDING; VALID AND BINDING. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada and has all requisite corporate power and authority to
own and operate its properties, to carry on its business as now conducted and
proposed to be conducted, to enter into this Agreement, to issue and sell the
Preferred Shares, and to carry out the terms hereof. Each of the Company's
subsidiaries is duly organized, validly existing and in good standing under the
laws of its state of incorporation. Each of the Company and its subsidiaries is
duly qualified as a foreign corporation to do business, and is in good standing
in each jurisdiction where the character of its properties owned or leased or
the nature of its activities makes qualification necessary, except where failure
to so qualify would not individually or in the aggregate have a material adverse
effect on the business, assets, liabilities, prospects, results of operations or
condition, financial or otherwise, of the Company and its subsidiaries, taken as
a whole ("Material Adverse Effect"). The execution, delivery and performance of
this Agreement, the Stockholders Agreement, the Registration Rights Agreement
and all other agreements contemplated hereby to which the Company is a party
have been duly authorized by the Company. Each of such agreements has been duly
and validly executed and delivered by the Company and constitutes a valid and
binding obligation of the Company, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, liquidation, moratorium,
receivership, conservatorship, readjustment of debts, fraudulent conveyance or
similar laws affecting the enforcement of creditors rights generally and general
equitable principles. The Preferred Shares have been duly authorized, and when
issued as contemplated by the Agreement, will be validly issued, fully paid,
non-assessable and entitled to the rights and privileges of the applicable
Certificate of Designations relating thereto. When shares of Common Stock shall
be issued pursuant to the terms of the Convertible Preferred Certificate of
Designations, such shares shall be duly authorized, validly issued, fully paid
and non-assessable shares of Common Stock.
4.2 INFORMATION FURNISHED; BUSINESS. The Company has furnished the
Purchaser with true and complete copies of (a) the Company's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1997, as amended to date, (b)
any and all of the Company's Current Reports on Form 8-K which have been filed
with the Securities and Exchange Commission ("SEC") since December 31, 1997, (c)
the Company's Quarterly Reports on Form
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10-QSB for the quarters ended March 31, 1998 and June 30, 1998, as amended to
date, (d) unaudited financial statements for the quarter ended September 30,
1998 and (e) all other reports and documents filed by the Company with the SEC
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
since January 1, 1998 (collectively, "SEC Documents"). The financial statements
contained in the SEC Documents have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis (except as stated
in the notes thereto), and present fairly (consisting, in the case of unaudited
statements, only of normal recurring adjustments) the financial condition of the
Company as of their respective dates and the results of operations and cash
flows for the respective periods. Except as disclosed in the SEC Documents or as
set forth on Schedule 4.2, since January 1, 1998 there has been no Material
Adverse Effect. Since January 1, 1998, the Company has made all filings required
to be made in compliance with the Exchange Act, and such filings, as modified by
subsequent reports filed pursuant to the Exchange Act conformed in all material
respects to the requirements of the Exchange Act, and the rules and regulations
of the SEC thereunder, and such filings did not contain any untrue statement of
a material fact and did not omit to state any material fact necessary in order
to make the statements contained therein not misleading in light of the
circumstances under which such statements were made as of their respective dates
of filing.
4.3 LITIGATION. Except as disclosed on Schedule 4.3, there are no
actions, proceedings or investigations nor any judgment, decree, injunction,
rule, or order pending or threatened to which the Company or any of its
subsidiaries is a party or which question or affect the validity of this
Agreement, the Preferred Shares or any action taken or to be taken pursuant
hereto, or which might have, either in any case or in the aggregate, a Material
Adverse Effect, or in any liabilities on the part of the Company which, either
in any case or in the aggregate, are or might be material and which liabilities
have not been disclosed in the notes to the Company's financial statements
contained in the SEC Documents and adequately reserved for on the Company's
balance sheet at September 30, 1998.
4.4 COMPLIANCE WITH OTHER INSTRUMENTS. Except for consents and
approvals required to be obtained as set forth on Schedule 4.4, the execution,
delivery and performance of this Agreement, the Stockholders Agreement, the
Registration Rights Agreement and the other agreements contemplated hereby, the
issuance of the Preferred Shares and the application of proceeds from the sale
of the Convertible Preferred do not and will not result in any violation of or
be in conflict with or constitute (with or without due notice or lapse of time
or both) a default or result in an adverse event under any term of the Articles
of Incorporation, as amended (the "Charter"), or By-Laws of the Company or its
subsidiaries, or of any material agreement, instrument, obligation, license,
judgment, decree, order, statute, rule or governmental regulation applicable to
the Company or its subsidiaries, its assets or properties or result in the
imposition or creation of any lien or encumbrance upon any asset or property of
the Company or its subsidiaries. The Company is not in violation of any term of
its Charter or By-Laws, or of any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation which is material to the
business, operations, prospects or affairs of the Company or its subsidiaries.
4.5 GOVERNMENTAL CONSENTS. Except for such consents, approvals,
authorizations, registrations or qualifications as are set forth on Schedule
4.5, neither the Company nor any of its
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subsidiaries is or will be required to obtain any consent, approval or
authorization of, or to make any declaration or filing with, any governmental
authority as a condition precedent to the valid execution and delivery of this
Agreement and the other agreements contemplated hereby, and the valid offer,
issue and delivery of the Preferred Shares, including Blue Sky laws. Schedule
4.5 correctly sets forth the names and jurisdictions of domicile of each
subsidiary of the Company.
4.6 CAPITAL STOCK. Schedule 4.6 correctly describes each class of the
authorized capital stock of the Company on the date hereof after giving effect
to the transactions contemplated hereby, including, as to each such class, the
number of shares thereof authorized and the number of shares thereof issued and
outstanding. Except as disclosed on schedule 4.6, all of the outstanding shares
of the Company are validly authorized and issued and outstanding, fully paid and
non-assessable and free of preemptive rights. The Company and its subsidiaries
do not have any outstanding securities convertible into or exchangeable for
capital stock and no outstanding options, warrants or other rights to subscribe
for or purchase, or agreements for the purchase from or the issue or sale by the
Company or its subsidiaries of, capital stock, other than as set forth in such
Schedule 4.6, which correctly describes each such security, right or agreement
and the number of shares subject thereto, whether or not reserved for on the
books of the Company. Schedule 4.6 also sets forth all shares of capital stock
reserved or required for issuance pursuant to any employee benefit, stock option
or other similar plan.
4.7 DISCLOSURE. There is no fact known to the Company which materially
adversely affects the business, operations, affairs, prospects, properties,
assets or condition of the Company which has not been set forth in this
Agreement or in the schedules attached hereto. No representation or warranty
contained in this Agreement, the other agreements contemplated hereby, or the
Schedules hereto or thereto, or any officer's certificate furnished hereunder or
thereunder, at the date hereof, or at the Closing Date, contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements contained herein or therein not
misleading.
4.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
SEC Documents or as set forth on the Schedules attached hereto, since September
30, 1998, the Company has conducted its business in the ordinary course
consistent with past practices in all material respects.
4.9 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on Schedule
4.9 and in the SEC Documents, and except for liabilities incurred after
September 30, 1998 in the ordinary course of business and consistent with past
practices, the Company does not have any liabilities or obligations (whether
absolute, accrued, contingent or otherwise) of a nature required by GAAP to be
reflected in a consolidated balance sheet (or reflected in the notes thereto).
4.10 NO DEFAULT. Except as set forth on Schedule 4.10 hereto, neither
the Company nor any of its subsidiaries is in violation, breach of, or default
under (and no event has occurred which with notice or the lapse of time or both
would constitute a violation, breach of, or default under) any term, condition
or provision of (i) any material note, bond, mortgage, deed of trust, security
interests, indenture, license, contract, agreement, plan or other instrument or
obligation to which the Company or any such subsidiary is a party or by which
the Company or any such
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subsidiary or any of their respective properties or assets may be bound or
affected, (ii) any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company, any subsidiary of the Company or any of their
respective properties or assets or (iii) any registration, license, permit or
other consent or approval of any governmental agency, except in each case for
breaches, defaults or violations which would not individually or in the
aggregate have a material adverse effect on the business, assets, liabilities,
results of operations or condition, financial or otherwise, of the Company and
its subsidiaries, taken as a whole.
4.11 NO GENERAL SOLICITATION. The Preferred Shares have not been
offered or sold by any form of general solicitation or general advertising which
would result in the violation of the federal securities laws or any applicable
state securities laws.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
represents and warrants that:
5.1 NO DISTRIBUTION. The Purchaser is acquiring the Preferred 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 Purchaser understands that the Preferred
Shares are "restricted securities" as defined in Rule 144 under the Securities
Act of 1933, as amended (the "Securities Act"), and have not been registered
pursuant to the provisions of the Securities Act, in as much as the proposed
purchase of the Preferred Shares is taking place in a transaction not involving
any public offering.
5.2 SOPHISTICATION. The Purchaser is knowledgeable, experienced and
sophisticated in financial and business matters and is able to evaluate the
risks and benefits of the investment in the Preferred Shares.
5.3 ECONOMIC RISK. The Purchaser is able to bear the economic risk of
its investment in the Preferred Shares for an indefinite period of time because
the Preferred Shares have not been registered under the Securities Act and,
therefore, cannot be sold unless subsequently registered under the Securities
Act or an exemption from such registration is available.
5.4 ACCESS TO INFORMATION. The Purchaser has been furnished or
otherwise had full access to such other information concerning the Company and
its subsidiaries as it has requested and that was necessary to enable the
Purchaser to evaluate the merits and risks of an investment in the Company, and
after a review of this information, has had an opportunity to ask questions and
receive answers concerning the financial condition and business of the Company
and the terms and conditions of the securities purchased hereunder, and has had
access to and has obtained such additional information concerning the Company
and the securities as it deemed necessary. The Purchaser has carefully reviewed
the information furnished pursuant to Section 4.2.
5.5 ACCREDITED INVESTOR. The Purchaser is an "accredited investor" as
defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
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5.6 RESTRICTIVE LEGEND.
a. The Purchaser understands that the certificate(s)
representing the Preferred Shares (and any Common Stock issued upon conversion
of the Convertible Preferred or as dividends on the Preferred Shares) will bear
a restrictive legend thereon (the "Restrictive Legend") as follows:
"The securities represented by this certificate have been acquired
directly or indirectly from the Company without being registered under
the Securities Act of 1933, as amended (the "Act"), or any other
applicable securities laws, and are restricted securities as that term
is defined under Rule 144 promulgated under the Act. These securities
may not be sold, pledged, transferred, distributed or otherwise
disposed of in any manner unless they are registered under the Act and
all other applicable securities laws, or unless the request for
transfer is accompanied by a favorable opinion of counsel, reasonably
satisfactory to the Company, stating that the transfer will not result
in a violation of the Act and all other applicable state securities
law."
b. REMOVAL OF RESTRICTIVE LEGEND. Subject to the provisions of
the Stockholders Agreement and this Section 5.6(b), Preferred Shares are
transferable in (i) a public offering registered under the Securities Act (a
"Public Offering"), (ii) in a transaction pursuant to Rule 144, or (iii) any
other legally available means of transfer under federal and state securities
laws. In connection with the transfer of any Preferred Shares pursuant to
subsections (ii) and (iii) above, a holder must first satisfy the following
conditions: (i) delivery of written notice to the Company describing in
reasonable detail the transfer or proposed transfer, (ii) together with a
favorable opinion of counsel which (to the Company's reasonable satisfaction) is
knowledgeable in securities laws matters stating that the transfer will not
result in a violation of the Act and all other applicable state securities law
and that such transfer of Preferred Shares may be effected without registration
of such Preferred Shares under the Securities Act. Upon satisfaction of such
conditions to the reasonable satisfaction of the Company, the holder shall
submit certificates representing the number of Preferred Shares to be so
transferred to the Company and the Company shall reissue certificates for such
Preferred Shares without the Restrictive Legend.
5.7 ADDITIONAL PURCHASER REPRESENTATIONS. The Purchaser is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. The execution, delivery and performance of
this Agreement, the Stockholders Agreement, the Registration Rights Agreement
and all other agreements contemplated hereby to which such Purchaser is a party
have been duly authorized by the Purchaser. Each of such agreements constitutes
a valid and binding obligation of the Purchaser, enforceable in accordance with
its terms, subject to bankruptcy, insolvency, reorganization, liquidation,
moratorium, receivership, conservatorship, readjustment of debts, fraudulent
conveyance or similar laws affecting the enforcement of creditors rights
generally and general equitable principles. The Purchaser has made or obtained
all material third party and governmental filings, consents and approvals to be
made or obtained prior to the Closing by the Purchaser in connection with the
consummation of
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<PAGE>
the transactions hereunder. The execution and delivery by the Purchaser of the
Agreement and the fulfillment of and compliance with the respective terms
thereof by the Purchaser do not and shall not (a) conflict with or result in a
breach of the terms, conditions or provisions of, (b) constitute a default under
or (c) result in a violation of the organizational documents of the Purchaser or
any material agreement or instrument to which Purchaser is subject.
5.8 REPRESENTATIONS REGARDING EXCHANGE SECURITIES. The Purchaser has
good and marketable title to the Exchange Securities, free and clear of all
liens, encumbrances, claims, options or other agreements.
6. INDEMNIFICATION.
6.1 INDEMNIFICATION BY THE COMPANY. In addition to all other sums due
hereunder or provided for in this Agreement and any other rights and remedies
available to Purchaser under applicable law, the Company agrees to hold harmless
and indemnify the Purchaser and all directors, officers and controlling persons
of the Purchaser (within the meaning of Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (individually referred to as an "Indemnified Person") from and against
any losses, claims, damages, costs and expenses, and liabilities (including
attorneys' fees and expenses of investigation) incurred by each Indemnified
Person pursuant to any action, suit, proceeding or investigation against any one
or more of the Company and such Indemnified Person, and arising out of or in
connection with a breach by the Company of any agreement, representation,
warranty, covenant or obligation contained in this Agreement and any and all
costs and expenses incurred by any Indemnified Person in connection with the
enforcement of its rights under this Agreement and the other agreements
contemplated hereby. The Company further agrees, promptly upon demand by an
Indemnified Person, from time to time, to reimburse each Indemnified Person for,
or pay, any loss, claim, damage, liability or expense as to which the Company
has indemnified the Indemnified Person pursuant to this Agreement.
6.2 INDEMNIFICATION BY THE PURCHASER. In addition to all other sums due
hereunder or provided for in this Agreement, the Purchaser agrees to hold
harmless and indemnify the Company and all directors, officers and controlling
persons of the Company (within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act) (individually referred to as an "Indemnified
Person") from and against any losses, claims, damages, costs and expenses and
liabilities (including attorneys' fees and expenses of investigation) incurred
by each Indemnified Person pursuant to any action, suit, proceeding or
investigation against any one or more of the Purchaser and such Indemnified
Person, and arising out of or in connection with a breach by the Purchaser of
any agreement, representation, warranty, covenant or obligation contained in
this Agreement and any and all costs and expenses incurred by any Indemnified
Person in connection with the enforcement of its rights under this Agreement.
The Purchaser further agrees, promptly upon demand by an Indemnified Person,
from time to time, to reimburse each Indemnified Person for, or pay, any loss,
claim, damage, liability or expense as to which the Purchaser has indemnified
the Indemnified Person pursuant to this Agreement.
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<PAGE>
6.3 PROCEDURE. Each Indemnified Person agrees to give prompt written
notice to the indemnifying party after the receipt by the Indemnified Person of
any written notice of the commencement of any action, suit, proceeding or
investigation or threat thereof made in writing for which such Indemnified
Person will claim indemnification or contribution pursuant to this Agreement,
provided that the failure of any Indemnified Person to give notice shall not
relieve the indemnifying party of its obligations except to the extent that the
indemnifying party is actually prejudiced by the failure to give notice. If any
such action is brought against an indemnified party, the indemnifying party will
be entitled to participate in and to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party for any legal or other expenses incurred by the latter in connection with
the defense thereof unless (i) in the reasonable opinion of counsel for the
indemnified party a conflict or potential conflict of interest exists between
the indemnified party and indemnifying party, (ii) the indemnified party
reasonably objects to such assumption on the basis that there may be defenses
available to it which are different from or in addition to the defenses
available to the indemnifying party, (iii) the indemnifying party has failed to
timely assume the defense of any such action or proceeding or (iv) the
indemnifying party and its counsel do not actively and vigorously pursue the
defense of such action, in the sole discretion of the indemnified party. Whether
or not such defense is assumed by the indemnifying party, the indemnifying party
will not be subject to any liability for any settlement made without its
consent. No indemnifying party will consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect of such claim or litigation. An indemnifying party who
elects not to assume the defense of an action or where a potential conflict of
interest or other defenses may able available, shall not be obligated to pay the
fees and expenses of more than one national counsel and any local counsel where
appropriate for all parties indemnified by such indemnifying party with respect
to such action, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such action. Cost and expenses incurred
by the indemnified party shall be reimbursed, from time to time, by the
indemnifying party as and when bills are received or expenses are incurred.
6.4 GROSS UP. Any payment required to be made under this Section 6
shall be increased so that the net amount retained by the Indemnified Person,
after deduction of any federal, state, local or foreign tax due thereon
(assuming a maximum effective total statutory tax rate), shall be equal to the
amount otherwise due.
7. EXCHANGE AND REPLACEMENT OF SECURITIES. Upon surrender of any
Preferred Share certificate by the Purchaser for exchange at the office of the
Company, the Company, at its expense (exclusive of applicable transfer taxes or
other similar taxes), will issue or cause to be issued, in exchange, a new
Preferred Share certificate in such denominations as may be requested for the
same number of Preferred Shares and registered as the Purchaser may request.
Upon receipt of evidence satisfactory to the Company of the loss, theft,
destruction or mutilation of any Preferred Share certificate, upon delivery of a
written agreement of indemnity reasonably satisfactory to the Company in form or
amount, or, in the case of any such mutilation upon
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<PAGE>
surrender and cancellation thereof, the Company, at its expense, will issue or
cause to be issued a new Preferred Share certificate in replacement of such
lost, stolen, destroyed or mutilated Preferred Share certificate.
8. SURVIVAL. All agreements, representations and warranties contained
herein or made in writing by or on behalf of the Company or by or on behalf of
the Purchaser in connection with the transactions contemplated hereby shall
survive the execution and delivery of this Agreement, all investigations made by
Purchaser or on Purchaser's behalf, and the issuance and delivery of the
Preferred Shares.
9. NO BROKER. Each party hereto represents and warrants that it has
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement.
10. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
hand delivered or sent by first class registered or certified mail (return
receipt requested), postage prepaid, to the respective addresses of the Company
and the Purchaser set forth below, unless subsequently changed by written
notice. Any notice shall be deemed to be effective when it is received.
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To the Purchaser:
Westar Security, Inc.
6225 N. State Hwy 161, Ste. 400
Irving, Texas 75038
Attention: Chief Financial Officer
Phone: 972-916-6044
Fax: 972-916-6698
With a copy to:
Renee T. Kingsley, Esq.
Protection One, Inc.
6225 N. State Hwy 161, Ste. 400
Irving, Texas 75038
Phone: 972-916-6142
Fax: 972-916-6699
To the Company:
Guardian International, Inc.
3880 North 28th Terrace
Hollywood, Florida 33020-1118
Attention: Richard Ginsburg, President and
Chief Executive Officer
Phone: 954-926-5200
Fax: 954-926-1822
With a copy to:
Harvey Goldman, Esq.
Steel Hector & Davis LLP
200 South Biscayne Boulevard
41st Floor
Miami, FL 33131-2398
Phone: 305-577-7011
Fax: 305-577-7001
11. COSTS AND EXPENSES. Whether or not the transactions contemplated
hereby close, each party will bear its own costs and expenses for due diligence
and for the preparation and negotiation of this Agreement and the other
agreements contemplated hereby. The Company agrees to pay, or cause to be paid,
all documentary and similar taxes levied under the laws of the United States of
America or any state or local taxing authority thereof or therein in connection
with the issuance and sale of the Preferred Shares and the execution and
delivery of the other documents contemplated hereby and any modification of any
of such documents and will hold
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<PAGE>
the Purchaser harmless without limitation as to time against any and all
liabilities with respect to all such taxes.
12. MUTUAL COVENANTS. Each of the Company and Purchaser agrees to
promptly use its best efforts to secure such consents as may be necessary to
effect the transactions contemplated hereunder.
13. PRESS RELEASES. Simultaneously with the execution of this
Agreement, the parties hereto shall issue a press release in mutually acceptable
form (the "Press Release"). The parties hereto agree to consult with each other
prior to the release of any other press release regarding the transactions
contemplated herein, and no such other press release shall be made unless it is
mutually acceptable to the parties hereto, provided, however, that information
may be released in a press release without the prior approval of the other party
only if and only to the extent, in the reasonable opinion of legal counsel to
the releasing party, that the release of such information in a press release is
required by law. In any such event, the non-releasing party shall receive no
less than 24 hours prior written notice of the release of any such information
(which notice shall contain the language to be released).
14. ASSIGNMENT, SUCCESSORS AND NO THIRD-PARTY RIGHTS. Neither party may
assign any of its rights under this Agreement, and any assignment will be null
and void, without the prior written consent of the other party, except that the
Purchaser may assign any of its rights under this Agreement to any "affiliate"
of the Purchaser as defined in Regulation D promulgated under the Securities Act
of 1933, as amended. This Agreement will apply to, be binding in all respects
upon, and inure to the benefit of the successors and permitted assigns of the
parties. Nothing expressed or referred to in this Agreement will be construed to
give any person other than the parties to this Agreement any legal or equitable
right, remedy or claim under or with respect to this Agreement or any provision
of this Agreement. This Agreement and all of its provisions and conditions are
for the sole and exclusive benefit of the parties to this Agreement and their
successors and assigns.
15. SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable. In the
event any provision of this Agreement shall be held invalid, the parties agree
to enter into such further agreements as may be necessary in order to carry out
the intent and purposes of the parties herein.
16. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Florida without regard
to conflicts of law principles thereunder.
17. ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the
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<PAGE>
agreement between the parties with respect to its subject matter. This Agreement
may be not amended except by a written agreement executed by the party to be
charged with the Amendment.
18. WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor the delay by any
party in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power or privilege, and no single or partial exercise of any such right, power
or privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. To the maximum
extent permitted by applicable law, (a) no claim or right arising out of this
Agreement or the documents referred to in this Agreement can be discharged by
any party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of an obligation of such party or of the right of the party giving such
notice or demand to take further notice or demand as provided in this Agreement
or the documents referred to in this Agreement.
19. SECTION HEADINGS; COUNTERPARTS. The headings in this Agreement are
for purposes of reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument.
20. DISPUTE RESOLUTION. Any dispute arising from, relating to, or in
connection with the matters contained herein shall be resolved in accordance
with procedures set forth in Exhibit H hereto.
21. USE OF PROCEEDS. The Company agrees that it will use the Cash
Consideration for the following purposes: (i) repayment of amounts due and owing
from time to time to Heller pursuant to the Second Amended and Restated Loan and
Security Agreement with Heller dated as of February 23, 1998; (ii) for working
capital purposes; (iii) for acquisitions, whether of accounts, assets or of
other companies; and (iv) for the repurchase by the Company in the open market
of Common Stock from time to time as market conditions warrant within the sole
discretion of the Independent Committee; provided, however, that the Board of
Directors shall have full and unfettered discretion as to the timing and amount
of such use of proceeds, and provided, further, however, that in no event shall
in excess of 10% of the cash proceeds (i) from the issuance of the Convertible
Preferred Stock pursuant to this Agreement, or (ii) from issuances in the future
of additional shares of the series of Convertible Preferred Stock, be used for
open market purchases described in subsection (iv) above.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on their behalf as of the date first written above.
GUARDIAN INTERNATIONAL, INC.
By:/S/ RICHARD GINSBURG
---------------------------------------
Richard Ginsburg,
President and Chief Executive Officer
WESTAR SECURITY, INC.
By:/S/ JOHN W. HESSE
---------------------------------------
Name:JOHN W. HESSE
- ------------------------------------------
Its:
--------------------------------------
- -15-
EXHIBIT 10.(b)
GUARDIAN INTERNATIONAL, INC.
STOCKHOLDERS AGREEMENT
This Stockholders Agreement (this "Agreement"), dated as of October
21, 1998, is made by and among Guardian International, Inc., a Nevada
corporation (the "Company"), Harold Ginsburg, Sheilah Ginsburg, Richard Ginsburg
and Rhonda Ginsburg (individually, a "Ginsburg" and collectively, the
"Ginsburgs") and Westar Security, Inc., a Kansas corporation ("Westar"). Each of
the Ginsburgs and Westar are referred to collectively as the "Stockholders" and
individually as a "Stockholder." Capitalized terms used herein and not defined
in the text are defined in Section 1 hereof.
Simultaneously with the execution hereof, Westar shall subscribe to
purchase the Preferred Shares pursuant to the Stock Subscription Agreement
between Westar and the Company of even date herewith (the "Subscription
Agreement").
The Company and the Stockholders desire to enter into this Agreement
for the purposes, among others, of (i) establishing the composition of the
Company's Board of Directors (the "Board") and certain other voting agreements,
(ii) assuring continuity in the management and ownership of the Company and
(iii) limiting the manner and terms by which the Stockholder Shares may be
transferred. The execution and delivery of this Agreement is a condition to
Westar's subscription for, and the Company's sale of, the Preferred Shares
pursuant to the Subscription Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:
1. DEFINITIONS.
"AFFILIATE" shall have the meaning set forth in Rule 405 of the
Securities Act.
"BONA FIDE PUBLIC SALE" means any bona fide sale of Stockholder
Shares (i) to the public pursuant to an effective registration statement under
the Securities Act or (ii) to the public through a broker, dealer or market
maker pursuant to the provisions of Rule 144 promulgated under the Securities
Act.
"BOARD" has the meaning set forth in the preamble.
"BENEFICIAL OWNERSHIP" shall have the meaning given to it pursuant
to Rule 13d-3 promulgated pursuant to the Securities Exchange Act of 1934, as
amended.
<PAGE>
"CERTIFICATES OF DESIGNATIONS" means the Convertible Certificate of
Designations and the Redeemable Certificate of Designations collectively.
"COMMITTEE" has the meaning set forth in Section 5(b).
"COMMON STOCK" means the Company's Class A Voting Common Stock, par
value $.001 per share.
"CONVERTIBLE PREFERRED STOCK" means the Company's Series D 6.00%
Convertible Cumulative Preferred Stock, $.001 par value per share, having the
rights and preferences set forth in the Convertible Certificate of Designations.
"CONVERTIBLE CERTIFICATE OF DESIGNATIONS" means the Certificate of
Designations to the Articles of Incorporation of the Company dated as of October
21, 1998 defining the rights and preferences of the Convertible Preferred Stock.
"DEFAULT EVENT" has the meaning set forth in either of the
Certificates of Designation, or if the context references a particular
Certificate of Designations, "Default Event" shall have the meaning set forth in
the Certificate of Designations so referenced.
"FAMILY GROUP" has the meaning set forth in Section 5(c).
"FULLY DILUTED BASIS" means, at any date as of which the number of
shares is to be determined, (a) all shares of capital stock outstanding at such
date, and (b) the maximum number of shares of capital stock issuable pursuant to
warrants, options or other rights to purchase or acquire (whether or not such
warrants, options or other rights are then exercisable), or pursuant to
securities convertible into or exchangeable (whether or not such securities are
then convertible or exchangeable) for, shares of capital stock outstanding on
such date (including any shares issuable pursuant to any outstanding warrants).
"OFFER NOTICE" has the meaning set forth in Section 5(b).
"OTHER STOCKHOLDERS" means the Stockholders other than the
Transferring Stockholder.
"PERMITTED TRANSFEREES" has the meaning forth in Section 5(c).
"PERSON" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
2
<PAGE>
"PREFERRED SHARES" means the shares of Convertible Preferred Stock
and the shares of Redeemable Preferred Stock of the Company to be sold to Westar
pursuant to the terms of the Subscription Agreement.
"PREFERRED STOCK" means any shares of any series of the class of
Preferred Stock, par value $.001 per share, of the Company as such term is
defined in the Certificate of Amendment to the Articles of Incorporation of the
Company filed with the Secretary of the State of Nevada on November 24, 1997.
"REDEEMABLE PREFERRED STOCK" means the Company's Series C 7.00%
Redeemable Cumulative Preferred Stock, $.001 par value per share, having the
rights and preferences set forth in the Redeemable Certificate of Designations.
"REDEEMABLE CERTIFICATE OF DESIGNATIONS" means the Certificate of
Designations to the Articles of Incorporation of the Company dated as of October
21, 1998 defining the rights and preferences of the Redeemable Preferred Stock.
"SALE OF THE COMPANY" has the meaning set forth in Section 7(a).
"SECURITIES ACT" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated pursuant thereto.
"STOCKHOLDER SHARES" means (i) any Common Stock or Preferred Stock
held, purchased or otherwise acquired by any Stockholder at any time, or from
time to time, during the term of this Agreement, (ii) any Common Stock issued or
issuable directly or indirectly upon conversion of Preferred Stock, and (iii)
any Common Stock or Preferred Stock issued or issuable as a dividend or
distribution on, or otherwise with respect to, the securities referred to in
clauses (i) or (ii) above. For purposes of this Agreement, any Person who holds
Convertible Preferred Stock shall be deemed to be the holder of the Stockholder
Shares issuable directly or indirectly upon conversion of the Preferred Stock in
connection with the transfer thereof or otherwise and regardless of any
restriction or limitation on the conversion thereof.
"STOCKHOLDERS" has the meaning set forth in the preamble.
"SUBSCRIPTION AGREEMENT" has the meaning set forth in the preamble.
"TRANSFER" means a sale, transfer, assignment, pledge,
hypothecation, gift, placement in trust (voting or otherwise) or transfer by
operation of law of, creation of a security interest in or lien on, or any other
encumbering or disposal (directly or indirectly, whether with or without
consideration and whether voluntarily or involuntarily) of, Stockholder Shares
or any interest therein.
"TRANSFERRING STOCKHOLDER" has the meaning set forth in Section
5(b).
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"VOTING SECURITIES" means any securities of the Company, or
securities which are convertible into or exchangeable for securities of the
Company (whether or not such securities are then convertible or exchangeable),
which may be entitled to vote on any matter to be presented to the stockholders
of the Company, whether pursuant to the articles of incorporation of the Company
or any amendment or certificate of designations thereto, the bylaws of the
Company, or by state corporate statute or the rules and regulations promulgated
pursuant thereto.
2. BOARD OF DIRECTORS.
1. COMPOSITION OF THE BOARD.
1. From and after the date of conversion of the Convertible
Preferred Stock into Common Stock pursuant to the terms of the
Convertible Certificate of Designations (the "Conversion"), and prior
to the date of Conversion, if the holders of Series D Preferred Stock
may exercise a special voting right pursuant to Section V(b) of the
Convertible Certificate of Designations, each Stockholder shall vote
all of its Stockholder Shares which are Voting Securities and any other
Voting Securities of the Company over which such Stockholder has voting
control and shall take all other necessary or desirable actions within
its control (including, without limitation, attendance at meetings in
person or by proxy for purposes of obtaining a quorum and execution of
written consents in lieu of meetings), and the Company shall take all
necessary or desirable actions within its control (including, without
limitation, calling special Board and stockholder meetings), so that,
subject to the remainder of this Section 2:
(1) The authorized number of directors on the Board shall be
no more than seven (7), and
(2) The following shall govern the composition of the Board:
(1) not less than three (3) representatives nominated by the
Ginsburgs, acting as a group, shall be elected to the
Board, who shall initially be Richard Ginsburg and two
additional representatives to be nominated by the
Ginsburgs; and
(2) not less than two (2) representatives who shall not be
officers or employees of the Company or its Affiliates or
of Westar or its Affiliates or related by blood or
marriage to or affiliated with any of the Ginsburgs (each
an "Independent Director") shall be nominated mutually by
the Stockholders and elected to the Board; and
(3) a number of directors, determined from time to time,
which shall be equal to the lesser of (i) the whole
number (in accordance with standard rounding conventions)
nearest to the product of (A) Westar's fully diluted
ownership
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percentage and (B) the number of authorized seats on the
Board of Directors; and (ii) two (2), shall be nominated
by Westar and elected to the Board;
PROVIDED, HOWEVER, that (i) in the event that the aggregate Stockholder Shares
owned by all of the Ginsburgs decreases to less than 2,000,000 shares of Common
Stock but more than or equal to 1,250,000 shares of Common Stock, then the
Ginsburgs shall have the right to nominate two (2) representatives; (ii) in the
event that the aggregate Stockholder Shares owned by all of the Ginsburgs
decreases to less than 1,250,000 but more than or equal to 500,000 shares of
Common Stock, then the Ginsburgs shall have the right to nominate one (1)
representative, and (iii) in the event that the aggregate Stockholder Shares
owned by all of the Ginsburgs decreases to less than 500,000 shares of Common
Stock, then the Ginsburgs shall have no nomination rights. In the event that
nomination rights are forfeited in accordance with the immediately preceding
proviso, such board seats shall be filled by Independent Directors nominated
mutually by the Stockholders.
2. Any committees of the Board shall be created and the
composition thereof determined only upon the approval of not less
than one Ginsburg nominee and one Independent Director.
3. The removal from the Board (with or without cause) of any
representative nominated hereunder shall be at the written request
of the Person nominating such representative, but only upon such
written request and under no other circumstances, subject to
applicable law and the Company's bylaws.
4. In the event that any representative nominated hereunder
resigns, is removed or otherwise ceases to serve as a member of the
Board during his term of office, the resulting vacancy on the Board
shall be filled by a representative nominated by the Person
nominating such representative as provided hereunder.
5. No transferee of Stockholder Shares (including Common Stock
issued upon Conversion), other than Permitted Transferees, shall,
after consummation of the Transfer of Stockholder Shares to such
transferee, have any of the nomination rights set forth in Section
2(a)(i)(2), but all transferees (other than a transferee pursuant to
a Bona Fide Public Sale) shall be subject to the voting agreement
contained in Section 2(a)(i).
6. The Company agrees to include each such designated nominee
to be added to or retained on the Board pursuant to this Agreement
in the slate of nominees recommended by the Board to the Company's
stockholders for election as directors and shall use its best
efforts to cause the election or reelection of each such nominee to
the Board, including soliciting proxies in favor of the election of
such persons
2. LIMITATIONS ON BOARD COMPOSITION. The provisions contained in
Section 2(a) are subject in their entirety to the terms of the Preferred Stock
contained in the Certificates
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of Designations, and the election of directors to the Board shall be subject at
all times to applicable law.
3. BOARD EXPENSES. The Company shall pay the reasonable
out-of-pocket expenses incurred by each director in connection with attending
the meetings of the Board and any committee thereof, and each Board member shall
otherwise be compensated as determined from time to time by the Board. The
Company shall use its best efforts to obtain and to maintain directors and
officers indemnity insurance coverage at a commercially reasonable price, and
the Company's articles of incorporation and bylaws shall provide for
indemnification and exculpation of directors to the fullest extent permitted
under applicable law.
4. WRITTEN CONSENT. Each director entitled to vote at a meeting of
the Board or to express consent or dissent to corporate action in writing
without a meeting may authorize another director to act for him or her by proxy,
but no such proxy shall be noted or acted upon after six months from its date or
if such proxy is not permitted by applicable law.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS. Each Stockholder
represents, warrants and agrees that (i) such Stockholder is the record owner of
the number of Stockholder Shares set forth opposite its name on the Schedule A
attached hereto, (ii) this Agreement has been duly authorized, executed and
delivered by such Stockholder and constitutes the valid and binding obligation
of such Stockholder, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, liquidation, moratorium, receivership,
conservatorship, readjustment of debts, fraudulent conveyance or other laws
affecting the enforcement of creditors' rights generally and limitations on the
availability of equitable remedies, (iii) such Stockholder has not granted and
is not a party to any proxy, voting trust or other agreement which is
inconsistent with, conflicts with or violates any provision of this Agreement,
and (iv) no holder of Stockholder Shares shall grant any proxy or become party
to any voting trust or other agreement which is inconsistent with, conflicts
with or violates any provision of this Agreement.
4. LIMITATION ON OWNERSHIP. For a period commencing on the date hereof
and ending on the earlier of (a) the fifth anniversary hereof, (b) the
occurrence of a Default Event, (c) a Sale of the Company, and (d) the date of a
third party offer which could result in the Sale of the Company to a third party
or an unsolicited tender offer or proxy contest for control of the Company by a
third party, Westar agrees to limit its Beneficial Ownership of Voting
Securities of the Company and agrees to cause its Affiliates and any Affiliates
of Western Resources, Inc., a Kansas corporation, or Protection One, Inc., a
Delaware corporation (collectively, Westar, Western Resources, Inc., Protection
One, Inc., and such Affiliates are hereinafter referred to in this Section 4 as
the "Restricted Group"), to limit their Beneficial Ownership of Voting
Securities of the Company so that at no time does any member of the Restricted
Group, or any combination of members of the Restricted Group, have direct or
indirect Beneficial Ownership of in excess of 45% of the Voting Securities of
the Company outstanding at any time on a Fully Diluted Basis, unless such member
or members of the Restricted Group receive the prior written consent of a
committee of the Board consisting of at least two Independent Directors to
exceed that limit. Solely for the purposes of this Section 4, the term
"Affiliate" shall not include David C. Wittig and Douglas T. Lake.
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5. RESTRICTIONS ON TRANSFER OF STOCKHOLDER SHARES.
1. TRANSFER OF STOCKHOLDER SHARES. No Stockholder shall, directly or
indirectly, effect or facilitate a Transfer of any interest in its Stockholder
Shares, except in compliance with all of the provisions of this Section 5 or
pursuant to a Bona Fide Public Sale.
2. FIRST OFFER RIGHT.
1. FIRST OFFER RIGHT OF THE COMPANY.
(1) At least 45 days prior to making any Transfer of any
Stockholder Shares (other than pursuant to a Bona Fide Public Sale)
(the "Election Period"), the transferring Stockholder (the
"Transferring Stockholder") shall deliver a written notice (an
"Offer Notice") to a committee of the Board comprised of at least
two Independent Directors (the "Committee") and the Other
Stockholders. The Offer Notice shall disclose in reasonable detail
the proposed number of Stockholder Shares to be transferred, the
proposed terms and conditions of the Transfer and the identity of
the prospective transferee(s) (if known).
(2) The Company may, by recommendation of the Committee, elect
to purchase all, but not less than all, of the Stockholder Shares
specified in the Offer Notice at the price and on the terms
specified therein by delivering written notice of such election (the
"Company Election Notice") to the Transferring Stockholder and the
Other Stockholders as soon as practical but in any event within 15
days after the delivery of the Offer Notice.
2. FIRST OFFER RIGHT OF THE OTHER STOCKHOLDERS.
(1) If the Company has not elected to purchase the Stockholder
Shares within such 15-day period, each of the Other Stockholders may
elect to purchase all or any portion of its pro rata share (based on
the number of Stockholder Shares held by such Person on a Fully
Diluted Basis) of the Stockholder Shares specified in the Offer
Notice for a price not less than 105% of the price, and on the
terms, contained in the Offer Notice by delivering written notice of
such election to the Transferring Stockholder (the "Stockholder
Election Notice") as soon as practical but in any event before the
expiration of the Election Period; provided, however, that the
Transferring Stockholder shall not be required to sell any of the
Stockholder Shares specified in the Offer Notice to any Other
Stockholders unless all such offered Shares are elected to be
purchased in the Stockholder Election Notice.
(2) If the Company or any of the Other Stockholders have
elected to purchase the Stockholder Shares offered in the Offer
Notice from the
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Transferring Stockholder, the Transfer of such shares shall be
consummated as soon as practicable after the delivery of the Company
Election Notice or the Stockholder Election Notice, as the case may
be, to the Transferring Stockholder, but in any event within 30 days
after the expiration of the Election Period.
3. TRANSFER TO THIRD PARTIES.
(1) If the Company and the Other Stockholders have not elected
to purchase all of such Stockholder Shares being offered, the
Transferring Stockholder may, within 120 days after the expiration
of the Election Period, Transfer all such Stockholder Shares to one
or more third parties at a price not less than 110% of the price set
forth in the Offer Notice and on other terms no more favorable to
the transferees thereof than offered to the Company and the Other
Stockholders in the Offer Notice.
(2) Any Stockholder Shares not transferred within such 120-day
period shall be re-offered to the Company and the Other Stockholders
under this Section 5(b) prior to any subsequent Transfer.
4. 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.
3. PERMITTED TRANSFERS. The transfer restrictions set forth in this
Section 5 shall not apply with respect to any Transfer of Stockholder Shares by
any Stockholder (i) in the case of the Ginsburgs, pursuant to applicable laws of
descent and distribution or among the Ginsburgs' Family Group, or (ii) in the
case of Westar, to an Affiliate as defined in this Section 5(c) (collectively
referred to herein as "Permitted Transferees"). Except as expressly provided in
this Agreement to the contrary, all rights and restrictions contained in this
Agreement shall continue to be applicable to the Stockholder Shares after any
Transfer to a Permitted Transferee. Any Permitted Transferee of such Stockholder
Shares shall agree in writing to be bound by all of the provisions of this
Agreement and shall have submitted to the Company such evidence as the Company
may reasonably request to demonstrate that such Person is a Permitted
Transferee. "Family Group" means an individual's spouse and descendants (whether
natural or adopted) and spouses of descendants and any trust, family limited
partnership or similar entity solely for the benefit of the individual and/or
the individual's spouse and/or descendants and/or spouses of their descendants,
and Darius G. Nevin for so long as he is an employee of the Company. For
purposes of this Section 5(c), "Affiliate" of Westar means each Person as to
which Westar, directly or indirectly, (i) owns or controls 50% or more of the
aggregate capital stock, partnership interests or other equity interests, or
(ii) any Person which controls, is controlled by or is under common control with
Westar.
6. PREEMPTIVE RIGHTS.
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1. If after Conversion, the Company authorizes the issuance or sale
of any equity securities (other than (i) as a dividend on the outstanding Common
Stock or Preferred Stock, or (ii) upon conversion of outstanding Preferred
Stock) to any Person and if, and only if, such issuance or sale (individually or
in the aggregate) would, after giving effect to any anti-dilution adjustments
with respect to, and as contained in the terms of, any such options, warrants or
convertible securities, reduce Westar's ownership percentage of Common Stock of
the Company to less than 25% of the outstanding Common Stock as of the date or
dates of such authorization on a Fully Diluted Basis, the Company shall first
offer to sell to Westar a portion of such equity securities equal to the
quotient determined by dividing (a) the number of shares of Common Stock held by
Westar on a Fully Diluted Basis by (b) the total number of shares of outstanding
Common Stock on a Fully Diluted Basis by giving 30 days' prior written notice to
Westar (the "Offering Period"). Westar shall be entitled to purchase such equity
securities for the same price and on the same terms as such equity securities
are to be offered to such Person. The purchase price for all equity securities
offered to Westar shall be payable in cash by wire transfer of immediately
available funds.
2. To exercise its purchase rights hereunder, Westar must within 15
days after receipt of written notice from the Company describing in reasonable
detail the equity securities being offered, the purchase price thereof, the
payment terms and Westar's percentage allotment, deliver a written notice to the
Company describing its election hereunder.
3. Upon the expiration of the Offering Period described in Section
6(a), the Company shall be entitled to sell such equity securities which Westar
has not elected to purchase during the 90 days following such expiration on
terms and conditions no more favorable to the purchasers thereof than those
offered to Westar. Any equity securities offered or sold by the Company to any
other Person after such 90-day period must be re-offered to Westar pursuant to
the terms of this Section 6(c).
7. SALE OF THE COMPANY.
1. If a Committee shall approve a cash sale of all or substantially
all of the Company's assets determined on a consolidated basis or a cash sale of
all of the Company's outstanding capital stock to any other person or entity
(collectively, a "Sale of the Company"), Westar shall either (i) vote all of its
Voting Securities for, consent to and raise no objections against, such Sale of
the Company or (ii) purchase, or cause an Affiliate to purchase, the shares of
outstanding Common Stock it does not then own on substantially the same terms
and conditions as approved by the Committee in connection with the Sale of the
Company. Westar shall have 30 days from the date of notice from the Committee of
approval of any such Sale of the Company to agree to such purchase. If the Sale
of Company is structured as a sale of stock, each Stockholder shall agree to
sell all of its shares of capital stock of the Company and rights to acquire
shares of capital stock of the Company on the terms and conditions approved by
the Committee. Each Stockholder shall take all necessary or desirable actions in
connection with the consummation of the Sale of the Company as reasonably
requested by the Company.
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2. The obligations of the Stockholders with respect to the Sale of
the Company are subject to the satisfaction of the following conditions:
1. If any holders of a class of the Company's capital stock are
given an option as to the form and amount of consideration to be
received, each holder of such class of capital stock shall be given the
same option; and
2. Each holder of then currently exercisable rights to acquire
shares of a class of the Company's capital stock shall be given an
opportunity to either
(1) exercise such rights prior to the consummation of the
Sale of the Company and participate in such sale as holders of such
class of capital stock, or
(2) upon the consummation of the Sale of the Company, receive
in exchange for such rights consideration equal to the amount
determined by multiplying (a) the same amount of consideration per
share of the Company's capital stock received by holders of such
class of capital stock in connection with the Sale of the Company
less the exercise price per share of such capital stock of such
rights to acquire such class of capital stock by (b) the number of
shares of such class of capital stock represented by such rights.
3. The Stockholders shall not be required to make any unqualified
representations or warranties to any Person in connection with such
sale, except as to (i) good title to the stock being sold, (ii) the
absence of encumbrances with respect to the Stock being sold, (iii) the
valid existence and good standing of the Stockholder (if applicable),
(iv) the authority for, and validity and binding effect of (as against
such Stockholder), any agreement entered into by such Stockholder in
connection with such sale, (v) all required material consents to such
Stockholder's sale and material governmental approvals having been
obtained (excluding any securities laws) and (vi) the fact that no
broker's commission is payable by the such Stockholder as result of
Stockholder's conduct in connection with the sale, if applicable; and
3. A Stockholder shall not be required to provide any
indemnification in connection with such sale except indemnification for breach
of the representations and warranties made by it pursuant to Section 7(b)(iii).
8. LEGEND. Each certificate evidencing Stockholder Shares or securities
convertible into Stockholder Shares and each certificate issued in exchange for
or upon the Transfer of any such securities shall be stamped or otherwise
imprinted with a legend in substantially the following form:
The securities represented by this certificate are subject to voting
obligations, transfer restrictions and other provisions set forth in
a Stockholders Agreement dated as of October 21, 1998, among the
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issuer of such securities (the "Company") and certain of the
Company's stockholders, as amended and modified from time to time. A
copy of such Stockholders Agreement shall be furnished without
charge by the Company to the holder hereof upon written request to
the Company at its principal executive office.
The Company shall imprint such legend on certificates evidencing Stockholder
Shares and securities convertible into Stockholder Shares outstanding as of the
date hereof. The legend set forth above shall be removed from the certificates
evidencing any Stockholder Shares upon termination of this Agreement in
accordance with Section 10.
9. TRANSFERS IN VIOLATION OF AGREEMENT; EFFECT OF TRANSFER. A
Stockholder shall not Transfer any Stockholder Shares to any Person unless and
until the prospective transferee has agreed to be bound by this Agreement and to
execute and deliver to the Company and the Other Stockholders a counterpart of
this Agreement. Any Transfer or attempted Transfer of any Stockholder Shares in
violation of any provision of this Agreement shall be void, and the Company
shall not record such Transfer on its books or treat any purported transferee of
such Stockholder Shares as the owner of such shares for any purpose. Except as
otherwise expressly provided herein, any transferee of Stockholder Shares (other
than a transferee pursuant to a Bona Fide Public Sale) shall take such
Stockholder Shares subject to the terms and provisions of this Agreement, and
such Stockholder Shares shall remain Stockholder Shares in the hands of such
transferee. Notwithstanding any provision contained herein to the contrary,
Stockholder Shares transferred by any of the Ginsburgs to either David C. Wittig
or Douglas T. Lake shall not be subject to this Agreement.
10. TERMINATION. Notwithstanding anything to the contrary contained
herein,
1. This Agreement shall terminate automatically and be of no
further force or effect upon the fifteenth anniversary of the date hereof unless
extended by the parties hereto in accordance with applicable law.
2. This Agreement shall terminate and be of no further force or
effect (i) upon a Sale of the Company, or (ii) upon the consummation of a Bona
Fide Public Sale with respect to the Stockholder Shares sold in such Bona Fide
Public Sale.
3. This Agreement shall terminate and be of no further force and
effect upon the earlier to occur of the following events: (i) the date upon
which Westar ceases to have Beneficial Ownership of 10% or more of the
outstanding equity securities of the Company on a Fully Diluted Basis; and (ii)
the date upon which the Ginsburgs, as a group, cease to have Beneficial
Ownership of 500,000 or more shares of Common Stock.
11. NEGATIVE COVENANTS. Without the prior approval of Westar, the
Company will not so long as Preferred Shares are outstanding: (a) authorize or
issue any equity securities equal to or senior as to dividends or upon
liquidation to the Preferred Stock; or (b) authorize or make any dividends or
other distributions to the holders of Common Stock. Without the prior approval
of
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Westar, the Company will not, so long as Westar or its Affiliates own or control
at least 10% of the outstanding equity securities of the Company, issue any
equity security senior to the Common Stock.
12. SPECIAL VOTING RIGHT. A holder of Convertible Preferred Stock
exercising the special voting rights set forth in Section V(b) of the
Convertible Certificate of Designations is subject to all of the terms and
conditions of this Agreement except Section 7 hereof.
13. MISCELLANEOUS.
1. AMENDMENT AND WAIVER. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company or the Stockholders unless such modification,
amendment or waiver is approved in writing by the Company and the Stockholders.
The failure of any party to enforce any of the provisions of this Agreement
shall in no way be construed as a waiver of such provisions and shall not affect
the right of such party thereafter to enforce each and every provision of this
Agreement in accordance with its terms.
2. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this
Agreement in such jurisdiction or affect the validity, legality or
enforceability of any provision in any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein. In
the event any provision of this Agreement shall be held invalid, the parties
agree to enter into such further agreements as may be necessary in order to
carry out the intent and purposes of the parties herein.
3. ENTIRE AGREEMENT. Except as otherwise expressly set forth
herein, this Agreement embodies the complete agreement and understanding among
the parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
4. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Stockholders (including Permitted
Transferees) and any subsequent holders of Stockholder Shares and the respective
successors and assigns of each of them, so long as they hold Stockholder Shares;
PROVIDED, HOWEVER, that the rights of Westar set forth in Section 6 (Preemptive
Rights) shall not be assignable or Transferable (whether in connection with the
Transfer of Westar's Stockholder Shares or otherwise) other than to an Affiliate
of Westar in connection with the Transfer of Westar's Stockholder Shares, and
any assignment of such rights other than pursuant to the terms of this section
shall be null and void.
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5. REMEDIES. The Company and the Stockholders shall be entitled to
enforce their rights under this Agreement specifically, to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights existing in their favor. The parties hereto agree and acknowledge
that money damages would not be an adequate remedy for any breach of the
provisions of this Agreement and that the Company or any Stockholder may in its
sole discretion apply to any court of law or equity of competent jurisdiction
for specific performance and/or injunctive relief (without posting a bond or
other security) in order to enforce or prevent any violation of the provisions
of this Agreement.
6. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
hand delivered or sent by first class registered or certified mail (return
receipt requested), postage prepaid, to the respective addresses of Westar and
the Company set forth below, unless subsequently changed by written notice. Any
notice shall be deemed to be effective when it is received.
To Westar: Westar Security, Inc.
6225 N. State Hwy 161, Ste. 400
Irving, Texas 75038
Attention: Chief Financial Officer
Phone: 972-916-6044
Fax: 972-916-6698
With a copy to:
Renee T. Kingsley, Esq.
Protection One, Inc.
6225 N. State Hwy 161, Ste. 400
Irving, Texas 75038
Phone: 972-916-6142
Fax: 972-916-6699
To the Company: Guardian International, Inc.
3880 North 28th Terrace
Hollywood, Florida 33020-1118
Attention: Richard Ginsburg, President
Phone: 954-926-5200
Fax: 954-926-1822
With a copy to:
Harvey Goldman, Esq.
Steel Hector & Davis LLP
200 South Biscayne Boulevard
41st Floor
Miami, FL 33131-2398
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Phone: 305-577-7011
Fax: 305-577-7001
7. VISITATION RIGHTS. The Stockholders may, during normal business
hours, at the Stockholders' expense, and upon reasonable prior notice to a
member of the senior management of the Company (i) visit and inspect the
properties of the Company and its subsidiaries, (ii) examine and copy their
books of record and account, and (iii) discuss their affairs, finances and
accounts with its officers, employees and independent public accountants,
subject, in each case, to any confidentiality agreements to which the Company is
a party; PROVIDED, however, that no such visit, inspection, examination or
discussion shall unreasonably disrupt normal operations of the Company and
PROVIDED, however, that such Stockholder will hold, and will cause its
affiliates, representatives and advisors to hold, in strict confidence, all
confidential documents and information (the "Information") provided by the
Company, its officers, employees and independent public accountants, and will
not release or disclose the Information to any other Person except to any Person
who such Stockholder demonstrates has a need to know such Information, except
that the Stockholder will have no obligation to protect any portion of the
Information which is (i) publicly available, (ii) previously known to the
receiving party without an obligation to keep it confidential or (iii) is
required to be disclosed by law, rule, regulation or as a result of any legal
process.
8. AMENDMENT TO ARTICLES AND BY-LAWS. The Stockholders shall not
vote to amend the Articles of Incorporation of the Company, nor shall the
Company amend its by-laws in any manner which conflicts with the provisions of
this Agreement.
9. GOVERNING LAW. All issues and questions concerning the
construction, validity, interpretation and enforceability of this Agreement and
the exhibits and schedules hereto shall be governed by, and construed in
accordance with, the laws of the State of Florida, without giving effect to any
choice of law or conflict of law rules or provisions (whether of the State of
Florida or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Florida.
10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN
CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THIS AGREEMENT.
11. PREVAILING PARTY. If a party commences an action against
another party to interpret or enforce any of the terms of this Agreement or
exhibits hereto or as a result of a breach by another party of any terms hereof
or of the exhibits, the non-prevailing (or defaulting) party shall pay to the
prevailing party reasonable attorneys' fees, costs and expenses incurred in
connection with the prosecution or defense of such action (including at any
appellate level).
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12. BUSINESS DAYS. If any time period for giving notice or taking
action hereunder expires on a day which is a Saturday, Sunday or legal holiday
in the states of Florida, Kansas, Texas, Nevada or New York the time period
shall automatically be extended to the business day immediately following such
Saturday, Sunday or legal holiday.
13. DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
14. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
15. TERMINATION OF STOCKHOLDERS AGREEMENT. The parties hereto agree
that the Stockholders Agreement dated as of October 21, 1997 by and among the
parties hereto is hereby terminated and of no further force and effect as of the
date first written above and that no party thereto shall have any rights or
obligations thereunder.
* * * * *
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the day and year first above written.
GUARDIAN INTERNATIONAL, INC.
By:/s/ Richard Ginsburg
---------------------------------------
Richard Ginsburg, President and Chief
Executive Officer
/s/ Harold Ginsburg
------------------------------------------
Harold Ginsburg
/s/ Sheilah Ginsburg
------------------------------------------
Sheilah Ginsburg
/s/ Richard Ginsburg
------------------------------------------
Richard Ginsburg
/s/ Rhonda Ginsburg
------------------------------------------
15
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Rhonda Ginsburg
WESTAR SECURITY, INC.
By:/s/ John W. Hesse
------------------------------------------
Name: John W. Hesse
Title:____________________________________
16
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SCHEDULE A
SCHEDULE OF STOCKHOLDER SHARES
- --------------------------------------------------------------------------------
NAME NUMBER OF SHARES AND CLASS OF CAPITAL STOCK
- --------------------------------------------------------------------------------
Harold Ginsburg 1,003,533 shares
- --------------------------------------------------------------------------------
Sheilah Ginsburg 903,533 shares
- --------------------------------------------------------------------------------
Richard Ginsburg 629,246 shares
- --------------------------------------------------------------------------------
Rhonda Ginsburg 629,245 shares
- --------------------------------------------------------------------------------
Westar Security, Inc. Preferred Stock Series C: 16,397 shares
Preferred Stock Series D: 10,000 shares
- --------------------------------------------------------------------------------
EXHIBIT 10.(c)
REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement dated as of October 21, 1998
(the "Effective Date") between Guardian International, Inc., a Nevada
corporation (the "Company"), and Westar Security, Inc., a Kansas corporation
(the "Stockholder").
RECITALS
1. The Company has sold to the Stockholder 16,397 shares of Series C
7.00% Redeemable Cumulative Preferred Stock (the "Redeemable Preferred Stock"),
par value $.001 per share, of the Company, and 10,000 shares of Series D 6.00%
Convertible Cumulative Preferred Stock (the "Convertible Preferred Stock"), par
value $.001 per share, of the Company.
2. The Company may, under certain circumstances more fully described in
the Series C Preferred Stock Certificate of Designations to the Articles of
Incorporation of the Company (the "Articles") of even date herewith, issue
shares (the "Dividend Common Shares") of its Class A Voting Common Stock (the
"Common Stock"), par value $.001 per share, in lieu of quarterly cash dividends
as dividends on the Redeemable Preferred Stock.
3. The Convertible Preferred Stock is convertible at the rate of
333.3333 shares of Common Stock for each share of Convertible Preferred Stock
pursuant to the terms and conditions of the Series D Preferred Stock Certificate
of Designations to the Articles of even date herewith defining the rights and
preferences of the Convertible Preferred Stock.
4. In this Agreement, the Dividend Common Shares and the shares Common
Stock issuable by the Company upon conversion of the Convertible Preferred
Stock, together with any stock dividends, distributions, or splits or any shares
of Common Stock issued or issuable in connection with any reclassification,
recapitalization, merger or consolidation or reorganization ("Adjustments"),
shall be collectively referred to as the "Shares."
AGREEMENT
1. REGISTRATION RIGHTS.
(a) INCIDENTAL RIGHTS. If at any time or from time to time the Company
proposes to file with the Securities and Exchange Commission (the "Commission")
a registration statement (other than a registration statement on Form S-8
covering solely an employee benefit plan or a registration statement on Form S-3
covering solely offers pursuant to a dividend or interest reinvestment plan) for
the registration under the Securities Act of 1933, as amended (the "Securities
Act") of any shares of Common Stock for sale to the public by the Company or on
behalf of a stockholder of the Company for cash (excluding shares of Common
Stock issuable by the Company upon the exercise of employee stock options or in
connection with the merger or consolidation of the Company with one or more
other corporations), the Company shall give the Stockholder and Heller
Financial, Inc.
<PAGE>
("Heller") so long as Heller has Heller Registration Rights (as later defined),
at least 30 days' prior written notice of the filing of the proposed
registration statement. The notice shall include a list of the states and
foreign jurisdictions, if any, in which the Company intends to qualify such
shares, the number of shares so proposed to be registered, the proposed date of
filing of such registration statement, any proposed means of distribution of
such shares, any proposed managing underwriter or underwriters, and a good faith
estimate by the Company or managing underwriter of the maximum offering price
thereof, as such price is proposed to appear on the facing page of such
registration statement. Upon written request of the Stockholder (and Heller, if
applicable) received by the Company within 15 days after the date of the
Company's delivery of its notice of intention, the Company shall, subject to the
conditions and in accordance with the procedures set forth in Sections 1(c) and
1(d), and at its own expense as provided in Section 3, include in the coverage
of such registration statement and qualify for sale under the blue sky or
securities laws of the various states, the aggregate number of Shares proposed
to be registered (the "Registrable Shares").
Notwithstanding any other provision in this Section 1(a), if
in connection with an underwritten offering the managing underwriter (which
shall be a nationally recognized independent investment banking firm or such
firm as the parties shall mutually agree) for the Company indicates its
reasonable belief in writing that the effect of including all or part of the
Registrable Shares in such underwritten offering will materially and adversely
affect the sale of the Registrable Shares (which statement of the managing
underwriter shall also state the maximum number of shares (the "Maximum
Shares"), if any, which can be sold without materially adversely affecting the
sale of the Registrable Shares), then the number of Registrable Shares to be
included in the offering shall be reduced to the Maximum Shares and such Maximum
Shares shall be allocated (i) first, to the Company or other party at whose
request the registration statement is being filed; and (ii) second, between the
Stockholder and Heller, in proportion, as nearly as practicable, as such
Person's Registrable Shares bears to the aggregate number of Registrable Shares.
If the managing underwriter has not limited the number of
Shares to be underwritten, the Company and other holders of the Company's
securities, in addition to Heller, may include securities for its (or their) own
account in such registration if (i) the managing underwriter so agrees and (ii)
the number of shares which would otherwise have been included in such
registration and underwriting will not thereby be limited.
No registration statement effected under this Section 1(a)
shall release the Company of its obligations to file registration statements on
behalf of the Stockholder under Section 1(b).
Notwithstanding any request for inclusion in any registration
statement under this Section 1(a), the Stockholder may elect to reduce or
withdraw its request for inclusion of its Shares at any time prior to execution
of the underwriting agreement with respect thereto by the Stockholder.
The Company shall have the right to select all underwriters,
including the managing underwriter, of all public offerings of shares of Common
Stock subject to the provisions of this Section 1(a), unless such registration
statement is being filed pursuant to registration of a third party, in which
case the agreement governing such registration statement shall govern the
selection of underwriters. The Stockholder shall enter into (together with the
Company and any other holder including shares in such registration statement) an
underwriting agreement with the underwriter or underwriters, provided that such
underwriting agreement is in a customary form and is reasonably
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<PAGE>
acceptable to the Stockholder. Nothing in this Section 1(a) shall create any
liability on the part of the Company to the Stockholder if the Company for any
reason decides not to file such a registration statement.
(b) MANDATORY RIGHTS. Upon written request by the Stockholder, the
Company shall, subject to the conditions, and in accordance with the procedures,
set forth in this Section 1(b) and Sections 1 (c) and 1(d), file a registration
statement, including, without limitation, by means of a shelf registration
pursuant to Rule 415 under the Securities Act (a "Shelf Registration") if so
requested by the Stockholder, (and use its best efforts to cause such
registration statement to become effective) and use its best efforts to qualify
Shares owned by the Stockholder for sale under the blue sky or securities laws
of such states as may be reasonably requested by the Stockholder. The request
for registration pursuant to this Section 1(b) shall specify the number of
Shares to be registered. The Stockholder shall have the right to select the
underwriters and managers to administer the offering, subject to approval of the
Company, which approval may not be unreasonably withheld. The Company shall
enter into (together with the Stockholder) an underwriting agreement with the
underwriter or underwriters, provided that such underwriting agreement is in a
customary form and is reasonably acceptable to the Company and the Stockholder.
The Company shall be permitted to delay the filing of any
registration statement requested pursuant to this Section 1(b) or to delay its
effectiveness for a reasonable period of time (in no event to exceed 45 days)
if, in the good faith and reasonable judgment of the Board of Directors of the
Company, such registration would have a material adverse effect on pending
financing transactions, corporate reorganizations or other material events
involving the Company, or if the Company, in the good faith judgment of its
Board of Directors, reasonably believes that the filing thereof at the time
requested would require disclosure of material confidential information which
would materially and adversely affect the business or prospects of the Company.
Notwithstanding anything herein to the contrary, the Company shall not exercise
its right to delay the effectiveness of a registration statement more than twice
in any twelve (12) month period. Once the cause of such delay is eliminated, the
Company shall promptly notify the Stockholder, and as soon as the Stockholder
notifies the Company to proceed, the Company shall file a registration statement
and use its best efforts to cause such sale to be registered under the
Securities Act and qualified under the securities laws of such states as may be
reasonably requested by the Stockholder, all as provided above.
Notwithstanding any other provision in this Section 1(b), if
the managing underwriter indicates its reasonable belief in writing that the
effect of including all or part of the securities requested to be registered by
the Stockholder, together with the number of shares to be registered on behalf
of Heller or the Company, if any, in the coverage of such registration statement
will materially and adversely affect the sale of such Registrable Shares (which
statement of the managing underwriter shall also state the number of Maximum
Shares, if any), then the number of Registrable Shares shall be reduced to the
number of Maximum Shares and such Maximum Shares shall be allocated (i) first,
to the Stockholder and (ii) second, between the Company, any other holders
including shares in the Registration Statement and Heller, in proportion, as
nearly as practicable, as such Person's Registrable Shares bears to the
aggregate number of Registrable Shares.
If the managing underwriter has not limited the number of
Shares to be underwritten, the Company and other holders of the Company's
securities, in addition to Heller, may include
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<PAGE>
securities for its (or their) own account in such registration if (i) the
managing underwriter so agrees, (ii) the number of shares which would otherwise
have been included in such registration and underwriting will not thereby be
limited and (iii) such other securities are then registrable on Form S-3.
The Stockholder shall be entitled to request one registration
during each 12-month period (each, a "Demand Period") pursuant to this Section
1(b). The Company may fulfill a demand by filing a post-effective amendment to
an effective Shelf Registration. The first such Demand Period shall commence on
the Effective Date of this Agreement and the last such Demand Period shall
terminate upon termination of this Agreement in accordance with Section 6. An
unexercised demand expires at the expiration of the Demand Period during which
it was exercisable, and any such unexercised demand may not be exercised during
subsequent Demand Periods. The Company shall be obligated to maintain the
effectiveness of each such registration statement until the earlier of (i) the
sale of all shares registered pursuant thereto or (ii) the date that is two
years after the date on which the registration statement is declared effective.
The Company shall not be required by this Section 1(b) to effect a registration
of Shares unless the aggregate number of the Shares requested to be registered
exceeds 500,000 Shares as adjusted for any Adjustments.
The Stockholder may withdraw a request under this Section 1(b)
in circumstances where the Company is in material breach of its obligations
hereunder and has not cured such breach after notice thereof and a reasonable
opportunity to do so, or the withdrawal occurs in connection with a delay by the
Company or inability of Stockholder to include all of its Shares requested by
Stockholder to be so registered or the failure of any requested registration to
become or remain effective as provided herein. Any request so withdrawn prior to
such registration statement being declared effective shall not constitute a
request for determining the number of requests to which Stockholder is entitled.
(c) CERTAIN REGISTRATION CONDITIONS. The Company shall not be required
to effect a registration of any Shares of the Stockholder pursuant to Section
1(a) or 1(b), or file any post-effective amendment thereto:
(i) unless the Stockholder agrees (A) that it has a present
intention to sell (other than in connection with a Shelf Registration) its
Shares so requested, (B) to sell and distribute a portion or all of its Shares
in accordance with the plan or plans of distribution adopted by and through
underwriters, if any, acting for the Company with respect to any request under
Section 1(a), and (C) to bear a pro rata share of underwriter's discounts and
commissions;
(ii) if, in the case of a request for registration of an
underwritten offering under the provisions of Section 1(b), (A) a registration
statement requested by the Stockholder with respect to an underwritten offering
covering Common Stock became effective in the same calendar quarter in which
such request was made, (B) the Company in good faith anticipates filing a
registration statement for an offering of Common Stock for the Company's account
within 30 days after such demand date and has not abandoned such proposed
offering; or (C) the Company has received a request for a demand registration
from the holders of other registration rights pursuant to which the Company is
effecting a registration of Common Stock within 30 days of the date of the
Stockholder's request;
4
<PAGE>
(iii) unless the Company has received from the Stockholder all
such information the Company reasonably requests from the Stockholder concerning
the Stockholder and its intended method of distribution of the Shares necessary
in the opinion of outside counsel to enable the Company to include in the
registration statement all material facts required to be disclosed therein; or
(iv) if the particular Shares for which registration has been
requested have been distributed to the public pursuant to an offering registered
under the Securities Act, sold to the public through a broker, dealer or market
maker in compliance with Rule 144 under the Securities Act (or any similar rule
then in force), or repurchased by the Company or any affiliate thereof.
(d) COVENANTS AND PROCEDURES. If and whenever the Company is required
hereunder to effect the registration of Shares under the Securities Act, the
Company, at its expense as provided in Section 3 hereof and as expeditiously as
possible, shall:
(i) In accordance with the Securities Act and all applicable
rules and regulations, promptly, and in any event within 45 days after the
request, prepare and file with the Commission a registration statement covering
the Shares requested to be registered and use its best efforts to cause such
registration statement to become and remain effective. The Company will file
such post-effective amendments to such registration statement (and use its best
efforts to cause them to become effective) and such supplements as are necessary
so that current prospectuses are at all times available until the earlier of the
completion of the distribution of all shares under the registration statement or
two (2) years after the effective date of the registration statement; PROVIDED
that before filing a registration statement or prospectus or any amendments or
supplements thereto, the Company will furnish to counsel selected by the
Stockholder, and the sales or placement agent or agents, if any, for the Shares
and the managing underwriter or underwriters, if any, draft copies of all such
documents proposed to be filed at least seven (7) days prior to such filing,
which documents will be subject to the reasonable review of the Stockholder, the
sales or placement agent or agents, if any, for the Shares and the managing
underwriter or underwriters, if any, and their respective agents and
representatives and (A) the Company will not include in any registration
statement information concerning or relating to the Stockholder to which the
Stockholder shall reasonably object in writing (unless in the reasonable opinion
of outside counsel the inclusion of such information is required by applicable
law or the regulations of any securities exchange to which the Company may be
subject), and (B) the Company will not file any registration statement pursuant
to Section 1(b) or amendment thereto or any prospectus or any supplement thereto
to which the Stockholder and managing underwriter shall reasonably object in
writing;
If the offering is to be underwritten, in whole or in part,
enter into a written underwriting agreement in form and substance reasonably
satisfactory to the managing underwriter of the public offering, the Stockholder
and the Company;
(A) Deliver to the Stockholder, the sales or placement agent
or agents, if any, and the managing underwriter or underwriters, if any,
("Underwriter or Underwriters") as promptly as practicable as many copies of
preliminary prospectuses as the Stockholder reasonably requests, and the
Stockholder shall keep, or cause to be kept, a written record of the
distribution of such preliminary prospectuses and shall refrain from delivery of
such preliminary prospectuses in any
5
<PAGE>
manner or under any circumstances which would violate the Securities Act or the
securities laws of any other jurisdiction, including the various states of the
United States,
(B) Deliver to the Stockholder and the Underwriters as soon as
practicable after the effective date of the registration statement, and from
time to time thereafter as many copies of the prospectuses required to be
delivered in connection with the sale of Shares registered under the
registration statement as the Stockholder or Underwriters reasonably request,
(C) In case of the happening, after the effective date of such
registration statement, of any event or occurrence which is required or may be
advisable, in the judgment of the Company, the Stockholder, any Underwriter and
their counsel to be set forth in an amendment of or supplement to such
prospectus to make any statements therein not misleading, give the Stockholder
and Underwriters written notice thereof and prepare and furnish to the
Stockholder and Underwriters in such quantities as it may reasonably request,
copies of such amended prospectus or of such supplement to be attached to the
prospectus in order that the prospectus, as so amended or supplemented, will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading and
to comply with the Securities Act, and
(D) Deliver to the Company and the Underwriters upon
reasonable request copies of any documents incorporated into any such
registration statement, prospectus, amendment or supplement.
(ii) On or prior to the date on which the registration
statement is declared effective, use its best efforts to register or qualify,
and cooperate with the Stockholder, the Underwriter or Underwriters, if any, and
their counsel, in connection with the registration or qualification of the
Shares covered by the registration statement for offer and sale under the
securities or blue sky laws of each state and other jurisdiction of the United
States as the Stockholder or Underwriter reasonably requests, to use its best
efforts to keep each such registration or qualification effective, including
through new filings, amendments or renewals, during the period such registration
statement is required to be kept effective and to do any and all other acts or
things necessary or advisable to enable the disposition in all such
jurisdictions of the Shares covered by the applicable registration statement;
PROVIDED, HOWEVER, that the Company will not be required to qualify generally to
do business in any jurisdiction where it is not then so qualified.
(iii) Use its best efforts to cause all of the Shares included
in such registration statement to be listed, by the date of the first sale of
such Common Stock pursuant to such registration statement, on each securities
exchange on which the Common Stock of the Company is then listed or proposed to
be listed, if any.
(iv) Make generally available to the Stockholder and any
underwriter participating in the offering conducted pursuant to the registration
statement an earnings statement satisfying the provisions of Section 11(a) of
the Securities Act no later than 45 days after the end of the 12-month period
beginning with the first day of the Company's first fiscal quarter commencing
after the effective date of the registration statement, which earnings statement
shall cover said 12-month period, which requirement will be deemed to be
satisfied if the Company timely files complete and
6
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accurate information on annual and period reports, including on Forms 10-QSB,
10-KSB, and (if needed) 8-K under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and otherwise complies with Rule 158 under the
Securities Act.
(v) Cooperate with the Stockholder and the Underwriter or
Underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing the Shares to be
sold under the registration statement, and enable such securities to be in such
denominations and registered in such names as the Underwriter or Underwriters,
if any, or the Stockholder requests, subject to the obligation to return any
certificates representing securities not sold.
(vi) Use its best efforts to cause the Shares covered by the
registration statement to be registered with or approved by such other
governmental agencies or authorities within the United States as may be
necessary to enable the Stockholder or the Underwriter or Underwriters, if any,
to consummate the disposition of such Shares.
(vii) Make available for inspection by the Stockholder and
each underwriter participating in any disposition pursuant to such registration
statement, and any attorney, accountant or other agent retained by the
Stockholder or any such underwriter (collectively, the "Inspectors"), all
financial and other records, pertinent corporate documents and properties of the
Company, as shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause the Company's officers, directors, employees
and independent public accountants to supply all information reasonably
requested by any such Inspector in connection with such registration statement,
in each case to the extent necessary to enable the Stockholder and any
underwriter to conduct a "reasonable investigation" for purposes of Section
11(a) of the Securities Act.
(viii) Obtain a "cold comfort" letter from the Company's
independent public accountants and an opinion of counsel for the Company, each
in customary form and covering such matters of the type customarily covered by
cold comfort letters and opinions of counsel in connection with public offerings
of securities, as the Stockholder or underwriters may reasonably request.
(ix) If requested by the Stockholder, promptly incorporate in
a prospectus, prospectus supplement or post-effective amendment such information
as the Stockholder reasonably specifies should be included therein, including,
without limitation, information relating to the planned distribution of Shares,
the number of Shares being sold by the Stockholder, the name and description of
the Stockholder, the offering price of such Shares and any discount, commission
or other compensation payable in respect of the Shares being sold, the purchase
price being paid therefor to the Stockholder and information with respect to any
other terms of the offering of the Shares to be sold in such offering, except to
the extent that the Company is advised in a written opinion of outside counsel
that the inclusion of such information is reasonably likely to violate
applicable securities laws; and make all required filings of such prospectus,
prospectus supplement or post-effective amendment promptly after notification of
the matters to be incorporated in such prospectus, prospectus supplement or
post-effective amendment.
(x) If requested by the Stockholder, use reasonable efforts to
participate in and assist with a "road show" any other customary marketing
efforts in connection with the sale of the
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Shares pursuant to such registration statement, at such times and in such manner
as the Company and the Stockholder mutually may determine.
(xi) Promptly notify the Stockholder and underwriters, after
becoming aware thereof, when the registration statement or any related
prospectus or any amendment or supplement has been filed, and, with respect to
the registration statement or any post-effective amendment, when the same has
become effective, of
(A) any request by the Commission for amendments or
supplements to the registration statement or the related prospectus or for
additional information,
(B) the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement or the initiation of
any proceedings for that purpose,
(C) the receipt by the Company of any notification
with respect to the suspension of the qualification of the Shares for sale in
any jurisdiction or the initiation of any proceeding for such purpose or
(D) the happening of any event which makes any
statement in the registration statement or any post-effective amendment thereto,
prospectus or any amendment or supplement thereto, or any document incorporated
therein by reference untrue in any material respect or which requires the making
of any changes in the registration statement or post-effective amendment thereto
or any prospectus or amendment or supplement thereto so that they will not
contain any untrue statement or a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
(in light of the circumstances under which they were made) not misleading.
(xii) In the case of a Block Trade (defined below):
(A) obtain an opinion of counsel addressed to the
Stockholder and the other party to the "block trade" covering matters that are
no more extensive in scope than would be customarily covered in opinions
obtained in secondary underwritten offerings by issuers with similar market
capitalization and reporting and financial histories;
(B) obtain a "cold comfort" letter from the
independent public accountants of the Company covering matters that are no more
extensive in scope than would be customarily covered in "cold comfort" letters
and updates obtained in secondary underwritten offerings by issuers with similar
market capitalization and reporting and financial histories, provided that the
letter described in this clause (B) shall only be required to the extent such
letters are being issued in respect of non-underwritten secondary offerings
under then prevailing accounting practices; and
(C) deliver a certificate of a senior executive
officer of the Company to cover matters no more extensive in scope than those
matters customarily covered in underwritten offerings by issuers with similar
market capitalization and reporting and financial histories.
(D) "Block Trade" shall mean the disposition, in
connection with a Shelf Registration, at a single time in a single transaction,
including through one or more placement
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<PAGE>
agents, by the Stockholder, of any or all of the Registrable Shares to one or
more Institutional Investors.
(E) "Institutional Investor" shall mean any insurance
company, pension fund, mutual fund, investment company, commercial bank, savings
bank, savings and loan association, investment banking company, trust company or
any finance or credit company, or any portfolio or investment fund managed by
any of the foregoing.
(xiii) If any person becomes a holder of shares that were
included in a Shelf Registration statement subsequent to the time that the Shelf
Registration statement became effective, add such holder to the Shelf
Registration statement, on a timely basis, through a post-effective amendment or
a supplement to the Prospectus, as shall be necessary in accordance with the
rules of the Commission under the Securities Act to include such holder as a
selling stockholder in a distribution under the Shelf Registration statement.
(e) HELLER REGISTRATION RIGHTS. The Stockholder acknowledges that
Heller has certain incidental registration rights with respect to equity
securities of the Company owned by it pursuant to that certain Agreement dated
August 15, 1996 between Heller and the Company (the "Heller Registration
Rights"). Accordingly, the Stockholder acknowledges that pursuant to the Heller
Registration Rights, Heller has the right to participate in any registration
effected pursuant to Section 1.
(f) COMPANY COVENANTS.
(i) The Company covenants to and with the Stockholder that to
the extent it shall be required to do so under the Exchange Act, the Company
shall timely file the reports required to be filed by it under the Exchange Act
or the Securities Act (including, but not limited to, the reports under Sections
13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144
adopted by the Commission under the Securities Act and the rules and regulations
adopted by the Commission thereunder) and shall take such further action as the
Stockholder may reasonably request, all to the extent required from time to time
to enable the Stockholder to sell Shares without registration under the
Securities Act within the limitations of the exemption provided by Rule 144
under the Securities Act, as such rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission. Upon the request
of the Stockholder, the Company shall deliver to the Stockholder a written
statement as to whether it has complied with such requirements.
(ii) If at any time the Company is not subject to Section 13
or 15(d) of the Exchange Act and is exempt from reporting pursuant to Rule
12g3-2(b) under the Exchange Act, the Company agrees, upon the request of the
Stockholder seeking to transfer Shares in conformity with Rule 144A under the
Securities Act, to furnish to the Stockholder or prospective purchasers of the
Shares from the Stockholder the information required by Rule 144A(d)(4)(i) under
the Securities Act in the manner and at the times contemplated by such Rule.
(iii) The Company covenants to make available "adequate
current public information" concerning the Company within the meaning of Rule
144(c) under the Securities Act.
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(iv) The Company will avoid taking any action which would
cause the Common Stock to cease to be eligible for inclusion on the National
Quotation Bureau's National Daily Quotation Price Sheets.
2. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. If Shares are registered under the
Securities Act pursuant to this Agreement, the Company will indemnify and hold
harmless the Stockholder and each underwriter of such Shares and their
respective officers and directors and each other person, if any, who controls
the Stockholder or such underwriter within the meaning of the Securities Act,
against any losses, claims, damages, actions (actual or threatened),
liabilities, costs and expenses (including legal fees and costs of court), joint
or several, to which the Stockholder or such underwriter, director, officer, or
controlling person may become subject under the Securities Act or otherwise, if
and to the extent that such losses, claims, damages, costs, expenses or
liabilities arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained, in any registration statement
under which such Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; and will reimburse the
Stockholder, each such underwriter and each such controlling person for any
legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage or liability; PROVIDED,
HOWEVER, that the Company shall not be liable to the Stockholder or its
underwriters or controlling persons in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement, preliminary prospectus or final prospectus or such
amendment or supplement in reliance upon and in conformity with information
furnished to the Company through a written instrument duly executed by the
Stockholder or such underwriter specifically for use in the preparation thereof.
(b) INDEMNIFICATION BY THE STOCKHOLDER. In connection with any
registration statement in which the Stockholder is participating, the
Stockholder shall indemnify and hold harmless (in the same manner and to the
same extent as set forth in Section 2(a)) the Company, each director of the
Company, each officer of the Company who signs such registration statement and
all persons who control the Company within the meaning of the Securities Act,
with respect to any statement or omission from such registration statement, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, to the extent, but only to the extent, such statement or
omission was made in reliance upon and in conformity with information furnished
to the Company through a written instrument duly executed by the Stockholder
specifically for use in the preparation of such registration statement,
preliminary prospectus or final prospectus or such amendment or supplement
thereto, and provided that the obligations of the Stockholder in connection with
such loss, claim, damage or liability, including all other payments made by
Stockholder to parties other than the Company, shall be limited to the amount of
proceeds received by Stockholder in the offering giving rise to the
indemnification claim.
(c) INDEMNIFICATION PROCEDURES. Promptly after receipt by an
indemnified party of notice of the commencement of any action involving a claim
referred to in the preceding paragraphs
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of this Section 2, such indemnified party shall, if a claim in respect thereof
is to be made against an indemnifying party, give written notice to the
indemnifying party of the commencement of such action; but the omission so to
notify the indemnifying party will not relieve the indemnifying party from any
liability which it may have to the indemnified party unless such indemnifying
party is incurably prejudiced by such omission. If any such action is brought
against an indemnified party, the indemnifying party will be entitled to
participate in and to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified party for
any legal or other expenses incurred by the latter in connection with the
defense thereof, unless (i) in the reasonable opinion of counsel for the
indemnified party, a conflict or potential conflict of interest exists between
the indemnified party and indemnifying party, (ii) the indemnified party
reasonably objects to such assumption on the basis that there may be defenses
available to it which are different from or in addition to the defenses
available to the indemnifying party, (iii) the indemnifying party has failed to
timely assume the defense of any such action or proceeding or (iv) the
indemnifying party and its counsel do not actively and vigorously pursue the
defense of such action in the sole discretion of the indemnified party. Whether
or not such defense is assumed by the indemnifying party, the indemnifying party
will not be subject to any liability for any settlement made without its
consent. No indemnifying party will consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect of such claim or litigation. An indemnifying party who
elects not to assume the defense of an action or where a potential conflict of
interest or other defenses may be available, shall not be obligated to pay the
fees and expenses of more than one national counsel and any local counsel where
appropriate for all parties indemnified by such indemnifying party with respect
to such action, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such action. Costs and expenses
incurred by the indemnified party shall be reimbursed, from time to time, by the
Company as and when bills are received or expenses are incurred.
(d) CONTRIBUTION. If the indemnification provided for in this Section 2
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations, provided, that the obligations of Stockholder
pursuant to this subsection (d) shall be limited to the amount of proceeds
received by Stockholder in the offering giving rise to the contribution claim
including all other payments made by Stockholder to parties other than the
Company. The relative fault of such indemnifying party and indemnified parties
shall be determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material fact,
has been made by, or relates to information supplied by, such indemnifying party
or indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities,
and expenses referred to above shall be deemed to include all legal or other
fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
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The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 2(d) were determined by pro
rata allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
3. EXPENSES. All expenses incurred by the Company and the Stockholder
in connection with any registration statement covering Shares offered by the
Stockholder, including, without limitation, all registration and filing fees
(including all expenses incident to filing with the National Association of
Securities Dealers, Inc.), printing expenses, fees and disbursements of counsel
(including the reasonable fees and disbursements of one counsel for the
Stockholder) and of the independent certified public accountants, and the
expense of qualifying such Shares under state blue sky laws (including
reasonable fees and disbursements of counsel in connection with such
qualification), messenger, telephone and delivery expenses, fees and expenses of
counsel for the underwriters, costs of preparation, printing, distribution and
reproduction of the registration statement, each prospectus, and each amendment
and supplement thereto, the cost and charges of any transfer agent and registrar
and the premiums and other costs of insurance against liability arising out of
such offering, if any, shall be borne by the Company; PROVIDED, HOWEVER, that
the Stockholder shall bear its pro rata share of (a) underwriter's discounts and
commissions and (b) any transfer taxes related to the sale of Shares. To the
extent any such expenses are incurred or paid by the Stockholder, any sales or
placement agent or underwriter, if any, thereof, the Company shall reimburse
such person for the full amount thereof promptly after a request therefor.
4. DISPOSITIONS DURING REGISTRATION.
(a) RESTRICTIONS ON SALES BY THE STOCKHOLDER. The Stockholder shall not
effect any public sale or distribution (including sales pursuant to Rule 144) of
equity securities of the Company, or any securities convertible or exchangeable
or exercisable for such securities, during the fifteen days prior to and the
90-day period beginning on the effective date of any underwritten demand
registration or underwritten incidental registration (or such longer period as
the Stockholder may agree with the underwriter), except to the extent securities
held by Stockholder are included in such effective registration statement. The
Stockholder agrees to comply with the foregoing requirements even if its Shares
are not being included in such registration.
(b) RESTRICTIONS ON PUBLIC SALE BY THE COMPANY. The Company shall not
effect any public or non-public sale or distribution of any securities similar
to those being registered, or any securities convertible into or exchangeable or
exercisable for any such securities or similar securities, during the 15-day
period prior to, and during the 90-day period beginning on, the effective date
of any registration statement in which the Stockholder is participating or the
commencement of a public distribution of Shares pursuant to any such
registration statement, except to the extent securities offered by the Company
are included in such effective registration statement (except (i) as part of
such registration or pursuant to registrations on Forms S-4 or S-8 or any
similar or successor form, or on any form filed in connection with an exchange
offer or an offering of securities solely to the existing stockholders or
employees of the Company or (ii) for sales or other issuances of securities
pursuant to outstanding options, warrants, rights or similar obligations).
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5. TRANSFER OF RIGHTS. No registration rights and benefits set forth in
this Agreement, including indemnification by the Company, shall be transferable
by the Stockholder in connection with the transfer of Shares except to an
"affiliate" as defined in Rule 405 of the Securities Act or any director or
officer of such affiliate or any person who controls such affiliate within the
meaning of the Securities Act, or to any party pursuant to a Block Trade. In
case of any partial assignment to more than one affiliate or Block Trade party,
the affiliates or Block Trade parties who have the rights and benefits of the
"Stockholder" under this Agreement shall not, as a group, have the right to any
greater number of registrations than provided herein as if no such assignment
occurred.
6. TERM. The obligations of the Company to register Shares hereunder
shall terminate on the fifth anniversary of the date of this Agreement with
respect to the registration of Shares not otherwise demanded or effected by such
date; provided, however, that this Agreement shall only terminate at the end of
such period if all Shares held by the Stockholder or any of its assigns
hereunder, shall be freely and publicly tradable without an effective
registration statement. Section 2 shall survive the termination of this
Agreement.
7. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
hand delivered or sent by first class registered or certified mail (return
receipt requested), postage prepaid, to the respective addresses of the Company
and the Stockholders set forth below, unless subsequently changed by written
notice. Any notice shall be deemed to be effective when it is received.
To the Stockholder: Westar Security, Inc.
6225 N. State Hwy 161, Ste. 400
Irving, Texas 75038
Attention: Chief Financial Officer
Phone: 972-916-6044
Fax: 972-916-6698
With a copy to:
Renee T. Kingsley, Esq.
Protection One, Inc.
6225 N. State Hwy 161, Ste. 400
Irving, Texas 75038
Phone: 972-916-6142
Fax: 972-916-6699
To the Company: Guardian International, Inc.
3880 North 28th Terrace
Hollywood, Florida 33020-1118
Attention: Richard Ginsburg, President
Phone: 954-926-5200
Fax: 954-926-1822
With a copy to:
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Harvey Goldman, Esq.
Steel Hector & Davis LLP
200 South Biscayne Boulevard
41st Floor
Miami, FL 33131-2398
Phone: 305-577-7011
8. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF FLORIDA WITHOUT REGARD
TO CONFLICT OF LAW PRINCIPLES THEREUNDER.
9. AMENDMENTS. This Agreement may be amended only by an instrument in
writing executed by all the parties hereto.
10. COUNTERPARTS. This Agreement may be executed in multiple original
counterparts, each of which shall be deemed an original, but all of which
together shall constitute the same instrument.
11. SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable. In the
event any provision of this Agreement shall be held invalid, the parties agree
to enter into such further agreements as may be necessary in order to carry out
the intent and purposes of the parties herein.
12. TERMINATION OF REGISTRATION RIGHTS AGREEMENT. The parties hereto
agree that the Registration Rights Agreement dated as of October 21, 1997, as
amended by the Amendment to Registration Rights Agreement dated as of February
23, 1998, by and between the Company and the predecessor in interest to the
Stockholder is hereby terminated and of no further force and effect as of the
Effective Date and that no party thereto shall have any rights or obligations
thereunder.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
GUARDIAN INTERNATIONAL, INC.
By:/s/ Richard Ginsburg
--------------------------------------
Richard Ginsburg
President and Chief Executive Officer
WESTAR SECURITY, INC.
By:/s/ John W. Hesse
--------------------------------------
Name: John W. Hesse
Title:
ACKNOWLEDGED AND AGREED:
HELLER FINANCIAL, INC.
By: /s/ Dennis R. Robleski
-------------------------------
Name: Dennis R. Robleski
Title: Senior Vice President
Date: October 21, 1998
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