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): February 23, 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 the
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,
to generate new accounts internally and to form strategic alliances; (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, and (iv) increased false alarm
fines and/or the possibility of reduced public response to alarm signals and (v)
other risk factors described in the Company's reports filed with the Securities
and Exchange Commission (the "SEC") 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 2. ACQUISITION OR DISPOSITION OF ASSETS.
Guardian International, Inc., a Nevada corporation, ("Guardian"), announced the
acquisition on February 24, 1998, of 100% of the equity securities of Mutual
Central
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Alarm Services, Inc. ("Mutual"), the nation's 70th largest monitored alarm
company (according to SDM Magazine, a trade publication) and one of the largest
independent alarm companies in the metropolitan New York area. Co-founded nine
years ago by Norman Rubin, Raymond Adams, and Joel Cohen, Mutual has grown
through a strategy of concentration on high-grade UL listed commercial security,
fire, CCTV, and access control systems. Mutual provides services to a
prestigious roster of high-end retail businesses, financial institutions, and
Fortune 500 companies. The acquisition will approximately double most of
Guardian's key financial indicators: monthly recurring income (MRI) will
increase by about $320,000; annual revenues are expected to increase by about $5
million or more, and EBITDA should improve by more than $1.5 million.
The total purchase price was $10 million in cash and two million shares of
Guardian unregistered Class A Voting Common Stock, par value $.001 per share
("Common Stock"). Of the latter consideration, 750,000 shares are being held in
escrow for a one year period for indemnification purposes. The effective date of
the acquisition was February 1, 1998 (the "Effective Date"). The transaction
will be accounted for under the purchase method of accounting.
Pursuant to the terms of the Stock Purchase Agreement dated as of February 23,
1998, by and among Guardian, Mutual, and the selling stockholders of Mutual (the
"Stock Purchase Agreement"), Guardian and Mutual entered into employment
agreements with Joel A. Cohen and with Raymond L. Adams. Mr. Cohen was retained
under a five year agreement as President of Mutual and was appointed to serve as
a Vice President of Guardian. Mr. Cohen was also granted options to purchase
100,000 shares of Common Stock. Twenty percent of the options vest and are
exercisable on each of the first five anniversaries of the Effective Date. Mr.
Adams was retained under a three-year agreement as a Vice President of Mutual.
Mr. Adams was also granted options to purchase 100,000 shares of Common Stock,
thirty three and one-third percent of which vest and are exercisable on each of
the first three anniversaries of the Effective Date.
Guardian funded the cash portion of the acquisition with borrowings under its
existing credit facility, as amended, with Heller Financial, Inc., a Delaware
corporation, and proceeds from a $4.0 million preferred stock investment from
Westar Security, Inc., a Kansas corporation ("Westar"), a wholly-owned
subsidiary of Protection One, Inc., a Delaware corporation. Westar purchased
1,600,000 shares of Series B 10 1/2% Convertible Cumulative Preferred Stock of
Guardian (the "Series B Preferred Stock") at a price of $2.50 per share. The
Series B Preferred Stock is convertible to Common Stock on a share for share
basis and is pari passu upon liquidation with the 1,875,000 shares of Series A
9-3/4% Convertible Cumulative Preferred Stock acquired by Westar in October
1997. The balance will be used for additional acquisitions and for other
corporate purposes. After this investment, and together with shares of Guardian
it already owns, Westar will own approximately 42% of the outstanding stock of
Guardian on a fully diluted basis.
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Guardian will continue to operate Mutual under its trade name as a wholly-owned
subsidiary and will continue to operate Mutual's New York based central
monitoring and dispatch center.
ITEM 5. OTHER EVENTS.
On January 30, 1998, William Remington was appointed to serve as an Independent
Director (as defined in the Stockholders' Agreement dated as of October 21, 1997
among Guardian, Westar, and the majority shareholders of Guardian) to serve as
a member of the Board of Directors. Mr. Remington is a Canadian citizen and
resident. For the past twenty-one years, Mr. Remington has been the Director
General of the Town of Hampstead, Quebec, Canada. Mr. Remington participated in
the design and installation of central monitoring stations for alarm monitoring
companies located in Montreal, Canada, Kingston, Jamaica, London, England, and
Florida.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
FINANCIAL STATEMENTS
Financial Statements of Mutual and pro forma financial information are
not included in this initial report. Such statements and information
will be filed on or before May 8, 1998.
EXHIBITS
4 Certificate of the Designations, Voting Powers, Preferences
and Relative, Participating, Optional and Other Special Rights
and Qualifications, Limitations or Restrictions of Preferred
Stock of Guardian International, Inc.
10(a) Stock Purchase Agreement dated as of February 23, 1998
10(b) Registration Rights Agreement dated as of February 23, 1998
10(c) Escrow and Pledge Agreement dated as of February 23, 1998
10(d) Employment Agreement with Joel A. Cohen dated as of February
1, 1998
10(e) Employment Agreement with Raymond L. Adams dated as of
February 1, 1998
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: March 9, 1998 Guardian International, Inc.
/S/ RICHARD GINSBURG
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Richard Ginsburg
President and Chief Executive Officer
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
4 Certificate of the Designations, Voting Powers, Preferences and
Relative, Participating, Optional and Other Special Rights and
Qualifications, Limitations or Restrictions of Preferred Stock of
Guardian International, Inc.
10(a) Stock Purchase Agreement dated as of February 23, 1998
10(b) Registration Rights Agreement dated as of February 23, 1998
10(c) Escrow and Pledge Agreement dated as of February 23, 1998
10(d) Employment Agreement with Joel A. Cohen dated as of February 1, 1998
10(e) Employment Agreement with Raymond L. Adams dated as of February 1, 1998
EXHIBIT 4
EXHIBIT 4
CERTIFICATE OF THE DESIGNATIONS, VOTING POWERS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS AND
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF PREFERRED STOCK OF
GUARDIAN INTERNATIONAL, INC.
The undersigned hereby certify that they are the duly elected and
acting President and Secretary of Guardian International, Inc., a Nevada
corporation, (the "Company"), and pursuant to Nev. Rev. Stat. ss. 78.1955, DO
HEREBY CERTIFY:
That, pursuant to the authority conferred upon the Board of Directors
of the Company (the "Board") by Article FOURTH of the Company's Articles of
Incorporation (the "Articles"), the Board by unanimous written consent dated
February 18, 1998 adopted the following resolution:
RESOLVED, that the Board hereby establishes and authorizes the
issuance of a second 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 second series, the annual rate of
dividends payable on such shares and the date from which dividends
shall commence to accrue, the terms and conditions on which the shares
may or shall be converted, as the case may be, and the voting rights
and liquidation preferences of such shares, as follows:
I. DESIGNATION AND RANK.
The second series of Preferred Stock of the Company
is designated "Series B 10 1/2% Convertible Cumulative
Preferred Stock, par value $.001 per share" (the "Series B
Preferred Stock"), and the number of shares which shall
constitute such Series shall be 1,600,000 shares. All shares
of Series B Preferred Stock shall rank equally and be
identical in all respects. So long as the Series B Preferred
Stock is outstanding, unless consented to by the affirmative
vote of 2/3 of the holders of the outstanding Series B
Preferred Stock, the Company shall not issue additional
securities of any kind, including shares of Preferred Stock of
any class, (including without limitation additional shares of
Series B Preferred Stock other than Dividend Preferred Shares,
defined below, and Dividend Preferred Shares issued on the
Series A 9 3/4% Convertible Cumulative Preferred Stock, par
value $.001 per share (the "Series A Preferred Stock")) series
or designation ranking in priority or in parity as to rights
and preferences with the Series B Preferred Stock now or
hereafter authorized.
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II. DIVIDENDS.
The holders of the Series B Preferred Stock, in
preference to the holders of Common Stock and any other class
or classes of stock of the Company ranking junior in rights
and preferences to the Series B 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 10 1/2%, in parity with the holders of
Series A Preferred Stock, payable as follows:
(a) Series B Preferred Stock dividends (the
"Dividends") shall commence to accrue on the shares of
Preferred Stock and be cumulative from and after the date of
issuance of such shares of Series B Preferred Stock and shall
be deemed to accumulate and accrue from day to day thereafter.
(b) The Dividends shall be payable to the holders of
the Series B Preferred Stock quarterly on the 1st day of
January, April, July and October at the Company's option in
cash or in additional shares of Series B Preferred Stock
("Dividend Preferred Shares") during the first two years after
the date of issuance of such shares of Series B Preferred
Stock. Thereafter, Dividends shall be paid quarterly on the
1st day of January, April, July and October in cash. Once
issued, any Dividend Preferred Shares shall rank PARI PASSU
and have all of the rights and privileges associated with all
other shares of the Series B Preferred Stock.
III. REDEMPTION.
The Series B Preferred Stock shall not be redeemable
by the Company.
IV. VOTING RIGHTS.
The holders of Series B Preferred Stock shall be
entitled to vote with the Common Stock on all matters required
or permitted to be submitted to the stockholders of the
Company for their approval, but not as a separate class,
except to the extent required by Nevada law, and shall have
such other voting rights as specifically provided under Nevada
law. Each issued and outstanding share of Series B Preferred
Stock shall have one vote.
V. SPECIAL VOTING RIGHTS.
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(a) ELECTION OF DIRECTORS. Notwithstanding the other
provisions of this Section V, upon the occurrence of a Default
Event (hereafter defined) and for the duration of the Default
Period (hereafter defined) the holders of the Preferred Stock,
in addition to any other voting rights they may have herein or
by law, shall be entitled to vote (voting as a class by a
majority of the outstanding shares thereof) for the election
to the Board of Directors of the smallest number of directors
necessary to constitute at any given time a majority of the
number of members of the Board of Directors, and should such
percentage when applied to the number of the members of the
Board of Directors result in a number that includes a
fraction, then such number shall be increased to the next
whole number. In addition, during the Default Period the
holders of the Preferred Stock shall be entitled to designate
(voting as a class as aforesaid) the number of positions on
the Board of Directors, which shall be the smallest number of
directors necessary for the nominees of the holders of
Preferred Stock to constitute a majority of the full Board. In
case the holders of the Preferred Stock become entitled to
exercise such special voting rights, they may call a special
meeting of stockholders during the Default Period, in the
manner provided herein or in the bylaws or otherwise as
provided by law, for the purpose of increasing or decreasing
the number of positions on the Board of Directors and electing
such members to the Board of Directors. In addition, the
holders of the 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
Preferred Stock) held during the Default Period. In lieu of
the foregoing, the holders of the 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 Preferred Stock
outstanding and entitled to vote thereon.
(b) REMOVAL; VACANCIES. During the Default Period,
each director elected by the holders of the Preferred Stock
may be removed only by the vote of the holders of the majority
of the outstanding shares of the Preferred Stock, voting
separately as a class, at a meeting of the stockholders, or of
the holders of shares of the Preferred Stock, called for that
purpose. During the Default Period, any vacancy in the office
of a director elected by the holders of the Preferred Stock
may be filled by a vote of the remaining directors then in
office elected by the holders of the Preferred Stock, or, if
not so filled, by the holders of the Preferred Stock at any
meeting, annual or special, for the election of directors held
thereafter. A special meeting of stockholders, or of the
holders of shares of the 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
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the same meeting at which such removal shall be voted. Holders
of the 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 Preferred Stock may take
any of such action by a written consent signed by the holders
of at least a majority of the shares of the Preferred Stock
outstanding and entitled to vote thereon.
(c) EXPIRATION OF RIGHT. Upon termination of the
Default Period, the special voting rights of the holders of
the Preferred Stock provided hereunder shall be immediately
divested, but always subject to the revesting of such right in
the holders of the Preferred Stock upon the occurrence of any
subsequent Default Event. In the event that such rights of the
holders of the Preferred Stock shall cease as provided above,
then the directors elected to the Board of Directors by the
holders of the Preferred Stock under this Section V shall be
automatically removed from office, and their respective
positions terminated and the number of positions on the Board
of Directors reduced in accordance with such termination,
without further action on the part of the holders of the
Preferred Stock, the holders of the Common Stock or the Board
of Directors.
(d) DEFAULT EVENT. For purposes hereof, a "Default
Event" occurs on the date that (i) the Company has failed to
pay any four quarterly Preferred Stock Dividends when due
whether consecutive or not and (ii) such Preferred Stock
Dividends remain unpaid.
(e) DEFAULT PERIOD. For purposes hereof, "Default
Period" means a period commencing on the date a Default Event
occurs and ending upon the payment of the next quarterly
Dividend in full and such cumulative Dividends in arrears in
full, such that not more than three quarterly Dividends shall
be in arrears.
VI. LIQUIDATION.
(a) The Series B Preferred Stock shall be preferred
upon liquidation over the Common Stock and any other class or
classes of stock of the Company ranking junior in rights and
preferences to the Series B Preferred Stock upon liquidation.
Holders of shares of Series B Preferred Stock shall be
entitled to be paid, after full payment is made on any stock
ranking prior to the Series B Preferred Stock as to rights and
preferences (but before any distribution is made to the
holders of the Common Stock and such junior stock) upon the
voluntary or involuntary dissolution, liquidation or winding
up of the Company (a "Liquidation").
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(b) The amount payable on each share of Series B
Preferred Stock in the event of Liquidation shall be $2.50 per
share.
(c) Upon Liquidation, if the net assets of the
Company are insufficient to permit the payment in full of the
amounts to which the holders of all outstanding shares of
Series B 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 B Preferred
Stock as to rights and preferences) shall be distributed among
the holders of Series B Preferred Stock in amounts
proportionate to the full preferential amounts and holders of
shares of preferred stock ranking in parity with the Series B
Preferred Stock as to rights and preferences to which they are
respectively entitled.
(d) For the purpose of this Section VI, the voluntary
sale, lease, exchange or transfer, for cash, shares of stock,
securities or other consideration, of all or substantially all
the Company's property or assets to, or its consolidation or
merger with, one or more corporations shall not be deemed to
be a Liquidation.
(e) Notwithstanding the foregoing, in the event that
any holder of Series B Preferred Stock converts its Series B
Preferred Stock to Common Stock pursuant to Section VII
hereof, the right to preferential liquidation rights pursuant
to this Section with respect to such converted Shares shall be
immediately terminated.
VII. CONVERSION.
(a) Subject to the provisions for adjustment
hereinafter set forth, each share of Series B Preferred Stock
shall be convertible at any time at the option of the holder
thereof, upon surrender to the transfer agent for the Series B
Preferred Stock or the Company of the certificate or
certificates evidencing the shares so to be converted, into
one fully paid and nonassessable share of Class A Common Stock
of the Company, par value $.001 per share ("Class A Common
Stock").
(b) Subject to the provisions for adjustment
hereinafter set forth, the Series B Preferred Stock must be
converted to Class A Common Stock:
(i) upon a secondary public offering by the
Company of Class A Common Stock at not less than $4.00 per
share; or
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(ii) if, at any time after four years from
the date of issuance of the Series B Preferred Stock, the
Class A Common Stock trades above $4.00 per share for 20
consecutive trading days.
(c) The number of shares of Class A Common Stock into
which an issued and outstanding share of Series B Preferred
Stock is convertible shall be subject to adjustment from time
to time only as follows:
(i) In the event that the Company shall at any
time (A) declare a dividend on the Class A Common Stock in
shares of its Class A Common Stock, (B) split or subdivide the
outstanding Class A Common Stock or (C) combine the
outstanding Class A Common Stock into a smaller number of
shares, each share of Series B 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 B
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 B 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 B 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
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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 B 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 B
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 B Preferred Stock. The Company
shall not effect any such consolidation, merger or sale,
unless prior to or simultaneously with the consummation
thereof, the successor corporation (if other than the Company)
resulting from such consolidation or merger or the corporation
purchasing such assets or the appropriate corporation or
entity shall assume by written instrument, the obligation to
deliver to the holder of each share of Series B 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 B Preferred Stock and
all other obligations of the Company under this Section VII,
and effective provisions are made in the Articles or
Certificate of Incorporation of such successor or transferee
corporation providing for conversion privileges relating to
the Series B 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 B 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 B 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 B
Preferred Stock and such determination shall be binding upon
the Company and the holders of the Series B 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 B Preferred
Stock, in addition to those adjustments required by this
Section VII, as it in its sole
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discretion shall determine to be advisable in order that any
consolidation or subdivision of the Class A Common Stock, or
any issuance wholly for cash of any shares of Class A Common
Stock at less than the current market price, or any issuance
wholly for cash of shares of Class A Common Stock or
securities which by their terms are convertible into or
exchangeable for shares of Class A Common Stock, or any
issuance of rights, options or warrants referred to
hereinabove in this Section VII, hereinafter made by the
Company to the holders of its Class A Common Stock shall not
be taxable to them.
(vi) Upon any adjustment of the number of the
shares of Class A Common Stock issuable upon conversion of
shares of Series B 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 B Preferred Stock, at its address
appearing on the Register for the Series B 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 B
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 B Preferred Stock, the number of
shares of Class A Common Stock deliverable upon conversion of
the Series B Preferred Stock.
(viii) The Company shall not be required to issue
fractional shares of Class A Common Stock upon conversion of
the Series B 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 B Preferred Stock;
PROVIDED that the Company shall not be required to pay any tax
which may be payable in respect of any transfer involved in
the issue of any shares of Class A Common Stock
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in a name other than that of the registered holder of the
Series B 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 B PREFERRED
STOCK.
In the event:
(a) of any consolidation or merger to which the
Company is a party and for which approval of any stockholders
of the Company is required, or of the conveyance or transfer
of the properties and assets of the Company substantially as
an entirety, or of any capital reorganization or
reclassification or change of the Common Stock (other than a
change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a
subdivision or combination); or
(b) of Liquidation; or
(c) that the Company proposes to take any other
action which would require an adjustment in the number of
shares of Class A Common Stock or other securities or assets
issuable upon conversion of shares of Series B Preferred Stock
pursuant to Section VII;
then the Company shall cause to be given to each of the
registered holders of the Series B Preferred Stock at its
address appearing on the Register for the Series B 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. The failure to give the notice required by
this Section VIII or any defect therein shall not affect the
legality or validity of any
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distribution, right, warrant, consolidation, merger,
conveyance, transfer or Liquidation, or the vote upon any
action.
IN WITNESS WHEREOF, the Company has caused this Certificate to be duly
executed in its corporate name on this 20th day of February, 1998.
GUARDIAN INTERNATIONAL, INC.
By:/S/ DARIUS G. NEVIN
----------------------------------
Darius G. Nevin, Vice President
By:/S/ SHEILAH GINSBURG
----------------------------------
Sheilah Ginsburg, Secretary
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STATE OF FLORIDA )
)
COUNTY OF BROWARD )
BEFORE ME, the undersigned authority, personally appeared DARIUS G.
NEVIN and SHEILAH GINSBURG, to me known to be the Vice President and Chief
Financial Officer and Secretary, respectively, of GUARDIAN INTERNATIONAL, INC.,
a Nevada corporation, who acknowledged before me that they have executed the
foregoing Certificate in their respective capacity as officers of the said
corporation for the reasons and purpose therein expressed, and that the
statements contained in the said Certificate are true and correct.
Sworn to and subscribed before me at Broward, Florida this 20th day of
February, 1998.
/S/ L. MARLENE CROSSLEY
--------------------------
L. Marlene Crossley
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EXHIBIT 10.(a)
EXHIBIT 10(A)
STOCK PURCHASE AGREEMENT
AGREEMENT effective as of February 1, 1998 by and among
Guardian International, Inc., a Nevada corporation (the "Buyer") and the sellers
listed on Exhibit A hereto (collectively, the "Sellers" or each, a "Seller").
W I T N E S S E T H:
WHEREAS, Sellers are the owners of all of the outstanding
shares (the "Shares") of common stock, $.01 par value per share (the "Common
Stock"), of Mutual Central Alarm Services, Inc., a New York corporation (the
"Company"); and
WHEREAS, Buyer desires to buy from Sellers and Sellers desire
to sell to Buyer all of the Shares, at the price and subject to the terms and
conditions as more fully described herein; and
WHEREAS, in connection with the purchase and sale of the
Shares pursuant to this Agreement, each of the following Sellers, Joel A. Cohen
("Cohen") and Raymond L. Adams ("Adams"), shall enter into an employment,
confidentiality and non-compete agreement with the Buyer. Cohen and Adams,
together with Norman Rubin, are hereinafter collectively referred to as the
"Principal Shareholders" or each, as a "Principal Shareholder."
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants, representations and warranties made herein, the parties agree
as follows:
1. PURCHASE AND SALE OF SHARES.
1.1 CLOSING. The consummation of the transaction contemplated
by this Agreement (the "Closing") shall take place at the offices of Steel
Hector & Davis LLP at 1900 Phillips Point West, 777 South Flagler Drive, West
Palm Beach, Florida, 33401 on February 23, 1998 (the "Closing Date") or on such
earlier date as the parties may agree.
1.2 PURCHASED SHARES. The Sellers agree to sell and transfer
to the Buyer and, subject to the terms and conditions of this Agreement and in
reliance on the representations, warranties and covenants of the Sellers, the
Buyer agrees to purchase all of the Sellers' right, title and interest in the
Shares for an aggregate purchase price (the "Purchase Price") which, subject to
the provisions of Section 1.4, shall be made up of (i) the sum of the aggregate
amount of cash identified as the "Aggregate Cash Amount" on Schedule 1.2 hereof
and interest on the Aggregate Cash Amount at the Prime Rate (as published in the
Wall Street Journal (the "Prime Rate")) accruing from February 1, 1998 to the
Closing Date, which cash sums shall be paid by certified check or wire transfer
to the Sellers at the Closing and (ii) an aggregate number of newly-issued
shares ("Guardian Shares") of Class A Voting Common Stock, $.001 par value, of
Buyer ("Guardian
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Common Stock") as set forth on Schedule 1.2 hereof (the "Aggregate Shares"). It
is understood and agreed that Schedule 1.2 (i) currently indicates that each
Seller has the right to receive the portion of the consideration to be paid for
such Seller's Shares of the Company in Guardian Common Stock and the portion to
be paid in cash at the Closing within the parameters specified on Schedule 1.2;
(ii) when delivered by the Sellers to the Buyer at the Closing shall specify the
number of Guardian Shares and amount of cash to be paid by the Buyer to each
Seller, and (iii) shall be the final and binding determination of the allocation
of the Purchase Price among the Sellers and as between cash and Guardian Shares.
1.3 DELIVERIES. At the Closing, the Sellers shall deliver the Shares to
the Buyer, free and clear of all liens, encumbrances, claims, pledges, security
interests, options and other agreements or restrictions (collectively, "Liens"),
either duly endorsed in blank or accompanied by duly executed stock powers. At
the Closing, the Sellers shall also deliver to the Buyer the books and records
of the Company. Buyer shall deliver to Emanuel Zimmer, Esq. Escrow Account one
check or one wire transfer in an amount equal to the Cash Purchase Price and
shall deliver stock certificates for the Guardian Shares issued in the names and
amounts as set forth on Schedule 1.2 which amounts shall be determined for each
Seller by multiplying the total number of Guardian Shares by a fraction having a
numerator equal to the number of Shares of Common Stock of the Company owned by
such Seller and the denominator equal to the total number of Shares of Common
Stock of the Company outstanding on the Closing Date, PROVIDED, HOWEVER, the
foregoing formula shall permit rounding (whether up or down) so that no Seller
shall receive a fractional share, but in no event shall the aggregate amount of
Guardian Shares so issued exceed 2,000,000 shares. The final determination of
any such rounding shall be set forth on Schedule 1.2 and Buyer shall be entitled
to rely on such Schedule for purposes of delivering the Guardian Shares
hereunder.
1.4 POST-CLOSING ADJUSTMENT. Within 45 (forty-five) days after the
Closing Date, Sellers shall determine the Net Working Capital Surplus (as
defined below) of the Company as of February 1, 1998 and shall deliver to the
Buyer a certificate (the "Certificate") setting forth such "Net Working Capital
Surplus." "Net Working Capital Surplus" shall mean the excess of X minus Y,
where X equals the sum of current assets plus security deposits and Y equals the
sum of current liabilities minus the "Litigation Contingency." All amounts shall
be determined by reference to the interim financial statements of the Company
dated as of January 31, 1998, certified by the President of the Company and
reviewed by Merdinger, Fruchter, Rosen & Corso, P.C. and delivered pursuant to
Section 2.9. The "Litigation Contingency" shall be $25,000 which shall be
reserved on the books of the Company for expenses incurred in connection with
(including amounts in settlement of) all litigation as to which the Company is a
defendant on the Closing Date. If, within 5 (five) business days following
receipt by the Buyer of the Certificate, Buyer has not given Sellers notice of
its objection to the Certificate (which notice must contain a statement of the
basis of Buyer's objection), then, Buyer shall deliver to Emanuel Zimmer, Esq.,
on behalf of the Sellers, a check payable to Emanuel Zimmer, Esq. in the amount
of Net Working Capital Surplus set forth in the Certificate plus interest on
such Net Working Capital Surplus at the Prime Rate from February 1 to the
payment date, which amounts shall be deemed part of the Purchase Price and shall
be distributed to the Sellers on a pro rata basis. If Buyer gives notice of
objection, then the issue in dispute will be submitted to
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Ernst & Young LLP, accountants for resolution, each of Buyer and Sellers bearing
50% of the fees of such accountants for such determination.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLERS.
The Company and the Principal Shareholders, and, to the extent
expressly provided herein, the Sellers, jointly and severally, hereby represent
and warrant to the Buyer as follows:
2.1 CORPORATE ORGANIZATION AND GOOD STANDING. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of New York, and has full corporate power and authority to carry on
its business as it is now being conducted (the "Business") and to own the
properties and assets it now owns. Except as set forth on Schedule 2.1, the
Company is duly qualified as a foreign corporation or authorized to transact
business in and is in good standing under the laws of each jurisdiction in which
the conduct of its Business or the ownership of its assets requires such
qualification or authorization, which jurisdictions are set forth in Schedule
2.1. The Company, simultaneously herewith shall deliver to Buyer complete and
correct copies of the Certificate of Incorporation and Bylaws of the Company as
presently in effect. True, complete and correct copies of the minute books of
the Company have been previously delivered to the Buyer. The minute books are
current as required by law, contain the minutes of all meetings of the
incorporators, Board of Directors, committees of the Board of Directors, if any,
and the shareholders thereof from the respective dates of incorporation to the
date hereof, and accurately reflect all material actions taken by the
incorporators, Board of Directors, committees of the Board of Directors and
shareholders of the Company. All capital stock of the Company, including the
Shares, was issued in compliance with all applicable federal and state
securities laws. Except as set forth on Schedule 2.1, the Company has no
subsidiaries and owns no capital stock or other securities or interests of or in
any other entity, partnership or joint venture. The transactions contemplated
herein have been approved by all necessary corporate action on the part of the
Company and its shareholders.
2.2 CAPITALIZATION. The authorized capital stock of the
Company consists of 3,400,000 shares of Common Stock, par value $.01 per share,
of which 3,400,000 are issued and outstanding. Schedule 2.2 sets forth a true,
accurate and complete listing of the shareholders of the Company and the number
of shares of Common Stock held by each of them.
All issued and outstanding shares of capital stock of the
Company are validly issued, fully paid, non-assessable, free of preemptive
rights and are not subject to any restriction on transfer under the charter or
Bylaws of the Company or under any agreement or otherwise, except as otherwise
set forth on Schedule 2.2. Except as set forth on Schedule 2.2, no shares of
capital stock of the Company are held in the treasury of the Company, and there
are no outstanding (i) securities convertible into or exchangeable for any of
the capital stock of the Company; (ii) options, warrants or other rights to
purchase or subscribe to capital stock of the Company; or (iii) commitments,
agreements or understandings of any kind relating to the issuance, redemption or
repurchase by the Company or others of any capital stock thereof, any such
convertible or exchangeable securities or any options, warrants or rights.
Except as listed on Schedule 2.2, neither the Sellers nor the
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Company have entered into any agreement or commitment to register its equity or
debt securities under the Securities Act of 1933, as amended (the "Securities
Act"). There are no dissenters' rights in connection with the transactions
contemplated by this Agreement.
2.3 TITLE OF STOCK. The Sellers are the record and beneficial
owners of the Shares, free and clear of any and all Liens, which Shares
represent one hundred percent (100%) of the authorized, issued and outstanding
capital stock of the Company and, upon the sale of the Shares in accordance with
this Agreement, the Buyer will acquire good, valid and indefeasible title to the
Shares, free and clear of any and all Liens.
2.4 AUTHORIZATION; VALIDITY. Each of the Sellers has full
power, capacity and authority to enter into this Agreement and to carry out the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of the Sellers and is the legal, valid and
binding obligation of each of the Sellers, enforceable in accordance with its
terms, except as such terms may be limited by bankruptcy, insolvency,
moratorium, reorganization and other laws of general application affecting the
enforcement of creditors' rights generally and by the availability of equitable
remedies.
2.5 NO VIOLATION. The Company and the Principal Shareholders
hereby represent and warrant that neither the execution and delivery of this
Agreement nor the performance by the Company and the Sellers of their
obligations hereunder will (a) violate any provision of the Certificate of
Incorporation or By-laws of the Company, (b) with or without the giving of
notice or the passage of time, violate, or be in conflict with, or constitute a
breach or default under (or would constitute a default or result in a breach
with the giving of notice, lapse of time or both), or require the consent of any
other party to, or result in the creation or imposition of any Lien upon any of
the assets of the Company under, any agreement or commitment to which the
Company is a party or by which it is bound, or (c) violate any authorization,
consent, approval, license, statute or law or any judgment, decree, order,
regulation or rule of any court, administrative agency or any federal, state,
local, municipal, or foreign government, governmental or quasi-governmental
agency or authority, or body exercising any administrative, executive, or
regulatory authority (each, a "Governmental Authority") or arbitrator to which
the Company, the Sellers or the Shares is subject. Without limiting the
generality of the foregoing, the sale and delivery of the Shares is exempt from
the registration requirements of the Securities Act and any applicable state
securities laws.
2.6 CONSENT AND APPROVALS OF GOVERNMENTAL AUTHORITIES. The
Company and the Principal Shareholders hereby represent and warrant that no
consent, approval or authorization of or declaration, filing or registration
with, any federal, state, local or other Governmental Authority (including,
based in part upon representations of the Buyer, the Federal Trade Commission
and the Antitrust Division of the Department of Justice pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) is required to
be made or obtained by the Company or the Sellers in connection with the
execution, delivery and performance of this Agreement.
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2.7 BROKERS. No broker, finder or other similar intermediary
has been engaged by the Company in connection with the transaction contemplated
by this Agreement.
2.8 LICENSES; COMPLIANCE. Schedule 2.8 sets forth separately
as to the Company all material authorizations, consents, approvals, licenses and
permits required under applicable law or regulation for the ownership or
operation of the assets owned or operated by the Company or for the conduct of
the Business of the Company. All such authorizations, consents, approvals,
licenses and permits (collectively, the "Authorizations") have been duly issued
or obtained, are in full force and effect and are in accordance therewith in all
material respects. Except as otherwise set forth in Schedule 2.8, the Company is
in compliance with (i) the terms and conditions of all such Authorizations, (ii)
all laws, statutes, regulations and ordinances affecting the Company and its
Business and assets, and (iii) all judgments, orders, decrees, rulings or other
decisions of any Governmental Authority, court or arbitrator having jurisdiction
over the Company. Neither the Principal Shareholders nor the Company has any
reason to believe that such Authorizations will not be renewed by the issuing
Governmental Authority in the ordinary course. None of such Authorizations is
subject to any restriction or condition which would limit in any material
respect the Business and operations of the Company.
2.9 FINANCIAL STATEMENTS. The audited financial statements of
the Company for the fiscal years ending as of December 31, 1997 and December 31,
1996, including, without limitation, the balance sheets, statements of income,
changes in financial position and shareholders equity of the Company, including
related notes, if any, and the unaudited financial statements of the Company for
the month ended January 31, 1998, as certified by the President of the Company
and reviewed by Merdinger, Fruchter, Rosen & Corso, P.C., independent auditors
of the Company (collectively, the "Financial Statements"), were prepared in
accordance with generally accepted accounting principles consistently applied,
are complete and correct and fairly present the financial condition of the
Company and the results of its operations for the periods ending on such dates,
respectively. True and complete copies of the Financial Statements are attached
as Schedule 2.9. Except as provided in the Financial Statements, or as fully
disclosed in Schedule 2.9, the Company has no liabilities or obligations
(whether accrued, absolute, contingent, mature, unmatured, whether due or to
become due or otherwise) which might be or become a charge against the Company
or its assets, including any "loss contingencies" considered "probable" or
"reasonably possible" within the meaning of the Financial Accounting Standard
Board's Statement of Financial Accounting Standards No. 5, except trade payables
and similar liabilities and obligations incurred in the ordinary course of
business since the date of the Financial Statements. The Company has maintained
its books and records in accordance with sound business practices and generally
accepted accounting principles, including, without limitation, the maintenance
of an adequate system of internal controls.
2.10 ABSENCE OF CHANGES. Except as set forth in Schedule 2.10,
since December 31, 1997, the Company has not suffered or taken any of the
following actions: (i) suffered any material adverse effect in its financial
condition, assets, liabilities (absolute, accrued, contingent or otherwise),
reserves, Business, prospects or operations; (ii) incurred any material
liabilities or obligations (whether absolute, accrued, contingent or otherwise),
except items incurred in the ordinary course of business; (iii) increased, or
experienced any material change in any assumptions
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underlying, or methods of calculating, any bad debt, contingency or other
reserves; (iv) permitted or allowed any of its assets to be subjected to any
Liens of any kind, except for Liens for Taxes not yet due or other minor
encumbrances; (v) leased, sold, transferred or otherwise disposed of any of its
assets except in the ordinary course of business; (vi) made any capital
expenditure or commitment for replacements or additions or structural
improvements or maintenance to property, plant, equipment or other capital
assets in excess of $50,000; (vii) declared, paid or set aside for payment any
dividend or other distribution with respect to its capital stock, redeemed,
purchased or otherwise acquired, directly or indirectly, any shares of capital
stock or other securities of the Company; (viii) made any change in its method
of accounting or accounting practice; (ix) issued, sold or delivered or agreed
to issue, sell or deliver any shares of capital stock of the Company or any
options, warrants or rights to acquire capital stock or securities convertible
into or exchangeable for capital stock; (x) increased the salaries,
compensation, pension or other benefits payable to any manager or employee of
the Company or entered into any employment agreement with any officer or
salaried employee that is not terminable by the employer, without cause and
without penalty on 30 days notice or less, except in the ordinary course of
business; (xi) forgiven or canceled any claims or waived any rights of material
value; (xii) suffered any casualty, damage, destruction or property loss
(whether or not covered by insurance) materially adversely effecting the
Company; (xiii) suffered any loss of employees due to resignation or customers
that materially adversely affect the Company, except in the ordinary course of
business; or (xiv) agreed, whether in writing or otherwise, to take any of the
actions described in this Section 2.10.
2.11 UNDISCLOSED LIABILITIES. Except as set forth in Schedule
2.11, the Company has no liabilities, obligations or unrealized or anticipated
losses (whether accrued, absolute, contingent, mature, unmatured, whether due or
to become due or otherwise) that are not fairly and adequately reflected or
reserved against on the Financial Statements, and, to the knowledge of the
Principal Shareholders, there is no circumstance, condition, event or
arrangement that hereafter is likely to give rise to any such liabilities,
obligations or losses.
2.12 LITIGATION; DISPUTES. Except as set forth in Schedule
2.12, there is no action, suit, proceeding, mediation or investigation pending,
or to the knowledge of the Principal Shareholders, threatened against or
relating to the Company or its assets or against the Sellers relating to the
Company before any court, Governmental Authority, mediator or arbitrator, nor,
to the knowledge of the Principal Shareholders and the Company, are there any
facts or circumstances creating a reasonable basis for the institution of any
such action, suit, proceeding, mediation or investigation. All the actions,
suits, proceedings, mediation or investigations described on Schedule 2.12 are
being diligently prosecuted and, except as set forth in Schedule 2.12, are
adequately covered by insurance or adequate reserves have been set aside
therefor on the Financial Statements.
2.13 TAXES; TAX ELECTIONS. "Tax" as used herein shall mean any
tax (including any income tax, capital gains tax, value-added tax, sales tax,
property tax, gift tax or estate tax), levy, assessment, tariff, duty,
deficiency, or other fee, and any related charge or amount (including any fine,
penalty, interest, or addition to tax), imposed, assessed, or collected by or
under the authority of any Governmental Authority. The Company is currently, and
has been since formation, operating as an "S" corporation pursuant to Section
1362 of the Internal Revenue Code of 1986 or any
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successor law, and regulations issued by the IRS pursuant to the Internal
Revenue Code and any successor law (the "Code"). The Company has filed, caused
to be filed or has obtained extensions to file all foreign, federal, state and
local Tax returns which are required to be filed by it, and which returns are
true, complete and correct, and has paid or caused to be paid, or has reserved
on its books amounts sufficient for the payment of, all Taxes as shown on said
returns or on any assessment received by it and all penalties and interest. The
federal income Tax returns of the Company have never been examined by the United
States Internal Revenue Service or any successor agency (the "IRS"). The Tax
returns of the Company are not presently being audited by the appropriate
foreign, federal, state or local authorities, nor are there currently in effect
with respect to the Company any agreement for the extension or waiver of any
statute of limitations on the assessment or collection of any Tax. The Company
has established adequate reserves for the payment of Taxes for years subsequent
to those covered by filed returns. No Tax liens have been filed against the
assets of the Company, no claim for any additional Tax or assessment is being
asserted against the Company by any Tax authority, and neither the Sellers nor
the Company has been notified of, and, to the knowledge of the Principal
Shareholders and the Company, there are no facts or circumstances that could
result in, any claim being asserted with respect to any Taxes. There is no
action, suit, proceeding, investigation or audit pending or, to the best
knowledge of the Principal Shareholders, threatened against the Company in
respect to any Tax or assessment. All foreign, federal, state, county and local
Taxes and assessments or contributions (including interest and penalties, if
any) payable by the Company on or prior to the date hereof were paid when due,
and will be paid to the extent they become due and payable after the date
hereof, and there are no unpaid Taxes which are or could become a Lien on the
properties, Business or assets of the Company. The Company has not filed a
consent to the application of Section 341(f)(2) of the Code, with regard to any
property held, acquired or to be acquired at any time. The Company has not been
a member of an affiliated group filing a consolidated income Tax return nor has
any liability for Taxes of any Person under Treasury Regulation Section 1-1502-6
or any similar provision of state, local or foreign law. The Company is not
obligated nor is a party under any agreements pursuant to which it may be
obligated to make payments which are not deductible under Section 280G of the
Code. All individuals that the Company treats as independent contractors are not
"employees" (within the meaning of Section 3121(d)(2)(1) of the Code or Section
3(6) of the Employee Retirement Income Security Act of 1974 or any successor
law, and regulations and rules issued pursuant to that Act or any successor law
(collectively, "ERISA") for purposes of any federal, state or local Taxes.
2.14 BANK ACCOUNTS. Attached hereto as Schedule 2.14 is a true
and complete list of the names and addresses of all banks and other financial
institutions in which the Company has any accounts, deposits or safe deposit
boxes, and the names of all persons authorized to draw on such accounts or
deposits or to have access to such safe deposit boxes. Except as listed on
Schedule 2.14, as of the Closing, no person will hold a power of attorney on
behalf of the Company. The books of account of the Company show all checks and
drafts outstanding, and, except as disclosed on Schedule 2.14, there are
sufficient funds in the accounts listed on Schedule 2.14 to pay any and all
checks or drafts presented or outstanding but not yet presented on said
accounts.
2.15 REAL PROPERTY. The Company owns no real property.
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2.16 LEASED PROPERTY. The Sellers have previously delivered to
Buyer true and complete copies of the leases of the Company with respect to both
leased real property and leased personal property (respectively, the "Real
Property Leases" and the "Personal Property Leases" and, collectively, the
"Leases" and such property, the "Leased Property"). Schedule 2.16 sets forth a
list of the Leases and separately designates which Leases contain change in
control provisions or otherwise require the consent, waiver or approval of the
other parties thereto with respect to the consummation of the Transactions. The
Leases are the valid and legally binding obligations of the Company and the
lessors thereunder, enforceable in accordance with their respective terms, and
are in full force and effect. None of the real property leased under the Real
Property Leases is affected by, subject to or, to the knowledge of the Principal
Shareholders, threatened by any condemnation or eminent domain proceedings or
any assessments for public improvements. Except as set forth on Schedule 2.16,
(a) the Company has valid leasehold interests in all of the leased real and
personal property subject to the Leases; and (b) neither the Company nor the
Principal Shareholders have received any notice of default or breach under any
of the Leases, (c) none of the Leases are in default, and (d) no event has
occurred which, with the passage of time or the giving of notice or both, would
constitute a default thereunder. The Company has, or will have on or before the
Closing Date, delivered all notices to, and obtained all consents, waivers and
approvals from, all parties that are required in connection with the
transactions contemplated by this Agreement including, without limitation,
estoppel letters from the landlords with respect to the Real Property Leases, in
form and substance satisfactory to the Buyer. The Company enjoys peaceful and
undisturbed possession of the Leased Property. None of the Leased Property is
effected or threatened by or subject to any condemnation or eminent domain
proceeding or any assessments for public improvements.
2.17 TITLE. The Company has valid leasehold interests in all
of its leased property and assets, and good and marketable title to all of its
other property and assets, tangible or intangible, reflected in the Financial
Statements or purported to have been acquired by the Company subsequent to the
date of such statements. Except as set forth in Schedule 2.17 and in the
Financial Statements, such property and assets are free and clear of
restrictions on or conditions to transfer or assignment, and are free and clear
of all Liens, other than Liens for current Taxes not yet due and payable or
which are being contested in good faith by appropriate proceedings (and for
which adequate reserves have been established) and other minor encumbrances
arising in the ordinary course of business, that are not substantial in amount,
do not, in any case or in the aggregate, detract from or interfere in, the
current or future operations of the Business and operations of the Company.
Except as set forth on Schedule 2.17, there are no shared or jointly owned
assets or facilities between or among the Company and those of the Sellers'
Affiliates. "Affiliates" shall be defined in this Agreement to mean, as to any
person, any other person, which, directly or indirectly, is in control of, is
controlled by, or is under common control with, such person. The term "control,"
as applied to any person, means the possession, direct or indirect, of the power
to direct or cause the direction of the management and policies of such person,
whether through the ownership of voting securities or other ownership interest,
by contract or otherwise. A true, accurate and complete copy of the asset list
of the Company, setting forth a description of all the tangible and intangible
assets of the Company is attached hereto as Schedule 2.17. Such assets
constitute all of the assets necessary to operate the Business in the ordinary
course consistent with past practices. The Principal Shareholders shall
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deliver to the Buyer such additional assurances as the Buyer may reasonably
request with respect to the assets of the Company.
2.18 CONDITION OF PROPERTIES. The plants, structures, and
equipment of the Company and all other property and assets owned or used by the
Company are in good and operating condition, are in condition to pass safety and
health examinations under applicable laws and are available for immediate use in
the Business and operations of the Company. The Leased Real Property and the
plants, structures, equipment and other improvements located thereon, and the
present use thereof, comply with all zoning, land use and other laws, ordinances
and regulations of all Governmental Authorities having jurisdiction thereof. To
the knowledge of the Principal Shareholders and the Company, there is no
asbestos-containing material in any of the buildings or facilities on the Leased
Property.
2.19 INTELLECTUAL PROPERTY; TRADE SECRETS. The Company neither
owns nor licenses Intellectual Property (which is defined to include the name of
the Company, all fictional business names, trading names, registered and
unregistered trademarks, service marks and applications, all patents and patent
applications, and all copyrights in both published works and unpublished works)
in the conduct of its Business. Neither the Company nor the Principal
Shareholders have received any notice of any claims, controversies, lawsuits or
judgments that affect the use or availability of the Company's name. All account
encryption codes and associated software (collectively, "Trade Secrets") of the
Company are current, accurate, and sufficient in detail and content to identify
and explain them and to allow their full and proper use without reliance on the
special knowledge or memory of others. The Company has taken all reasonable
precautions to protected the secrecy, confidentiality, and value of its Trade
Secrets. The Trade Secrets are not part of the public knowledge or literature,
and, to the knowledge of the Principal Shareholders, have not been used,
divulged, or appropriated either for the benefit of any Person (other than the
Company) or to the detriment of the Company. "Person" shall mean any individual,
corporation, general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization or other entity. To the
knowledge of the Principal Shareholders, no Trade Secret is subject to any
adverse claim or has been challenged or threatened in any way. The Company
licenses all software used by of the Company pursuant to valid and binding
license agreements. All license agreements are in full force and effect and
there are no defaults (or events which with notice, lapse of time or both, could
constitute defaults) under such license agreements. The consummation of the
transactions contemplated by this Agreement will not alter, impact on or
otherwise affect any of the rights granted to the Company pursuant to such
license agreements. None of the software has manifested any significant
operating problems, other than such problems that have been corrected or are
correctable in the ordinary course of business.
2.20 PATENTS. The Company neither owns nor licenses any
patents in the conduct of its Business.
2.21 CONTRACTS. Schedule 2.21 sets forth a complete and
correct list of each of the following types of contracts (whether oral or
written) to which the Company is a party (collectively, the "Contracts"): (i)
contracts for the employment of any officer or employee; (ii) contracts for the
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purchase of materials, supplies, services, merchandise or equipment; (iii)
management agreements, franchise agreements, license agreements, advertising
agreements and contracts for the purchase and sale of inventory; (iv) agreements
or arrangements for the sale or lease of any of its assets other than in the
ordinary course of business; (v) mortgages, pledges, conditional sales
contracts, security agreements or other similar agreements; (vi) leases of
machinery or equipment; (vii) loan agreements, promissory notes, guarantees,
letters of credit, subordination or similar type agreements; (viii) agreements
or arrangements for the acquisition or sale of real or personal property; (ix)
all consulting and independent contractor contracts; (x) all contracts and
policies for insurance coverage; (xii) agreements with customers; (xiii) all
joint venture, strategic alliance and partnership agreements; and (xiv) any
contract not otherwise covered by clauses (i) through (xiii) above which
involves annual or aggregate payments or receipts in excess of $5,000. The
Company has materially performed all of the obligations required to be performed
by it to date under such Contracts, is not in default under any such Contracts,
and no event has occurred which with the passage of time, the giving of notice
or both would constitute a default under any such Contracts. Except as set forth
in Schedule 2.21, all of such Contracts shall remain in full force and effect
after the date of the Closing and none of such Contracts contain change in
control provisions. The Sellers will obtain all necessary consents with respect
to any change of control or other such provisions from the other parties to the
Contracts with respect to the transactions contemplated by this Agreement. To
the knowledge of the Principal Shareholders and the Company, there is no reason
that any of the agreements between the Company and its customers will be
terminated prior to their stated expiration date or will not be renewed in the
ordinary course of business. The Sellers have delivered to the Buyer true and
complete copies of the Contracts described in Schedule 2.21 and all amendments
thereto, provided, however, that in the case of customer agreements, the Sellers
have delivered to the Buyer true and complete copies of the forms of customer
agreements and hereby represent and warrant that all customer agreements conform
to one of such forms in all material respects. The Company and the Principal
Shareholders represent and warrant that all customer agreements which contain
provisions giving the customer the right to terminate as a result of the
transactions contemplated hereby do not exceed monthly recurring income in
excess of $5,000 in the aggregate.
2.22 INSURANCE POLICIES. The Company has in full force and
effect, with responsible insurance companies, policies of insurance with respect
to its employees, assets and Business insuring the Company against such
casualties and contingencies and of such types and amounts as are reasonably
adequate for the size and scope of the Business conducted and properties held by
the Company, and the Company maintains such other insurance as may be required
by law and by all contracts to which it is a party. Schedule 2.22 sets forth a
description of all policies of insurance that the Company has and maintains in
full force and effect, the annual premiums therefor, the limits of liability,
whether such policies are on an occurrence or "claims made" basis and all
performance bonds and letters of credit securing such obligations. True and
complete copies of all such policies have previously been delivered to the
Buyer. If the Company has any self-insurance arrangement by or affecting the
Company, such arrangement shall also be described on Schedule 2.22, including
any reserves established thereunder. All premiums due on such policies have been
paid and, to the knowledge of the Principal Shareholders, the aggregate amount
of all claims under such policies do not exceed policy limits. Neither the
Company nor the Sellers has received any
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notification from any insurance carrier denying or disputing any claim made by
or on behalf of the Company denying or disputing any coverage for any claim,
denying or disputing the amount of any claim, or regarding the possible
cancellation of any policies. Except as set forth in Schedule 2.22, to the
knowledge of the Principal Shareholders, there is no reason to believe that any
of such policies will not be renewed by the respective insurance carriers with
substantially the same coverage. The Company has not received (i) any notice of
cancellation of any policy, (ii) any notice that any issuer of such policy has
filed for protection under applicable bankruptcy laws or is otherwise in the
process of liquidating or has been liquidated, (iii) any other indication that
such policies are no longer in full force and effect or that the issuer of any
such policy is no longer willing or able to perform its obligations thereunder,
or (iv) any refusal of coverage or any notice that a defense will be afforded
with reservation of rights. All premiums due on such policies have been paid,
and the aggregate amount of all claims under such policies do not exceed policy
limits. The Company has given notice to the insurers of all claims that may be
insured thereunder.
2.23 CUSTOMERS. No customer of the Company accounts for more
than five percent (5%) of the Company's gross revenues during the year ended
December 31, 1997, ranked by revenues. To the knowledge of the Principal
Shareholders, there is no reason to believe that the benefits of any material
relationship of the Company with customers will not continue to be available to
the Company or that any such relationship will be changed in an adverse manner
as a result of the transactions contemplated by this Agreement.
2.24 ERISA AND OTHER COMPENSATION PLANS. Except as set forth
in Schedule 2.24, the Company does not maintain or participate in any
arrangements or policies, deferred compensation arrangements, stock purchase,
stock option, employee benefit plan (as defined in Section 3(3) of ERISA), or
any other employee benefit policies, programs or arrangements maintained
currently or in the past by ERISA Employer, under which ERISA Employer has any
current or future obligation or under which any former or present employee of
ERISA Employer has any current or future rights to benefits (the "Benefit
Plans"). ERISA Employer does not contribute and has not contributed to any
multi-employer pension plan (as defined in Section 4001(a)(3) of ERISA). The
ERISA Employer does not participate and has not participated in any employee
benefit plan maintained, or subscribed to, by any other employer.
2.25 LABOR MATTERS. Except as set forth in Schedule 2.25(a),
the Company is not a party to or bound by any collective bargaining agreement or
any other agreement with a labor union relating to the Company's employees, and,
to the knowledge of the Sellers, there has been no effort by any labor union
during the twenty-four (24) months prior to the date of this Agreement to
organize any of such employees into one or more collective bargaining units.
Except as set forth in Schedule 2.25(b), (i) the Company is in compliance with
all federal, state and local laws regarding employment and employment practices,
conditions of employment, wages and hours (including, without limitation, the
Immigration Reform and Control Act of 1986, as amended and supplemented, and
Sections 212(n) and 274A of the Immigration and Nationality Act, as amended and
supplemented, and all implementing regulations relating thereto), and the
Company does not employ any unauthorized aliens (as such term is defined under 8
CFR /section/ 274a.1(a)), (ii) the Company is not engaged in unfair labor
practices, and there are no unfair labor practice complaints pending or, to
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the knowledge of the Sellers, threatened against the Company before the National
Labor Relations Board or otherwise, (iii) there are no EEOC violations or age,
sex, racial discrimination, occupation safety or health standards claims
charged, pending or, to the knowledge of the Sellers, threatened against the
Company and, to the knowledge of the Sellers, no actions have been taken or
practices followed by any employee of the Company that would give rise to any
such claims, (iv) there is no labor strike or dispute pending or, to the
knowledge of the Sellers, threatened against or involving the Company or at the
current customer locations that may effect the Business of the Company, and (v)
none of the employees of the Company are presently subject to collective
bargaining agreements or are engaged in organizing, or are members of, any union
or other employee group that is seeking recognition as a bargaining unit.
2.26 EMPLOYEES. The Company has 54 employees. Schedule 2.26
lists the names, job descriptions and annual salary rates, length of service,
commissions, benefits and other compensation for all present officers,
directors, managers, and employees of the Company and also contains a complete
and correct copy of the permanent payroll of the Company as of December 31,
1997. None of the Company's employees has any employment agreement (written or
oral).
2.27 ENVIRONMENTAL MATTERS. Except with respect to the matters
set forth in Schedule 2.27, (i) the Company is in compliance with (A) all legal
requirements designed to minimize, prevent, punish or remedy the consequences of
actions that damage or threaten the environment or public health and safety
("Environmental Laws") relating to the generation, management, handling,
transportation, treatment, disposal, storage, delivery, discharge, release or
emission of any waste, pollutant or toxic, hazardous or other substance
(collectively, "Hazardous Materials"), and (B) all regulations and requirements
promulgated by the Occupational Safety and Health Administration that may be
applicable to the Company; (ii) there is no proceeding, suit or investigation
pending or, to the knowledge of the Sellers, threatened with respect to any
violation or alleged violation of the Environmental Laws, and there is no
reasonable basis known to the Sellers for the institution of any such
proceeding, suit or investigation; (iii) there has been no spillage, leakage,
contamination or release of any Hazardous Materials for which appropriate
remedial action has not been completed, and no transportation of Hazardous
Materials to any other location; (iv) none of the Leased Real Property is
contaminated with any Hazardous Materials, and the waters below and adjacent
thereto have not received any Hazardous Materials from the operations of the
Company; and (v) there are no underground storage tanks or other underground
facilities on the Leased Real Property.
2.28 RECEIVABLES. All accounts, notes and mortgages receivable
and premiums due and uncollected as reflected on the latest balance sheet
included in the Financial Statements and all accounts, notes and mortgages
receivable and premiums due and uncollected arising subsequent to the date of
such balance sheet, (i) to the knowledge of the Principal Shareholders,
represent valid obligations due to the Company enforceable in accordance with
their respective terms and conditions, (ii) to the knowledge of the Principal
Shareholders, are not subject to any defense, offset or counterclaim, and (iii)
subject only to a reserve for bad debts computed in a manner consistent with
past practice, have been collected or are collectible in the ordinary course of
Business.
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2.29 AFFILIATED TRANSACTIONS. Except as set forth on Schedule
2.29, neither of the Sellers is an owner, partner, officer, director, employee,
agent, investor or consultant in any business competitive with that of the
Company. Except as set forth on Schedule 2.29, there are no loans, guarantees,
leases or commitments from or to any of the Sellers or any Affiliate thereof, on
the one hand, and the Company, on the other hand. Except as set forth in
Schedule 2.29, there are no outstanding transactions between any of the Sellers
or any Affiliate thereof and the Company, nor do any of the Sellers or
Affiliates have any interest in any property (whether real, personal or mixed,
tangible or intangible), used in or pertaining to the Business.
2.30 CONSENTS; APPROVALS. Except as set forth on Schedule
2.30, no consents, approvals, waivers or other authorizations of any
Governmental Authority or other third party are required to be obtained by the
Sellers to consummate the transactions contemplated hereby, nor is any
corporate, shareholder or board of directors action required.
2.31 AFFILIATED TRANSACTIONS. The Company has at all times
been operated as a separate business.
2.32 DISCLOSURE. No representation or warranty of the Company,
the Principal Shareholders, or the Sellers herein and no information disclosed
by the Sellers to the Buyer in connection herewith contains any untrue statement
of a material fact or omits to state a material fact necessary to make the
statements contained herein or therein not misleading. Except as otherwise
disclosed in this Agreement or the Schedules to this Agreement, there is no fact
presently known to the Principal Shareholders that would or could reasonably be
expected to have a material adverse effect on the financial condition or
prospects of the Company.
2.33 NO DISTRIBUTION. Each of the Sellers is acquiring the
Guardian 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. Each of the Sellers understands that
the Guardian Shares are "restricted securities" as defined in Rule 144 under the
Securities Act, and have not been registered pursuant to the provisions of the
Securities Act, in as much as the proposed purchase of the Guardian Shares is
taking place in a transaction not involving any public offering.
2.34 SOPHISTICATION. Each of the Sellers is knowledgeable,
experienced and sophisticated in financial and business matters and is able to
evaluate the risks and benefits of the investment in the Guardian Shares.
2.35 ECONOMIC RISK. Each of the Sellers is able to bear the
economic risk of its investment in the Guardian Shares for an indefinite period
of time because the Guardian Shares have not been registered under the
Securities Act and, therefore, cannot be sold unless subsequently registered
under the Securities Act or an exemption from such registration is available.
2.36 ACCESS TO INFORMATION. Each of the Sellers has been
furnished or otherwise had full access to such other information concerning
Buyer and its subsidiaries as it has requested
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and that was necessary to enable the Sellers to evaluate the merits and risks of
an investment in Buyer, and after a review of this information, has had an
opportunity to ask questions and receive answers concerning the financial
condition and business of Buyer and the terms and conditions of the securities
purchased hereunder, and has had access to and has obtained such additional
information concerning Buyer and the securities as each of the Sellers has
deemed necessary.
2.37 ACCREDITED INVESTOR. Each of the Sellers represents and
warrants that it is an "accredited investor" as defined in Rule 501(a) of
Regulation D promulgated under the Securities Act.
2.38 LOW VOLTAGE SYSTEMS TECHNOLOGY, INC. The Principal
Shareholders and the Company represent and warrant that the equity ownership of,
and loan receivable relating to, Low Voltage Systems Technology, Inc., a New
Jersey corporation ("LST"), has been transferred out of the Company, prior to
the Closing Date, as reflected in the unaudited financial statements for the
period ended January 31, 1998. Prior to the Closing Date, Cohen and Adams shall
resign from the Board of Directors of LST.
Each of the representations and warranties shall survive
Closing for a period of one (1) year, and each of which shall be deemed to be
material and relied upon by the Buyer regardless of any investigation made by or
information known to the Buyer, PROVIDED, HOWEVER, that the representation
contained in Section 2.13 (Taxes; Tax Election) shall survive for the applicable
statute of limitations, and any tolling or extensions thereof. If any claim for
indemnification under Section 4 in connection with any representation or
warranty is made prior to the termination of its period of survival, the
termination of such survival period shall be tolled until the final resolution
of such claim.
3. REPRESENTATIONS AND WARRANTIES OF THE BUYER.
3.1 CORPORATE ORGANIZATION. Buyer is an organization duly
organized, validly existing and in good standing under the laws of the State of
Nevada. Buyer has full corporate power and authority to enter into this
Agreement and to carry out the transactions contemplated hereby. The Board of
Directors of Buyer has duly authorized the execution and delivery of this
Agreement and the performance by the Buyer of its obligations hereunder. No
other corporate proceedings on the part of Buyer are necessary to authorize the
execution and delivery of this Agreement and the performance by Buyer of its
obligations hereunder.
3.2 NO VIOLATION. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (a)
violate any provisions of the Certificate of Incorporation or Bylaws of Buyer,
(b) violate or be in conflict with, or constitute a default under, or require
the consent of any other party to, any agreement or commitment to which Buyer is
a party or by which Buyer is bound, or (c) to the best knowledge of Buyer
violate any statute or law or any judgment, decree, order, regulation or rule of
any court or Governmental Authority to which Buyer is subject.
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3.3 BROKERS. No broker, finder or other similar intermediary
has been engaged by Buyer in connection with the transaction contemplated by
this Agreement.
3.4 CONSENT AND APPROVALS OF GOVERNMENTAL AUTHORITIES. No
consent, approval or authorization of or declaration, filing or registration
with, any Governmental Authority (including, based in part upon representations
of the Sellers, the Federal Trade Commission and the Antitrust Division of the
Department of Justice pursuant to the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended) is required to be made or obtained by the Buyer in
connection with the execution, delivery and performance of this Agreement.
3.5 NO DISTRIBUTION. The Buyer is acquiring the Shares for its
own account with the present intention of holding such securities for purposes
of investment, and it has no intention of selling such securities in a public
distribution in violation of the federal securities laws or any applicable state
securities laws. The Buyer understands that the Shares are "restricted
securities" as defined in Rule 144 under the Securities Act and have not been
registered pursuant to the provisions of the Securities Act, in as much as the
proposed purchase of the Shares is taking place in a transaction not involving
any public offering.
3.6 SOPHISTICATION. The Buyer is knowledgeable, experienced
and sophisticated in financial and business matters and is able to evaluate the
risks and benefits of the investment in the Shares.
3.7 ECONOMIC RISK. The Buyer is able to bear the economic risk
of its investment in the Shares for an indefinite period of time because the
Shares have not been registered under the Securities Act and, therefore, cannot
be sold unless subsequently registered under the Securities Act or an exemption
from such registration is available.
3.8 ACCESS TO INFORMATION. The Buyer has been furnished or
otherwise had full access to such other information concerning the Company and
its subsidiaries as it has requested and that was necessary to enable the Buyer
to evaluate the merits and risks of an investment in the Company, and after a
review of this information, has had an opportunity to ask questions and receive
answers concerning the financial condition and business of the Company and the
terms and conditions of the securities purchased hereunder, and has had access
to and has obtained such additional information concerning the Company and the
securities as it deemed necessary.
3.9 ACCREDITED INVESTOR. The Buyer is an "accredited investor"
as defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
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4. INDEMNIFICATION.
4.1 GENERAL INDEMNITY.
a. The Sellers, jointly and severally, agree to
indemnify and hold harmless the Buyer from and against any and all liabilities,
damages, claims, deficiencies, assessments, losses, suits, proceedings, actions,
investigations, penalties, interest, costs and expenses, including without
limitation, reasonable fees and expenses of counsel, amounts paid in settlement
and reasonable costs of investigation (whether suit is instituted or not and, if
instituted, whether at the trial or appellate level) (collectively, the
"Liabilities"), whether in law or equity, arising from or in connection with (A)
the failure of any representation of the Company, the Principal Shareholders or
the Sellers contained in this Agreement or in any document delivered in
connection herewith to be true and correct, (B) any breach or violation of any
of the warranties, covenants or agreements of the Company or the Sellers
contained in this Agreement or in any document delivered in connection herewith,
or (C) any acts of the Company or Sellers taken or omitted prior to Closing;
PROVIDED, HOWEVER, that notwithstanding anything to the contrary contained
herein, (i) the first $250,000 (the "Basket") in aggregate amount for all
Liabilities under this Section 4.1(a) for which Sellers would be liable will be
borne by Buyer, and (ii) any and all Liabilities of the Sellers under this
Section 4.1(a) shall be satisfied solely from the 750,000 shares (the "Escrowed
Shares") of the Guardian Shares (the "Cap") which shall be placed in escrow
pursuant to the terms of the Escrow and Pledge Agreement attached hereto as
Exhibit B, PROVIDED, FURTHER HOWEVER, that neither the Cap nor the Basket shall
apply to (i) any Liabilities arising from or relating to Taxes (as such term is
defined in Section 2.13 hereof), and (ii) the extent that any such Liability is
found, in a final unappealable judgment by a court of competent jurisdiction to
have arisen from or related to one or more of Sellers' willful bad faith,
willful misconduct or gross negligence with an intent to defraud. A materiality
qualification in any representation or warranty will not be taken into account
in determining whether the Basket has been met.
The indemnification covenant contained in this Section 4.1(a) shall
survive the consummation of the transactions contemplated hereby for a period of
one year from the Closing Date, provided, however, in the case of Liabilities
arising from or in connection with the representations contained in Section 2.13
(Taxes; Tax Election), such indemnification covenant shall survive for the
applicable statute of limitations, and any tolling or extensions thereof.
b. Subject to the limitations set forth in Section
4.1(a), with respect to the measurement of "Liabilities," the Buyer shall have
the right to be put in the same financial position as it would have been in had
the representations and warranties of the Sellers been true and correct and had
each of the covenants of the Sellers been performed in full.
4.2 INDEMNITY OF EACH SELLER.
a. In addition to the indemnification covenant set
forth in Section 4.1(a), each Seller agrees to indemnify and hold harmless, for
a period of one year from the Closing Date, the Buyer from and against any and
all Liabilities, whether in law or equity, arising from or in
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connection with (A) the failure of any representation expressly made by such
Seller in this Agreement or in any document delivered in connection herewith to
be true and correct, (B) any breach or violation of any of the warranties,
covenants or agreements expressly made by such Seller contained in this
Agreement or in any document delivered in connection herewith, or (C) any acts
of such Seller taken or omitted prior to Closing.
b. With respect to the measurement of "Liabilities,"
the Buyer shall have the right to be put in the same financial position as it
would have been in had the representations and warranties of the Sellers been
true and correct and had each of the covenants of such Seller been performed in
full.
4.3 PROCEDURE. In the event any person or entity not a party
to this Agreement shall make any demand or claim or file or threaten to file or
continue any lawsuit, which demand, claim or lawsuit may result in Liabilities
to any party pursuant to the indemnification provisions of this Agreement, then,
in any such event, within 10 days after notice by the indemnified party (the
"Notice") to the indemnifying party of such demand, claim or lawsuit (provided,
however, that the failure to give such Notice shall not relieve the indemnifying
party of its obligations hereunder unless, and only to the extent that, such
failure caused the damages for which the indemnifying party is obligated to be
greater than they would otherwise have been had the indemnified party given
prompt notice hereunder), the indemnifying party shall have the option, at its
cost and expense, to retain counsel for the indemnified party (which counsel
shall be selected by or be reasonably satisfactory to the indemnified party), to
defend any such demand, claim or lawsuit. Thereafter, the indemnified party
shall be permitted to participate in such defense at its own expense, provided
that, if the named parties to any such proceeding (including any impleaded
parties) include both the indemnifying party and the indemnified party or if the
indemnifying party proposes that the same counsel represent both the indemnified
party and the indemnifying party and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them, then the indemnified party shall have the right to retain its own
counsel at the cost and expense of the indemnifying party. In the event that the
indemnifying party shall fail to respond within 10 days after receipt of the
Notice, the indemnified party may retain counsel and conduct the defense of such
demand, claim or lawsuit, as it may in its sole discretion deem proper, at the
sole cost and expense of the indemnifying party.
4.4 ASSUMPTION OF LITIGATION LIABILITY. The Sellers hereby
agree to indemnify, hold harmless and make whole, the Buyer, for any and all
Liabilities accruing after the Closing Date arising out of or relating to that
litigation as to which the Company is a defendant on the Closing Date; provided,
however, that Buyer shall pay for the first $25,000 of such Liabilities upon
delivery to Buyer of evidence reasonably satisfactory to Buyer of such
Liabilities.
5. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER. The obligation
of the Buyer to consummate the purchase and sale of the Shares is subject to the
fulfillment, at or before the Closing, of all of the following conditions:
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5.1 DUE PERFORMANCE. The Sellers and the Company shall have
fully performed and complied with all agreements and conditions required by this
Agreement to be performed or complied with by them on or prior to the Closing.
5.2 ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of the Company, the Principal Shareholders, and
the Sellers set forth in this Agreement shall be true and correct at the Closing
in all respects, as though made at and as of the Closing.
5.3 SUPPORTING DOCUMENTS. The Buyer shall have received and
approved:
(a) True copies of the Articles of Incorporation and current
Bylaws of the Company; a certificate of good standing with regard to the
Company, together with appropriate corporate resolutions (of the Board of
Directors and the shareholders) and incumbency certificates reasonably
satisfactory to Buyer's counsel;
(b) Certificate(s) evidencing the Shares, duly endorsed or
with appropriate stock powers;
(c) A certificate of each of the Principal Shareholders that
the conditions set forth in Sections 5.1 and 5.2 have been satisfied as of the
Closing; and
(d) Such other documents as the Buyer or its counsel may
reasonably request.
5.4 EMPLOYMENT AGREEMENT. Each of Cohen and Adams shall have
entered into an employment, non-disclosure, non-competition and non-solicitation
agreement with the Buyer and the Company substantially in the form attached as
Exhibits C and D, respectively (collectively, the "Employment Agreements").
5.5 IRREVOCABLE PROXY. Each of the Principal Shareholders
shall have granted to Richard Ginsburg an irrevocable proxy coupled with an
interest, substantially in the form attached as Exhibit E (the "Irrevocable
Proxy"), relating to the voting of the Guardian Shares owned by each Principal
Shareholder for the election of directors of the Buyer.
5.6 REGISTRATION RIGHTS AGREEMENT. Each of the Sellers shall
have entered into a Registration Rights Agreement with the Buyer and certain
shareholders of the Buyer substantially in the form attached as Exhibit F (the
"Registration Rights Agreement").
5.7 OPINION OF COUNSEL. The Buyer shall have received the
opinion of Sellers' counsel in the form attached as Exhibit G.
5.8 SATISFACTION OF COUNSEL. All actions, proceedings,
instruments, documents and other relevant legal matters in connection with the
transactions contemplated by this Agreement shall be reasonably satisfactory to
counsel for the Buyer.
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5.9 THIRD PARTY CONSENTS. All necessary third party consents
of both Buyer (including the consent of Heller Financial, Inc. and Westar
Capital, Inc.) and Sellers (including the consent of the landlord on the central
station leased premises of the Company) shall have been obtained by the Closing
Date.
5.10 AUDITED FINANCIALS. Buyer shall have received from
Merdinger, Fruchter, Rosen and Corso, P.C. (i) an unqualified auditors' opinion
for the financial statements for fiscal year ended December 31, 1997 and (ii) a
comfort or "negative assurances" letter for the interim financial statements for
the period ended January 31, 1998.
5.11 BOARD APPROVAL; SHAREHOLDER APPROVAL. The transactions
contemplated hereby shall have been approved by the full Board of Directors of
Buyer and such approvals shall not have been withdrawn or adversely modified.
The transactions contemplated hereby shall have been approved by the full Board
of Directors of the Company and its shareholders and such approvals shall not
have been withdrawn or adversely modified.
5.12 SECURITIES LAWS. Each Seller shall have completed and
returned to counsel to Buyer a Qualified Investor Questionnaire and the
Representations and Warranties of Shareholders substantially in the forms of
Exhibit H and Exhibit I respectively in a manner which does not adversely affect
the exemption from registration under Section 4(2) of the Securities Act of
1933, as amended.
5.13 AFFILIATE LOANS. Evidence that Sellers have caused the
Company to collect all principal, interest and other amounts on all outstanding
loans made by the Company, except as set forth in Schedule 5.13(a), to
Affiliates of the Company as listed on Schedule 5.13(b) ("Affiliate Loans") such
that all such Affiliate Loans shall be repaid (and, if necessary, prepaid) in
full.
6. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLERS. The
obligation of the Sellers to consummate the purchase and sale of the Shares is
subject to the fulfillment, at or before the Closing, of all of the following
conditions:
6.1 DUE PERFORMANCE. The Buyer shall have fully performed and
complied with all agreements and conditions required by this Agreement to be
performed or complied with by it on or prior to the Closing.
6.2 ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and Warranties of the Buyer set forth in this Agreement shall be
true and correct at the Closing, in all respects, as though made at and as of
the Closing.
6.3 SUPPORTING DOCUMENTS. Counsel for the Sellers shall have
received and approved:
(a) True copies of the Articles of Incorporation and current
Bylaws of the Buyer; a certificate of good standing with regard to the Buyer,
together with appropriate corporate
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resolutions of the Board of Directors and incumbency certificates reasonably
satisfactory to Sellers' counsel;
(b) Certificate(s) evidencing the Guardian Shares issued in
accordance with Schedule 1.2;
(c) A certificate of the Buyer that the conditions set forth
in Sections 6.1 and 6.2 have been satisfied as of the Closing;
(d) A certified check in an amount equal to the Cash Purchase
Price as set forth in Section 1.2 (unless such funds are sent by wire transfer
in accordance with Section 1.2); and
(e) Such other documents as the counsel to the Sellers may
reasonably request.
6.4 EMPLOYMENT AGREEMENT. The Buyer shall have entered into
the Employment Agreements.
6.5 REGISTRATION RIGHTS AGREEMENT. The Buyer and certain
shareholders of the Buyer shall have entered into the Registration
Rights Agreement.
6.6 OPINION OF COUNSEL. The Sellers shall have received the
opinions of Buyer's counsel in the form attached as Exhibit J.
6.7 SATISFACTION OF COUNSEL. All actions, proceedings,
instruments, documents and other relevant legal matters in connection with the
transactions contemplated by this Agreement shall be reasonably satisfactory to
counsel for the Buyer.
6.8 THIRD PARTY CONSENTS. All necessary third party consents
of both Buyer and Sellers shall have been obtained by the date of the Closing.
6.9 BOARD APPROVAL. The transactions contemplated hereby shall
have been approved by the full Board of Directors of the Company and its
shareholders and such approvals shall not have been withdrawn or adversely
modified.
7. WAIVER OF CONDITIONS. The Buyer and the Sellers shall have the right
to waive any part or all of any one or more of the conditions to their
performance set forth in this Agreement and, upon such waiver, the waiving party
may proceed with the consummation of the transactions contemplated hereby. It is
expressly understood that a waiver shall not constitute a waiver of any rights
which that party may have by reason of the breach by the other party of any
other warranty; covenant or agreement or by reason of any misrepresentation made
by the other party.
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8. TERMINATION.
8.1 TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned, but not later than the
Closing Date:
(i) by mutual written consent of the Buyer and the Sellers;
(ii) by the Buyer, in its sole discretion, if any of the
representations or warranties of the Sellers contained herein are not in all
material respects true, accurate and complete or if the Sellers, the Company or
the Principal Shareholders breach any covenant or agreement contained herein;
(iii) by the Buyer, if any required third party consents of
the Company or the Sellers are not obtained or become unobtainable;
(iv) by the Sellers, if any required third party consents of
the Buyer are not obtained or become unobtainable;
(v) by the Sellers, in their sole discretion, if any of the
representations or warranties of the Buyer contained herein are not in all
material respects true, accurate and complete or if the Buyer breaches any
covenant or agreement contained herein; or
(vi) by either the Buyer or the Sellers, if the Closing has
not taken place on or before March 31, 1998, unless the failure to consummate
the Closing on or prior to such date is solely due to such party's fault.
8.2 EFFECT OF TERMINATION. In the event of a termination of
this Agreement pursuant to Section 8.1, written notice thereof shall promptly be
given to the other party hereto and this Agreement shall terminate and the
transactions contemplated hereby shall be abandoned without further action by
the other party hereto, and this Agreement shall forthwith become void and have
no further effect, without any liability on the part of any party hereto or its
affiliates, directors, officers or shareholders, other than with respect to
Section 8.3 and Article 4 hereof. Notwithstanding such termination and anything
contained to the contrary herein, each party shall have the right to seek
damages in the event of a breach by the other party of its obligations under
this Agreement.
8.3 BREAKUP FEE. In the event of the termination of this
Agreement by the Buyer pursuant to Section 8.1(ii) or Section 8.1(iii), or the
Sellers' refusal to consummate the transactions contemplated hereby which
refusal is not permitted by Section 8.1, a breakup fee of $300,000 shall be
paid, within one business day following termination, by the Company to the
Buyer. In the event of the termination of this Agreement by the Sellers pursuant
to Section 8.1(iv) or Section 8.1(v), a breakup fee of $300,000 shall be paid,
within one business day following termination, by the Buyer to the Company.
21
<PAGE>
9. COVENANTS OF THE SELLERS, THE COMPANY AND THE PRINCIPAL
SHAREHOLDERS.
9.1 CONDUCT OF BUSINESS OF THE COMPANY PRIOR TO CLOSING.
Except as may otherwise be contemplated by this Agreement or otherwise consented
to or approved in writing by the Buyer, after the execution hereof: (a) the
businesses of the Company shall be conducted only in the ordinary course of
business consistent with past practices; (b) the Sellers will (i) use their best
efforts to preserve the good will of and contractual relationships with their
respective customers, distributors, franchisors, dealers, licensees, suppliers
and others having business relations with the Company, and (ii) maintain its
properties in customary repair, working order and condition; and (c) the Sellers
will not (i) amend the Company's Articles of Incorporation or Bylaws, (ii) issue
or agree to issue any additional shares of capital stock of any class or series
or securities convertible into or exchangeable for shares of capital stock or
issue any options, warrants or other rights to acquire any shares of capital
stock, (iii) merge or consolidate with or acquire all or substantially all of
the assets or business of any other Company or entity, (iv) incur, assume or
guarantee any indebtedness for money borrowed other than in the ordinary course
of business, (v) settle any claims, actions or proceedings by paying an amount
which, in the aggregate, is in excess of $10,000, (vi) make any management fee,
wage or salary increase or agree to pay any pension or retirement allowance not
required by existing plans or agreements or enter into any employment or
consulting agreement (not terminable at will), bonus or employee benefit plan,
(vii) permit or allow any of its assets to be subjected to any material
mortgage, pledge, lien, security interest, encumbrance, restriction or charge of
any kind, except for liens for taxes not yet due or as otherwise incurred in the
ordinary cause of business, (viii) lease, sell, transfer or otherwise dispose of
any of its material assets, except in the ordinary course of business and
consistent with past practice, (ix) make any material capital expenditure or
commitment for replacements or additions or structural improvements or
maintenance to property, plant, equipment or other capital assets, (x) declare,
pay or set aside for payment any dividend or other distribution in respect to
its capital stock or redeem, purchase or otherwise acquire, directly or
indirectly, any shares of capital stock or other securities of the Company, (xi)
amend or revise any agreement it may have with any third party; or (xii) agree,
whether in writing or otherwise, to take any action described in this Section 9,
PROVIDED, HOWEVER, the Company shall be permitted to transfer all of its
interest in Low Voltage Systems Technology, Inc., a New Jersey corporation and
majority-owned subsidiary of the Company.
9.2 INSPECTIONS. Immediately subsequent to the execution of
this Agreement, the Company shall make available to Buyer and its authorized
employees and agents, for the purpose of facilitating inspections by the Buyer
of the Company's business, affairs, properties, and assets, all books and
records and information, permits, licenses, approvals, reports, studies and any
and all other documents which the Company may have pertaining to the Company's
Business and its assets, including without limitation, the monitoring contracts.
Buyer, its authorized agents and employees, shall have the right of access to
such books and records and all other documents and instruments pertaining to the
Company's Business and its assets at all reasonable times subsequent to the date
of the execution of this Agreement with full right to: (i) inspect the assets
and operations of the Company's Business; and (ii) conduct on all books and
records, and all other documents and instruments, studies, surveys and tests on
the assets and operations of the Company's Business as Buyer, its authorized
agents and employees shall deem necessary or desirable (collectively, the
22
<PAGE>
foregoing are hereinafter referred to as "Inspections"). Such rights of
Inspections, or the exercise or non-exercise of same, shall not constitute a
waiver by Buyer of the breach of any representation or warranty of the Company
which were or might have been disclosed by such Inspections.
9.3 COMPANY SPECIAL SHAREHOLDERS MEETING; SHAREHOLDER
APPROVAL. As soon as practicable following the date hereof, the Company shall
cause to be prepared a notice to the Sellers as required by New York law
relating to the Company's special shareholders meeting to approve the
transactions contemplated hereby (the "Special Meeting") and shall cause the
Special Meeting to be convened as soon as permitted under New York law. Each of
the Principal Shareholders covenants that he (i) will vote all Shares as to
which he has voting power against any other transaction relating to the issuance
or transfer of equity securities by, the sale of assets by, or a change of
control of, the Company and to grant proxies to designees of the Buyer to that
effect, and (ii) will not sell or otherwise dispose of any interest in any
Shares beneficially owned by him.
9.4 NOTICE OF CERTAIN EVENTS. Each of the Company and the
Sellers shall promptly notify the Buyer of:
a. any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
b. any notice of other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement; and
c. any actions, suits, claims, investigations or proceedings
commenced or threatened against, relating to or involving or otherwise affecting
any party which, if pending on the date of this Agreement, would have been
required to have been disclosed pursuant to this Agreement or which related to
the consummation of the transactions contemplated by this Agreement.
9.5 COLLATERAL ASSIGNMENT BY BUYER. Each of the Company and
the Sellers hereby agree that Buyer shall be entitled to collaterally assign its
rights under this Agreement to a lender providing financing for the transactions
contemplated hereby.
10. RESTRICTION ON TRANSFER OF SHARES. No Principal Shareholder shall
sell, transfer, assign, pledge or otherwise dispose of (whether with or without
consideration and whether voluntarily or involuntarily) any interest in his
Guardian Shares to a third party (a "Transfer"), except in compliance with the
provisions of this Section 10 and any other restrictions on Transfer contained
in this Agreement.
23
<PAGE>
10.1 FIRST OFFER RIGHT OF BUYER.
a. At least 15 days prior to effecting a Private Sale
(defined as any sale of Guardian Shares other than to the public pursuant to an
offering registered under the Securities Act or to the public through a broker,
dealer or market maker pursuant to the provisions of Rule 144 promulgated under
the Securities Act) of any Guardian Shares to a third party, the transferring
Principal Shareholder(s) (the "Transferring Principal Shareholder(s)") shall
deliver a written notice (an "Offer Notice") to the President of Buyer who shall
forward it to an independent committee established by the Board of Directors of
Buyer (a "Committee"). The Offer Notice shall disclose in reasonable detail the
proposed number of Guardian Shares to be transferred, the proposed terms and
conditions of the Transfer and the identity of the prospective transferee(s) (if
known). Buyer shall have the sole responsibility for compliance with the
provisions of this Section 10.1(a) requiring Committee approval.
b. Buyer may, by recommendation of the Committee,
elect to purchase all, but not less than all, of the number of Guardian Shares
specified in the Offer Notice at the price and on the terms specified therein by
delivering written notice of such election to the Transferring Principal
Shareholder(s) as soon as practical but in any event within 15 days after the
delivery of the Offer Notice (the "Election Period").
10.2 TRANSFER TO THIRD PARTIES.
a. If Buyer has not elected to purchase all of such
Guardian Shares being offered, the Transferring Principal Shareholder(s) may,
within 90 days after the expiration of the Election Period, Transfer all such
Guardian Shares to one or more third parties at a price not less than 100% of
the price offered to Buyer and on other terms no more favorable to the
transferees thereof than offered to Buyer in the Offer Notice.
b. Any Shares not transferred within such 90-day
period shall be re-offered to Buyer under this Section 10 prior to any
subsequent Transfer.
10.3 PURCHASE PRICE. The purchase price specified in any Offer
Notice shall be payable solely in cash at the closing of the transaction or, if
provided in the Offer Notice, in installments over time.
10.4 PERMITTED TRANSFERS. The restrictions set forth in this
Section 10 shall not apply with respect to any Transfer of Guardian Shares by a
Principal Shareholder pursuant to applicable laws of descent and distribution or
among a Principal Shareholder's Family Group ("Permitted Transferees"). For
purposes of this Agreement, "Family Group" means an individual's spouse and
descendants (whether natural or adopted) and spouses of descendants and any
trust, family limited partnership or similar entity solely for the benefit of
the individual and/or the individual's spouse and/or descendants and/or spouses
of their descendants.
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11. LEGENDS.
11.1 RESTRICTIVE LEGEND. Each certificate evidencing Guardian
Shares or securities convertible into Guardian Shares and each certificate
issued in exchange for or upon the Transfer of any such securities (a
"Certificate" or "Certificates") (if such securities remain Guardian Shares or
remain convertible into Guardian Shares after such Transfer) shall be stamped or
otherwise imprinted with a legend in substantially the following form (the
"Restrictive Legend"):
Some or all of the securities represented by this certificate
may be subject to voting obligations, transfer restrictions,
escrow provisions, and/or certain other restrictions and
obligations set forth in a Stock Purchase Agreement dated as
of February 1, 1998, by and among the issuer of such
securities (the "Company") and the shareholders of Mutual
Central Alarm Services, Inc., as amended and modified from
time to time (the "Stock Purchase Agreement"). In addition,
some or all of the securities represented by this certificate
and held by a Principal Shareholder (as such term is defined
in the Stock Purchase Agreement) may be subject to irrevocable
proxy provisions set forth in the Stock Purchase Agreement. A
copy of such Stock Purchase Agreement shall be furnished
without charge by the Company to the holder hereof upon
written request to the Company at its principal executive
office.
Buyer shall imprint the Restrictive Legend on Certificates outstanding as of the
Closing Date, in addition to imprinting on such Certificates a legend stating
that the Guardian Shares evidenced by such Certificate are not registered under
the Securities Act (the "Securities Law Legend").
11.2 TRANSFER OF UNREGISTERED GUARDIAN SHARES. Subject to the
provisions governing the Escrowed Shares in Section 4.1 and the Lock-up and
Volume Cap provisions of Section 12, Guardian Shares are transferable in (i) a
public offering registered under the Securities Act or (ii) in a transaction
pursuant to Rule 144 or any other legally available means of Transfer after the
Transferring holder of Guardian Shares (the "Transferring Shareholder") has
satisfied the conditions specified in Section 11.3 below.
11.3 REMOVAL OF SECURITIES LAW LEGEND. In connection with the
Transfer of any Guardian Shares (other than a Transfer in a public offering
registered under the Securities Act), a Transferring Shareholder shall deliver
(a) written notice to Buyer describing in reasonable detail the Transfer or
proposed Transfer (the "Notice of Transfer") and (b) an opinion (the "Opinion")
of counsel, which (to Buyer's reasonable satisfaction) is knowledgeable in
securities laws matters, to the effect that such Transfer of Guardian Shares may
be effected without registration of such Guardian Shares under the Securities
Act. Upon delivery of the Notice of Transfer and the Opinion to Buyer by a
Transferring Shareholder, Buyer shall instruct its transfer agent to remove the
Securities Law Legend from the Certificate(s) evidencing such Guardian Shares.
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11.4 REMOVAL OF RESTRICTIVE LEGEND. Removal of the Restrictive
Legend shall be governed in accordance with the terms of this Agreement.
11.5 TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or
attempted Transfer of any Guardian Shares in violation of any provision of this
Agreement shall be void, and Buyer shall not record such Transfer on its books
or treat any purported Transferee of such Guardian Shares as the owner of such
Guardian Shares for any purpose.
12. LOCK-UP AND VOLUME CAP. Notwithstanding anything to the contrary
contained herein, (a) each Principal Shareholder agrees that he shall not
Transfer (i) any of his Guardian Shares for one year from the Closing Date, and
(ii) beginning on the first anniversary of the Closing Date and ending on the
fourth anniversary of the Closing Date, in excess of a one-third of his Guardian
Shares during any one-year period thereof, except that if a Principal
Shareholder does not sell up to one-third of his Guardian Shares in any given
one-year period, such Principal Shareholder may cumulate the remainder of
one-third of his unsold Guardian Shares with the amount permitted to be sold
during the following one-year period ("Volume Cap"), and (b) in the event
Transfers in any one-year period exceed the Volume Cap, such Transfers shall be
null and void and Buyer shall not record such Transfer on its books or treat any
purported Transferee of such Guardian Shares as the owner of such Guardian
Shares for any purpose. The restrictions set forth in this Section 12 shall not
restrict any Transfer of Guardian Shares by a Principal Shareholder pursuant to
applicable laws of descent and distribution or among his Family Group.
13. MISCELLANEOUS PROVISIONS.
13.1 FEES AND EXPENSES. Except in the event of a default,
and/or as otherwise set forth herein, each party will pay its own expenses in
connection with the execution and delivery of this Agreement and the performance
of its obligations hereunder, including attorneys' fees whether or not the
transactions contemplated hereby are consummated.
13.2 RESERVED.
13.3 NOTICES. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given if delivered by certified mail, return receipt
requested with postage prepaid, or by overnight guaranteed delivery service, or
by facsimile (upon confirmation of receipt):
(a) if to the Sellers, to:
Mutual Central Alarm Services, Inc.
10 W. 46th Street
New York, New York 10036
Attention: Joel A. Cohen and Norman Rubin
Phone: 212-768-0808
Fax: 212-768-9629
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with copy to:
Emanuel Zimmer, Esq.
6 East 74th Street
New York, New York 10021
Phone: 212-737-4653
Fax: 212-744-2618
(b) if to the Buyer, to:
Guardian International, Inc.
3880 N. 28th Terrace
Hollywood, Florida 33020-1118
Attention: Richard Ginsburg, President
with copy to:
Harvey Goldman, Esq.
Steel Hector & Davis LLP
200 South Biscayne Boulevard
41st Floor
Miami, FL 33131-2398
Phone: 305-577-7011
Fax: 305-577-7001
13.4 SUCCESSION OF AGREEMENT. This Agreement and the rights
and obligations contained herein shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and assigns.
13.5 TIME IS OF THE ESSENCE. For purposes herein, the parties
agree that time shall be of the essence of this Agreement and the
representations and warranties made are all material and of the essence of this
Agreement.
13.6 CAPTIONS AND PARAGRAPH HEADINGS. Captions and paragraph
headings contained in this Agreement are for convenience and reference only and
in no way define, describe, extend or limit the scope or intent of this
Agreement, nor the intent of any provision hereof.
13.7 NO WAIVER. No waiver of any provision of this Agreement
shall be effective unless it is in writing, signed by the party against whom it
is asserted and any such written waiver shall only be applicable to the specific
instance to which it relates and shall not be deemed to be a continuing or
future waiver.
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<PAGE>
13.8 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which shall constitute one and the same Agreement.
13.9 GENDER. All terms and words used in this Agreement
regardless of the number and gender in which used, shall be deemed to include
any other gender or number as the context or the use thereof may require.
13.10 ENTIRE AGREEMENT AND MODIFICATION. This Agreement and
the exhibits and schedules constitute the entire understanding and agreement
between the parties and may not be changed, altered or modified except by an
instrument in writing signed by all parties against whom enforcement of such
change would be sought. In the event any term or provision of this Agreement be
determined by appropriate judicial authority to be illegal or otherwise invalid,
such provision shall be given its nearest legal meaning or be construed as
deleted as such authority determines, and the remainder of this Agreement shall
be construed to be in full force and effect.
13.11 EXHIBITS. All Exhibits and schedules attached hereto
contain additional terms of this Agreement. Typewritten or handwritten
provisions inserted in this form or attached hereto shall control all printed
provisions in conflict therewith.
13.12 GOVERNING LAW. This Agreement shall be construed and
interpreted according to the laws of the State of New York (conflict of laws
provisions notwithstanding), and venue with respect to any litigation shall be
New York, New York.
13.13 FURTHER ASSURANCES. Each of the parties shall execute
all documents and other papers and take such further actions as may be
reasonably required or desirable to carry out the provisions hereof and the
transactions contemplated hereby. Each party shall use their respective best
efforts to fulfill or obtain the fulfillment of the conditions to the closing.
13.14 PUBLIC ANNOUNCEMENTS. On the date of execution of this
Agreement, the Buyer and the Company shall issue a press release with respect to
the execution of this Agreement in a mutually acceptable form. Except with
respect to such press release and the information contained therein, each of the
Company and the Sellers, on the one hand, and the Buyer, on the other hand, will
consult with the other before issuing any press release or otherwise making any
public statements with respect to this Agreement and the transactions
contemplated hereby, and shall not issue any such press release or make any such
public statement prior to such consultation. Notwithstanding the above, any
party required by law to disclose the existence of or the terms of this
Agreement shall use its best efforts to provide prior notice to the other party
giving such other party an opportunity to comment on the content of such
disclosure, but shall in any event be permitted to make such disclosure.
13.15 SURVIVAL. All agreements contained in Sections 2, 3, 4,
10, 11 and 12 shall survive the execution and delivery of this Agreement, the
delivery of the Shares and the issuance and delivery of the Guardian Shares.
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<PAGE>
13.16 REMEDIES. Buyer shall be entitled to enforce its rights
under this Agreement specifically, to recover damages by reason of any breach of
any provision of this Agreement and to exercise all other rights existing in
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 Buyer 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.
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<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
duly executed as of the 23rd day of February, 1998.
MUTUAL CENTRAL ALARM SERVICES, INC.
By: /s/ Joel A. Cohen
-------------------------------------
Joel A. Cohen
President
GUARDIAN INTERNATIONAL, INC.
By: /s/ Richard Ginsburg
-------------------------------------
Richard Ginsburg, President
and Chief Executive Officer
/s/ Joel A. Cohen
-----------------------------------------
JOEL A. COHEN
/s/ Raymond L. Adams
-----------------------------------------
RAYMOND L. ADAMS
/s/ Norman Rubin
-----------------------------------------
NORMAN RUBIN
/s/ Herbert Abramson
-----------------------------------------
HERBERT ABRAMSON
/s/ Scott Adams
-----------------------------------------
SCOTT ADAMS
/s/ Joseph Belch
-----------------------------------------
JOSEPH BELCH
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<PAGE>
/s/ Robert Bitton
---------------------------
ROBERT BITTON
/s/ Douglas Blauschild
---------------------------
DOUGLAS BLAUSCHILD
/s/ Joel A. Cohen
---------------------------
JOEL A. COHEN
/s/ Joseph DiGilio
---------------------------
JOSEPH DIGILIO
/s/ Douglas DiMonda
---------------------------
DOUGLAS DIMONDA
/s/ Peter Eyl
---------------------------
PETER EYL
/s/ David Fishman
---------------------------
DAVID FISHMAN
/s/ Evelyn Freeman
---------------------------
EVELYN FREEMAN
/s/ Mitchell Freeman
---------------------------
MITCHELL FREEMAN
/s/ Arlene Glass
---------------------------
ARLENE GLASS
/s/ Irwin Glass
---------------------------
IRWIN GLASS
31
<PAGE>
/s/ Jack Hirschfield
---------------------------
JACK HIRSCHFIELD
/s/ Seymour Isaacman
---------------------------
SEYMOUR ISAACMAN
/s/ George Kowalczyk
---------------------------
GEORGE KOWALCZYK
/s/ Laurie Kleinhaus
---------------------------
LAURIE KLEINHAUS
/s/ Ronald Liebling
---------------------------
RONALD LIEBLING
/s/ Marilyn Levy
---------------------------
MARILYN LEVY &
W.A. LEVY TRUST
/s/ Vivian Lucks
---------------------------
VIVIAN LUCKS
/s/ Martin Mevorah
---------------------------
MARTIN MEVORAH
/s/ Samuel Mevorach
---------------------------
SAMUEL MEVORACH
/s/ Miriam Rhein
---------------------------
MIRIAM RHEIN
/s/ Gary Rose
---------------------------
GARY ROSE
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<PAGE>
/s/ Joseph Rossi
---------------------------
JOSEPH ROSSI
/s/ Norman Rubin
---------------------------
NORMAN RUBIN
/s/ Katherine DiMonda
---------------------------
KATHERINE DIMONDA
/s/ Daniel DiMonda
---------------------------
DANIEL DIMONDA
/s/ James Burger
---------------------------
JAMES BURGER
/s/ Ilene Kassman
---------------------------
ILENE KASSMAN
/s/ Donna Kassman
---------------------------
DONNA KASSMAN
/s/ Betty Avin
---------------------------
BETTY AVIN
/s/ Kimberly Avin
---------------------------
KIMBERLY AVIN
/s/ Irving Avin
---------------------------
IRVING AVIN
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<PAGE>
/s/ Joyce D. Black
---------------------------
MURRY VICTOR
/s/ Jeffrey Slatken
---------------------------
JEFFREY SLATKEN
/s/ Lila Wager
---------------------------
LILA WAGER
/s/ Eli Wager
---------------------------
ELI WAGER
/s/ Saul Victor
---------------------------
SAUL VICTOR
/s/ Sophia Zimmer
---------------------------
SOPHIA ZIMMER
/s/ Bob Zuckerman
---------------------------
BOB ZUCKERMAN
/s/ Michael Fischman
---------------------------
MICHAEL FISCHMAN
/s/ Mark Pesci
---------------------------
MARK PESCI
/s/ Gerald Adams
---------------------------
GERALD ADAMS
34
<PAGE>
EXHIBIT A
35
EXHIBIT 10.(b)
EXHIBIT 10(B)
REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement dated February 23, 1998 between
Guardian International, Inc., a Nevada corporation (the "Company"), and the
shareholders listed on the signature pages hereto (each, a "Shareholder" and
collectively, the "Shareholders"). Capitalized terms not defined herein shall
have meaning assigned to them in the Stock Purchase Agreement (defined below).
RECITALS
The Company and the Shareholders are parties to a Stock
Purchase Agreement, effective as of February 1, 1998 (the "Stock Purchase
Agreement"), pursuant to which the Company has issued to the Shareholders an
aggregate of 1,981,700 shares (the "Shares") of the Company's Class A Voting
Common Stock, par value $.001 per share (the "Common Stock"). In order to induce
the Shareholders to enter into the Stock Purchase Agreement, the Company has
agreed to provide to each current Shareholder the registration rights set forth
in this Agreement.
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 shareholder 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 Shareholders at least 30 days'
prior written notice of the filing of the proposed registration statement (the
"Registration Notice"). The Registration 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 the written request of any Shareholder
(each, a "Requesting Shareholder"), received by the Company within fifteen (15)
days after the giving of the Registration Notice by the Company, to register any
of the Shareholder's Shares, 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, use its best efforts to
1
<PAGE>
cause the Shares as to which registration shall have been so requested (the
"PiggyBack Shares") to be included in the coverage of such registration
statement.
Notwithstanding any other provision in this Section 1(a), if in
connection with an underwritten offering the managing underwriter for the
Company indicates its reasonable belief in writing that the effect of including
all or part of the PiggyBack Shares in such underwritten offering will
materially and adversely affect the sale of all of the Common Stock to be
registered (which statement of the managing underwriter shall also state the
maximum number of shares of Common Stock (the "Maximum Shares"), if any, which
can be sold without materially adversely affecting such sale), then the number
of shares of Common Stock to be included in the offering shall be reduced to the
Maximum Shares and such Maximum Shares shall be allocated (i) first, to the
Company and to any holder or holders of shares of the Common Stock who may have
exercised a mandatory right for registration; and (ii) second, among the
Requesting Shareholders, Westar Security, Inc., a Nevada corporation ("Westar")
and Heller Financial, Inc., a Delaware corporation ("Heller"), in proportion, as
nearly as practicable, as such Person's shares of Common Stock proposed to be
registered bears to the aggregate number of shares of Common Stock proposed to
be registered by all Persons.
If the managing underwriter has not limited the number of shares of
Common Stock to be underwritten, the Company and other holders of the Company's
securities may include securities for its (or their) own account in such
registration if (A) the managing underwriter so agrees and (B) the number of
shares which would otherwise have been included in such registration and
underwriting will not thereby be limited and (C) such other securities are then
registrable on Form S-3.
Notwithstanding any request for inclusion in any registration statement
under this Section 1(a), the Requesting Shareholders may elect to reduce or
withdraw their request for inclusion of its Shares at any time prior to
execution of the underwriting agreement with respect thereto.
The Company shall have the right to select all underwriters, including
the managing underwriter, of all public offerings of shares of Common Stock
subject to the provisions of this Section 1(a). The Requesting Shareholders
shall enter into (together with the Company) an underwriting agreement with the
underwriter or underwriters, provided that such underwriting agreement is in a
customary form and is reasonably acceptable to the Requesting Shareholders.
Nothing in this Section 1(a) shall create any liability on the part of the
Company to the Requesting Shareholder if the Company for any reason decides not
to file such a registration statement.
(b) MANDATORY RIGHTS. Upon written request of Shareholders holding from
time to time in the aggregate more than fifty percent (50%) of the total number
of Shares ("Majority Shareholders"), 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 (and use its
best efforts to cause such registration statement to become effective) and use
its best efforts to qualify Shares owned by the Majority Shareholders for sale
under the securities laws of such states as may be reasonably requested by the
Majority Shareholders. The request for registration pursuant to this Section
1(b) shall specify the number of Shares to be registered. The Company shall have
the right to select the underwriters and managers to administer the offering.
The Company shall enter into
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<PAGE>
(together with the Majority Shareholders) 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 Majority
Shareholders.
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 120 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 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
Majority Shareholders (the "Demand Shares"), together with the number of shares
to be registered on behalf of Heller, Westar, or the Company, if any, in the
coverage of such registration statement will materially and adversely affect the
sale of all of the Common Stock to be registered (which statement of the
managing underwriter shall also state the number of Maximum Shares, if any),
then the number of shares of Common Stock to be registered shall be reduced to
the Maximum Shares and such Maximum Shares shall be allocated (i) first, to the
Company and the Majority Shareholders who are exercising a mandatory right for
registration and (ii) second, between Westar and Heller, in proportion, as
nearly as practicable, as such Person's shares of Common Stock proposed to be
registered bears to the aggregate number of shares of Common Stock proposed to
be registered by all Persons.
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 and Westar, may include securities for its (or their) own
account in such registration if (A) the managing underwriter so agrees and (B)
the number of shares which would otherwise have been included in such
registration and underwriting will not thereby be limited and (C) such other
securities are then registrable on Form S-3.
The Majority Shareholders shall be entitled to request two
registrations pursuant to this Section 1(b). The Company shall be obligated to
maintain the effectiveness of each such registration statement until the earlier
of (A) the sale of all shares registered pursuant thereto, or (B) the date that
is one year 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 (A) Form S-3, or another equivalent short-form
registration statement, is then available to the Company for such registration,
and (B) the aggregate number of the Shares requested to be registered exceeds
1,000,000 Shares as adjusted for any Adjustments. Notwithstanding anything
contained herein to the contrary, the Company shall not be required to effect a
registration pursuant to this Section 1(b) more often than once every six
months.
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<PAGE>
The Majority Shareholders 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 the Majority Shareholders to include all of the Shares
requested by the Majority Shareholders to be so registered or the failure of any
requested registration to become or remain effective as provided herein.
(c) CERTAIN REGISTRATION CONDITIONS. The Company shall not be required
to effect a registration of any Shares pursuant to Section 1(a) or 1(b), or file
any post-effective amendment thereto:
(1) unless the Shareholders registering Shares (collectively,
the "Registering Shareholders") agree (w) that they have a present intention to
sell their Shares so requested (x) to sell and distribute a portion or all of
their Shares in accordance with the plan or plans of distribution adopted by and
through underwriters, if any, acting for the Company with respect to any request
under Section 1(a), and (y) to bear a pro rata share of underwriter's discounts
and commissions;
(2) if, in the case of a request for registration under the
provisions of Section 1(b), in the opinion of counsel for the Company and
counsel for the Registering Shareholders, the Shares for which registration has
been requested may be disposed of within a comparable time frame without
registration under the Securities Act and upon such disposition all legends on
certificates representing such Shares which restrict transfer under the
Securities Act and applicable state securities laws may be removed from such
certificates and any such restriction and legends are so removed;
(3) if, in the case of a request for registration of an
underwritten offering under the provisions of Section 1(b), (x) a registration
statement with respect to Common Stock became effective in the same calendar
quarter in which such request was made, (y) the Company in good faith
anticipates filing a registration statement for an offering of Common Stock for
the Company's account within sixty (60) days after such demand date and has not
abandoned such proposed offering; or (z) the Company has received a request for
a demand registration from the holders of other registration rights pursuant to
which the Company is effecting a registration of Common Stock within sixty (60)
days of the date of the Registering Shareholders' request;
(4) unless the Company has received from the Registering
Shareholders all such information the Company reasonably requests from the
Registering Shareholders concerning them and their intended method of
distribution of the Shares to enable the Company to include in the registration
statement all material facts required to be disclosed therein; or
(5) if the particular Shares for which registration has been
requested have been distributed to the public pursuant to an offering registered
under the Securities Act, sold to the public through a broker, dealer or market
maker in compliance with Rule 144 under the Securities Act (or any similar rule
then in force), or repurchased by the Company or any affiliate thereof.
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<PAGE>
(d) COVENANTS AND PROCEDURES. If and whenever the Company is required
hereunder to effect the registration of Shares under the Securities Act, the
Company, as expeditiously as possible, shall:
(1) In accordance with the Securities Act and all applicable
rules and regulations, promptly, and in any event within sixty (60) days of the
request, prepare and file with the Commission a registration statement covering
the Shares requested to be registered and use its best efforts to cause such
registration statement to become and remain effective. The Company will file
such post-effective amendments to such registration statement (and use its best
efforts to cause them to become effective) and such supplements as are necessary
so that current prospectuses are at all times available until the earlier of the
completion of the distribution of all shares under the registration statement or
two 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
Registering Shareholders, 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
Registering Shareholders, the sales or placement agent or agents, if any, for
the Shares and the managing underwriter or underwriters, if any, and their
respective agents and representatives and (x) the Company will not include in
any registration statement information concerning or relating to the Registering
Shareholders to which such Registering Shareholders shall reasonably object in
writing (unless in the reasonable opinion of outside counsel the inclusion of
such information is required by applicable law or the regulations of any
securities exchange to which the Company may be subject), and (y), the Company
will not file any registration statement pursuant to Section 1(b) or amendment
thereto or any prospectus or any supplement thereto to which the Registering
Shareholders 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 Registering
Shareholders and the Company;
If the Shares to be covered by the registration statement are
not to be sold to or through underwriters acting for the Company, the Company
shall: (w) deliver to the Registering Shareholders, 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 Registering Shareholders reasonably request, and
the Registering Shareholders shall keep, or cause to be kept, a written record
of the distribution of such preliminary prospectuses and shall refrain from
delivery of such preliminary prospectuses in any manner or under any
circumstances which would violate the Securities Act or the securities laws of
any other jurisdiction, including the various states of the United States, (x)
deliver to the Registering Shareholders, 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 Registering Shareholders or Underwriter reasonably
request, (y) in case of the happening, after the effective date of such
registration statement, of any event or occurrence which is required or may be
5
<PAGE>
advisable, in the judgment of the Company, the Registering Shareholders, 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
Registering Shareholders and Underwriter written notice thereof and prepare and
furnish to the Registering Shareholders, and Underwriters in such quantities as
it may reasonably request, copies of such amended prospectus or of such
supplement to be attached to the prospectus in order that the prospectus, as so
amended or supplemented, will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading and to comply with the Securities
Act, and (z) deliver to the Company and the Underwriters upon reasonable request
copies of any documents incorporated into any such registration statement,
prospectus, amendment or supplement.
(2) On or prior to the date on which the registration
statement is declared effective, the Company shall use its best efforts to
register or qualify, and cooperate with the Registering Shareholders, 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 laws of each state and other
jurisdiction of the United States as the Registering Shareholders or Underwriter
reasonably requests, to use its best efforts to keep each such registration or
qualification effective, including through new filings, or amendments or
renewals, during the period such registration statement is required to be kept
effective and to do any and all other acts or things necessary or advisable to
enable the disposition in all such jurisdictions of the Shares covered by the
applicable registration statement; provided that the Company will not be
required to qualify generally to do business in any jurisdiction where it is not
then so qualified.
(3) The Company shall make generally available to the
Registering Shareholders 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 accurate information on Forms 10-QSB, 10-KSB, and (if needed)
8-K under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and otherwise complies with Rule 158 under the Securities Act.
(4) The Company shall cooperate with the Registering
Shareholders 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 Registering
Shareholders request, subject to the obligation to return any certificates
representing securities not sold.
(5) The Company shall make available for inspection by the
Registering Shareholders and each Underwriter participating in any disposition
pursuant to such registration statement, and any attorney, accountant or other
agent retained by the Registering Shareholders or any such Underwriter
(collectively, the "Inspectors"), all financial and other records, pertinent
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<PAGE>
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 Registering Shareholders and any Underwriter to conduct
a "reasonable investigation" for purposes of Section 11(a) of the Securities
Act.
(6) The Company shall obtain a "cold comfort" letter from the
Company's independent public accountants, and an opinion of counsel for the
Company, each in customary form and covering such matters of the type
customarily covered by cold comfort letters and opinions of counsel in
connection with public offerings of securities, as the Registering Shareholders
or Underwriters may reasonably request.
(7) If requested by the Registering Shareholders, the Company
shall promptly incorporate in a prospectus, prospectus supplement or
post-effective amendment such information as the Registering Shareholders
reasonably specify should be included therein, including, without limitation,
information relating to the planned distribution of Shares, the number of Shares
being sold by each Registering Shareholder, the name and description of each
Registering Shareholder, 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 Shareholder 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.
(8) If requested by the Registering Shareholders, the Company
shall use reasonable efforts to participate in and assist with a "road show" any
other customary marketing efforts in connection with the sale of Shares pursuant
to such registration statement, at such times and in such manner as the Company
shall approve.
(9) The Company shall promptly notify the Registering
Shareholders and Underwriters, after becoming aware thereof, when the
registration statement or any related prospectus or any amendment or supplement
has been filed, and, with respect to the registration statement or any
post-effective amendment, when the same has become effective, (A) of any request
by the Commission for amendments or supplements to the registration statement or
the related prospectus or for additional information, (B) of the issuance by the
Commission of any stop order suspending the effectiveness of the registration
statement or the initiation of any proceedings for that purpose, (C) of the
receipt by the Company of any notification with respect to the suspension of the
qualification of the Shares for sale in any jurisdiction or the initiation of
any proceeding for such purpose or (D) of the happening of any event which makes
any statement in the registration statement or any post-effective amendment
thereto, prospectus or any amendment or supplement thereto, or any document
incorporated therein by reference untrue in any material respect or which
requires the making of any changes in the registration statement or
post-effective amendment thereto
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<PAGE>
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.
(e) HELLER AND WESTAR REGISTRATION RIGHTS. The Shareholders acknowledge
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 Shareholders acknowledge that pursuant to the Heller
Registration Rights, Heller has the right to participate in any registration
effected pursuant to this Section 1. The Shareholders acknowledge that Westar
has certain incidental and demand registration rights with respect to equity
securities of the Company owned by it pursuant to that certain Registration
Rights Agreement dated October 21, 1997 between Westar Capital, Inc. and the
Company (the "Westar Registration Rights"). On November 24, 1997, Westar
Capital, Inc. assigned all of its rights and obligations under its Registration
Rights Agreement to Westar. Accordingly, the Shareholders acknowledge that
pursuant to the Westar Registration Rights, Westar has the right to participate
in any registration effected pursuant to this Section 1.
(f) COMPANY COVENANT. The Company covenants to and with the
Shareholders 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 Rule
144(c)(1) promulgated 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 Shareholders may reasonably request, all to the extent
required from time to time to enable the Shareholders 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 promulgated by the
Commission.
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 each Registering Shareholder and each underwriter of such Shares and
its respective officers and directors and each other person, if any, who
controls any Registering Shareholder 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 a Registering Shareholder 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
8
<PAGE>
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; and will reimburse each
such Registering Shareholder and 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 a
Registering Shareholder or each such underwriter 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 each such Registering Shareholder or such
underwriter specifically for use in the preparation thereof.
(b) INDEMNIFICATION BY THE SHAREHOLDERS. In connection with any
registration statement in which a Registering Shareholder is participating, such
Registering Shareholder 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 Registering Shareholder specifically for use in the preparation of such
registration statement, preliminary prospectus or final prospectus or such
amendment or supplement thereto.
(c) INDEMNIFICATION PROCEDURES. Promptly after receipt by an
indemnified party of notice of the commencement of any action involving a claim
referred to in the preceding paragraphs of this Section 2, such indemnified
party shall, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the indemnifying party of the commencement of such
action; but the omission so to notify the indemnifying party will not relieve it
from any liability which it may have to the indemnified party unless such
indemnifying party is prejudiced by such omission. If any such action is brought
against an indemnified party, the indemnifying party will be entitled to
participate in and to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified party for
any legal or other expenses incurred by the latter in connection with the
defense thereof unless (i) in the reasonable opinion of counsel for the
indemnification party a conflict of interest exists between the indemnified
party and indemnifying party, (ii) the indemnified party reasonably objects to
such assumption on the basis that there may be defenses available to it which
are different from or in addition to the defenses available to the indemnifying
party, (iii) the indemnifying party has failed to timely assume the defense of
any such action or proceeding or (iv) the indemnifying party and its counsel do
not actively and vigorously pursue the defense of such action . Whether or not
such defense is assumed by the indemnifying party, the indemnifying party will
not be subject to any liability for any settlement made without its consent. No
indemnifying party will consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a
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<PAGE>
release from all liability in respect of such claim or litigation. An
indemnifying party who elects not to assume the defense of an action or where a
potential conflict of interest or other defenses may be available, shall not be
obligated to pay the fees and expenses of more than one counsel and local
counsel where appropriate for all parties indemnified by such indemnifying party
with respect to such action, unless in the reasonable judgment of any
indemnified party a conflict of interest may exist between such indemnified
party and any other of such indemnified parties with respect to such action.
Cost and expenses incurred by the indemnified party shall be reimbursed, from
time to time, by the Company as and when bills are received or expenses are
incurred.
(d) CONTRIBUTION. If the indemnification provided for in this Section 2
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact, has been made by, or relates to information supplied by,
such indemnifying party or indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities, and expenses referred to above shall be deemed to
include all legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 2(d) were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
3. EXPENSES. All expenses incurred by the Company and the Registering
Shareholders in connection with any registration statement covering Shares
offered by the Registering Shareholders, 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 Registering Shareholders) 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 Registering Shareholders shall bear its pro rata
share of (A)
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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
Registering Shareholders, 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. The Shareholders 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 15 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
Shareholders may agree with the underwriter). Each Shareholder agrees to comply
with the foregoing requirements even if its Shares are not being included in
such registration.
5. TRANSFER OF RIGHTS. No registration rights and benefits set forth in
this Agreement, including indemnification by the Company, shall be transferable
by the Shareholders in connection with the transfer of Shares.
6. TERM. The obligations of the Company to register Shares hereunder
shall terminate on the fourth anniversary of the date of this Agreement with
respect to the registration of Shares not otherwise demanded or effected by such
date. 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 Shareholders set forth below, unless subsequently changed by written
notice. Any notice shall be deemed to be effective when it is received.
To the Shareholders:
Emanuel Zimmer, Esq.
6 East 74th Street
New York, New York 10021
Phone: 212-737-4653
Fax: 212-744-2618
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
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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
8. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF FLORIDA WITHOUT REGARD
TO CONFLICT OF LAW PRINCIPLES THEREUNDER.
9. AMENDMENTS. This Agreement may be amended only by an instrument in
writing executed by all the parties hereto.
10. COUNTERPARTS. This Agreement may be executed in multiple original
counterparts, each of which shall be deemed an original, but all of which
together shall constitute the same instrument.
11. SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable. In the
event any provision of this Agreement shall be held invalid, the parties agree
to enter into such further agreements as may be necessary in order to carry out
the intent and purposes of the parties herein.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
GUARDIAN INTERNATIONAL, INC.
By:/S/ RICHARD GINSBURG
------------------------
Richard Ginsburg
President and Chief Executive Officer
/S/ JOEL A. COHEN
---------------------------
JOEL A. COHEN
/S/ RAYMOND L. ADAMS
---------------------------
RAYMOND L. ADAMS
/S/ NORMAN RUBIN
---------------------------
NORMAN RUBIN
/S/ HERBERT ABRAMSON
---------------------------
HERBERT ABRAMSON
/S/ SCOTT ADAMS
---------------------------
SCOTT ADAMS
/S/ JOSEPH BELCH
---------------------------
JOSEPH BELCH
/S/ ROBERT BITTON
---------------------------
ROBERT BITTON
/S/ DOUGLAS BLAUSCHILD
---------------------------
DOUGLAS BLAUSCHILD
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/S/ JOEL A. COHEN
---------------------------
JOEL A. COHEN
/S/ JOSEPH DIGILIO
---------------------------
JOSEPH DIGILIO
/S/ DOUGLAS DIMONDA
---------------------------
DOUGLAS DIMONDA
/S/ PETER EYL
---------------------------
PETER EYL
/S/ DAVID FISHMAN
---------------------------
DAVID FISHMAN
/S/ EVELYN FREEMAN
---------------------------
EVELYN FREEMAN
/S/ MITCHELL FREEMAN
---------------------------
MITCHELL FREEMAN
/S/ ARLENE GLASS
---------------------------
ARLENE GLASS
/S/ IRWIN GLASS
---------------------------
IRWIN GLASS
/S/ JACK HIRSCHFIELD
---------------------------
JACK HIRSCHFIELD
/S/ SEYMOUR ISAACMAN
---------------------------
SEYMOUR ISAACMAN
14
<PAGE>
/S/ GEORGE KOWALCZYK
---------------------------
GEORGE KOWALCZYK
/S/ LAURIE KLEINHAUS
---------------------------
LAURIE KLEINHAUS
/S/ RONALD LIEBLING
---------------------------
RONALD LIEBLING
/S/ MARILYN LEVY
---------------------------
MARILYN LEVY &
W.A. LEVY TRUST
/S/ VIVIAN LUCKS
---------------------------
VIVIAN LUCKS
/S/ MARTIN MEVORAH
---------------------------
MARTIN MEVORAH
/S/ SAMUEL MEVORACH
---------------------------
SAMUEL MEVORACH
/S/ MIRIAM RHEIN
---------------------------
MIRIAM RHEIN
/S/ GARY ROSE
---------------------------
GARY ROSE
/S/ JOSEPH ROSSI
---------------------------
JOSEPH ROSSI
/S/ NORMAN RUBIN
---------------------------
NORMAN RUBIN
15
<PAGE>
/S/ KATHERINE DIMONDA
---------------------------
KATHERINE DIMONDA
/S/ DANIEL DIMONDA
---------------------------
DANIEL DIMONDA
/S/ JAMES BURGER
---------------------------
JAMES BURGER
/S/ ILENE KASSMAN
---------------------------
ILENE KASSMAN
/S/ DONNA KASSMAN
---------------------------
DONNA KASSMAN
/S/ BETTY AVIN
---------------------------
BETTY AVIN
/S/ KIMBERLY AVIN
---------------------------
KIMBERLY AVIN
/S/ IRVING AVIN
---------------------------
IRVING AVIN
/S/ JOYCE D. BLACK
---------------------------
MURRY VICTOR
/S/ JEFFREY SLATKEN
---------------------------
JEFFREY SLATKEN
16
<PAGE>
/S/ LILA WAGER
---------------------------
LILA WAGER
/S/ ELI WAGER
---------------------------
ELI WAGER
/S/ SAUL VICTOR
---------------------------
SAUL VICTOR
/S/ SOPHIA ZIMMER
---------------------------
SOPHIA ZIMMER
/S/ BOB ZUCKERMAN
---------------------------
BOB ZUCKERMAN
/S/ MICHAEL FISCHMAN
---------------------------
MICHAEL FISCHMAN
/S/ MARK PESCI
---------------------------
MARK PESCI
/S/ GERALD ADAMS
---------------------------
GERALD ADAMS
/S/ RAYMOND ADAMS
---------------------------
RAYMOND ADAMS
ACKNOWLEDGED AND AGREED:
HELLER FINANCIAL, INC.
By: /S/ SCOTT E. GAST
-----------------
Name: SCOTT E. GAST
Title: Assistant Vice President
Date: 2/27/98
17
<PAGE>
WESTAR SECURITY, INC.
By:/S/ JOHN W. HESSE
-----------------
Name: John W. Hesse
Title: Secretary/Treasurer
Date: 2/23/98
18
EXHIBIT 10.(c)
EXHIBIT 10(C)
ESCROW AND PLEDGE AGREEMENT
Escrow and Pledge Agreement (the "Agreement") dated February 23, 1998
among Guardian International, Inc., a Nevada corporation ("Guardian"), the
persons listed on Exhibit A attached hereto (individually, a "Seller" and
collectively, the "Sellers") and Emanuel Zimmer, Esq. (the "Escrow Agent").
RECITALS
A. Pursuant to the Stock Purchase Agreement of even date herewith by
and between Guardian and the Sellers ("Stock Purchase Agreement"), the Sellers
sold all of their outstanding shares of Mutual Central Alarm Services, Inc., a
New York corporation, to Guardian for, among other consideration specified in
the Stock Purchase Agreement, up to 2,000,000 shares of Guardian Common Stock
$.001 par value per share (the "Guardian Shares"), the number of which is to be
determined in accordance with Schedule 1.2 of the Stock Purchase Agreement. All
capitalized terms not otherwise defined in this Agreement shall have the
meanings given them in the Stock Purchase Agreement.
B. Pursuant to Section 4 of the Stock Purchase Agreement, the Sellers,
jointly and severally, agree to indemnify Guardian and hold Guardian harmless,
for a period ending on the later of the first anniversary of the Closing Date or
until the adjudication to final resolution of any and all claims for
indemnification thereunder (the "Indemnification Period"), from and against all
Liabilities. In connection with such indemnification, each Seller is obligated
to place its pro rata portion of 750,000 shares of the Guardian Shares (each of
which pro rata portion is enumerated in Exhibit A) (collectively, the "Escrowed
Shares") in escrow and pledge such Escrowed Shares as security for payment of
any Liabilities.
C. Guardian and the Sellers desire that the Escrow Agent hold the
Escrowed Shares pursuant to the terms of this Agreement.
AGREEMENT
1. ESCROW AND PLEDGE. The Sellers hereby deliver to the Escrow Agent
(a) stock certificates representing the Escrowed Shares (the "Certificates"),
(b) a stock power for each Certificate endorsed in blank (the "Stock Powers")
and (c) a copy of UCC-1 Financing Statements evidencing the pledge of the
Escrowed Shares hereunder to be filed in the States of Florida and New York (the
"UCC-1" and together with the Certificates and the Stock Powers, the
"Documents"). The Sellers hereby pledge and grant to Guardian a security
interest in the Escrowed Shares as security for the payment of Liabilities
pursuant to the Stock Purchase Agreement (a "Payment") during the
Indemnification Period. The Escrow Agent acknowledges receipt of the Documents
and agrees to hold and distribute them in accordance with the terms of this
Agreement.
<PAGE>
2. VOTING OF ESCROWED SHARES; DIVIDENDS. During the Indemnification
Period, unless and until a claim arises which entitles Guardian to a Payment and
to foreclose on its security interest in the Escrowed Shares, the Sellers are
entitled with respect to the Escrowed Shares:
(a) subject to the grant of the Irrevocable Proxy, to vote the
Escrowed Shares at meetings of shareholders of Guardian and to execute consents
in respect thereof, and to consent to, ratify or waive notice of meetings of the
shareholders of Guardian; and
(b) to receive and collect or to have paid over to it all
dividends or other distributions declared or paid on the Escrowed Shares, except
(i) dividends or redistributions constituting stock dividends, (ii) dividends or
distributions in property other than cash or stock of the Company, and (iii)
liquidation dividends (either partial or complete) (collectively, "Excepted
Dividends"). All Excepted Dividends shall constitute additional security for a
Payment, and shall be paid over and pledged and deposited with the Escrow Agent.
Guardian shall have all of the powers and rights to all Excepted Dividends as
Guardian has with respect to the Escrowed Shares.
Immediately upon a release of all or any portion of the Escrowed Shares
under Section 4(a) hereof and without any further action by the parties hereto,
the Sellers shall no longer have the rights enumerated in this Section 2 and
such rights will automatically vest in Guardian.
3. COVENANTS
(a) RECAPITALIZATION. During the term of this Agreement, if any share
dividend, reclassification or readjustment is declared or made with respect to
the Escrowed Shares, all new, substituted, or additional shares or other
securities issued by reason of this change shall be delivered to and held by the
Escrow Agent under the terms of this Agreement in the same manner as the
Escrowed Shares.
(b) SELLERS' REPRESENTATIVE. The Sellers shall appoint a representative
(the "Sellers' Representative") for purposes of taking any and all action under
this Agreement, including but not limited to, the notice requirements under
Sections 5 and 12 below. The Sellers' Representative shall be Emanuel Zimmer,
Esq.. The Escrow Agent shall be entitled to rely upon the authority of such
Sellers' Representative without further investigation. No Seller shall be
entitled to exercise any rights hereunder other than through the Sellers'
Representative.
(c) FILING OF UCC-1'S. The Sellers agree that simultaneously with the
deposit of the Documents with the Escrow Agent, they shall cause the Sellers'
Representative to file the UCC-1's in the states of New York and Florida and
shall provide evidence of such filings as soon as practicable thereafter.
2
<PAGE>
4. RELEASE OF ESCROWED SHARES.
(a) RELEASE DURING INDEMNIFICATION PERIOD. At any time during the
Indemnification Period, upon delivery to the Escrow Agent of a joint written
notice, substantially in the form of Exhibit B attached hereto, from Guardian
and the Sellers' Representative, the Escrow Agent shall distribute to Guardian,
as soon as practicable after receipt of the notice, the number of Escrowed
Shares stated in the written notice to be distributed as a Payment. Upon such
release, any released Escrowed Shares shall be surrendered to the transfer agent
for the Company and the restrictive legend regarding the provisions of this
Agreement shall be removed. The joint written notice shall reflect a
distribution of the Escrowed Shares which shall be prorated based upon each
Seller's proportionate interest in the Escrowed Shares.
(b) RELEASE UPON EXPIRATION OF INDEMNIFICATION PERIOD. Simultaneous
with the expiration of the Indemnification Period, Guardian and the Sellers'
Representative each agree to give a joint written notice, substantially in the
form of Exhibit C attached hereto, to the Escrow Agent enumerating the number of
Escrowed Shares that are to be distributed by the Escrow Agent to each of the
Sellers pro rata according to the amounts listed next to the name of each Seller
on Exhibit A, and the number of Escrowed Shares to be distributed by the Escrow
Agent to Guardian, if any and if not previously distributed to Guardian pursuant
to Section 4(a), as a Payment. The Escrow Agent shall release the Escrowed
Shares in accordance with the notice as soon as practicable after receipt of the
notice. Upon such release, the Escrowed Shares shall be surrendered to the
transfer agent for the Company and the restrictive legend regarding the
provisions of this Escrow and Pledge Agreement shall be removed.
(c) The Sellers agree that, except for indemnification arising out of
Section 4.2 of the Stock Purchase Agreement, all or part of the Escrowed Shares
may be disbursed without regard to the responsibility or culpability of a single
Seller or group of Sellers for the facts and circumstances giving rise to a
claim for indemnification and Payment under this Agreement. Upon the occurrence
of a claim for Payment, Guardian shall be entitled to foreclose its security
interest in the Escrowed Shares, and Guardian may exercise all rights of a
pledgee under the laws of the States of Florida and New York.
5. DUTIES OF ESCROW AGENT. It is agreed that the duties of the Escrow
Agent are only those which are specifically provided in this Agreement, and are
purely ministerial in nature. Provided the Escrow Agent acts in good faith, the
Escrow Agent shall incur no liability except for willful misconduct or gross
negligence. The Escrow Agent has no responsibility for the Documents deposited
with it, other than to use due care in holding the Documents and faithfully to
follow the instructions contained in this Agreement and given pursuant to it.
The Escrow Agent may consult with counsel and shall be fully protected in all
actions taken in good faith in accordance with the advice of counsel. The Escrow
Agent is not required to defend any legal proceedings which may be instituted
against it relating to the Documents unless it is (a) requested to do so by both
Guardian and the Sellers and (b) indemnified to the Escrow Agent's satisfaction
against the costs and expenses of the defense. The Escrow Agent shall not be
required to institute legal proceedings of any kind. The
3
<PAGE>
Escrow Agent shall be fully protected in acting in accordance with all joint
written instructions from Guardian and the Sellers. If any action is threatened
or instituted against the Escrow Agent, it may interplead the other parties to
this Agreement and may deposit the Documents into court. In such event, the
Escrow Agent shall be relieved of and discharged from all obligations and
liabilities under this Agreement.
6. EXPENSES. If there is a dispute between Guardian and the Sellers
(through the Sellers' Representative) concerning the release of the Escrowed
Shares, the Escrow Agent shall be entitled to be paid or reimbursed for all
expenses, disbursements and advances, including reasonable attorneys' fees,
incurred or made by the Escrow Agent in connection with the carrying out of its
duties under this Agreement. In such an event, the Escrow Agent's expenses,
disbursements and advances shall be paid directly to Escrow Agent and shall be
borne by the non-prevailing party.
7. COOPERATION. Guardian and each of the Sellers agree to execute,
acknowledge, deliver and file, or cause to be executed, acknowledged, delivered
and filed, all further instruments, agreements or documents as may be necessary
to consummate the transactions provided for in this Agreement and to do all
further acts necessary to carry out the purpose and intent of this Agreement.
8. NO WAIVER. No delay on the part of Guardian in exercising its rights
under this Agreement shall waive these rights, nor shall the waiver of any
breach hereunder operate as a waiver of any subsequent breach.
9. GOVERNING LAW; VENUE AND JURISDICTION. This Agreement shall be
governed by and construed in accordance with the laws of the State of Florida
without reference to its conflicts of law principles. Venue and jurisdiction of
all actions relating to the performance or interpretation of this Agreement may
be brought only in the courts of the State of Florida located in Broward County
or in the United States District Court for the Southern District of Florida. The
parties consent to personal jurisdiction in the courts described in this Section
for the purpose of all actions, and waive all objections to venue and the right
to assert that a court chosen under this Section is improper based on the
doctrine of forum non conveniens.
10. ATTORNEYS' FEES. If litigation is brought concerning this
Agreement, the prevailing party shall be entitled to receive from the
non-prevailing party, and the non-prevailing party shall upon final judgment and
expiration of all appeals immediately pay upon demand all reasonable attorneys'
fees and expenses of the prevailing party.
11. NOTICES. Notices required or permitted to be given under this
Agreement shall be in writing and effective upon delivery in person or by
certified mail, return receipt requested, to the parties at the addresses below
or to another address as any party shall direct by notice to the other parties
as provided in this Section.
4
<PAGE>
(a) if to the Sellers' Representative, to:
Emanuel Zimmer, Esq.
6 East 74th Street
New York, New York 10021
Phone: 212-737-4653
Fax: 212-744-2618
(b) if to Guardian, to:
Guardian International, Inc.
3880 N. 28th Terrace
Hollywood, Florida 33020-1118
Attention: Richard Ginsburg, President
with copy to:
Harvey Goldman, Esq.
Steel Hector & Davis LLP
200 South Biscayne Boulevard
41st Floor
Miami, FL 33131-2398
Phone: 305-577-7011
Fax: 305-577-7001
(c) if to the Escrow Agent, to:
Emanuel Zimmer, Esq.
6 East 74th Street
New York, New York 10021
Phone: 212-737-4653
Fax: 212-744-2618
12. SEVERABILITY. If any one or more of the provisions of this
Agreement is held invalid, illegal or unenforceable, the remaining provisions of
this Agreement shall be unimpaired, and the invalid, illegal or unenforceable
provision shall be replaced by a mutually acceptable valid, legal and
enforceable provision which comes closest to the intent of the parties.
13. SUCCESSORS AND ASSIGNS. This Agreement shall be for the benefit of,
and shall be binding upon, the parties and their respective heirs, personal
representatives, executors, legal representatives, successors and permitted
assigns.
5
<PAGE>
14. PAYMENT OF EXPENSES. Except as otherwise provided in this
Agreement, each party shall pay its own legal fees and disbursements and other
expenses incurred in connection with this Agreement.
15. COUNTERPARTS. This Agreement may be executed by the parties in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument.
16. JURY TRIAL. IF LITIGATION IS BROUGHT TO ENFORCE THIS AGREEMENT, THE
PARTIES KNOWINGLY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM HAS TO A TRIAL
BY JURY. THE PARTIES AGREE THIS PROVISION IS A MATERIAL INDUCEMENT TO THE
PARTIES' ENTERING INTO THIS AGREEMENT.
17. COLLATERAL ASSIGNMENT BY SELLERS. Each of the Sellers hereby agrees
that Guardian shall be entitled to collaterally assign its rights under this
Agreement to a lender providing financing for the transactions contemplated by
the Stock Purchase Agreement.
6
<PAGE>
The parties have executed this Agreement effective as of the day and
year first written above.
GUARDIAN INTERNATIONAL, INC.
By: /S/ RICHARD GINSBURG
----------------------------------------
Richard Ginsburg, President and Chief
Executive Officer
/S/ EMANUEL ZIMMER
--------------------------------------------
Emanuel Zimmer
/S/ JOEL A. COHEN
--------------------------------------------
JOEL A. COHEN
/S/ RAYMOND L. ADAMS
--------------------------------------------
RAYMOND L. ADAMS
/S/ NORMAN RUBIN
--------------------------------------------
NORMAN RUBIN
/S/ HERBERT ABRAMSON
--------------------------------------------
HERBERT ABRAMSON
/S/ SCOTT ADAMS
--------------------------------------------
SCOTT ADAMS
/S/ JOSEPH BELCH
--------------------------------------------
JOSEPH BELCH
/S/ ROBERT BITTON
--------------------------------------------
ROBERT BITTON
7
<PAGE>
/S/ DOUGLAS BLAUSCHILD
--------------------------------------------
DOUGLAS BLAUSCHILD
/S/ JOEL A. COHEN
--------------------------------------------
JOEL A. COHEN
/S/ JOSEPH DIGILIO
--------------------------------------------
JOSEPH DIGILIO
/S/ DOUGLAS DIMONDA
--------------------------------------------
DOUGLAS DIMONDA
/S/ PETER EYL
--------------------------------------------
PETER EYL
/S/ DAVID FISHMAN
--------------------------------------------
DAVID FISHMAN
/S/ EVELYN FREEMAN
--------------------------------------------
EVELYN FREEMAN
/S/ MITCHELL FREEMAN
--------------------------------------------
MITCHELL FREEMAN
/S/ ARLENE GLASS
--------------------------------------------
ARLENE GLASS
/S/ IRWIN GLASS
--------------------------------------------
IRWIN GLASS
/S/ JACK HIRSCHFIELD
--------------------------------------------
JACK HIRSCHFIELD
8
<PAGE>
/S/ SEYMOUR ISAACMAN
--------------------------------------------
SEYMOUR ISAACMAN
/S/ GEORGE KOWALCZYK
--------------------------------------------
GEORGE KOWALCZYK
/S/ LAURIE KLEINHAUS
--------------------------------------------
LAURIE KLEINHAUS
/S/ RONALD LIEBLING
--------------------------------------------
RONALD LIEBLING
/S/ MARILYN LEVY
--------------------------------------------
MARILYN LEVY &
W.A. LEVY TRUST
/S/ VIVIAN LUCKS
--------------------------------------------
VIVIAN LUCKS
/S/ MARTIN MEVORAH
--------------------------------------------
MARTIN MEVORAH
/S/ SAMUEL MEVORACH
--------------------------------------------
SAMUEL MEVORACH
/S/ MIRIAM RHEIN
--------------------------------------------
MIRIAM RHEIN
/S/ GARY ROSE
--------------------------------------------
GARY ROSE
/S/ JOSEPH ROSSI
--------------------------------------------
JOSEPH ROSSI
9
<PAGE>
/S/ NORMAN RUBIN
--------------------------------------------
NORMAN RUBIN
/S/ KATHERINE DIMONDA
--------------------------------------------
KATHERINE DIMONDA
/S/ DANIEL DIMONDA
--------------------------------------------
DANIEL DIMONDA
/S/ JAMES BURGER
--------------------------------------------
JAMES BURGER
/S/ ILENE KASSMAN
--------------------------------------------
ILENE KASSMAN
/S/ DONNA KASSMAN
--------------------------------------------
DONNA KASSMAN
/S/ BETTY AVIN
--------------------------------------------
BETTY AVIN
/S/ KIMBERLY AVIN
--------------------------------------------
KIMBERLY AVIN
/S/ IRVING AVIN
--------------------------------------------
IRVING AVIN
/S/ JOYCE D. BLACK
--------------------------------------------
MURRY VICTOR
/S/ JEFFREY SLATKEN
--------------------------------------------
JEFFREY SLATKEN
10
<PAGE>
/S/ LILA WAGER
--------------------------------------------
LILA WAGER
/S/ ELI WAGER
--------------------------------------------
ELI WAGER
/S/ SAUL VICTOR
--------------------------------------------
SAUL VICTOR
/S/ SOPHIA ZIMMER
--------------------------------------------
SOPHIA ZIMMER
/S/ BOB ZUCKERMAN
--------------------------------------------
BOB ZUCKERMAN
/S/ MICHAEL FISCHMAN
--------------------------------------------
MICHAEL FISCHMAN
/S/ MARK PESCI
--------------------------------------------
MARK PESCI
/S/ GERALD ADAMS
--------------------------------------------
GERALD ADAMS
11
<PAGE>
EXHIBIT A
LIST OF SELLERS
12
<PAGE>
EXHIBIT B
JOINT WRITTEN NOTICE
To - Emanuel Zimmer
This notice is given pursuant to Section 4(a) of the Escrow and Pledge
Agreement dated February 23, 1998 (the "Agreement"). You are hereby directed to
distribute the number of Escrowed Shares to Guardian as follows:
SELLERS' REPRESENTATIVE
--------------------------------------
Name
GUARDIAN INTERNATIONAL, INC.
--------------------------------------
By:
Its:
Dated: __________________
13
<PAGE>
EXHIBIT C
JOINT WRITTEN NOTICE
To - Emanuel Zimmer
This notice is given pursuant to Section 4(b) of the Escrow and Pledge
Agreement dated February 23, 1998 (the "Agreement"). The Indemnification Period
has expired and you are hereby directed to distribute the number of Escrowed
Shares to each Seller and to Guardian as follows:
SELLERS' REPRESENTATIVE
--------------------------------------
Name
GUARDIAN INTERNATIONAL, INC.
--------------------------------------
By:
Its:
Dated: __________________
14
EXHIBIT 10.(d)
EXHIBIT 10(D)
EMPLOYMENT AGREEMENT
The Employment Agreement (this "Agreement") is made and entered into
this 1st day of February, 1998, by and among Mutual Central Alarm Services,
Inc., a New York corporation ("Employer"), Guardian International, Inc., a
Nevada corporation ("Guardian") as guarantor and parent of Employer, and Joel A.
Cohen ("Employee").
WITNESSETH
WHEREAS, the Board of Directors of Employer (the "Board") recognizes
that Employee will contribute to the future growth and success of the security
business of Employer, consisting of burglar alarm, fire alarm, closed circuit
television and electronic access and control and central station monitoring
services to residential and commercial customers (the "Business"), and the Board
therefore desires to assure Employer of Employee's services as an employee of,
and for the benefit of, Employer; and
WHEREAS, in order to induce Employee to remain in the employ of
Employer, this Agreement sets forth employment and other benefits which Employer
shall pay to Employee in connection with his employment, provides for Employee's
employment for a term of five years and provides for Employee's agreement not to
compete with the Business in the event of his termination of employment on the
terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the receipt and sufficiency of which
are mutually acknowledged, the parties hereto hereby agree as follows:
1. EMPLOYMENT. Employer hereby employs Employee, and Employee hereby
accepts such employment, upon the terms and conditions set forth in this
Agreement.
2. TERM. Subject to the provisions for termination contained in Section
10 hereof, the term of this Agreement, and the employment of Employee hereunder,
shall commence on February 1, 1998 and continue for a five-year term ending on
January 31, 2003. Thereafter, this Agreement shall renew automatically for
one-year terms unless six months advance notice of termination is given by
either party.
3. DUTIES. During the term of his employment hereunder, Employee shall
serve as President and Chief Executive Officer of Employer and Vice President of
Guardian. In such capacity, Employee (i) shall (x) supervise and administer the
day to day operations, business and affairs of Employer, (y) administer and
oversee all labor union affairs, (z) shall have the power and authority to do
and to perform any and all other acts and things which he shall reasonably
<PAGE>
consider to be necessary, desirable, convenient, or appropriate and in the best
interests of Employer, in the ordinary and usual course of its business, (ii)
shall report to the President of Guardian, and (iii) shall perform such other
duties as shall be usual and customary for such executive officer in accordance
with the Bylaws of Employer. The place of employment shall be New York City, New
York. Employee will travel from time to time as may be necessary in furtherance
of the Business.
4. EXCLUSIVITY OF SERVICES. Employee shall devote his full business
time, energy and ability exclusively to the business, affairs and interests of
Employer and matters related thereto, shall use Employee's best efforts and
abilities to promote Employer's interests, and shall perform the services
contemplated by this Agreement in accordance with policies established by and
under the direction of the Board. During the term hereof, Employee shall not
serve as an officer, director, employee, consultant or advisor to any other
business, and shall not engage in any other business activities other than the
Permitted Activities, as herein defined. The Employee may (i) make and manage
personal business investments of his choice, provided, that the Employee shall
hold no investment in any entity which competes in any way with Employer or its
subsidiaries, other than an investment representing a less than 5% interest in
any publicly held entity; and (ii) serve in any capacity with any civic,
educational or charitable organization without seeking or obtaining approval by
the Board, provided, that the activities and services described in clauses (i)
and (ii) (collectively, the "Permitted Activities") do not interfere or conflict
with the performance of duties hereunder or create any conflict of interest with
such duties. Employee hereby confirms that he is under no contractual
commitments inconsistent with his obligations set forth in this Agreement.
5. COMPENSATION.
a. During the term of his employment hereunder, Employee shall
receive a salary of One Hundred Fifty Thousand Dollars ($150,000) per annum (the
"Salary"), payable in equal installments no less frequently than semi-monthly,
and receive annual increases equal to the lesser of (i) the Consumer Price Index
for the Standard Metropolitan Statistical Area including New York, New York or
(ii) 5% of the Salary. Employee shall receive 15% of any profits from off-shore
ventures in which the Employee is actively involved on behalf of Employer.
b. Employee shall be entitled to a bonus from time to time
during the term of his employment with Employer pursuant to Schedule 5(b)
attached hereto.
c. Employee shall be entitled, in addition to the above, to
any benefits and perquisites to which executive officers of Employer may be or
may generally become entitled to receive under any present or future employment
benefit and perquisite plans or programs, or executive contingent compensation
plans, of Employer, and Employee shall be eligible to receive, during the period
of his employment under this Agreement, benefits and emoluments for which
corporate executive officers are eligible under every plan or program to the
extent
2
<PAGE>
permissible under the general terms and provisions thereof. The foregoing
notwithstanding, Employer may change or discontinue any such benefits in its
sole discretion.
d. In addition to the above, upon execution of this Agreement,
Employer shall grant to Employee options to purchase 100,000 shares of
Employer's Class A Common Stock, par value $.001 per share (the "Common Stock"),
with an exercise price equal to the five-day average closing price of the Common
Stock for the five days prior to the public announcement of the transactions
contemplated by the Stock Purchase Agreement by and among Guardian and the
shareholders of Employer, dated as of February 1, 1998. Twenty percent (20%) of
such options shall become exercisable on each anniversary of the execution of
this Agreement. If the Employee does not exercise all exercisable options in any
given year, such options may be exercised in subsequent years. In the event that
Employee's employment hereunder is terminated under Section 10(a) prior to the
vesting of all options, any such unvested options shall be forfeited. In the
event that Employee's employment hereunder is terminated pursuant to Section
10(b) or (c) prior to the vesting of all options, any such unvested options
shall vest automatically as of the date of termination, provided that Employee
has been employed with Employer at least 30 consecutive months from the date of
the execution of this Agreement.
e. All options shall immediately vest upon a Change of
Control. "Change of Control" means either (i) the acquisition directly or
indirectly, by any "person" (as this term is used in Section 13(d) of the
Securities Exchange Act of 1934, as amended) of in excess of 50% of the
Employer's combined voting power of all then-outstanding securities; or (ii) the
consummation of a merger, consolidation, or other business combination of the
Employer with any other person (as defined immediately above), other than a
merger, consolidation or other business combination that would result in the
Employer's 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 50% of
the Employer's outstanding common stock or stock of the surviving entity or
parent or affiliate thereof outstanding immediately after such transaction.
6. AUTOMOBILE. During the term of his employment hereunder, Employer
shall furnish to Employee a Jeep Grand Cherokee automobile or equivalent and
will reimburse all expenses relating to such automobile including gas, tolls,
parking, maintenance and repairs. Employer agrees that on the fourth anniversary
of the execution of this Agreement, Employer shall provide Employee with a new
Jeep Grand Cherokee.
7. EXPENSE REIMBURSEMENT. During the term of Employee's employment
hereunder, Employer, upon the submission of proper proof by Employee, shall
promptly reimburse Employee for reasonable business expenses actually and
necessarily paid or incurred by him in the Employee's discretion in connection
with the discharge of his duties hereunder.
8. VACATION. During the term of his employment hereunder, Employee,
during each year of the term of this Agreement, shall be entitled to four weeks
of vacation time as selected in
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consecutive or nonconsecutive periods or any combination thereof by Employee in
his reasonable discretion consistent with his duties and responsibilities
hereunder, during which vacation time Employee shall be paid the applicable
portion of his Salary provided, however, Employee shall not take a vacation for
longer than two weeks without the prior consent of the Board. Vacation shall not
accumulate or carry over from year to year.
9. INSURANCE. During the term of his employment hereunder, Employer
shall at all times pay the reasonable premiums of medical insurance policies for
Employee and his immediate family and shall further provide and pay the premiums
of group term life insurance, group disability insurance and such other
insurance as is from time to time provided to all of Employer's executive
officers on terms no less favorable than that provided to Employer's other
executive officers.
10. TERMINATION.
a. Notwithstanding anything contained in this Agreement,
Employer by written notice to Employee shall at all times in its sole discretion
have the right to terminate this Agreement, and Employee's employment hereunder,
"for cause" effective upon delivery of notice to Employee. For purposes for this
Agreement, "for cause" shall mean: (i) any conviction of Employee of a felony or
any conduct which if proved would support conviction of a felony; (ii) conduct
amounting to a material act of fraud, gross misconduct or dishonesty involving
Employer; (iii) a material act of fraud or dishonesty not involving Employer
which has a material adverse effect upon the Business or reputation of Employer;
(iv) continuing material violation by Employee of his obligations under this
Agreement after written notice thereof to Employee and failure to cure such
violation within fifteen (15) days following such notice; (v) misuse of alcohol
that materially impairs Employee's ability to perform the duties of his
employment as determined by a physician retained by Employer or, if Employee
refuses to submit to appropriate examinations by such physician at the request
of the Board of Directors, then by at least three members of the Board of
Directors; or (vi) the unlawful use of drugs or other controlled substances.
b. Employer by written notice to Employee shall have the right
to terminate this Agreement and Employee's employment upon Employee's lack of
capacity to perform the essential functions of his duties under this Agreement,
with or without reasonable accommodation, because of physical or mental
disability ("Disability") of Employee, for a period of 120 or more days, either
consecutively or in the aggregate during any six-month period, as determined by
an impartial reputable physician agreed upon by the Board and Employee (or his
representative, as the case may be).
c. If Employee dies during the term of his employment
hereunder, this Agreement shall terminate automatically upon the date of
Employee's death.
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11. PAYMENTS UPON TERMINATION OR EXPIRATION.
a. In the event that this Agreement, and Employee's employment
hereunder, is terminated for cause pursuant to Section 10(a) hereof, then, in
such event, (i) Employer shall have no obligation whatsoever to make any
payment, including, without limitation, any payment of Salary, bonus, automobile
expense reimbursement or any insurance premium, to or on behalf of Employee for
any period subsequent to the date of such termination; (ii) Employer may,
subject to the terms of such plans and applicable law, remove Employee from
coverage under any medical, life, disability or other insurance plans or
programs made available to Employee by Employer; and (iii) Employee shall, upon
such termination, return the automobile provided pursuant to Section 6.
b. In the event that this Agreement, and Employee's employment
hereunder, is terminated for death or Disability of Employee pursuant to Section
10(b) or 10(c) hereof, then, in any such event, Employer shall have no
obligation whatsoever to make any payment, including without limitation, any
payment of Salary, bonus, automobile expense reimbursement or any such insurance
premium, to or on behalf of Employee for any period subsequent to the date of
such termination or expiration and Employee shall, upon such termination, return
the automobile provided pursuant to Section 6. Notwithstanding the above, in the
event this Agreement is terminated for Disability of Employee pursuant to
Section 10(b) hereof, Employee shall have the right at Employer's expense
through the remaining term of this Agreement to continue such disability
insurance as Employer was providing as of the date of termination, and, at
Employee's own expense, to continue any group medical insurance then provided to
Employee and to such other benefits as he is then entitled under such insurance
and any disability plan or program of Employer.
c. In the event that this Agreement, and Employee's employment
hereunder, is terminated by Employer without cause during the terms set forth in
Section 2 hereof, or Employee shall terminate his employment with Employer as a
result of a material breach by Employer of the terms hereof, which breach is not
cured within fifteen (15) days following notice in writing from Employee to
Employer specifying the nature of such breach, then, in such event, in addition
to such amounts as have accrued prior to the date of termination and have not
previously been paid including any accrued vacation benefits, Employer shall pay
to Employee, payable at such time as such payments would otherwise be payable
hereunder, Employee's Salary and benefits that would have accrued to him for the
remaining term of this Agreement, and any bonus pursuant to Schedule 5(b)
prorated to the date of termination.
12. GUARDIAN BOARD SEAT. During the term of Employee's employment
hereunder, Harold Ginsburg, Sheilah Ginsburg, Richard Ginsburg and Rhonda
Ginsburg agree to vote all Guardian stock over which they have voting control to
elect Employee to the Board of Directors of Guardian. Employee agrees to tender
his resignation as such a director immediately upon termination of his
employment hereunder for any reason.
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13. CONFIDENTIALITY.
a. For good consideration and as an inducement for Employer to
employ Employee, Employee agrees that, both during the term of this Agreement
and after the termination of this Agreement, Employee will hold in a fiduciary
capacity for the benefit of Employer, and shall not, directly or indirectly, use
or disclose, except as authorized by Employer in connection with the performance
of his duties, any Confidential Information (as defined below) that Employee may
have or acquire (whether or not developed or compiled by Employee and whether or
not Employee has been authorized to have access to such Confidential
Information) prior to or during the term of this Agreement. The term
"Confidential Information" as used in this Agreement shall mean and include any
material information, data and know-how specific to the Business of Employer and
not generally known in the industry that is disclosed to Employee by Employer or
known by him as a result of his relationship with Employer (or a company
acquired by Employer) and not generally within the public domain (whether
constituting a trade secret or not), including without limitation, the
following: financial information, supply and service information, marketing
information, personnel information, customer information and information with
respect to any corporate affairs that Employer treats as confidential.
The term "Confidential Information" does not include information that
has become generally available to the public by the act of Employer or by the
act of one who has the right to disclose such information without violating any
right of Employer or the customer to which such information pertains.
Nothing in this Section 13 shall prevent Employee from disclosing any
Confidential Information to the extent such disclosure is required by law or any
order of a court or government authority with jurisdiction, provided, however,
that Employee agrees to give Employer advance written notice as soon as possible
of the Confidential Information required to be disclosed, and at Employer's
request, to use his best efforts to obtain assurances that the Confidential
Information required to be disclosed will be maintained on a confidential basis
and will not be disclosed to a greater degree than required by law.
b. The covenant contained in this Section 13 shall survive the
termination of Employee's employment with Employer for any reason for a period
of two (2) years; provided, however, that with respect to those items of
Confidential Information which constitute trade secrets under applicable law,
Employee's obligations of confidentiality and non-disclosure as set forth in
this Section 13 shall continue to survive after said two (2) year period to the
greatest extent permitted by applicable law. These rights of Employer are in
addition to those rights Employer has under the common law or applicable
statutes for the protection of trade secrets.
14. COVENANT NOT TO COMPETE. For good consideration and as an
inducement for Employer to employ Employee, Employee agrees that he will not
engage or participate, directly or indirectly, in any business that competes
with the Business, whether as employee, employer,
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consultant, agent, principal, partner, stockholder, corporate officer, director,
or other representative capacity, at any time during Employee's employment with
Employer, and (i) if terminated pursuant to Section 10(a) for cause, for a
period of two (2) years after the date of termination of Employee's employment
with Employer, in any city or county within the United States in which the
Employer (or any of its subsidiaries) is then engaging and continues to engage
in its Business, and (ii) if terminated by expiration of this Agreement pursuant
to its terms, for a period of one (1) year after the date of termination of
Employee's employment with Employer, in the five boroughs of New York, New York,
and (iii) if terminated without cause during the term of this Agreement, for
only the balance of the term of this Agreement, in the five boroughs of New
York, New York. Notwithstanding the foregoing, Employee may hold an investment
representing a less than 5% interest in any publicly held entity engaging in a
business that competes with the Business. In the event any court shall refuse to
enforce any portion of the covenant set forth in this Section 14, then such
unenforceable portion shall be deemed eliminated and severed from said contract
for the purposes of said court's proceedings to the extent necessary to permit
the remaining portions of the covenant to be enforced.
15. COVENANTS AGAINST OTHER ACTIONS DAMAGING EMPLOYER. Employee agrees
that he will not, at any time during his employment with Employer and for the
period of the non-compete provision determined in accordance with Section 14
(the "Non-Compete Period"), for himself or on behalf of or in conjunction with
any third party solicit any employee of Employer or its subsidiaries to leave
such employment; provided that the posting by Employee or any entity with which
Employee is involved of general advertisements soliciting employees shall not
constitute the solicitation of any employee of Employer or its subsidiaries.
Employee further agrees that during his employment with Employer and for an
unlimited period thereafter, he will not directly or indirectly, on his own
behalf or in the service of or on behalf of others, solicit, divert or
appropriate, or attempt to solicit, divert or appropriate, to any competing
business, any customers of Employer who are customers as of the date of
termination. If, during the term of this agreement, Employee is engaged in or
associated with the planning or implementing of any project, program or venture
involving Employer and a third party or parties (a "Venture"), or any
discussions, analysis or negotiations with respect to an investment in, merger,
acquisition or purchase, directly or indirectly, of the stock, assets, or
business of any entity (an "Acquisition"), all rights in the Venture and the
Acquisition and any opportunity to make any investment in the entity to be so
acquired (the "Target") shall belong to Employer and shall constitute a
corporate opportunity belonging exclusively to Employer. Except as approved by
the Board, Employee shall not be entitled to any interest in any such Venture or
to invest or solicit any third party to invest in the Target or consummate the
Acquisition, or to any commission, finder's fee or other compensation in
connection therewith other than any Salary paid to Employee for performance of
his duties in the ordinary course of business. In the event any court shall
refuse to enforce any portion of the covenants set forth in this Section 15,
then such unenforceable portion shall be deemed eliminated and severed from said
contract for the purposes of said court's proceedings to the extent necessary to
permit the remaining portions of the covenant to be enforced.
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<PAGE>
16. ARBITRATION. All disputes or controversies between the parties
arising from or related to any matter that pertains to this Agreement, to the
employment of Employee by Employer, or to the termination Employee's employment
which otherwise would allow or require resort to a court, administrative, or
other governmental dispute resolution forum (whether the claim is legal or
equitable in nature, whether it is based on any tort, contract, or common law
theory of recovery, and whether it is based on any federal, state, or local
employment discrimination or civil rights statute, executive order, law,
regulation, or ordinance, including without limitation the Age Discrimination in
Employment Act of 1967, the Americans with Disabilities Act, Title VII of the
Civil Rights Act of 1964, the New York Sate Human Rights Law, and the New York
City Human Rights Law) shall be referred to binding, non-appealable arbitration
in accordance with the procedures set forth in Exhibit A hereto and without
recourse to any litigation except as set forth in Exhibit A. Each party hereby
submits to personal jurisdiction in New York, New York for the purpose of such
arbitration proceedings, and/or any suits to confirm same. Pending completion of
any arbitration proceedings, payments not in dispute shall continue to be made
and obligations not in dispute shall continue to be performed.
17. ASSIGNMENT. This Agreement is personal to Employee, and Employee
may not assign or transfer any of its benefits or obligations. Upon written
notice by Employer to Employee, Employer may assign its rights under this
Agreement to any entity (i) that controls or acquires control of Employer, (ii)
that is controlled by, is under common control with, or acquires an interest in
Employer, or (iii) in which Employer acquires a financial interest, provided
that such entity assumes Employer's obligations under this Agreement or that
Employer remains liable for its obligations under the Agreement. Upon written
notice by Employer to Employee, Employer may assign its rights to any entity
that acquires substantially all of Employer's assets, provided that such entity
assumes Employer's obligations under this Agreement.
18. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without reference to the
conflicts of laws principles thereof.
19. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, understandings
and arrangements, both oral and written, between the parties hereto with respect
to the subject matter hereof. This Agreement may not be modified in any way
unless in writing signed by both Employer and Employee.
20. NOTICES. Any notices required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been duly given when
delivered by hand and receipted or when received or refused if delivered by
United States mail, by registered or certified mail, return receipt requested,
postage prepaid, as follows:
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If to Employer: Guardian International, Inc.
3880 North 28th Terrace
Hollywood, Florida 33020
If to Employee: Joel A. Cohen
99 N. Rockledge Drive
Livingston, New Jersey 07039
or to such other addresses as either party hereto may from time to time give
notice of to the other on five days prior notice in the manner aforesaid.
21. BENEFITS; BINDING EFFECT. This Agreement shall be for the benefit
of and binding upon the parties hereto and their respective legal
representatives, successors and, where applicable, assigns.
22. SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part hereof, all of which are inserted conditionally on their being valid in
law, and, in the event that anyone or more of the words, phrases, sentences,
clauses or sections contained in this Agreement declared invalid, this Agreement
shall be construed as if such invalid word or words, phrase or phrases, sentence
or sentences, clause or clauses, or section or sections had not been inserted.
23. WAIVERS. The waiver by either party hereto of a breach of any
provision of this Agreement shall not be construed as a waiver of any subsequent
breach.
24. SECTION HEADINGS. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
25. EQUITABLE REMEDIES. Employee acknowledges that Employer would not
have an adequate remedy at law for money damages if Employee breaches Sections
13, 14 or 15. Therefore, in addition to all other remedies to which Employer may
be entitled for a breach or threatened breach of this Agreement, Employer will
be entitled to specific enforcement of this Agreement and to injunctive or other
equitable relief as a remedy for a breach or threatened breach. In the event of
legal proceedings in connection with this Agreement, the non-prevailing party
shall pay all reasonable attorneys' fees and costs of the prevailing party at
trial and on appeal.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written.
EMPLOYER:
MUTUAL CENTRAL ALARM SERVICES, INC.,
a New York corporation
By: /S/ RICHARD GINSBURG
--------------------
Name: RICHARD GINSBURG
Title: VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
GUARANTOR AND PARENT OF
EMPLOYER:
GUARDIAN INTERNATIONAL, INC.,
a Nevada corporation
By: /S/ RICHARD GINSBURG
--------------------
Richard Ginsburg, President and
Chief Executive Officer
EMPLOYEE:
/S/ JOEL A. COHEN
-----------------
Joel A. Cohen
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EXHIBIT A
ARBITRATION PROCEDURES
a. If a dispute or controversy arises, the parties hereto shall attempt
in good faith to resolve such dispute or controversy promptly by negotiation.
Any such dispute or controversy which has not been resolved by negotiation
within thirty (30) days after the initiation of discussions shall be resolved by
binding arbitration in accordance with the then current CPR Rules for
Non-Administered Arbitration of Business Disputes. Unless the parties agree
otherwise, the arbitration shall be conducted in New York, New York, by a panel
of three arbitrators. The disputing parties shall each select one arbitrator,
and the arbitrators so selected shall select an attorney as the third
arbitrator. If the arbitrators selected by the disputing parties fail to agree
on the third arbitrator within thirty (30) days of the date this arbitration
provision becomes operative, any person involved may request CPR to make the
appointment in accordance with its applicable rules.
b. The arbitrators shall decide the issues submitted to them in
accordance with the provisions and commercial purposes of this Agreement;
provided that, all substantive questions of law shall be determined under the
laws of the State of New York (without regard to its principles of conflicts of
laws).
c. The arbitration shall be governed by the United States Arbitration
Act, 9 U.S.C.ss. 1, ET SEQ., and judgment upon the award rendered by the
arbitrators may be entered by any court having jurisdiction thereof. The
arbitrators may grant any remedy or relief which is just and equitable,
including injunctive relief or specific performance.
d. The parties hereto agree to facilitate the arbitration by: (i)
making available to one another and to the arbitrators for examination,
inspection and extraction all documents, books, records and personnel under
their control if determined by the arbitrators to be relevant to the dispute;
(ii) participating in reasonable discovery, including oral depositions; (iii)
conducting arbitration hearings to the greatest extent possible on successive
days; and (iv) observing strictly the time periods established by the Rules or
by the arbitrators for submission of evidence or briefs.
e. Initially, the disputing parties shall each pay one-half of the
costs (excluding attorneys' fees) of any arbitration; provided, however, that
the arbitrators shall divide all costs (excluding attorneys' fees) incurred in
conducting the arbitration in their final award in accordance with what they
deem just and equitable under the circumstances, and any party who is allocated
in excess of one-half of such costs shall reimburse the other for such excess
costs.
f. Notwithstanding the exclusivity of the dispute resolution procedures
specified herein, a party hereto, without prejudice to such procedures, may file
a complaint or seek a
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preliminary injunction or other provisional judicial relief if in its sole
judgment such action is necessary to avoid irreparable damage or to preserve the
status quo. Despite any such action, the parties shall continue to participate
in good faith in the procedures specified herein.
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EXHIBIT 10.(e)
EXHIBIT 10(E)
EMPLOYMENT AGREEMENT
The Employment Agreement (this "Agreement") is made and entered into
this 1st day of February, 1998, by and among Mutual Central Alarm Services,
Inc., a New York corporation ("Employer"), Guardian International, Inc., a
Nevada corporation ("Guardian"), as guarantor and parent of Employer, and
Raymond L. Adams ("Employee").
WITNESSETH
WHEREAS, the Board of Directors of Employer (the "Board") recognizes
that Employee will contribute to the future growth and success of the security
business of Employer, consisting of burglar alarm, fire alarm, closed circuit
television and electronic access and control and central station monitoring
services to residential and commercial customers (the "Business"), and the Board
therefore desires to assure Employer of Employee's services as an employee of,
and for the benefit of, Employer; and
WHEREAS, in order to induce Employee to remain in the employ of
Employer, this Agreement sets forth employment and other benefits which Employer
shall pay to Employee in connection with his employment, provides for Employee's
employment for a term of three years and provides for Employee's agreement not
to compete with the Business in the event of his termination of employment on
the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the receipt and sufficiency of which
are mutually acknowledged, the parties hereto hereby agree as follows:
1. EMPLOYMENT. Employer hereby employs Employee, and Employee hereby
accepts such employment, upon the terms and conditions set forth in this
Agreement.
2. TERM. Subject to the provisions for termination contained in Section
10 hereof, the term of this Agreement, and the employment of Employee hereunder,
shall commence on February 1, 1998 and continue for a three-year term ending on
January 31, 2001. Thereafter, this Agreement shall renew automatically for
one-year terms unless six months advance notice of termination is given by
either party.
3. DUTIES. During the term of his employment hereunder, Employee shall
work 156 days per year and serve as Vice President of Employer. In such
capacity, Employee (i) shall perform those reasonable duties as directed by the
President of Employer, (ii) shall report to the President of Employer, and (iii)
shall perform such other duties as shall be usual and customary for such
executive officer in accordance with the Bylaws of Employer. Employee agrees to
maintain his status as the "qualifier" for the Licenses listed on Schedule 2.8
of the Purchase Agreement which
<PAGE>
require an individual to serve as a "qualifier" and not to do anything that
would disqualify Employee from acting as a "qualifier" under the applicable
Licenses. The place of Employee's employment shall be New York, New York and
Employee shall travel as is necessary in the furtherance of his duties under
this Agreement.
4. EXCLUSIVITY OF SERVICES. Employee shall devote his full business
time, energy and ability exclusively to the business, affairs and interests of
Employer and matters related thereto in accordance with the provisions of
Section 3, shall use Employee's best efforts and abilities to promote Employer's
interests, and shall perform the services contemplated by this Agreement in
accordance with policies established by and under the direction of the Board.
During the term hereof, Employee shall not serve as an officer, director,
employee, consultant or advisor to any other business, and shall not engage in
any other business activities other than the Permitted Activities, as herein
defined. The Employee may (i) make and manage personal business investments of
his choice, provided, that the Employee shall hold no investment in any entity
which competes in any way with Employer or its subsidiaries, other than an
investment representing a less than 5% interest in any publicly held entity; and
(ii) serve in any capacity with any civic, educational or charitable
organization without seeking or obtaining approval by the Board, provided, that
the activities and services described in clauses (i) and (ii) (collectively, the
"Permitted Activities") do not interfere or conflict with the performance of
duties hereunder or create any conflict of interest with such duties. Employee
hereby confirms that he is under no contractual commitments inconsistent with
his obligations set forth in this Agreement.
5. COMPENSATION.
a. During the term of his employment hereunder, Employee shall
receive a salary of Ninety Thousand Dollars ($90,000) per annum (the "Salary"),
payable in equal installments no less frequently than semi-monthly. Salary
increases may be considered annually by the President of Employer.
b. Employee may be entitled to a bonus from time to time
during the term of his Agreement pursuant to such policies as are developed by
the President of Employer and adopted from time to time by the Board of
Directors of Employer. Employee shall receive 15% of any profits made from
off-shore ventures in which the Employee is actively involved.
c. Employee shall be entitled, in addition to the above, to
any benefits and perquisites to which executive officers of Employer may be or
may generally become entitled to receive under any present or future employment
benefit and perquisite plans or programs, or executive contingent compensation
plans, of Employer, and Employee shall be eligible to receive, during the period
of his employment under this Agreement, benefits and emoluments for which
corporate executive officers are eligible under every plan or program to the
extent permissible under the general terms and provisions thereof. The foregoing
notwithstanding, Employer may change or discontinue any such benefits in its
sole discretion.
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d. In addition to the above, upon execution of this Agreement,
Employer shall grant to Employee options to purchase 100,000 shares of
Employer's Class A Common Stock, par value $.001 per share (the "Common Stock"),
with an exercise price equal to the five-day average closing price of the Common
Stock for the five days prior to the public announcement of the transactions
contemplated by the Stock Purchase Agreement by and among Guardian and the
shareholders of Employer, dated as of February 1, 1998. Thirty-three and a third
percent (33-1/3%) of such options shall become exercisable on each anniversary
of the execution of this Agreement. If the Employee does not exercise all
exercisable options in any given year, such options may be exercised in
subsequent years. In the event that Employee's employment hereunder is
terminated under Section 10(a) prior to the vesting of all options, any such
unvested options shall be forfeited. In the event that Employee's employment
hereunder is terminated pursuant to Section 10(b) or (c), any such unvested
options shall vest automatically provided that Employee has been employed with
Employer at least 30 months from the date of the execution of this Agreement.
e. All options shall immediately vest upon a Change of Control. "Change
of Control" means either (i) the acquisition directly or indirectly, by any
"person" (as this term is used in Section 13(d) of the Securities Exchange Act
of 1934, as amended) of in excess of 50% of the Employer's combined voting power
of all then-outstanding securities; or (ii) the consummation of a merger,
consolidation, or other business combination of the Employer with any other
person (as defined immediately above), other than a merger, consolidation or
other business combination that would result in the Employer's 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 50% of the Employer's
outstanding common stock or stock of the surviving entity or parent or affiliate
thereof outstanding immediately after such transaction.
6. AUTOMOBILE ALLOWANCE. During the term of his employment hereunder,
Employer shall furnish to Employee a Jeep Grand Cherokee automobile or
equivalent and will reimburse all expenses relating to such automobile including
gas, tolls, parking, maintenance and repairs.
7. EXPENSE REIMBURSEMENT. During the term of Employee's employment
hereunder, Employer, upon the submission of proper proof by Employee, shall
promptly reimburse Employee for reasonable business expenses actually and
necessarily paid or incurred by him in the Employee's discretion in connection
with the discharge of his duties hereunder.
8. VACATION. During the term of his employment hereunder, Employee,
during each year of the term of this Agreement, shall be entitled to four weeks
of vacation time as selected in consecutive or nonconsecutive periods or any
combination thereof by Employee in his reasonable discretion consistent with his
duties and responsibilities hereunder, during which vacation time Employee shall
be paid the applicable portion of his Salary provided, however, Employee shall
not take a vacation for longer than two weeks without the prior consent of the
Board. Vacation shall not accumulate or carry over from year to year.
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9. INSURANCE. During the term of his employment hereunder, Employer
shall at all times pay the reasonable premiums of medical insurance policies for
Employee and his immediate family and shall further provide and pay the premiums
of group term life insurance, group disability insurance and such other
insurance as is from time to time provided to all of Employer's executive
officers on terms no less favorable than that provided to Employer's other
executive officers.
10. TERMINATION.
a. Notwithstanding anything contained in this Agreement,
Employer by written notice to Employee shall at all times in its sole discretion
have the right to terminate this Agreement, and Employee's employment hereunder,
"for cause" effective upon delivery of notice to Employee. For purposes for this
Agreement, "for cause" shall mean: (i) any conviction of Employee of a felony or
any conduct which if proved would support conviction of a felony; (ii) conduct
amounting to a material act of fraud, gross misconduct or dishonesty involving
Employer; (iii) a material act of fraud or dishonesty not involving Employer
which has a material adverse effect upon the Business or reputation of Employer;
(iv) continuing material violation by Employee of his obligations under this
Agreement after written notice thereof to Employee and failure to cure such
violation within fifteen (15) days following such notice; (v) misuse of alcohol
that materially impairs Employee's ability to perform the duties of his
employment as determined by a physician retained by Employer or, if Employee
refuses to submit to appropriate examinations by such physician at the request
of the Board of Directors, then by at least three members of the Board of
Directors; or (vi) the unlawful use of drugs or other controlled substances.
b. Employer by written notice to Employee shall have the right
to terminate this Agreement and Employee's employment upon Employee's lack of
capacity to perform the essential functions of his duties under this Agreement,
with or without reasonable accommodation, because of physical or mental
disability ("Disability") of Employee, for a period of 120 or more days, either
consecutively or in the aggregate during any six-month period, as determined by
an impartial reputable physician agreed upon by the Board and Employee (or his
representative, as the case may be).
c. If Employee dies during the term of his employment
hereunder, this Agreement shall terminate automatically upon the date of
Employee's death.
11. PAYMENTS UPON TERMINATION OR EXPIRATION.
a. In the event that this Agreement, and Employee's employment
hereunder, is terminated for cause pursuant to Section 10(a) hereof, then, in
such event, (i) Employer shall have no obligation whatsoever to make any
payment, including, without limitation, any payment of Salary, bonus, automobile
expense reimbursement or any insurance premium, to or on behalf of Employee for
any period subsequent to the date of such termination; (ii) Employer may,
subject to the terms of such plans and applicable law, remove Employee from
coverage under any medical, life, disability
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<PAGE>
or other insurance plans or programs made available to Employee by Employer; and
(iii) Employee shall, upon such termination, return the automobile provided
pursuant to Section 6.
b. In the event that this Agreement, and Employee's employment
hereunder, is terminated for death or Disability of Employee pursuant to Section
10(b) or 10(c) hereof, then, in any such event, Employer shall have no
obligation whatsoever to make any payment, including without limitation, any
payment of Salary, bonus, automobile expense reimbursement or any such insurance
premium, to or on behalf of Employee for any period subsequent to the date of
such termination or expiration and Employee shall, upon such termination, return
the automobile provided pursuant to Section 6. Notwithstanding the above, in the
event this Agreement is terminated for Disability of Employee pursuant to
Section 10(b) hereof, Employee shall have the right at Employer's expense
through the remaining term of this Agreement to continue such disability
insurance as Employer was providing as of the date of termination, and, at
Employee's own expense, to continue any group medical insurance then provided to
Employee and to such other benefits as he is then entitled under such insurance
and any disability plan or program of Employer.
c. In the event that this Agreement, and Employee's employment
hereunder, is terminated by Employer without cause during the terms set forth in
Section 2 hereof, or Employee shall terminate his employment with Employer as a
result of a material breach by Employer of the terms hereof, which breach is not
cured within fifteen (15) days following notice in writing from Employee to
Employer specifying the nature of such breach, then, in such event, in addition
to such amounts as have accrued prior to the date of termination and have not
previously been paid including any accrued vacation benefits, Employer shall pay
to Employee, payable at such time as such payments would otherwise be payable
hereunder, Employee's Salary and benefits that would have accrued to him, and
any bonus the Board has otherwise approved prior to termination, for the
remaining term of this Agreement.
12. RESERVED,
13. CONFIDENTIALITY.
a. For good consideration and as an inducement for Employer to
employ Employee, Employee agrees that, both during the term of this Agreement
and after the termination of this Agreement, Employee will hold in a fiduciary
capacity for the benefit of Employer, and shall not, directly or indirectly, use
or disclose, except as authorized by Employer in connection with the performance
of his duties, any Confidential Information (as defined below) that Employee may
have or acquire (whether or not developed or compiled by Employee and whether or
not Employee has been authorized to have access to such Confidential
Information) prior to or during the term of this Agreement. The term
"Confidential Information" as used in this Agreement shall mean and include any
material information, data and know-how specific to the Business of Employer and
not generally known in the industry that is disclosed to Employee by Employer or
known by him as a result of his relationship with Employer (or a company
acquired by Employer) and not generally within the public domain (whether
constituting a trade secret or not), including without limitation, the
following:
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financial information, supply and service information, marketing information,
personnel information, customer information and information with respect to any
corporate affairs that Employer treats as confidential.
The term "Confidential Information" does not include information that
has become generally available to the public by the act of Employer or by the
act of one who has the right to disclose such information without violating any
right of Employer or the customer to which such information pertains.
Nothing in this Section 13 shall prevent Employee from disclosing any
Confidential Information to the extent such disclosure is required by law or any
order of a court or government authority with jurisdiction, provided, however,
that Employee agrees to give Employer advance written notice as soon as possible
of the Confidential Information required to be disclosed, and at Employer's
request, to use his best efforts to obtain assurances that the Confidential
Information required to be disclosed will be maintained on a confidential basis
and will not be disclosed to a greater degree than required by law.
b. The covenant contained in this Section 13 shall survive the
termination of Employee's employment with Employer for any reason for a period
of two (2) years; provided, however, that with respect to those items of
Confidential Information which constitute trade secrets under applicable law,
Employee's obligations of confidentiality and non-disclosure as set forth in
this Section 13 shall continue to survive after said two (2) year period to the
greatest extent permitted by applicable law. These rights of Employer are in
addition to those rights Employer has under the common law or applicable
statutes for the protection of trade secrets.
14. COVENANT NOT TO COMPETE. For good consideration and as an
inducement for Employer to employ Employee, Employee agrees that he will not
engage or participate, directly or indirectly, in any business that competes
with the Business of Employer in the five Boroughs of New York, New York,
whether as employee, employer, consultant, agent, principal, partner,
stockholder, corporate officer, director, or other representative capacity, at
any time during Employee's employment with Employer and for a period of two (2)
years after the date of termination (for any reason) of Employee's employment
with Employer. Notwithstanding the foregoing, Employee may hold an investment
representing a less than 5% interest in any publicly held entity engaging in a
business that competes with the Business. In the event any court shall refuse to
enforce any portion of the covenant set forth in this Section 14, then such
unenforceable portion shall be deemed eliminated and severed from said contract
for the purposes of said court's proceedings to the extent necessary to permit
the remaining portions of the covenant to be enforced.
15. COVENANTS AGAINST OTHER ACTIONS DAMAGING EMPLOYER. Employee agrees
that he will not, at any time during his employment with Employer and forever
thereafter, for himself or on behalf of or in conjunction with any third party
solicit any employee of Employer or its subsidiaries to leave such employment;
provided that the posting by Employee or any entity with which Employee is
involved of general advertisements soliciting employees shall not constitute the
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solicitation of any employee of Employer or its subsidiaries. Employee further
agrees that, during his employment with Employer and for an unlimited period
hereafter, he will not directly or indirectly, on his own behalf or in the
service of or on behalf of others, solicit, divert or appropriate, or attempt to
solicit, divert or appropriate, to any competing business, any customers of
Employer or its subsidiaries existing as of the date of termination. If, during
the term of this agreement, Employee is engaged in or associated with the
planning or implementing of any project, program or venture involving Employer
and a third party or parties (a "Venture"), or any discussions, analysis or
negotiations with respect to an investment in, merger, acquisition or purchase,
directly or indirectly, of the stock, assets, or business of any entity (an
"Acquisition"), all rights in the Venture and the Acquisition and any
opportunity to make any investment in the entity to be so acquired (the
"Target") shall belong to Employer and shall constitute a corporate opportunity
belonging exclusively to Employer. Except as approved by the Board, Employee
shall not be entitled to any interest in any such Venture or to invest or
solicit any third party to invest in the Target or consummate the Acquisition,
or to any commission, finder's fee or other compensation in connection therewith
other than any Salary paid to Employee for performance of his duties in the
ordinary course of business. In the event any court shall refuse to enforce any
portion of the covenants set forth in this Section 15, then such unenforceable
portion shall be deemed eliminated and severed from said contract for the
purposes of said court's proceedings to the extent necessary to permit the
remaining portions of the covenant to be enforced.
16. ARBITRATION. All disputes or controversies between the parties
arising from or related to any matter that pertains to this Agreement, to the
employment of Employee by Employer, or to the termination Employee's employment
which otherwise would allow or require resort to a court, administrative, or
other governmental dispute resolution forum (whether the claim is legal or
equitable in nature, whether it is based on any tort, contract, or common law
theory of recovery, and whether it is based on any federal, state, or local
employment discrimination or civil rights statute, executive order, law,
regulation, or ordinance, including without limitation the Age Discrimination in
Employment Act of 1967, the Americans with Disabilities Act, Title VII of the
Civil Rights Act of 1964, the New York Sate Human Rights Law, and the New York
City Human Rights Law) shall be referred to binding, non-appealable arbitration
in accordance with the procedures set forth in Exhibit A hereto and without
recourse to any litigation except as set forth in Exhibit A. Each party hereby
submits to personal jurisdiction in New York, New York for the purpose of such
arbitration proceedings, and/or any suits to confirm same. Pending completion of
any arbitration proceedings, payments not in dispute shall continue to be made
and obligations not in dispute shall continue to be performed.
17. ASSIGNMENT. This Agreement is personal to Employee, and Employee
may not assign or transfer any of its benefits or obligations. Upon written
notice by Employer to Employee, Employer may assign its rights under this
Agreement to any entity (i) that controls or acquires control of Employer, (ii)
that is controlled by, is under common control with, or acquires an interest in
Employer, or (iii) in which Employer acquires a financial interest, provided
that such entity assumes Employer's obligations under this Agreement or that
Employer remains liable for its obligations under the Agreement. Upon written
notice by Employer to Employee, Employer may
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assign its rights to any entity that acquires substantially all of Employer's
assets, provided that such entity assumes Employer's obligations under this
Agreement.
18. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without reference to the
conflicts of laws principles thereof.
19. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, understandings
and arrangements, both oral and written, between the parties hereto with respect
to the subject matter hereof. This Agreement may not be modified in any way
unless in writing signed by both Employer and Employee.
20. NOTICES. Any notices required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been duly given when
delivered by hand and receipted or when received or refused if delivered by
United States mail, by registered or certified mail, return receipt requested,
postage prepaid, as follows:
If to Employer: Guardian International, Inc.
3880 North 28th Terrace
Hollywood, Florida 33020
If to Employee: Raymond L. Adams
46 Anita Place
Farmingdale, New York 11735
or to such other addresses as either party hereto may from time to time give
notice of to the other on five days prior notice in the manner aforesaid.
21. BENEFITS; BINDING EFFECT. This Agreement shall be for the benefit
of and binding upon the parties hereto and their respective legal
representatives, successors and, where applicable, assigns.
22. SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part hereof, all of which are inserted conditionally on their being valid in
law, and, in the event that anyone or more of the words, phrases, sentences,
clauses or sections contained in this Agreement declared invalid, this Agreement
shall be construed as if such invalid word or words, phrase or phrases, sentence
or sentences, clause or clauses, or section or sections had not been inserted.
23. WAIVERS. The waiver by either party hereto of a breach of any
provision of this Agreement shall not be construed as a waiver of any subsequent
breach.
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24. SECTION HEADINGS. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
25. EQUITABLE REMEDIES. Employee acknowledges that Employer would not
have an adequate remedy at law for money damages if Employee breaches Sections
13, 14 or 15. Therefore, in addition to all other remedies to which Employer may
be entitled for a breach or threatened breach of this Agreement, Employer will
be entitled to specific enforcement of this Agreement and to injunctive or other
equitable relief as a remedy for a breach or threatened breach. In the event of
legal proceedings in connection with this Agreement, the non-prevailing party
shall pay all reasonable attorneys' fees and costs of the prevailing party at
trial and on appeal.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written.
EMPLOYER:
MUTUAL CENTRAL ALARM SERVICES, INC.,
a New York corporation
By: /S/ JOEL COHEN
-----------------------------------
Name: JOEL COHEN
Title: PRESIDENT
GUARANTOR AND PARENT OF EMPLOYER:
GUARDIAN INTERNATIONAL, INC.,
a Nevada corporation
By: /S/ RICHARD GINSBURG
-----------------------------------
Richard Ginsburg, President and
Chief Executive Officer
EMPLOYEE:
/S/ RAYMOND L. ADAMS
---------------------------------------
Raymond L. Adams
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EXHIBIT A
ARBITRATION PROCEDURES
a. If a dispute or controversy arises, the parties hereto shall attempt
in good faith to resolve such dispute or controversy promptly by negotiation.
Any such dispute or controversy which has not been resolved by negotiation
within thirty (30) days after the initiation of discussions shall be resolved by
binding arbitration in accordance with the then current CPR Rules for
Non-Administered Arbitration of Business Disputes. Unless the parties agree
otherwise, the arbitration shall be conducted in New York, New York, by a panel
of three arbitrators. The disputing parties shall each select one arbitrator,
and the arbitrators so selected shall select an attorney as the third
arbitrator. If the arbitrators selected by the disputing parties fail to agree
on the third arbitrator within thirty (30) days of the date this arbitration
provision becomes operative, any person involved may request CPR to make the
appointment in accordance with its applicable rules.
b. The arbitrators shall decide the issues submitted to them in
accordance with the provisions and commercial purposes of this Agreement;
provided that, all substantive questions of law shall be determined under the
laws of the State of New York (without regard to its principles of conflicts of
laws).
c. The arbitration shall be governed by the United States Arbitration
Act, 9 U.S.C. /section/ 1, ET SEQ., and judgment upon the award rendered by the
arbitrators may be entered by any court having jurisdiction thereof. The
arbitrators may grant any remedy or relief which is just and equitable,
including injunctive relief or specific performance.
d. The parties hereto agree to facilitate the arbitration by: (i)
making available to one another and to the arbitrators for examination,
inspection and extraction all documents, books, records and personnel under
their control if determined by the arbitrators to be relevant to the dispute;
(ii) participating in reasonable discovery, including oral depositions; (iii)
conducting arbitration hearings to the greatest extent possible on successive
days; and (iv) observing strictly the time periods established by the Rules or
by the arbitrators for submission of evidence or briefs.
e. Initially, the disputing parties shall each pay one-half of the
costs (excluding attorneys' fees) of any arbitration; provided, however, that
the arbitrators shall divide all costs (excluding attorneys' fees) incurred in
conducting the arbitration in their final award in accordance with what they
deem just and equitable under the circumstances, and any party who is allocated
in excess of one-half of such costs shall reimburse the other for such excess
costs.
f. Notwithstanding the exclusivity of the dispute resolution procedures
specified herein, a party hereto, without prejudice to such procedures, may file
a complaint or seek a preliminary injunction or other provisional judicial
relief if in its sole judgment such action is necessary to avoid
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irreparable damage or to preserve the status quo. Despite any such action, the
parties shall continue to participate in good faith in the procedures specified
herein.
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