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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
|X| Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1999
|_| Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from _____ to _____
Commission File Number 0-28490
GUARDIAN INTERNATIONAL, INC.
(Name of Small Business Issuer as specified in its charter)
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Florida 58-1799634
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3880 N. 28 Terrace (954) 926-5200
Hollywood, Florida 33020 (The Company's telephone number, including area code)
(Address of principal executive offices)
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.001
Par Value
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form and no disclosure will be
contained, to the best of registrant 's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
The issuer's revenues for the 1999 fiscal year were $18,233,485.
The aggregate market value of voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the stock was sold
as of March 24, 2000 was $3,855,699.
As of March 24, 2000, there are 8,384,441 shares of Class A Voting
Common Stock, par value $.001 per share, and 634,035 shares of Class B Nonvoting
Common Stock, par value $.001 per share, of the issuer outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
Transitional Small Business Disclosure Format (check one): Yes ____ No [X]
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TABLE OF CONTENTS
Page No.
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Introductory Note 1
PART I.
Item 1. Description of Business 2
Item 2. Description of Property 13
Item 3. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 14
PART II.
Item 5. Market for Common Equity and Related Stockholder Matters 15
Item 6. Management's Discussion and Analysis or Plan of Operations 17
Item 7. Financial Statements 25
Item 8. Changes In and Disagreements With Accountants on Accounting and Financial 25
Disclosure
PART III.
Item 9. Directors, Executive Officers, Promoters and Control Persons; 43
Compliance with Section 16(a) of the Exchange Act
Item 10. Executive Compensation 46
Item 11. Security Ownership of Certain Beneficial Owners and Management 47
Item 12. Certain Relationships and Related Transactions 48
Item 13. Exhibits and Reports on Form 8-K 49
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Introductory Note
FORWARD-LOOKING STATEMENTS.
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 ("the Reform Act"), Guardian International, Inc.
(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 made herein. 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 statements of
historical facts and may be forward-looking. These forward-looking statements
are based largely on the Company's expectations and are subject to a number of
risks and uncertainties, including but not limited to, economic, competitive,
regulatory, growth strategies, available financing and other factors discussed
elsewhere in this report and in the documents filed by the Company with the
Securities and Exchange Commission ("SEC"). Many of these factors are beyond the
Company's control. Actual results could differ materially from the
forward-looking statements made. In light of these risks and uncertainties,
there can be no assurance that the results anticipated in the forward-looking
information contained in this report will, in fact, occur.
Such forward-looking statements involve estimates, assumptions, and
uncertainties, and, accordingly, actual results could differ materially from
those expressed in the forward-looking statements. Such uncertainties include,
among others, the following: (i) the ability of the Company to add additional
customer accounts to its account base through acquisitions from third parties,
through internal sales efforts and through 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; (iv) increased false alarm fines
and/or the possibility of reduced public response to alarm signals; (v) changes
in local, state and federal regulations; (vi) availability of qualified
personnel; (vii) competitive factors in the industry, including additional
competition from existing competitors or future entrants to the industry; (viii)
social and economic conditions; (ix) natural disasters; and (x) other risk
factors described in the Company's reports filed with the SEC from time to time.
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, nor can it 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.
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PART I.
Item 1. Description of Business
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The Company's Services
The Company is presently a leading supplier of security monitoring and
high grade monitored security and fire systems in Florida and New York City. The
Company's principal activities include the following: (i) monitoring services
provided pursuant to alarm contracts owned by the Company; (ii) acquisition of
alarm contracts in connection with the acquisition of other alarm companies;
(iii) the sales and installation of electronic security and fire systems
including alarm, closed circuit television ("CCTV") and access control systems;
(iv) maintenance of electronic security systems; and (v) monitoring services
provided pursuant to alarm contracts owned by other alarm companies (wholesale
monitoring).
The majority of the Company's revenue is derived from recurring
payments for the monitoring and maintenance of security and fire systems,
pursuant to contracts with initial terms typically ranging from one to five
years. The remainder of the Company's revenue is derived from the sale and
installation of security and fire systems and the servicing and upgrades of such
installed systems. For fiscal year 1999, monitoring revenues represented
approximately 63% of total revenues. The balance of the Company's revenues was
derived from (i) the sale and installation of security and fire systems
(approximately 29% of total revenues); (ii) the provision of maintenance
services (approximately 8% of total revenues) and (iii) miscellaneous sources
(less than 1% of total revenues).
Based on the Company's gross revenues for the year ended December 31,
1998, the Company was ranked 23rd in Security Distributing and Marketing
Magazine's ("SDM Magazine") May 1999 issue with the annual listing of the top
security companies in the United States. Based on monthly recurring revenues
("MRR"), a standard industry measurement, the Company holds the position of 17th
largest company. The Company expects that it will be ranked among the top 25
security companies in SDM Magazine's 2000 annual listing. In addition, according
to the 1998 Fact Book Issue of Security Sales (Vol. 21, No. 12, supplement),
only 9.2% of all security companies in the United States generate gross revenues
in excess of $2,500,000. These statistics place the Company as a leader among
United States security firms. As reflected in the Company's financial
statements, set forth in Item 7 below, the Company's net revenues for the year
ended December 31, 1999 were $18,233,485.
Retail Monitoring Services
The Company monitors digital signals arising from burglaries, fires and
other events through security systems installed at subscribers' premises. Most
of these signals are received and processed at the Company's two central
monitoring stations, one of which is located in Hollywood, Florida and the other
of which is located in New York City, New York. Each central monitoring station
is listed by Underwriters Laboratories, Inc. ("UL") as (i) a burglar alarm
system central station; and (ii) a protective signaling services central
station.
The Company's central monitoring stations have many security devices,
including closed circuit television ("CCTV"), motion detecting units, high
intensity lighting and access control. All of the equipment the Company uses to
monitor its customers' systems and to protect its central monitoring station
generally contain the latest enhancements, and most of the equipment is less
than five years old.
The central monitoring stations operate with redundant systems and,
therefore, upon any failure of equipment, an exact duplicate is available to
back it up within minutes. The central station monitoring
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facility is largely paperless, resulting in lower costs and greater efficiency
than would be obtained otherwise. To the extent feasible, every alarm function
is handled through automation including the dialing of customer and police
telephone numbers, thereby reducing the possibility of human error.
The central monitoring stations are comprised of a number of electronic
devices including: alarm receiving equipment, telephone dialers, radio signal
receiving equipment, a telephone recorder, a digital telephone system and a
voice mail/auto phone attendant. All of these devices are maintained internally
by the Company's technical personnel. The balance of the Company's equipment
includes dual redundant Data General Aviion(TM) servers, associated CRTs
(terminals) and the software which runs the automated functions of the Company's
security, service and accounting functions. The security and service software is
maintained by Monitoring Automation Systems (Irvine, CA) ("MAS"), the accounting
software by Great Plains Software, Inc. (Fargo, ND) and the Data General
Corporation (Boston, MA) ("Data General") computers and terminals are maintained
by Data General pursuant to annual maintenance contracts.
Monitoring services provided by the Company include monitoring homes
and commercial facilities for burglary, fire and environmental problems. If an
alarm condition is detected, a signal is transmitted over telephone and/or radio
transmission to the Company's central monitoring station. When the conditions
require verification and/or dispatch action, the Company's human operators react
in accordance with standard procedures.
The central monitoring system also monitors opening and closing
schedules for the Company's commercial customers. Commercial customers have the
option of receiving periodic reports reflecting the date, time, action and
employee name with respect to each opening or closing activity during the
relevant period. The reports can be sent to any location around the world via
mail, facsimile or email.
Retail monitoring generated revenue of approximately $10.9 million and
$8.5 million in 1999 and 1998, respectively. As of the date of this Annual
Report, the Company had approximately 25,800 retail customers. No individual
retail customer represents more than 5% of the Company's total revenues.
Wholesale Monitoring Program
Under the Company's wholesale monitoring program, (the "Wholesale
Monitoring Program") subscribers are monitored on a "wholesale" basis for
certain third party security alarm companies, some of which are competitors of
the Company. This practice is commonly referred to in the industry as "third
party monitoring" or "wholesale" monitoring. The Company also offers such third
party companies additional services, such as off-site data entry and account
maintenance, automated account history and testing via touch tone telephone,
marketing and technical support.
Under the Wholesale Monitoring Program, the Company bills the third
party company a monthly amount for all services rendered. The third-party
company is responsible for billing its customers. Typical fees for wholesale
monitoring are approximately 20% of the amount billed directly by the Company to
its retail customers. While wholesale monitoring results in significantly lower
margins than are obtained with respect to the Company's retail subscribers, the
wholesale customer base creates an opportunity for the Company to expand its
customer base by purchasing customer accounts from third party companies. The
Company has, in fact, purchased customer accounts that were being monitored
under the Wholesale Monitoring Program.
The Wholesale Monitoring Program generated revenues of approximately
$631,000 and $606,000 in 1999 and 1998, respectively. As of the date of this
Annual Report, the Company had approximately
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23,900 wholesale customers. No such wholesale account represents more than 5% of
the Company's total revenues.
Installation and Sale of Electronic Security Systems
The Company typically installs electronic security and fire systems for
its residential and commercial customers. These systems can range in complexity
from simple alarm panels interfaced with one or two sensors up to highly
integrated card access and CCTV systems. With the exception of sales to builders
of residential developments or communities, most of the electronic security
systems sold by the Company are leased to the customer for a period of time
coinciding with the monitoring contract.
Most of the alarm-related products sold by the Company are manufactured
or distributed by subsidiaries of Pittway Corporation and by Detection Systems,
Inc. and its subsidiaries. The Company sells a variety of brands of access
control and CCTV products, depending upon the specific application.
Revenues derived from the installation and sale of security and fire
systems totaled approximately $5.2 million and $4.7 million in 1999 and 1998,
respectively. Increased revenues are a result of a full year of revenues for
businesses acquired in 1998 and of the increased sales and marketing efforts of
the Company.
Maintenance of Electronic Security and Fire Systems
A strong maintenance and service capability is an important element in
maintaining good customer relations and low attrition. The Company provides
responsive service to its customers whose electronic security and fire systems
require repair or upgrading. Depending on the nature of the problem and the
customer, such services are typically provided within 24-48 hours.
Maintenance of security and fire systems generates revenue primarily
through billable field service calls or contractual payments under service
agreements. Revenue derived from maintenance services totaled approximately $1.4
million and $1.1 million in 1999 and 1998, respectively. Increased revenues
correlate to the increase in the Company's account base, which increased to
approximately 25,800 subscriber accounts at December 31, 1999 from approximately
23,400 subscriber accounts at December 31, 1998.
History
The Company was incorporated under the laws of the State of Nevada on
October 30, 1986. In July 1999, the Company changed its state of domicile and is
now incorporated in the State of Florida.
On August 15, 1996, the Company executed an Agreement and Plan of
Merger ("Merger Agreement") with Guardian International, Inc. ("Guardian"), a
Florida corporation. The merger ("Merger") was completed on August 28, 1996.
Pursuant to the terms of the Merger Agreement, in reliance upon the exemption
from registration afforded by Section 4(2) of the Securities Act of 1933, as
amended (the "Securities Act"), the Company issued 3,226,902 shares of Class A
Voting Common Stock, par value $.001 per share ("Class A Common Stock"), to the
shareholders of Guardian in exchange for all of the outstanding shares of common
stock of Guardian. These shares represented approximately fifty percent (50%) of
the Company's then issued and outstanding Class A Common Stock. Also, pursuant
to the terms of the Merger Agreement, the Company paid approximately $1.8
million to Harold Ginsburg, one of the shareholders of Guardian, in repayment of
certain loans to Guardian and as a return of capital.
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Following the Merger, the Company changed its name to Guardian
International, Inc. The Company's directors preceding the Merger resigned
following the Merger and the directors of Guardian filled the vacancies on the
Board. For a listing of the Company's directors, see Item 9 - Directors,
Executive Officers, Promoters and Control Persons.
In October and November 1997, the Company issued 2,500,000 shares of
Class A Common Stock for $1.50 per share ($3,750,000 in the aggregate) and
1,875,000 newly authorized shares of Series A 9 3/4% Convertible Cumulative
Preferred Stock, par value $.001 per share ("Series A Preferred Stock"), for
$2.00 per share ($3,750,000) to Westar Capital, Inc., a subsidiary of Western
Resources, Inc. ("Western"). Such shares were subsequently contributed by
Western to its majority-owned security business subsidiary, Protection One
Investments, Inc. ("Protection One").
In February 1998, the Company completed the acquisition of all of the
capital stock of Mutual Central Alarm Services, Inc. ("Mutual"), the nation's
then 60th largest monitored alarm company (according to SDM Magazine) and one of
the largest independent alarm companies in the metropolitan New York area.
Founded in 1989, Mutual grew through a strategy of concentrating on high-grade
UL listed commercial security, fire, CCTV and access control systems. Mutual
provides services to high-end retail businesses, financial institutions and
Fortune 500 companies. As a result of the acquisition, the Company increased its
subscriber base by approximately 2,600 accounts and added MRR of approximately
$320,000.
Mutual is continuing to operate under its trade name as a wholly-owned
subsidiary of the Company.
During 1998, the Company acquired three significant additional security
alarm installation and monitoring companies, two of which were located in the
state of Florida and one in Staten Island, New York. The additional acquisitions
increased the subscriber base by approximately 6,100 customers and increased MRR
by approximately $208,000.
On October 21, 1998, Protection One purchased 10,000 shares of Series D
6% Convertible Cumulative Preferred Stock, par value $.001 per share ("Series D
Preferred Stock"), of the Company for $10 million.
The Series D Preferred Stock is non-convertible until the third
anniversary of the date of issuance, after which date, the shares are
convertible at a rate of 333.3333 shares of Class A Common Stock for each share
of Series D Preferred Stock. Dividends are payable annually either in cash or in
additional shares of Series D Preferred Stock. As of December 31, 1999, 605
shares of Series D Preferred Stock are accounted for as dividends payable and
are expecteed to be issued during the first half of 2000. The holders of Series
D Preferred Stock have no voting rights until such shares are converted into
Class A Common Stock except that the holders of Series D Preferred Stock are
allowed to vote on an as-converted basis with the holders of Class A Common
Stock under the following circumstances: (i) until the third anniversary of the
date of issuance, upon a Change in Control as that capitalized term is defined
in Article III Section 7 of the Articles of Amendment to the Articles of
Incorporation filed with the Florida Secretary of State on March 9, 2000
("Articles of Amendment") (see Exhibit 3(iii)); (ii) or at any time the Series D
Preferred Stock is outstanding, under an Event of Default, as that capitalized
term is defined in Article III Section 7 of the Articles of Amendment (see
Exhibit 3(iii)). The holders of Series D Preferred Stock have no redemption
rights except upon a Change in Control. After the third anniversary of issuance,
the Company can elect to redeem the Series D Preferred Stock for a premium.
In addition, Protection One exchanged its existing equity holdings in
Guardian (2,980,000 million shares of Class A Common Stock, 2,037,133 million
shares of Guardian Series A Preferred Stock and
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1,704,232 million shares of Guardian Series B 10 1/2% Convertible Cumulative
Preferred Stock, par value $.001 per share ("Series B Preferred Stock")) for
16,397 shares of Series C 7% Redeemable Preferred Stock, par value $.001
("Series C Preferred Stock"), of the Company.
The Series C Preferred Stock is non-voting and is redeemable on the
sixth anniversary of the date of issuance at a liquidation value of $1,000 per
share. Dividends are payable quarterly in cash and have been made each quarter
since the issuance of the Series C Preferred Stock. The holders of Series C
Preferred Stock have the right to optional redemption upon a Change in Control,
as that capitalized term is defined Article III Section 6 of the Articles of
Amendment (see Exhibit 3(iii)). At any time after issuance, the Company can
elect to redeem the Series C Preferred Stock for a premium. Due to the
redeemable nature of the Series C Preferred Stock, the capital will reside
outside the stockholders' equity section in the mezzanine section of the balance
sheet, following long-term debt. This treatment is consistent with the hybrid
characteristics of the issue.
The holders of the Series D Preferred Stock do not have any right to
nominate directors unless and until conversion of the Series D Preferred Stock.
After giving effect to the transactions, Protection One presently owns
approximately 26% of the outstanding capital stock of the Company on a
fully-diluted as-converted basis.
Heller Credit Facility
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The Company's credit facility with Heller was amended in October 1998
to include Heller's consents: (i) to allow the above-mentioned transactions;
(ii) to improve the Company's borrowing base calculation through the period
ended September 30, 1999 after which time it reverted to the prior calculation;
(iii) to allow for the payment of cash dividends on the Series C Preferred
Stock; (iv) to allow for use of funds drawn on the credit facility for the
Company's stock repurchase program; and (v) to extend the termination date to
May 2001.
1999 Developments
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Stock Repurchase Program
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In accordance with the Stock Repurchase Program authorized by the Board
of Directors in October 1998, the Company purchased 197,800 shares of its Class
A Common Stock, during the year ended December 31, 1999. In accordance with
Florida securities law, the shares were concurrently retired. The treasury
shares acquired in connection with the October 1998 investment by Protection One
have also been retired. The excess of the cost of the treasury shares over
issuance price of the retired shares resulted in a charge to accumulated deficit
of approximately $4.4 million.
Market Overview and Trends
The Company's target market consists of the owners of single family
residences, builders of and homeowners within residential development
communities and the owners and tenants of commercial establishments.
The security alarm industry is characterized by a high degree of
fragmentation and currently is comprised of a small number of relatively large
competitors (greater than $20 million annual sales) and a great many small
providers of alarm systems and services. A survey published by SDM Magazine in
May 1999 reported that in 1998, based upon information provided by its
respondents, the 100 largest companies in the alarm industry accounted for
approximately 25% of industry revenues. The Company believes that thousands of
smaller alarm service companies, because of their small size, have higher
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overhead expenses as a percentage of revenues than the Company and lack access
to capital on terms as attractive as those available to the Company. Moreover,
due to a decline in security system installation prices over the last two years,
security alarm companies participating in market growth are required to make a
substantial investment in each new subscriber. In order to be competitive,
security alarm companies must sell equipment at or below cost or transfer
equipment gratuitously in the expectation of generating future recurring
monitoring revenues. Consequently, access to capital has become an increasingly
important factor in a security alarm company's success.
The residential security alarm market is also characterized by rapid
growth, but a relatively low level of market penetration and is, therefore,
still in a relatively immature stage. The Company believes that several factors
have spawned an increased demand for residential security alarm systems in the
markets where the Company operates, including unacceptably high levels of crime,
public concern about crime and the prevalence of insurance company discounts to
homeowners who purchase alarm systems, which discounts are typically larger when
alarm systems are monitored by a central station. In addition, insurance
companies may require that businesses install an alarm system as a condition to
obtaining or renewing insurance coverage. Also, the Company enjoys the benefits
of operating in two separate sectors of the industry: high-grade commercial and
traditional residential. By operating in both sectors, economic strength in one
may subsidize any weaknesses that may occur in the other, a reputation earned in
one sector may carry over into the reputation for the other, and cash flow from
commercial projects may help fund investments in the residential market.
Advances in digital communications technology permit the monitoring of
subscriber accounts over a wide geographic area from a central monitoring
station. The elimination of local monitoring stations has decreased the cost of
providing alarm monitoring services and has substantially increased the
economies of scale for larger alarm service companies. In addition, the
concurrent development of microprocessor-based control panels has substantially
reduced the cost of the equipment available to subscribers in the residential
and commercial markets. Digital technology has also enabled equipment
manufacturers to build more features into security systems, such as remote user
interface, lighting and heating controls and user programming features.
Large, consumer-oriented companies in industries facing deregulation,
including long distance and local telephone companies and electric and gas
utilities, such as Southern California Edison, Southern Company, Inc., Western
Resources, Inc., and SBC Communications, Inc., have demonstrated an increased
interest in the security alarm industry over the last several years. Except for
SBC Communications, regional Bell operating companies ("RBOCs") have been
prohibited from owning assets in the alarm industry until early 2001. The
Company believes telecommunications and utility companies are interested in
offering their customers additional services, including security services, as a
means of enhancing customer loyalty and reducing future risk of losing customers
in a fully competitive environment. The entrance by such large companies into
the security alarm business poses the threat that such companies will engage in
price wars with other companies in the alarm industry. Such price wars, if they
were to occur, could have a materially adverse effect on the Company's financial
condition. The Company has, however, successfully developed one strategic
partnership with a utility, Western Resources, and believes it is an attractive
partner for other companies seeking to enter this industry. As evidenced by
Protection One's total investment of $21.5 million cash in Guardian, the Company
believes that its strategic alliance with affiliates of Western Resources, Inc.
has helped and will help the Company's competitive position by (i) improving the
Company's financial strength by increasing the Company's equity; (ii) lowering
its cost of capital; (iii) improving its appeal to potential sellers of alarm
accounts or alarm companies; and (iv) improving and expanding acquisition and
investment opportunities made available to the Company.
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Business Strategy
The Company has never had any net income and has a history of
consistent and sometimes significant net losses. The Company has two core
strategies; (1) generating monitoring contracts through its own sales and
installation efforts and (2) acquiring alarm monitoring contracts. The first
core strategy requires a cost infrastructure that results in lower operating
margins than are achievable by companies that only acquire and service alarm
monitoring contracts. In order to pursue the second core strategy of acquiring
alarm monitoring contracts, the Company has chosen to issue yield-bearing
instruments (such as senior debt or preferred stock). The Company's present
amortization policy for those acquired contracts results in significant
amortization costs. The issuance of yield-bearing instruments results in related
interest and dividend expense. The Company believes that these strategies, which
emphasize creating long-term value over short-term net income, will result in
the Company's recording of net losses until such time as (i) the Company's cash
flow from its increased customer base allows it to reduce significantly its
indebtedness and related interest costs; and (ii) the Company's amortization
expense, through the passage of time and recognition of account losses, is
reduced.
The Company's strategy for growth has consisted primarily of the
implementation of an aggressive and strategic acquisition plan. Since 1994
Guardian has acquired more than thirty alarm companies and/or portfolios of
customer monitoring contracts from existing alarm companies. The financing for
these acquisitions has been derived from an initial $7 million credit facility
with Heller, which has been replaced by the Company's Renewed Credit Facility of
$20 million (see "Management's Discussion and Analysis - Liquidity and Capital
Resources - Capital Resources"), with Company stock and with the proceeds from
several investments by Protection One (see "History").
Management believes that numerous acquisition opportunities continue to
be available and the Company is pursuing, and intends to continue to pursue,
acquisitions of alarm companies and of portfolios of subscriber accounts, some
of which may be significant to the Company's expected future growth. Through its
1998 acquisition of Mutual, the Company has expanded its operations outside of
Florida and into New York. The Company plans to continue pursuing other
acquisitions outside Florida, not only in New York, but in major metropolitan
areas throughout North America. Acquisitions of account portfolios, thus far,
have been achieved primarily through the acquisition of alarm companies and
through the Company's "Independent Alarm Acquisition Program" as described
below.
Under the Independent Alarm Acquisition Program, the Company acquires
customer contracts from independent alarm companies in Florida. Under this
program, the independent alarm company solicits sales of its own alarm systems
from potential residential or commercial customers. Such customers are also
offered the option to enter into an agreement with the independent alarm
company, in the independent alarm company's own name, for the provision of alarm
monitoring and/or repair services, typically for a period not to exceed a 60
month term. The independent alarm company then sells the customer contract to
Guardian for an amount typically between 25 to 35 times the amount of MRR to be
generated by the contract, or a proportionately smaller multiple of MRR if the
contract is for less than 60 months. The costs of such acquisitions are
accounted for at the fair value as of the date of acquisition and amortized over
10 years.
Under the program, the independent alarm company (the "Contract
Seller") may be required to guarantee that a minimum number of payments (usually
between 12 and 18 monthly payments) will be received by the Company from the
customer (the "Minimum Payment Period") and that customers will pay any amounts
owed within 90 days during such Minimum Payment Period. If the guaranteed number
of payments is not received by the Company, or if a customer is late in paying
any amounts due for a period exceeding 90 days, the Contract Seller must replace
the subscriber contract with a new contract of equal original duration and MRR.
In order to ensure that such Contract Seller guarantees are met, the
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Company typically withholds an average of 10% of the payment made to the
Contract Seller at the inception of the transaction (referred to as a
"holdback"). After the guarantee period lapses, the Company will pay the
Contract Seller the holdback monies due.
Another source of growth of the Company's account portfolio is the
Company's internal sales departments. The Company has various marketing programs
in place intended to generate additional subscribers, the most notable of which
is the Company's affiliation with First Alert Professional, an equipment
manufacturer that provides a variety of joint marketing programs. The Company
expects that its internal sales programs will create accounts in excess of
attrition, affording the Company moderate growth even in the absence of
significant acquisitions.
Based on projections for new home starts from its builder clients,
management expects additional revenue from the Company's new construction
residential installations. The Company is under contract with builders of new
home developments in South Florida and the greater Tampa Bay area. The Company
is one of the leading providers of alarm systems to the new residential
construction market in the state of Florida.
In addition, the Company currently has master association contracts
("Master Contracts") with five development companies throughout Florida. Each
Master Contract calls for Company-installed alarms to be monitored by the
central station with one bill each month to the relevant master homeowners
association. Closings on homes located in these developments began in the first
quarter of 1996 and will continue for the next five years. The Company's revenue
under a Master Contract increases incrementally with each closing. Current MRR
under the Master Contracts is approximately $13,000. Management anticipates that
upon completion of the development projects, the Company will generate over
$40,000 in additional MRR under the Master Contracts; there can be no
assurances, however, as to the completion of these projects or the realization
of the additional MRR.
The Company's commercial business units in Florida and New York are
among the leaders in their respective areas. The Company intends to broaden
geographic coverage in the Northeast via its 1998 acquisition of the Staten
Island burglar alarm company and to increase direct sales representation and
product lines offered in Florida.
The financial strategy for effecting the business goals is enhanced by
the Company's relationship with Protection One (see "History"). The Company
believes that the relationship will enhance its access to capital for the
future, affording management the ability to focus on executing the business
strategy. Some of the relationship's many potential benefits are enumerated in
"Market Overview and Trends" above.
In 1999, the Company became an authorized distributor of the IBM Home
Director product line of structured wiring systems. The Company believes that
its association with IBM enhances its ability to compete for large new
residential development projects and to realize more attractive returns from
that work.
Equipment and Technology
General Corporate Technology
- ----------------------------
The Company believes that it utilizes automation equipment that is the
same as or comparable to those systems utilized by the largest national security
alarm companies.
The Company operates two alarm-monitoring centers, one in Hollywood,
Florida, and the other in
9
<PAGE>
mid-town Manhattan, the commercial center of New York City. Each control center
is equipped with equipment that enables the Company to receive, analyze, and
process information from alarm, fire, temperature-sensing, video, and access
control systems located at customer sites. The Company can, in most cases, also
perform remote diagnostics for many customers from the control center. The
automation equipment also enables the Company to process accounting information,
service maintenance, and scheduled compliance requirements required by the
Company's customers.
The Company has departmental file servers which accommodate the
Company's internal e-mail network, new accounts payable and general ledger
software, as well as proprietary alarm system manufacturers' software to enhance
the Company's ability to communicate with customer security alarm panels.
The Company has invested in monitoring hardware upgrades over the
years. These enhancements enable the Company to link its New York City, Staten
Island, Tampa, Florida and Miami, Florida offices into the main system.
Furthermore, the Company has a number of web sites (www.4Guardian.com,
www.4Mutual.com, www.Statland.com, www.PrepareandProtect.net) that are used for
both informational purposes and marketing, as well as sites where customers can
make routine requests for small items, request service, and order additional
security equipment. These enhancements enable a large part of the Company to
share one customer database and to improve its efficiency in the areas of
monitoring, service routing, and internal communication. This investment
increased capacity and improved the productivity of operators and other
administrative staff using the automation and accounting systems. The Company
expects to upgrade its security monitoring system periodically as necessary to
keep up with technological advances.
The Company currently operates under the MAS 5.50.65 version for its
automation, service and billing system. The Company also relies heavily on
integrated MAS fax technology. MAS technology gives the Company the ability to
automate numerous aspects of information that were previously processed
manually. In addition, such technological advancements as the provision of
alphanumeric alarm indications give the Company the ability to process data
efficiently with little or no human interaction.
The Company's central monitoring systems currently have the capacity to
monitor up to approximately 250,000 subscribers with moderate upgrades to the
storage and processor capacity of its existing hardware system. Moreover, the
operating facility would require minimal physical changes to accommodate such a
volume of accounts.
Mutual Central Alarm Services Enhancement Project
-------------------------------------------------
In October 1998, the Company embarked on a $250,000 upgrade project, in
conjunction with the renewal of the Company's lease in New York City. The
primary objective of the project was the upgrading of the New York monitoring,
accounting, and service system from an older PICK operating system-based
automation system to the same automation and accounting systems used by the rest
of the Company. The project was completed in November 1999.
The project significantly increased consistency of operations between
the Florida and New York offices of the Company, which permits the Company to
realize efficiencies across numerous critical disciplines. In addition, the New
York monitoring station now has additional capacity to aggregate more customers
on the new system.
The Company consolidated the monitoring of its subscribers in Staten
Island from a competitive third party monitoring station into the new system at
Mutual. In addition, the Manhattan and Staten
10
<PAGE>
Island offices were upgraded with additional communication equipment, which
enables live access to the new system from the satellite office in Staten Island
as well as from the Company's headquarters in Florida.
Marketing
A large portion of the Company's marketing activities has consisted of
referrals and a limited amount of advertising. As mentioned above, the Company
elected to become a First Alert Professional(TM) dealer to enhance its direct
sales efforts. Since 1998, the Company has applied significantly more resources
to direct mail and limited media advertising, improved distribution of Company
yard signs, and other marketing programs.
In 1999, the Company became an authorized distributor of the IBM Home
Director product line of structured wiring systems. The Company believes that
its association with IBM enhances its ability to compete for large new
residential development projects and to realize more attractive returns from
that work.
Competition
Competitive conditions vary within each segment of the security
industry. The largest segment is composed of security system dealers. Most of
these companies have fewer than twenty employees, average one hundred fifty to
eight hundred fifty (150-850) customer accounts, are usually under-capitalized,
are owner-managed, and do not have their own central monitoring stations.
According to a 1998 survey conducted by SDM Magazine (published in May
1999), the 100 largest companies in the security industry account for
approximately twenty-five percent of the industry's total revenue. Therefore,
the majority of industry revenue is generated by smaller alarm service
companies.
The segment of the industry composed of central monitoring services is
characterized by a small number of companies that provide both wholesale and
retail monitoring. The barriers to entry in this segment are high due to the
large investment required to equip and conform the facilities for UL approval.
This segment is divided into national and regional firms. The smaller regional
companies have difficulty competing with the larger national firms due to higher
overhead, the inability to purchase service and equipment on volume discounts
and, often, the lack of capital or financing to make acquisitions. The Company
believes that large regional companies, such as Guardian, have a competitive
advantage relative to large national companies, because large national companies
provide sales and/or leases, installations and service of security systems and
provide central monitoring services, but typically provide only retail
monitoring for security systems installed by them. They generally do not enter
the wholesale market. In contrast, regional companies typically provide
wholesale monitoring services to other regional and local alarm companies that
are unable to supply the monitoring function for the security systems which they
sell (see "Wholesale Monitoring Program").
There are a number of larger companies which may have significantly
greater capital and resources than the Company (see "Market Overview and
Trends"). The following chart reflects the size of Guardian as compared to the
nine largest alarm companies. The information was obtained from the May 1999
issue of SDM Magazine.
11
<PAGE>
<TABLE>
<CAPTION>
1998 Revenue Number of
Company (in millions) Accounts
--------- --------
<S> <C> <C>
ADT Security Services $1,330 2,200,000
SecurityLink from Ameritech 482 1,200,000
Protection One, Inc. (1) 421 1,542,000
Brinks Home Security, Inc. 204 580,000
Honeywell, Inc. 201 250,000
Edison Security Services 90 175,000
Slomin's, Inc. 68 112,000
Checkpoint Security Systems Group, Inc. 55 n/a
Bay Alarm Co. 50 75,000
Guardian International, Inc. 15 23,400
</TABLE>
(1) Protection One Investments, Inc., an affiliate of Protection One, Inc.,
a Delaware corporation and majority-owned subsidiary of Western
Resources, Inc, owns 27% of the Company's outstanding shares of Class A
Common Stock, on an as-converted basis, as of March 24, 2000.
Government Regulation
The Company's operations are subject to federal, state, county and
municipal laws, regulations and licensing requirements. The Company's employees
include four State of Florida licensed low-voltage electrical contractors. In
addition, the Company believes it holds all the licenses required to operate in
the counties and municipalities in Florida in which it is presently providing
services. In New York, the Company is qualified to provide low-voltage
electrical services, uniformed response services and fire monitoring for
customers in New York.
Because the Company operates a central monitoring station and installs
burglar and fire alarms, the State of Florida requires that the Company's
employees directly involved in the monitoring of customers and provision of
field repair services complete a certification program and that the Company
maintain a license to conduct its monitoring business. The Company believes that
it holds the necessary licenses to conduct its business and that it is in
compliance with all licensing and regulatory requirements in each jurisdiction
in which it operates.
The Company relies on the use of telephone lines and radio frequencies
to transmit signals and relay alarm calls. The cost and type of equipment that
may be employed for telephone lines is regulated by the federal and state
governments. The use and operation of radio frequencies is regulated by the
Federal Communications Commission and the state public utilities commissions.
Trademarks
During 1997, the Company filed an application with the United States
Patent and Trademark Office ("Office") to register the mark "Security By
Guardian International" and "G" design. In late 1997, the Company received
notification from the Office that its application had not been accepted. The
Company retained the Washington D.C. intellectual property law firm of Cohen &
Smith. The Company was advised to continue its common law use of the mark and
file for state trademark protection. Two state trademark registrations were
granted for Guardian International Security and "G" design (T98000000478 on
April 29, 1998) and a "G" design contained within a circle (T98000000637 on June
1, 1998). The Company has been using these marks in Florida since January 1993
without third party opposition. Based on a later review of the federal register,
Cohen & Smith advised the Company to refile
12
<PAGE>
an application for the mark "Security by Guardian International" and "G" design
(U.S. application for the mark - U.S. application serial no. 75/597, 830 on
November 30, 1998).
The Company has a federal trademark for the mark "Mutual Central Alarm
Services, Inc." and design (U.S. registration no. 2,277,912). The Company is
currently monitoring its trademarks: Guardian International, Inc., Gibraltar
Security Alarm Services, Alarm Control, Inc., Mutual Central Alarm Services,
Inc. and Gator Telecom, Inc. in order to evaluate the availability and
feasibility of continuing to operate under separate trademarks or of
consolidating them into one name. No assurances can be given that third parties
will not attempt to assert superior trademark rights in similar marks or that
the Company will be able to successfully enforce and protect its rights in its
trademarks against third party infringers.
Employees
At December 31, 1999, the Company employed 212 individuals, all but one
of whom were full-time employees. Any future increase in the number of employees
will depend upon growth of the Company's business.
Research and Development and Environmental Issues
The Company does not conduct any research and development activity.
The Company has the need to dispose of many batteries, which constitute
environmentally sensitive waste. The used batteries are stored in the Company's
warehouse until such time as they are transported to a recycling center for
disposal.
Item 2. Description of Property
- --------------------------------
The Company leases its corporate headquarters from Guardian
Investments, a Florida partnership owned by Harold and Sheilah Ginsburg, both of
whom are directors, officers and principal shareholders of the Company (see Item
12 - Certain Relationships and Related Transactions). The Company's corporate
headquarters occupies a 12,000 square foot building, which houses a central
monitoring station, offices and warehouse facilities, located in Hollywood,
Florida. The lease expires on December 31, 2002, but the Company has a renewal
option for an additional five years under the same terms and conditions. The
annual rent is approximately $105,000, with annual increases not to exceed three
percent (3%). The terms of the lease are no less favorable to the Company than
those which could be obtained from an unaffiliated third party.
The Company leases space with Windbrook Realty in New York, New York.
The lease expires in December 2004, with a renewal option for an additional five
years under the same terms and conditions. The 3,500 square feet of leased space
houses a central monitoring station, offices and warehouse facilities. The
annual rent is approximately $91,000.
The Company also leases office space in Miami and Tampa, Florida and in
Staten Island, New York. The leases expire on various dates through July 2003
and most are renewable at the option of the Company.
Item 3. Legal Proceedings
- --------------------------
The Company experiences routine litigation in the normal conduct of its
business. The Company believes that any such pending litigation will not have,
individually or in the aggregate, a material adverse effect on its business,
financial condition or results of operations.
13
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
The Company's annual meeting was held on June 21, 1999. The following
number of votes were cast for the matters indicated:
1. Election of Board of Directors
Director For Withheld
-------- --- --------
Harold Ginsburg 6,772,501 8,470
Richard Ginsburg 6,771,501 9,470
Sheilah Ginsburg 6,772,501 8,470
Darius G. Nevin 6,772,501 8,470
William Remington 6,772,501 8,470
Douglas T. Lake 6,772,501 8,470
Joel A. Cohen 6,773,871 7,100
David Heidecorn 6,773,871 7,100
2. Ratification of Arthur Andersen, LLP as the independent accountants
for the Company for the year ending December 31, 1999.
For Against Abstain Non-vote
--- ------- ------- --------
6,774,500 1,000 5,471 -
3. Approval of the 1999 Stock Option Plan and ratification of non-plan
grants of stock options.
For Against Abstain Non-vote
--- ------- ------- --------
4,657,672 415,794 4,135 1,703,370
4. Approval of a change in domicile of the Company from Nevada to
Florida.
For Against Abstain Non-vote
--- ------- ------- --------
5,021,119 4,000 52,482 1,703,370
14
<PAGE>
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
- ------- --------------------------------------------------------
The Class A Common Stock has been publicly traded under the symbol
"GIIS" since November 1996 through the OTC Bulletin Board.
The following table set for the high and low bid information of the
Class A Common Stock for the periods indicated below, as reported by the
National Quotation Bureau during such periods.
High Low
---- ---
1998
----
1st Quarter $3.38 $2.06
2nd Quarter $2.69 $1.66
3rd Quarter $1.84 $0.94
4th Quarter $1.44 $0.56
1999
----
1st Quarter $1.69 $0.84
2nd Quarter $1.00 $0.78
3rd Quarter $0.94 $0.55
4th Quarter $0.75 $0.47
The Company is authorized to issue 30,000,000 shares of Preferred
Stock, of which 27,122 shares are issued and outstanding as of March 24, 2000.
The Company is presently authorized to issue 100,000,000 shares of Class A
Common Stock, of which 8,384,441 are outstanding as of March 24, 2000. There are
130 holders of record of Class A Common Stock. The Company is authorized to
issue 1,000,000 shares of Class B Common Stock, of which 634,035 shares are
issued and outstanding as of March 24, 2000. Heller is the sole holder of record
of the Class B Common Stock.
In connection with the merger of Guardian into the Company, Heller
received 484,035 shares of Class B Common Stock in exchange for certain capital
appreciation rights with respect to the common stock of pre-merger Guardian held
by Heller. In addition, pursuant to the terms of an agreement entered into among
the pre-merger Guardian shareholders and Heller, the Company was required to
issue 150,000 shares of Class B Common Stock to Heller. In order to fulfill this
commitment, the Company's Articles of Incorporation were amended to authorize
additional shares of Class B Common Stock which were issued to Heller in
November 1997.
Dividends
The Company has not declared any cash dividends on its Common Stock
since its inception and does not anticipate paying such dividends in the
foreseeable future. The Company plans to retain any future earnings for use in
the Company's business. In addition to the self-imposed restriction on the
payment of dividends resulting from the Company's own policies, the payment of
dividends is currently restricted pursuant to the terms of the existing credit
facility with Heller and is likely to remain subject to such restriction for the
foreseeable future (see "Management's Discussion and Analysis - Liquidity and
Capital Resources").
Quarterly dividends are payable at a rate of 1.75% on the Series C
Preferred Stock in cash or, if prohibited by the Company's credit facility, in
shares of Class A Common Stock. To date, the Company
15
<PAGE>
has paid the Series C Preferred Stock quarterly dividends in cash. The Series D
Preferred Stock pays dividends at a rate of 6% on an annual basis in either cash
or additional shares of the Series D Preferred Stock. The Company has elected to
pay the Series D Preferred dividends in additional shares of the preferred
stock.
Transfer Agent
The Company's transfer agent is Continental Stock Transfer & Trust
Company, 2 Broadway, New York, New York 10004.
Recent Sales of Unregistered Securities
In connection with the acquisition of the assets of Alarm Control,
Inc., the Company issued 50,000 shares of Class A Common Stock to Terry Akins
and options to purchase 100,000 shares of Class A Common Stock at a price of
$2.50 per share, pursuant to the Option Agreement dated May 7, 1997. The
issuance was exempt from registration under Section 4(2) of the Securities Act.
Date of Number of
Purchaser Purchases Common Shares
--------- --------- -------------
Terry Akins 5/7/97 50,000
On October 21, 1997 and November 24, 1997, pursuant to a Stock Purchase
Agreement between the Company and Protection One, dated as of October 14, 1997,
the Company issued 2,500,000 shares of Class A Common Stock to and 1,875,000
shares of Series A Preferred Stock to Western Resources, Inc. The shares were
exchanged in a transaction outlined above in "Description of Business -
History". The issuance was exempt from registration under Section 4(2) of the
Securities Act.
<TABLE>
<CAPTION>
Date of Number of Aggregate
Purchaser Purchases Common Shares Consideration Paid
--------- --------- ------------- ------------------
<S> <C> <C> <C>
Protection One 10/16/97 2,500,000 $3,750,000
Protection One 11/24/97 1,875,000* $3,750,000
</TABLE>
* On an as-converted basis.
On February 19, 1998, the Company issued 1,981,700 shares of Class A
Common Stock, pursuant to a Stock Purchase Agreement dated February 23, 1998, as
partial consideration in acquiring all of the outstanding common stock of
Mutual. The shares were registered with the Securities and Exchange Commissions,
effective August 13, 1998.
<TABLE>
<CAPTION>
Date of Number of
Purchaser Purchase Common Shares
--------- -------- -------------
<S> <C> <C>
Mutual Sellers 2/23/98 1,981,700
</TABLE>
On February 19, 1998, pursuant to a Stock Purchase Agreement between
the Company and Protection One, dated as of February 23, 1998, the Company
issued 1,600,000 shares of Series B Preferred Stock at $2.50 per share, the
proceeds of which were used in the funding of the Mutual acquisition. The
issuance was exempt from registration under Section 4(2) of the Securities Act;
however, these shares were exchanged in a transaction outlined above in
"Description of Business - History".
<TABLE>
<CAPTION>
Date of Number of Aggregate
Purchaser Purchase Common Shares Consideration Paid
--------- -------- ------------- ------------------
<S> <C> <C> <C>
Protection One 2/19/98 1,600,000* $4,000,000
</TABLE>
* On an as-converted basis.
16
<PAGE>
In connection with the acquisition of the assets of Gator Telecom,
Inc., the Company issued 94,937 shares of Class A Common Stock on March 9, 1998.
The issuance was exempt from registration under Section 4(2) of the Securities
Act.
Date of Number of
Purchaser Purchase Common Shares
--------- -------- -------------
Gator Telecom, Inc. 3/9/98 94,937
On April 27, 1998, the Company issued 194,269 shares of Class A Common
Stock, pursuant to a Stock Purchase Agreement, dated April 27, 1998, as partial
consideration in acquiring all of the outstanding common stock of Precision
Security Systems, Inc. The issuance was exempt from registration under Section
4(2) of the Securities Act.
Date of Number of
Purchaser Purchase Common Shares
--------- -------- -------------
David Weston 4/27/98 194,269
On May 4, 1998, the Company issued 5,513 shares of Class A Common Stock
to Terry E. Akins, for services performed in connection with an acquisition by
the Company in December 1997. The issuance was exempt from registration under
Section 4(2) of the Securities Act.
Date of Number of
Purchaser Purchase Common Shares
--------- -------- -------------
Terry E. Akins 5/4/98 5,513
On August 13, 1998, the Company issued 289,018 shares of Class A Common
Stock, pursuant to a Stock Purchase Agreement, dated August 13, 1998, as partial
consideration for the Company's acquisition of the outstanding common stock of
Stat-Land Burglar Alarm Systems & Devices, Inc. The issuance was exempt from
registration under Section 4(2) of the Securities Act.
Date of Number of
Purchaser Purchase Common Shares
--------- -------- -------------
Stat-Land Sellers 8/13/98 289,018
Item 6. Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------
Results of Operations
- ----------------------
The information contained below includes statements of the Company's or
management's beliefs, expectations, hopes, goals and plans that are
forward-looking statements subject to certain risks and uncertainties that could
cause actual results to differ materially from those anticipated in the
forward-looking statements. For a description of such risks and uncertainties,
see the information set forth in the Introductory Note to this Annual Report
under the caption "Forward-Looking Statements," which information is
incorporated herein by reference.
Overview
The majority of the Company's revenue is derived from recurring
payments for the monitoring, maintenance and leasing of security and fire
systems, pursuant to contracts with initial terms typically ranging from one to
five years. The remainder of the Company's revenue is derived from the sale and
installation of security and fire systems and the servicing and upgrades of such
installed systems. Monitoring and service revenues are recognized as the service
is provided. On installations for which the
17
<PAGE>
Company retains title to the electronic security systems, the excess of
installation revenue over estimated selling costs is amortized over the initial
term of the related service/monitoring contract (generally five years). All
other installation revenues are recognized in the period in which installation
occurs. All direct installation costs, which include materials, labor and
installation overhead are capitalized and amortized over a five year period.
When the Company maintains ownership of the equipment, the costs of such
equipment are capitalized to property and equipment and amortized over seven
years.
The Company has never had any net income and has a history of
consistent and sometimes significant net losses. The Company has two core
strategies; (1) generating monitoring contracts through its own sales and
installation efforts and (2) acquiring alarm monitoring contracts. The first
core strategy requires a cost infrastructure that results in lower operating
margins than are achievable by companies that only acquire and service alarm
monitoring contracts. In order to pursue the second core strategy of acquiring
alarm monitoring contracts, the Company has chosen to issue yield-bearing
instruments (such as senior debt or preferred stock). The Company's present
amortization policy for those acquired contracts results in significant
amortization costs. The issuance of yield-bearing instruments results in related
interest and dividend expense. The Company believes that these strategies, which
emphasize creating long-term value over short-term net income, will result in
the Company's recording of net losses until such time as (i) the Company's cash
flow from its increased customer base allows it to reduce significantly its
indebtedness and related interest costs; and (ii) the Company's amortization
expense, through the passage of time and recognition of account losses, is
reduced.
Alarm monitoring revenues generate favorable gross margins.
Historically, installation and service activity generated unfavorable gross
margins because such activity was necessary for the generation and retention of
residential and mid-market commercial alarm monitoring customers. With the
February 1998 acquisition of Mutual Central Alarm Services, Inc. ("Mutual"), a
New York City-based provider to high-end commercial customers, however,
approximately 40% of the Company's installation activity now generates favorable
gross margins because competition in the high-end commercial market is based
less on price and more on the ability of competitors to design, deliver and
maintain sophisticated security systems.
The Company's objective is to provide residential and commercial
security services to an increasing number of subscribers. The Company's growth
strategy is to enhance its position in the security alarm monitoring industry in
Florida and in the Metropolitan New York City area by increasing the number and
density of subscribers for whom it provides services. The Company is pursuing
this strategy through a balanced growth plan involving incorporating
acquisitions of portfolios of subscriber accounts in existing and contiguous
markets and growth of the Company's core business through referrals and
traditional local marketing. The Company believes that increasing the number and
density of its subscribers will help it to achieve economies of scale and
enhance its results of operations. The Company also regularly reviews
opportunities for expanding its operations into other large metropolitan
markets.
Key Operating Measures
The Company believes that EBITDA, MRR, and MRR attrition are key
measurements of performance in the security monitoring industry.
EBITDA. Earnings before interest, taxes, depreciation and amortization
("EBITDA") does not represent cash flow from operations as defined by generally
accepted accounting principles, should not be construed as an alternative to
operating income and is indicative neither of operating performance nor of cash
flows available to fund the cash needs of the Company. Items excluded from
EBITDA are significant components in understanding and assessing the financial
performance of the Company. The Company believes presentation of EBITDA enhances
an understanding of financial condition, results of
18
<PAGE>
operations and cash flows because EBITDA is used by the Company to satisfy
its debt service obligations and its capital expenditure and other operational
needs, as well as to provide funds for growth. In addition, EBITDA is used by
senior lenders and the investment community to determine the current borrowing
capacity and to estimate the long-term value of companies with recurring cash
flows from operations. The Company's computation of EBITDA may not be comparable
to other similarly titled measures of other companies. The following table
provides a calculation of EBITDA for the years ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------
1999 1998
---- ----
<S> <C> <C>
Net loss $(3,041,655) $(2,188,342)
Plus:
Amortization of customer contracts 4,873,131 3,972,575
Depreciation and amortization 805,641 545,181
Interest expense and other 1,050,922 1,352,203
----------- -----------
EBITDA $ 3,688,039 $3,681,617
=========== ===========
</TABLE>
Monthly Recurring Revenue ("MRR"). MRR is revenue that the Company is
entitled to receive under monitoring and service contracts in effect at the end
of the period. Because the Company has grown rapidly, often by acquiring
security alarm companies and portfolios of customer accounts which are included
in revenues only from the date of acquisition, the Company's revenues are not
proportional to the level of its investment of capital reported to the end of
the period upon which a return must be earned. Management believes MRR enhances
an investor's understanding of the Company's financial condition, results of
operations and cash flows because it provides a measure of the Company's revenue
that can be used to derive estimated annual revenues acquired in acquisitions
for a full year of operations. As a result, MRR can be compared to the level of
investment in the statement of financial condition at the end of the period. By
comparing MRR to cash, debt and equity balances at the end of a period, an
investor can assess the Company's investment track record. Further, management
believes an investor's consideration of MRR relative to the Company's customer
base helps identify trends in MRR per customer. MRR does not measure
profitability or performance, and does not include any allowance for future
losses of customers or allowance for doubtful accounts. The Company does not
have sufficient information as to the losses of acquired customers accounts to
predict with absolute certainty the amount of acquired MRR that will be realized
in future periods or the impact of the loss of acquired accounts on our overall
rate of customer loss. Our computation of MRR may not be comparable to other
similarly titled measures of other companies and MRR should not be viewed by
investors as an alternative to actual monthly revenue as determined in
accordance with generally accepted accounting principles. MRR at December 31,
1999 and 1998 was approximately $1,040,000 and $927,000, respectively.
MRR Attrition. The Company experiences customer cancellations, i.e.,
attrition, of monitoring and related services as a result of subscriber
relocation, the cancellation of acquired accounts during the process of
integrating such accounts into the Company's operations, unfavorable economic
conditions and other reasons. This attrition is offset to a certain extent by
revenues from the sale of additional services to existing subscribers, the
reconnection of premises previously occupied by subscribers, the conversion of
accounts previously monitored by other alarm companies and guarantees provided
by the sellers of such accounts. The Company defines attrition numerically for a
particular period as a quotient, the numerator of which is equal to the
difference between gross MRR lost as the result of canceled subscriber accounts
and MRR lost that was replaced pursuant to guarantees from sellers of accounts
purchased by the Company, and the denominator of which is the expected month-end
MRR calculated at the end of such
19
<PAGE>
period. Net MRR attrition of the Company's customers during the years ended
December 31, 1999 and 1998 was less than 10%, on an annualized basis.
Consolidated Statements of Operations
The following table sets forth certain operating data as a percentage
of total revenues for the periods indicated.
<TABLE>
<CAPTION>
Year Ended
December 31,
------------
1999 1998
---- ----
<S> <C> <C>
Revenues:
Monitoring 63.3 60.2
Installation and service 36.7 39.8
------ ------
Total revenues 100.0 100.0
Operating expenses
Monitoring 11.6 13.2
Installation and service 28.8 27.4
General and administrative 39.3 35.1
------ ------
79.7 75.7
------ ------
Income before interest expense, amortization and
depreciation 20.3 24.3
------ ------
Interest and other expense 5.8 8.9
Amortization of customer contracts 26.7 26.2
Depreciation and amortization 4.4 3.6
------ ------
36.9 38.7
------ ------
Net loss (16.6) (14.4)
====== ======
</TABLE>
Years Ended December 31, 1999 and 1998
Revenue. Total revenues for 1999 increased 20% to $18,233,485, from
$15,165,755 for 1998. Monitoring revenues increased by 27% to $11,545,257 during
1999, from $9,125,514 during 1998. Installation and service revenues increased
by 11% to $6,688,228 during 1999, compared to $6,040,241 during 1998. Total
retail subscribers numbered approximately 25,800 at December 31, 1999, compared
to approximately 23,400 at December 31, 1998, a net increase of approximately
10%. The increase in revenues is due to the full year of revenues in 1999 for
the companies acquired in 1998, as well as the results of the purchase of two
portfolios of subscriber accounts and the Company's internal installation
efforts.
Operating Expenses. Total operating expenses, net of amortization of
customer contracts and depreciation and amortization, for 1999 increased 27% to
$14,545,446, from $11,484,138 during 1998. Monitoring expenses increased 6% to
$2,118,781 during 1999, compared to $2,002,700 during 1998. As a percentage of
monitoring revenues, monitoring expenses decreased to 18% in 1999, compared to
22% in 1998. The increase in monitoring expenses was a result of the increase in
the number of subscriber accounts and the costs associated with the full year of
monitoring the accounts acquired in 1998. Installation and service costs for
1999 increased by 26% to $5,259,775, compared to $4,161,520 during 1998. The
increase in total installation and service costs from 1999 to 1998 was partly
the result of increases in volume of installation activities in 1999 from 1998.
As a percentage of installation and service revenue, such costs were 79% in
1999, compared to 69% in 1998. Costs as a percentage of sales
20
<PAGE>
increased because the Company derived a larger percentage of sales from lower
revenue/higher cost sales to homeowners and builders in 1999 compared to 1998.
Gross Profit. Total gross profit, defined as total revenues less
monitoring, installation and service costs, increased by 21% to $10,854,929 in
1999, compared to $9,001,535 in 1998. Gross profit from monitoring revenues
increased by 32% to $9,426,476 in 1999, compared to $7,122,814 in 1998. Gross
profit from installation and service activities decreased 24% to $1,428,453 in
1999 compared to $1,878,721 in 1998. See the previous two paragraphs for a
discussion of revenues and expenses of such monitoring and installation and
service activity.
Selling, General and Administrative. General and administrative
("SG&A") costs increased by 35% to $7,166,890 in 1999, compared to $5,319,918
during 1998. The increase in SG&A costs from 1999 to 1998 is related primarily
to additional personnel and resources necessary to service the Company's growing
customer base and to certain legal and other professional expenses related to
terminated acquisition activity and related expenses. Included in G&A is bad
debt expense of $452,450 in 1999, compared to $511,333 in 1998. The decreased
bad debt expense during 1999 from 1998 resulted from increased efforts in the
Company's collection process. As a percentage of total revenues, G&A increased
to 39% in 1999 compared to 35% in 1998.
Amortization of Customer Contracts. Amortization of customer contracts
increased 23% to $4,873,131 during 1999, compared to $3,972,575 during 1998. The
increase in such costs from 1998 to 1999 is primarily attributable to the 1998
acquisitions. Amortization for 1999 includes a full year of amortization on the
contracts acquired in 1998 and the amortization for 1998 includes only the
period from the date which the contracts were acquired. Such costs are amortized
over 10 years, unless a contract is canceled and not replaced by the
corresponding independent alarm company, or otherwise, in which case the
remaining unamortized balance is written off as a charge to amortization
expense.
Depreciation and Amortization. Depreciation and amortization increased
by 48% to $805,641 during 1999, compared to $545,181 during 1998. Such costs
include depreciation of property and equipment (the gross balance of which
increased to approximately $5.4 million at December 31, 1999 from approximately
$3.2 million at December 31, 1998 as a result of (i) the Company's continued
expansion activities and (ii) the Company's 1998 acquisitions (which resulted in
additional property and equipment being acquired)), goodwill amortization (a
gross balance of approximately $430,000 in goodwill was recorded in connection
with the 1998 acquisitions, which is being amortized over 10 years), and
amortization of certain other intangible assets.
Interest Expense. Interest expense decreased 24% to $999,388 during
1999, compared to $1,312,703 during 1998. The decrease in interest expense
resulted from reduced average borrowings under the Renewed Credit Facility.
Total borrowings under the Renewed Credit Facility averaged approximately $7.3
million during 1999 compared to an average of approximately $9.2 million during
1998. The decrease in debt was due to the October 1998 repayment of a portion of
the debt, as a result of the investment by Protection One, discussed in Note 10
in Notes to Consolidated Financial Statements. As of March 24, 2000, the Company
had approximately $10.0 million of borrowings under the Heller Renewed Credit
Facility.
Net Loss. Net loss applicable to Class A Common Stock for the year
ended December 31, 1999 was approximately $4.8 million, or $(0.52) per share,
basic and diluted, compared to a net loss of approximately $3.1 million, or
$(0.28) per share, for the year ended December 31, 1998. The increase in net
loss is primarily attributable to increased selling, general and administrative
expenses and amortization expenses associated with the Company's growth and
prior-year acquisition initiatives, as
21
<PAGE>
well as to higher preferred stock dividends associated with financing used to
fund internal growth and acquisitions.
Liquidity and Capital Resources
Capital Resources. As of December 31, 1999, the Company believes it
will maintain the ability to generate sufficient cash to fund future operations
of the business. Generally, cash flow will be generated from a combination of
(1) the Company's existing $20.0 million Renewed Credit Facility with Heller,
subject to compliance with the provisions of the debt covenants in the Renewed
Credit Facility, and (2) recurring revenue from its security monitoring customer
base, which generated $3.7 million of EBITDA in the year ended December 31,
1999. At December 31, 1999, there was $4.3 million of availability under the
Renewed Credit Facility. Cash flow from operating activities was $3.8 million
for the year ended December 31, 1999.
In May 1997, the Company refinanced its existing credit facility with
Heller. Under the Renewed Credit Facility, the maximum credit facility available
to the Company was increased from an existing $7.0 million to $15.0 million. In
connection with the acquisition of Mutual, the Renewed Credit Facility was
further amended to increase the maximum available to $20.0 million. The Renewed
Credit Facility expires in May 2001. Availability under the Renewed Credit
Facility is subject to certain "Borrowing Base" limitations (as defined in the
Renewed Credit Facility). In relation to the October 1998 investment by
Protection One (see Note 10 to Notes to Consolidated Financial Statements),
Heller consented to increase the Company's borrowing base and made other
amendments to conform the agreement with the transactions. The Renewed Credit
Facility includes customary covenants, including, but not limited to,
restrictions related to the incurrence of other debt, the encumbrance or sale of
the Company's assets, and the payment of dividends or making of other
distributions to the Company's shareholders and other financial performance
covenants. The Company believes it was in compliance with all such covenants as
of December 31, 1999.
The Renewed Credit Facility will be used primarily for acquisitions of
subscriber accounts. The Company's continued plan of growth through acquisitions
of subscriber accounts is contingent upon its ability to borrow under the
Renewed Credit Facility.
In accordance with the Stock Repurchase Program authorized by the Board
of Directors in October 1998, the Company purchased 197,800 shares of its Class
A Common Stock, during the year ended December 31, 1999. In accordance with
Florida securities law, the shares were concurrently retired. The treasury
shares acquired in connection with the October 1998 investment by Protection One
(see "History") have also been retired. The excess of the cost of the treasury
shares over issuance price of the retired shares resulted in a charge to
accumulated deficit of approximately $4.4 million.
Liquidity. Net cash provided by operating activities during the year
ended December 31, 1999 was approximately $3.8 million. The Company incurred a
net loss of approximately $3.0 million during such period; however, included in
such loss was depreciation and amortization expense, amortization of customer
accounts, amortization of capitalized installation costs and amortization of
deferred financing costs totaling approximately $6.8 million, cash outflows of
approximately $1.6 million related to increases in accounts receivable and other
assets and cash inflows of approximately $1.1 million related to net increases
in liabilities and unearned revenue.
Net cash used in investing activities was approximately $6.7 million
during the year ended December 31, 1999 and was comprised of the purchase and
placement of customer accounts of approximately $4.6 million and the purchases
of fixed assets of approximately $2.1 million which includes equipment under
lease at customer premises of approximately $1.5 million.
22
<PAGE>
Net cash provided by financing activities was approximately $2.7
million, during the year ended December 31, 1999, consisting of proceeds under
borrowings from Heller of approximately $4.9 million reduced by repayments to
Heller and other long-term debt of approximately $1.0 million, payment of cash
dividends on preferred stock of approximately $1.1 million and open market
purchases of the Company's stock of approximately $144,000. As of December 31,
1999, the Company's cash balance was $578,034.
Total shareholders' equity decreased by a net amount of $4,940,504
during fiscal 1999 to $4,174,989 as of December 31, 1999. The net decrease
resulted primarily from the payment and accrual of dividends on the Company's
preferred stock of approximately $1.8 million and the net loss of approximately
$3.0 million.
Affiliation with Western Resources, Inc. As discussed above, in
"History", Western Resources, Inc. indirectly holds a significant investment in
the Company though its majority-owned subsidiary, Protection One Investments,
Inc.
The Company does not currently have any significant commitments for
capital outlays.
Year 2000 Compliance
General
The Company faced the same Year 2000 problem that other participants in
the security and alarm monitoring industry faced given the high reliance on
computer-based monitoring and electronic customer site equipment. The Year 2000
problem was a result of prior computer programming limiting the use of the year
placeholder to a two digit number, such as "98" (rather than a four digit), so
that when the year 2000 arrived, many systems could have interpreted the year
date "00" as being of the turn of a prior century. This is generally referred to
as the "Year 2000 Issue." Accordingly, unless corrective action was taken to
ensure that such systems were "Year 2000 Ready," many systems may have failed or
the processes which those systems control may have malfunctioned due to the
inappropriate year interpretation.
The Year 2000 problem did not have an impact on the Company or on its
continuing ability to deliver installation and alarm monitoring goods and
services to its customer base. Furthermore, management believes it has no
further contingencies related to the Year 2000 problem.
State of Readiness
- ------------------
The Company's primary business process is the act of monitoring
electronic signals from equipment placed at residential and commercial customer
premises, which are generally sent over standard analog telephone lines. The
Company conducts this primary process, including secondary processes of
accounting and financial reporting, through the use of systems acquired from
Monitoring Automation Systems ("MAS"). In a technical bulletin received from MAS
in 1999, the Company was informed that all of the MAS monitoring, database and
billing systems are Year 2000 compliant, however, its legacy general ledger and
accounts payable programs are no longer being offered. The Company implemented
Year 2000 ready general ledger and accounts payable software during 1999. The
Company's other significant monitoring station resides at its Mutual subsidiary
in New York. Testing of the New York site MAS software for Year 2000 readiness
was successfully completed in July 1999.
Certain non-information technology-related ("IT") processes are of
critical importance to the Company's business, but are largely beyond the
Company's ability to control. These non-IT processes
23
<PAGE>
encompass the Company's interaction with providers of local and long-distance
telephony, local police and fire response, utilities including, but not limited
to, electricity and water, and both public and private transportation.
Readiness Program
- -----------------
In order to address the remainder of what the Company believed to be
its Year 2000 risk, it developed a multi-phase plan to identify, assess and
remediate the Year 2000 problem from its business processes. Accordingly, the
Company categorized the following phases through which it progressed in 1999:
<TABLE>
<CAPTION>
Phase Status
----- ------
<S> <C>
I. Identification Completed
o Establish readiness program and methodology
o Identify all computer programs and collect manufacturers' statements
o Identify and evaluate all equipment with embedded programs
II. Assessment and Inventory Completed
o Awareness assessment (vendors) and inventory phase
III. Contingency Plans Completed
o Develop written contingency plan and policy
o Update contingency plan
IV. Remediation and Testing Completed
o Corrective application and sample testing
o Completion of MAS software testing - Hollywood
V. Post-Evaluation Completed
o Post Y2K evaluation of life safety systems (implementation of full testing field services)
</TABLE>
Costs
- -----
The Company's total cost to remediate its controllable Year 2000 risks
was not more than $15,000. These costs were primarily incurred on IT upgrades.
Risks
- -----
The Company believed that its most likely worst case scenario was a
limited failure of some portion of its customer premise equipment leased by the
Company. As a general rule, such equipment is Year 2000 ready either as a result
of recent vendor updates and upgrades, new equipment, or equipment that is not
date dependent. However, the Company does not believe that it will be able to
physically visit, assess, test and potentially remediate all of its thousands of
leased systems that are currently in operation. The Company intends to work in
concert with its equipment vendors to ensure that the risk of the most
reasonable likely worst case scenario actually occurring is reduced to a minimum
level.
24
<PAGE>
Contingency Plans
- -----------------
In accordance with regulations established as part of the Underwriter's
Laboratories Listing process, the Company had previously developed a monitoring
contingency plan. In the event of an equipment failure, the Company would
continue to process electronic signals on a manual basis. This plan was modified
in mid-1999 implementing Year 2000 issues as well.
The Company acquires other companies from time to time as part of its
business development strategy, and it anticipates that acquisitions will
continue through the Year 2000. The Company has established procedures in its
due diligence investigations of acquisition candidates to ascertain whether or
not their products or services, or those of their critical suppliers, are Year
2000 ready, and whether or not such suppliers and key customers, if any, were
adversely affected by the Year 2000 issue. While acquisition candidates may
provide certain information or make representations and warranties regarding
Year 2000 readiness, in some cases, the Company may be unable to verify the
status of readiness until the acquisition is completed and the steps outlined
herein as part of the Company's Year 2000 program are undertaken.
The preceding "Year 2000 Readiness Disclosures" contain forward-looking
statements of the Company's expectations regarding the ability of its products
and systems to be Year 2000 ready, as well as its ability to assess the
readiness of its suppliers and customers, and related risks. These statements
relate to future events, the outcome of which is uncertain, and should be read
in conjunction with the cautionary factors listed in the Introductory Note to
this report.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade receivables from a
large number of customers, including both residential and commercial customers.
The Company extends credit to its customers in the normal course of business,
performs periodic credit evaluations and maintains allowances for potential
credit losses.
Item 7. Financial Statements
- -----------------------------
Consolidated financial statements as of December 31, 1999 and for each
of the two years then ended contained herewithin.
Item 8. Changes In and Disagreements With Accountants on Accounting and
- ------------------------------------------------------------------------
Financial Disclosure
- --------------------
None.
25
<PAGE>
<TABLE>
<CAPTION>
Index to Financial Statements
Page
<S> <C>
Report of Independent Public Accountants 27
Consolidated Balance Sheet 28
December 31, 1999
Consolidated Statements of Operations 29
For the Years Ended December 31, 1999 and 1998
Consolidated Statement of Changes in Shareholders' Equity 30
For the Years Ended December 31, 1999 and 1998
Consolidated Statements of Cash Flows 31
For the Years Ended December 31, 1999 and 1998
Notes to Consolidated Financial Statements 32
</TABLE>
26
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Guardian International, Inc.:
We have audited the accompanying consolidated balance sheet of Guardian
International, Inc. (a Florida corporation) and subsidiaries as of December 31,
1999 and the related consolidated statements of operations, changes in
shareholders' equity and cash flows for each of the two years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Guardian International, Inc.
and subsidiaries as of December 31, 1999, and the results of their operations
and their cash flows for each of the two years then ended in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Dallas, Texas
February 25, 2000
27
<PAGE>
<TABLE>
<CAPTION>
GUARDIAN INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 578,034
Accounts receivable, net of allowance for doubtful accounts of $549,356 2,896,317
Current portion of notes receivable 73,564
Inventory 458,385
Other 237,697
--------------
Total current assets 4,243,997
Property and equipment, net 4,101,810
Customer accounts, net 30,230,816
Goodwill and other intangible assets, net 1,789,014
Notes receivable, less current portion 51,683
Deposits and other assets 90,273
--------------
Total assets $40,507,593
==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $3,632,094
Current portion of unearned revenue 3,230,957
Current portion of long term obligations 807,421
--------------
Total current liabilities 7,670,472
Unearned revenue, less current portion 1,656,852
Long term obligations, less current portion 10,608,280
--------------
Total liabilities 19,935,604
Commitments and contingencies (see Note 8)
Redeemable preferred stock, 16,397 shares issued and outstanding 16,397,000
Shareholders' equity:
Preferred stock, $.001 par value, 30,000,000 shares authorized:
Series D preferred stock, 10,120 shares issued and outstanding 10
Class A voting common stock, $.001 par value, 100,000,000 shares authorized,
8,384,441 shares issued and outstanding 8,385
Class B non-voting common stock, $.001 par value, 1,000,000 shares authorized,
634,035 shares issued and outstanding 634
Additional paid-in capital 19,516,784
Accumulated deficit (15,350,824)
--------------
Total shareholders' equity 4,174,989
--------------
Total liabilities and shareholders' equity $ 40,507,593
==============
</TABLE>
The accompanying notes are an integral part of this consolidated financial
statement.
28
<PAGE>
<TABLE>
<CAPTION>
GUARDIAN INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
---- ----
<S> <C> <C>
Revenues:
Monitoring $ 11,545,257 $ 9,125,514
Installation and service 6,688,228 6,040,241
---------------- -------------
Total revenues 18,233,485 15,165,755
---------------- -------------
Operating expenses:
Monitoring 2,118,781 2,002,700
Installation and service 5,259,775 4,161,520
Selling, general and administrative 7,166,890 5,319,918
Amortization of customer accounts 4,873,131 3,972,575
Depreciation and amortization 805,641 545,181
---------------- -------------
Total operating expenses 20,224,218 16,001,894
---------------- -------------
Operating loss (1,990,733) (836,139)
Interest expense 999,388 1,312,703
Other expense 51,534 39,500
---------------- -------------
1,050,922 1,352,203
---------------- -------------
Net loss (3,041,655) (2,188,342)
Preferred stock dividends 1,750,035 896,336
---------------- -------------
Net loss applicable to common stock $(4,791,690) $(3,084,678)
================ =============
Loss per common share $ (0.52) $ (0.28)
================ =============
Weighted average shares outstanding 9,152,808 11,084,009
================ =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
29
<PAGE>
<TABLE>
<CAPTION>
GUARDIAN INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
Common Stock Common Stock
Preferred Stock Class A Class B Additional
--------------- ------- ------- Paid-in
Shares Amount Shares Amount Shares Amount Capital
------ ------ ------ ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 1,894,033 $1,894 9,003,804 $ 9,004 634,035 $ 634 $12,091,050
Stock dividend on Series A Preferred
Stock 143,100 143 - - - - 286,055
Sale of Series B Preferred Stock, net
of issuance costs of $13,855 1,600,000 1,600 - - - - 3,984,545
Stock dividend on Series B Preferred
Stock 104,232 104 - - - - 260,476
Retirement of Series A and Series
B Preferred Stock, acquisition of
Treasury shares (3,741,365) (3,741) - - - - (8,331,103)
Sale of Series D Preferred Stock, net
of issuance costs of $130,882 10,000 10 - - - - 9,869,108
Dividends on Series C Preferred
Stock - - - - - - -
Dividends on Series D Preferred
Stock 120 - - - - - 120,000
Issuance of Class A Common Stock
In connection with acquisitions, net
of issuance costs of $28,034 - - 2,565,437 2,565 - - 5,056,339
Net loss - - - - - - -
---------- -------- ----------- -------- --------- -------- ------------
Balance December 31, 1998 10,120 10 11,569,241 11,569 634,035 634 23,336,470
Dividends on Series C Preferred Stock - - - - - - -
Dividends on Series D Preferred Stock - - - - - - -
Acquisition of treasury shares - - - - - - -
Retirement of treasury shares - - (3,184,800) (3,184) - - (3,815,295)
Equity issuance costs - - - - - - (4,391)
Net loss - - - - - - -
---------- -------- ----------- -------- --------- -------- ------------
Balance December 31, 1999 10,120 $ 10 8,384,441 $ 8,385 634,035 $ 634 $19,516,784
========== ======== =========== ======== ========= ======== ============
(RESTUBBED TABLE)
Accumulated Treasury
Deficit Shares Total
----------- -------- -----
<C> <C> <C>
Balance, December 31, 1997 $ (3,079,918) $ (6,438) $ 9,016,226
Stock dividend on Series A Preferred
Stock (286,198) - -
Sale of Series B Preferred Stock, net
of issuance costs of $13,855 - - 3,986,145
Stock dividend on Series B Preferred
Stock (260,580) - -
Retirement of Series A and Series
B Preferred Stock, acquisition of
Treasury stock - (8,062,156) (16,397,000)
Sale of Series D Preferred Stock, net
of issuance costs of $130,882 - - 9,869,118
Dividends on Series C Preferred
Stock (229,558) - (229,558)
Dividends on Series D Preferred
Stock (120,000) - -
Issuance of Class A Common Stock
In connection with acquisitions, net
of issuance costs of $28,034 - - 5,058,904
Net loss (2,188,342) - (2,188,342)
------------ ----------- ------------
Balance December 31, 1998 (6,164,596) (8,068,594) 9,115,493
Dividends on Series C Preferred Stock (1,144,601) - (1,144,601)
Dividends on Series D Preferred Stock (605,434) - (605,434)
Acquisition of treasury shares - (144,423) (144,423)
Retirement of treasury shares (4,394,538) 8,213,017 -
Equity issuance costs - - (4,391)
Net loss (3,041,655) - (3,041,655)
------------ ----------- ------------
Balance December 31, 1999 $(15,350,824) $ - $ 4,174,989
============ =========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
30
<PAGE>
<TABLE>
<CAPTION>
GUARDIAN INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities-
Net loss $(3,041,655) $ (2,188,342)
Adjustments to reconcile net loss to net cash provided by
operating activities-
Depreciation and amortization 805,641 545,181
Amortization of customer accounts 4,873,131 3,972,575
Amortization of capitalized installation costs 1,016,836 650,210
Amortization of deferred financing costs 152,521 256,178
Provision for doubtful accounts 482,450 511,333
Changes in assets and liabilities, net of acquisitions:
Accounts receivable (1,353,972) (623,556)
Deposits and other assets (236,356) (712,558)
Accounts payable and accrued expenses 241,278 812,635
Unearned revenue 831,867 307,296
----------------- ----------------
Net cash provided by operating activities 3,771,741 3,530,952
----------------- ----------------
Cash flows from investing activities-
Purchase of fixed assets (2,170,315) (1,786,027)
Business acquisitions, net of cash acquired - (16,650,382)
Purchase and placement of customer accounts (4,568,459) (4,537,787)
----------------- ----------------
Net cash used in investing activities (6,738,774) (22,974,196)
----------------- ----------------
Cash flows from financing activities-
Payments of long term obligations (1,006,953) (11,940,666)
Proceeds from line of credit 4,922,190 18,328,227
Proceeds from equity issuance (4,391) 13,827,227
Payment of cash dividends (1,087,213) -
Acquisition of treasury shares (144,423) -
----------------- ----------------
Net cash provided by financing activities 2,679,210 20,214,788
----------------- ----------------
Net increase (decrease) in cash and cash equivalents (287,823) 771,544
Cash and cash equivalents, beginning of year 865,857 94,313
----------------- ----------------
Cash and cash equivalents, end of year $578,034 $ 865,857
================= ================
Supplemental disclosures-
Interest paid $ 864,201 $ 874,514
Income taxes paid 44,000 70,500
Non cash investing and financing activities-
Exchange of Class A common stock, retained as treasury shares - (8,062,156)
Retirement of Series A and Series B Preferred Stock - (8,334,844)
Issuance of Series C Redeemable Preferred Stock - 16,397,000
Issuance of Class A common stock in consideration for business acquisitions - 5,058,904
Stock dividends on Series A and Series B preferred stock - 546,778
Stock dividends on Series D preferred stock 605,434 120,000
Contract holdbacks applied against accounts written off 25,076 156,397
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
31
<PAGE>
GUARDIAN INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
----------------------
The consolidated financial statements include the accounts of Guardian
International, Inc., a Florida Corporation ("Guardian") and its wholly
owned subsidiaries, collectively the Company (the "Company"). All
significant intercompany accounts and transactions have been eliminated in
consolidation.
Description of Business
-----------------------
The Company operates two central monitoring alarm stations and monitors and
maintains electronic security systems for residential and commercial
customers in the United States (its primary market).
Liquidity
---------
As of December 31, 1999, the Company maintained an accumulated deficit of
$(15,350,824) and negative working capital of $(3,426,475). Net losses for
1999 and 1998 were $(3,041,655) and $(2,188,342), respectively. However,
the Company generates annual cash flows, as evidenced by its cash flow from
operations of $3,771,741 and $3,530,952 for 1999 and 1998, respectively.
As of December 31, 1999, the Company believes it will maintain the ability
to generate sufficient cash to fund future operations of the business.
Generally, cash flow will be generated from a combination of (1) the
Company's existing $20.0 million Renewed Credit Facility with Heller,
subject to compliance with the provisions of the debt covenants in the
Renewed Credit Facility, and (2) recurring revenue from its security
monitoring customer base. At December 31, 1999, there was approximately $4
million of availability under the Renewed Credit Facility.
Revenue Recognition
-------------------
Installation Revenue. Prior to 1998, installation revenues were recognized
when installations of security alarm systems were performed. Costs of
providing installations were charged to income in the period when the
installation occurred, except in cases where the Company maintained
ownership of the equipment installed, in which case the Company capitalized
the cost of the equipment to property and equipment and depreciated the
amount over a seven year period. Net margins on installation activities
prior to 1998 were not material to the Company's operations.
In 1998, as a result of the acquisition of Mutual, the Company adopted a
new accounting policy related to installation activity due to the nature of
the high-end commercial installations performed by Mutual. The Company
defers the excess of installation revenue over estimated selling costs and
amortizes such difference over the initial term of the non-cancelable
customer monitoring/service contract (generally over five years). Costs
attributed to providing the installations, which include direct labor,
direct materials and direct overhead, are capitalized and amortized over a
five year period. All other costs associated with the installation are
charged to income in the period when the installation occurs. Customers are
billed for installation services when the installation is completed.
Monitoring/Service Revenue. Customers are billed for monitoring and
maintenance services primarily on a monthly or quarterly basis in advance
of the period in which such services are provided. Unearned revenues result
from billings in advance of performance of services. Contracts
32
<PAGE>
for monitoring services are generally for an initial non-cancelable term of
five years with automatic renewal on an annual basis thereafter, unless
terminated by either party. A substantial number of contracts are on an
automatic renewal basis.
Cash and Cash Equivalents
-------------------------
All highly liquid investments purchased with a remaining maturity of three
months or less at the date acquired are considered cash equivalents.
Restricted Cash
---------------
Included in cash and cash equivalents is restricted cash of $44,396
representing cash held in escrow pursuant to the Company's acquisition
activity.
Customer Accounts, Net
----------------------
Customer accounts acquired from alarm dealers are reflected at cost. The
cost of acquired accounts is based on the estimated fair value at the date
of acquisition and included in "Customer Accounts, net" in the accompanying
consolidated balance sheet. Acquired customer accounts are capitalized and
amortized on a straight-line basis over a ten-year period. For those
accounts which are cancelled during the amortization period, the remaining
net book value of that account is expensed in the period in which it is
cancelled. Costs applicable to providing installation of internally
generated customer accounts are capitalized and amortized over the life of
the monitoring/service contract (generally five years). It is the Company's
policy to perform monthly evaluations of acquired customer account
attrition and, if necessary, to adjust the remaining useful lives. The
Company periodically estimates future cash flows from customer accounts.
Because expected cash flows continue to exceed the unamortized cost of
customer accounts, the Company has not recorded an impairment loss.
Goodwill and Other Intangible Assets, Net
-----------------------------------------
Goodwill is the excess of purchase consideration given over the net assets
acquired in a purchase business combination. The Company amortizes its
goodwill balances over a ten-year life. Intangible assets are recorded at
cost and amortized over their estimated useful lives. The carrying value of
intangible assets is periodically reviewed and impairments are recognized
when expected operating cash flows derived from such intangibles are less
than their carrying value. Included in other intangible assets are deferred
financing costs which are amortized over the respective terms of associated
long-term debt obligations using the interest method.
Inventories
-----------
Inventories, comprised of alarm systems and parts, are stated at the lower
of average cost or market.
Concentration of Credit Risk
----------------------------
Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of trade receivables
from a large number of customers, including both residential and
commercial. The Company extends credit to its customers in the normal
course of business, performs periodic credit evaluations and maintains
allowances for potential credit losses.
Concentration of Vendor Risk
----------------------------
The Company purchases alarm systems for sale and installation from a small
number of vendors. At December 31, 1999, approximately 55% of accounts
payable were due to one supplier.
Property and Equipment
----------------------
Property and equipment are stated at cost. Depreciation of property and
equipment is provided on the straight-line method. The estimated useful
lives for property and equipment range from three to
33
<PAGE>
seven years and the estimated useful lives for leasehold improvements is
approximately ten years. During 1998, the Company adjusted its estimate of
useful economic life for leasehold improvements from thirty years to ten
years. There was no material impact on the loss for the year as a result of
the change in the estimated useful life.
Fair Value of Financial Instruments
-----------------------------------
Carrying amounts of certain of the Company's financial instruments
including cash and cash equivalents, accounts receivable, accounts payable
and other accrued liabilities approximate fair value because of their short
term maturities.
The fair value of the Company's credit facility approximates fair value
because the interest rates are based on floating rates identified by
reference to market rates. The fair value of the Company's other long-term
debt approximates carrying value. The estimated fair values may not be
representative of actual values of the financial instruments that could
have been realized at year-end or may be realized in the future.
Income Taxes
------------
The Company has established deferred tax assets and liabilities for
temporary differences between financial statement and tax bases of assets
and liabilities, using enacted tax rates in effect in the years in which
the differences are expected to reverse. Net deferred tax assets have been
fully reserved as it is more likely than not that the asset will not be
utilized in the future.
Comprehensive Income
--------------------
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" provides reporting and disclosure requirements for
comprehensive income and its components within the financial statements.
The Company had no comprehensive income components for the years ended
December 31, 1999 and 1998, therefore, comprehensive loss is the same as
net loss for both periods.
Accounting Pronouncements
-------------------------
Accounting standards setters in the United States have issued several
accounting pronouncements that the Company will be required to adopt in
future fiscal reporting periods.
SFAS 133 "Accounting for Derivative Instruments and Hedging Activities"
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts,
(collectively referred to as derivatives) and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value. SFAS 133 is effective for all fiscal quarters,
beginning after June 15, 2000. Management has not traditionally been
required to utilize derivative instruments in managing its business and
does not anticipate utilizing them in 2000. Accordingly, the Company does
not believe SFAS 133 will have a material effect on the Company's
consolidated financial statements.
SEC Staff Accounting Bulletin No. 101 "Revenue Recognition" ("SAB 101")
provides guidance on accounting for revenue-earning activities. It
highlights existing criteria for determining when revenue is realized (or
realizable) and earned. SAB 101 is required to be implemented no later than
the second fiscal quarter beginning after December 15, 1999. Management
believes its revenue recognition accounting has been substantially
consistent with the guidance found in SAB 101.
Loss Per Common Share
---------------------
The Company makes its earnings per share calculation in accordance with
SFAS No. 128, "Earnings Per Share". Basic loss per common share is computed
by dividing net loss attributable to common
34
<PAGE>
shareholders (net loss plus the preferred stock dividends) by the weighted
average number of shares of common stock outstanding during the year.
Diluted loss per share, which assumes that the convertible preferred stock
is converted into Class A Voting Common Stock, par value $.001 per share
"(Class A Common Stock") and the stock options to purchase shares of Class
A Common Stock (see Note 11) are exercised, is not presented because the
effect would be anti-dilutive for both 1999 and 1998. Options to purchase
1,045,122 shares of Class A Common stock were outstanding at December 31,
1999 but were not included in the computation of diluted EPS because the
options' exercise prices were greater than the average market price of the
common shares. The options expire on various dates through 2010. The
weighted average shares outstanding used in the computation of net loss
attributable to common shares are as follows:
<TABLE>
<CAPTION>
Weighted Average Shares
Outstanding for the Year
Ended December 31,
------------------
1999 1998
---- ----
<S> <C> <C>
Class A Common Stock 8,518,773 10,449,974
Class B Common Stock 634,035 634,035
----------- -----------
9,152,808 11,084,009
=========== ===========
</TABLE>
Advertising Costs
-----------------
Advertising costs are expensed as incurred. Total advertising expense was
$105,106 and $100,268 for the years ended December 31, 1999 and 1998,
respectively.
Use of Estimates
----------------
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Reclassification
----------------
Certain 1998 amounts in the consolidated statements of operations,
shareholders' equity and cash flows have been reclassified to conform to
the 1999 presentation. Such reclassifications have no impact on the net
loss reported for 1999.
2. NOTES RECEIVABLE
Notes receivable consist of the following at December 31, 1999:
Installment sales $ 90,950
Notes with customers and dealers 34,297
---------
125,247
Current portion (73,564)
---------
Notes receivable, less current portion $ 51,683
=========
The above notes are repayable in monthly installments of principal and
interest, will be fully repaid at various intervals during 2000 and 2001
have interest rates varying from 6.0% to 18.85%. Certain installment sales
with payment periods less than a year do not contain a finance component.
35
<PAGE>
3. CUSTOMER ACCOUNTS, NET
The following is an analysis of the changes in acquired customer accounts
for the year ended December 31, 1999:
<TABLE>
<CAPTION>
<S> <C>
Balance, beginning of year $31,552,324
Purchase of customer accounts from dealers 2,819,205
Customer accounts acquired in acquisitions -
Internally generated accounts 1,774,330
Charges against contract holdbacks (25,076)
Amortization of capitalized installation costs (1,016,836)
Amortization of customer accounts (4,873,131)
-----------
Balance, end of year $30,230,816
===========
</TABLE>
The accumulated amortization of customer accounts was $6,756,730 at
December 31, 1999. In conjunction with certain purchases of customer
contracts and accounts, the Company withholds a portion of the price as a
credit to offset qualifying attrition of the acquired customer accounts and
for purchase price settlements of assets acquired and liabilities assumed.
The Company had a total balance withheld of $297,881 at December 31, 1999,
as contract holdbacks in connection with the acquisition of customer
accounts which are included in "Accounts payable and accrued expenses" in
the accompanying consolidated balance sheet.
4. PROPERTY AND EQUIPMENT, NET
Property and equipment, net, consist of the following at December 31, 1999:
<TABLE>
<CAPTION>
<S> <C>
Property and equipment, at cost:
Station equipment $3,837,391
Transportation vehicles 399,061
Furniture and office equipment 723,548
Leasehold improvements 430,742
-----------
5,390,742
Accumulated depreciation and amortization (1,288,932)
-----------
$4,101,810
===========
</TABLE>
Included in property and equipment at December 31, 1999 was $447,317 of
assets held under capital leases. The accumulated depreciation on such
assets at December 31, 1999 was $93,710.
The depreciation and amortization charge (including amortization of assets
held under capital leases) was $525,266 and $325,373 for the years ended
December 31, 1999 and 1998, respectively.
The Company believes there are no impairments of long-lived assets based on
review of expected cash flows from the use of such assets.
36
<PAGE>
5. GOODWILL AND OTHER INTANGIBLE ASSETS, NET
Goodwill and other intangible assets, net, consist of the following at
December 31, 1999:
<TABLE>
<CAPTION>
Amortization
Period
------
<S> <C> <C>
At cost:
Goodwill 10 years $1,943,211
Deferred financing costs 3 years 812,667
Covenant not to compete and other 5 - 10 years 442,569
------------
3,198,447
Accumulated amortization (1,409,433)
------------
$1,789,014
============
</TABLE>
The amortization of goodwill, covenant not-to-compete and other intangible
assets was $280,375 and $219,808 for the years ended December 31, 1999 and
1998, respectively. Amortization of deferred financing costs, included in
interest expense, was $152,521 and $256,178 for the years ended December
31, 1999 and 1998, respectively.
6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following, at December
31, 1999:
<TABLE>
<CAPTION>
<S> <C>
Trade accounts payable $ 578,660
Contract holdbacks 297,881
Preferred dividend payable 892,380
Accrued expenses 1,863,173
-----------
$3,632,094
===========
</TABLE>
7. LONG TERM OBLIGATIONS
Long term obligations consist of the following at December 31, 1999:
<TABLE>
<CAPTION>
<S> <C>
Credit facility with financial institution $10,338,757
Capital lease obligations 348,648
Equipment notes payable and other 728,296
---------------
11,415,701
Less-current portion (807,421)
---------------
Long-term obligations, less current portion $10,608,280
===============
Estimated maturities of long-term debt are as follows:
2000 $ 807,421
2001 10,567,377
2002 29,739
2003 11,164
2004 and thereafter -
---------------
$11,415,701
===============
</TABLE>
37
<PAGE>
Credit Facility. In connection with the acquisition of Mutual, the Company
amended its credit facility (the "Renewed Credit Facility") with Heller
Financial, Inc., the Company's senior lender. Under the Renewed Credit
Facility, borrowings will bear interest at floating rates, either at Prime
plus 1 3/4% or, at the Company's election, LIBOR plus 3 1/2% and is
collateralized by substantially all of the Company's assets. At December
31, 1999, the debt was bearing interest at varying rates. The Renewed
Credit Facility expires in May 2001. The $20 million total availability
under the Renewed Credit Facility is subject to certain "Borrowing Base"
limitations (as defined in the Renewed Credit Facility). In connection with
the investment by Protection One Investments, Inc. ("Protection One") (See
Note 10), in October 1998, Heller made other amendments to the Renewed
Credit Facility to conform the agreement with the transactions. The Renewed
Credit Facility includes customary covenants including, but not limited to,
restrictions related to the incurring of other debt, the encumbrance or
sale of the Company's assets, and the payment of dividends or making of
other distributions to the Company's shareholders and other financial
performance covenants. The Company believes it was in compliance with all
such covenants as of December 31, 1999. At December 31, 1999, there was
approximately $4 million of availability under the Renewed Credit Facility
Capital Lease Obligations. During 1997, the Company entered into a lease
agreement for central station equipment, expiring in 2002. The lease has
been capitalized in accordance with generally accepted accounting
principles using an interest rate of 10.51%. The future minimum payments
under this lease are disclosed in Note 8.
Equipment Notes. Equipment notes payable and other relate to purchases of
vehicles and equipment and the purchase of an account portfolio. Interest
rates vary from 6.0% to 10.51%. The notes are repayable in monthly
installment of principal and interest through 2001.
8. COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS
Leased Facilities
-----------------
The Company leases its corporate headquarters from an affiliate which is
owned by the principal shareholders of the Company. The Company's corporate
headquarters occupies a 12,000 square foot building which houses its
central monitoring facility located in Hollywood, Florida. The lease
expires on December 31, 2002, but has a renewal option for an additional
five years under the same terms and conditions. The annual rent is
approximately $105,000, with annual increases commencing January 2000 not
to exceed three percent (3%). The terms of the lease are no less favorable
to the Company than those which could be obtained from an unaffiliated
third party, in an arms length transaction.
The Company leases space with Windbrook Realty in New York, New York. The
lease expires in December 2004, with a renewal option for an additional
five years under the same terms and conditions. The 3,500 square feet of
leased space houses a central monitoring station, offices and warehouse
facilities. The annual rent is approximately $91,000.
The Company also leases office space in Miami and Tampa, Florida and in
Staten Island, New York. The leases expire on various dates through July
2003 and most are renewable at the option of the Company.
38
<PAGE>
Future minimum payments under operating leases and capital leases (see Note
7) are as follows:
<TABLE>
<CAPTION>
Operating Capital
--------- -------
<S> <C> <C> <C>
2000 $337,704 $177,959
2001 265,929 168,424
2002 252,003 31,626
2003 147,353 11,614
2004 102,600 -
- -
Thereafter ---------- ---------
$1,105,589 389,623
==========
Less interest (40,975)
---------
Capital lease obligations reflected as current
($149,939) and non-current ($198,709)
portions of long-term obligations $348,648
=========
</TABLE>
9. INCOME TAXES
At December 31, 1999, the Company has net operating loss carryforwards for
federal income tax purposes of approximately $6.7 million, which begin to
expire in 2010. The components of deferred tax assets and liabilities at
December 31, 1999 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Deferred tax (liabilities) assets:
Allowance for doubtful accounts - current $ 211,697
Difference in amortization of customer contracts (223,213)
Net operating loss carryforwards 2,606,439
Installation activity (254,621)
Inventory reserve 17,550
Other 4,233
--------------
2,362,085
Less valuation allowance (2,362,085)
--------------
Net deferred tax (liabilities) assets $ -
==============
</TABLE>
The Company's 1999 and 1998 losses have not been benefited for financial
reporting purposes because it is more likely than not that the Company will
be unable to generate sufficient future taxable income to offset such
losses.
10. SHAREHOLDERS' EQUITY
In October and November 1997, the Company issued 2,500,000 shares of Class
A Common Stock for $1.50 per share ($3,750,000 in the aggregate) and
1,875,000 newly authorized shares of Series A 9 3/4% Convertible Cumulative
Preferred Stock for $2.00 per share ($3,750,000 in the aggregate) to
Protection One. The proceeds of the $7,500,000 investment was used to
reduce debt and for acquisitions.
In February 1998, the Company issued 1,600,000 newly authorized shares of
Series B 10 1/2% Convertible Cumulative Preferred Stock, par value $.001
("Series B Preferred Stock") to Protection One, for $2.50 per share
($4,000,000 in the aggregate). The proceeds of the $4,000,000 investment
was used in the acquisition of Mutual.
39
<PAGE>
Both issuances of the Preferred Stock paid quarterly preferred stock
dividends. A total of 143,100 dividend shares of Series A Preferred Stock
and 104,232 dividend shares of Series B Preferred Stock were issued in
1998.
On October 21, 1998, Protection One exchanged 2,980,000 million shares of
Class A Common Stock, 2,037,133 million shares of Series A Preferred Stock,
(both of which were previously held by Western Resources, Inc. and
contributed to Protection One in their merger), and 1,704,232 million
shares of Series B Preferred Stock for 16,397 shares of Series C 7%
Redeemable Cumulative Preferred Stock, par value $.001 ("Series C Preferred
Stock"), of the Company. After giving effect to the transactions, Guardian
had approximately 9.2 million shares of Common Stock outstanding including
634,035 shares of Class B Non-Voting Common Stock, par value $.001 per
share. The Company has retired the Series A Preferred Stock and the Series
B Preferred Stock, subsequent to the exchange transaction. Due to the
redeemable nature of the Series C Preferred Stock, the capital will reside
outside the stockholders' equity section in the mezzanine section of the
balance sheet, following long-term debt. This treatment is consistent with
the hybrid characteristics of the issue.
The Series C Preferred Stock is non-voting and is redeemable on the sixth
anniversary of the date of issuance at a liquidation value of $1,000 per
share. Dividends are payable quarterly in cash and have been made each
quarter since the issuance of the Series C Preferred Stock. The holders of
Series C Preferred Stock have the right to optional redemption upon a
Change in Control, as defined. At any time after issuance, the Company can
elect to redeem the Series C Preferred Stock for a premium. Due to the
redeemable nature of the Series C Preferred Stock, the capital will reside
outside the stockholders' equity section in the mezzanine section of the
balance sheet, following long-term debt. This treatment is consistent with
the hybrid characteristics of the issue.
Also on October 21, 1998, Protection One purchased 10,000 shares of Series
D 6% Convertible Cumulative Preferred Stock, par value $.001 per share
("Series D Preferred Stock"), of the Company for $10 million. The proceeds
of the sale of the Series D Preferred Stock were used to pay down long-term
debt.
The holders of Series D Preferred Stock have no voting rights until such
shares are converted into Class A Common Stock except that the holders of
Series D Preferred Stock are allowed to vote on an as-converted basis with
the holders of Class A Common Stock under the following circumstances: (i)
until the third anniversary of the date of issuance, upon a Change in
Control, as defined; (ii) or at any time the Series D Preferred Stock is
outstanding, under an Event of Default, as defined. The holders of Series D
Preferred Stock have no redemption rights except upon a Change in Control.
After the third anniversary of issuance, the Company can elect to redeem
the Series D Preferred Stock for a premium.
In accordance with the Stock Repurchase Program authorized by the Board of
Directors in October 1998, the Company purchased 197,800 shares of its
Class A Common Stock, during the year ended December 31, 1999. In
accordance with Florida securities law, the shares were concurrrently
retired. The treasury shares acquired in connection with the October 1998
investment by Protection One have also been retired. The excess of the cost
of the treasury shares over issuance price of the retired shares resulted
in a charge to accumulated deficit
40
<PAGE>
11. STOCK OPTIONS
During 1999, the Company issued options to purchase shares of common stock
at exercise prices ranging from $0.69 to $0.81 per share, which equals fair
value on the dates of grant, to various employees and two directors. The
options are exercisable on a pro rata basis on the anniversary dates of the
agreements under which they were granted.
On December 14, 1998, the Company canceled 375,000 of options held by
certain members of management, other senior employees and directors (the
"option holders"). Such options had been issued in 1997 and 1998 with
exercise prices ranging from $1.95 to $3.25 per share. On the same date,
375,000 new options were issued to the option holders with an exercise
price of $0.84 per share, being the market price of the Company's stock on
such date. There were no other changes to the terms of these options.
The following is a summary of stock option activity for the years ended
December 31, 1999 and 1998:
<TABLE>
<CAPTION>
Weighted Average
Option Exercise
Shares Price
------ -----
<S> <C> <C>
Outstanding at December 31, 1997 474,720 $2.08
Granted 703,902 $1.77
Cancelled (375,000) $2.41
------------
Outstanding at December 31, 1998 803,622 $1.66
Granted 241,500 $0.73
Cancelled - -
------------
Outstanding at December 31, 1999 1,045,122 $1.44
============
Exercisable at 12/31/98 369,720 $1.84
=======
Exercisable at 12/31/99 503,833 $1.59
=======
</TABLE>
The following table summarizes stock options outstanding and exercisable at
December 31, 1999:
<TABLE>
<CAPTION>
Weighted Average Weighted
Range of Number of Number of Remaining Average
Exercise Options Options Contractual Life in Exercise
Description Price Outstanding Exercisable Years Price
----------- -------- ----------- ----------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
1995 options $2.00 174,720 174,720 1 $2.00
1997 options $2.50 100,000 100,000 2 $2.50
1997 options $0.84 200,000 120,000 8 $0.84
1998 options $0.84 175,000 50,000 8 $0.84
1998 options $1.73 53,902 10,780 9 $1.73
1998 options $3.25 100,000 33,333 8 $3.25
1999 options $0.81 75,000 15,000 10 $0.81
1999 options $0.69 166,500 - 10 $0.69
</TABLE>
41
<PAGE>
The Company has adopted SFAS No. 123, "Accounting for Stock-Based
Compensation", which requires the Company, for options issued to employees,
to either recognize expense for stock based award based on the fair value
on the date of grant or provide footnote disclosure regarding the impact of
such charges. The Company continues to account for employee stock options
pursuant to APB No. 25. Accordingly, the Company does not record
compensation costs unless the market price exceeds the exercise price on
the date of the grant.
If the Company had elected to recognize compensation cost based on the fair
value of the options granted, the pro forma net loss and net loss per
common share for the years ended December 31, 1999 and 1998 would be as
follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Net loss applicable to common shares:
As reported $(4,791,690) $(3,084,678)
Pro forma for SFAS No. 123 (5,009,208) (3,354,476)
Net loss per common share:
As reported $(0.52) $(0.28)
Pro forma for SFAS No. 123 (0.55) (0.30)
</TABLE>
The weighted average fair value of options granted, estimated on the date
of grant was $0.73 for the year ended December 31, 1999 and $1.27 for the
year ended December 31, 1998. The fair value of options granted was
estimated on the date of grant using the following weighted average
assumptions:
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998
---- ----
<S> <C> <C>
Dividend yield 0.00% 0.00%
Expected stock price volatility 121.41% 124.44%
Risk free interest rate 6.27% 5.32%
Expected option life 10 years 9.5 years
</TABLE>
12. 401(k) SAVINGS PLAN
The Company established a voluntary 401(k) Savings Plan (the "Plan") for
its employees effective July 1, 1998. Employees who are over the age of 21
and have completed six months of service with the Company are eligible to
participate in the Plan.
The Company matches 10% of the first 4% of each employee's contribution.
Participants have a choice of several investing options for their
contributions and have sole direction over the investment of their
contributions. The Company's contributions to the Plan for the years ended
December 31, 1999 and 1998 were approximately $15,900 and $7,300,
respectively.
13. SEGMENT REPORTING
Effective January 1, 1998, the Company adopted SFAS 131, "Disclosures About
Segments of an Enterprise and Related Information" ("SFAS 131"). SFAS 131
established standards for reporting information about operating segments in
annual financial statements. It also established standards for related
disclosures about products and services and geographic areas.
42
<PAGE>
For the years ended December 31, 1999 and 1998, the Company operated under
a single reportable segment providing alarm monitoring services, and
selling and installing alarm systems to residential and commercial
customers in the United States. Accordingly, no further segment reporting
beyond the consolidated financial statements is presented.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
The following table sets forth the names, ages and positions of the
executive officers and directors of the Company as of December 31, 1999. A
summary of the background and experience of each of these individuals is set
forth following the table. Under the Company's by-laws, directors hold office
for a period of one year, at which time the shareholders elect new directors.
Further, under the Company's by-laws, directors hold office until their
successors are elected and qualified.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Richard Ginsburg (1) 31 Chief Executive Officer, President, Director
Harold Ginsburg (1) 66 Chairman of the Board of Directors
Sheilah Ginsburg (1) 61 Secretary, Treasurer, Director
Darius G. Nevin 41 Vice President, Chief Financial Officer, Director
William Remington 70 Director
Terry Akins 53 Chief Operating Officer, Vice President
Douglas T. Lake 49 Director
David Heidecorn 43 Director
Joel A. Cohen 59 Vice President, Director, President of Mutual
Raymond L. Adams 70 Vice President of Mutual
</TABLE>
(1) Harold and Sheilah Ginsburg are married and Richard Ginsburg is their
son.
Harold Ginsburg
Mr. Ginsburg was a co-founder and the President of Guardian from its
inception in 1993 until August 15, 1996. Mr. Ginsburg is an acknowledged
authority on electronic/computer technology security systems and has personally
developed high-tech security systems for many well-known regional and national
firms. Mr. Ginsburg also has served as a consultant to financial organizations
and government agencies throughout Latin America and Europe. In addition to
being regarded as an international consultant in the alarm service and
monitoring industry, he is responsible for the start-up of several successful
security companies, including Guardsman Security Corporation, which he owned and
operated from 1983 to 1991. In 1991, Guardsman was sold to Alert Centre, now
owned by ADT Security, Inc. In 1978, Mr. Ginsburg founded Gibraltar Central
Security Corporation, which he partially owned and operated until 1982, at which
time Gibraltar Central was sold to Security Centres of London, England.
Mr. Ginsburg does not hold directorships in any other reporting
companies.
43
<PAGE>
Sheilah Ginsburg
Mrs. Ginsburg was a co-founder of Guardian. She is responsible for the
human resources and certain other administrative functions of the Company. Prior
to her participation in the development of Guardian, Mrs. Ginsburg was the Vice
President/Controller of Guardsman Central Security, a business similar to
Guardian.
Mrs. Ginsburg does not hold directorships in any other reporting
companies.
Richard Ginsburg
Mr. Ginsburg was a co-founder of Guardian and has been a Director of
the Company since its inception. He has been President and Chief Executive
Officer of Guardian since August 1996. He received a Bachelor of Science degree
in communications from the University of Miami. He subsequently served as
Central Station Manager of Guardsman Security from 1987 to 1990. Mr. Ginsburg
then became Operations Manager for Alert Centre, Inc., another security alarm
company, a position he filled from 1990 to 1992.
Mr. Ginsburg does not hold directorships in any other reporting
companies. Mr. Ginsburg is a director of Paradigm Direct, in which Western
Resources, Inc., the parent company of Protection One, holds a significant
minority ownership position.
Darius G. Nevin
Mr. Nevin assumed the position of Chief Financial Officer of the
Company in October 1997. For most of the ten years leading up to that time, Mr.
Nevin served as Chief Financial Officer of Guard Technologies, Inc. (now
Security Technologies Group, Inc.), a provider of electronic security systems
and services to the commercial market. For the last three years, prior to
joining the Company, Mr. Nevin also served as President of Guard Technologies,
Inc. Before entering the security industry, Mr. Nevin was a junior partner of
Madison Dearborn Partners, at that time the venture capital division of First
Chicago Corp. Mr. Nevin holds an A.B. from Harvard University and an M.B.A. from
the University of Chicago.
Mr. Nevin does not hold directorships in any other reporting companies.
Douglas T. Lake
Mr. Lake has been a Director of the Company since April 1998. Mr. Lake
is Executive Vice President and Chief Strategic Officer of Western Resources,
Inc., an entity which, through its wholly owned subsidiary, maintains a material
investment in the Company. Mr. Lake is also presently Chairman of the Board of
Protection One, Inc. a publicly-held company. From 1995 to 1998, Mr. Lake was
Senior Managing Director of Investment Banking with Bear Stearns & Company in
New York City. Prior to 1995, he was Managing Director with Dillon Reed &
Company in New York City. Mr. Lake holds a B.A. from Trinity College in
Hartford, Connecticut and an M.B.A. from Amos Tuck School at Dartmouth.
Mr. Lake also holds a directorship with Oneok, Inc, a publicly-held
company.
44
<PAGE>
William Remington
Mr. Remington has been a director of the Company since 1996. Mr.
Remington is a Canadian citizen and resident and for the past twenty-one years,
has been the Director General of the Town of Hampstead, Quebec, Canada. In
addition, Mr. Remington has participated in the design and installation of
central monitoring stations for alarm monitoring companies located in Montreal,
Canada; Kingston, Jamaica; London, England and Florida.
Mr. Remington does not hold directorships in any other reporting
companies.
David Heidecorn
Mr. Heidecorn has been a director since May 1999. Mr. Heidecorn is the
Chief Financial Officer of Catterton Partners, a growth equity fund. Mr.
Heidecorn served as Executive Vice President, Chief Financial Officer and a
director of Alarmguard Holdings, Inc. from 1992 until February 1999 when the
company was sold to Tyco/ADT. From 1986 to 1992, Mr. Heidecorn was employed by
GE Capital Corporation as a Vice President in the Leveraged Finance Group and a
Senior Vice President for the Corporate Finance Group, where he led the
Bankruptcy and Reorganization Finance activity for the Northeast. He received
his B.A. in Economics from Lehigh University and his M.B.A. in Finance from
Columbia University.
Mr. Heidecorn does not hold directorships in any other reporting
companies.
Terry E. Akins
Mr. Akins served as president of ACI, which he co-founded in 1970,
between 1989 and May 1997. From 1970 to 1989, Mr. Akins served as Vice President
of ACI. In addition, Mr. Akins has been active with local, state and national
alarm associations, having served in 1989 as President of the Alarm Association
of Florida, an association he co-founded in 1970. Mr. Akins received a Bachelor
of Science from the Georgia Institute of Technology in 1969.
Joel A. Cohen
Mr. Cohen is Vice President of the Company and President of Mutual. Mr.
Cohen has served as President of Mutual since March 1989. He holds a B.A. from
Brooklyn College and an M.B.A. from LIU in Brooklyn.
Raymond L. Adams
Mr. Adams is Vice President of Mutual. He has served as Vice President
of Mutual since January 1991. Mr. Adams holds a B.A. from Syracuse University.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who beneficially own more than ten percent (10%) of a registered class
of the Company's equity securities, to file with the Securities and Exchange
Commission ("SEC") initial reports of ownership and reports of changes in
ownership of Common Stock and the other equity securities of the Company.
Officers, directors and persons who beneficially own more than ten percent (10%)
of a registered class of the Company's equity securities are required by the
45
<PAGE>
regulations of the SEC to furnish the Company with copies of all Section 16(a)
forms they file. To the Company's knowledge, based solely on review of these
filings and written representations from the directors and officers, one such
filing was not timely made during the year ended December 31, 1999 by Mr. Harold
Ginsburg, Mr. William Remington and Mrs. Sheilah Ginsburg.
Item 10. Executive Compensation
- --------------------------------
Executive Compensation
The following sets forth certain information regarding the aggregate
cash and other compensation paid to or earned by the executive officers of the
Company.
<TABLE>
<CAPTION>
Year Salary Bonus Other
---- ------ ----- -----
<S> <C> <C> <C> <C> <C>
Richard Ginsburg 1999 $128,890 (1) - $14,149 (2)
President and CEO, Director 1998 100,000 - 12,219
1997 91,985 - 10,800
Darius G. Nevin 1999 135,000 - 13,492 (2)
Vice President and Chief Financial Officer, 1998 135,537 - 12,084
Director 1997 25,660 (3) - 462
Joel A. Cohen 1999 152,305 31,158 10,586 (2)
Vice President, President and CEO of Mutual, 1998 135,577 (4) - 10,928
Director 1997 - - -
Terry E. Akins 1999 142,500 (5) 29,390 (2),(6)
Chief Operating Officer, Vice President 1998 144,808 (5) 12,559
1997 96,346 7,089
</TABLE>
(1) Mr. Ginsburg's annualized compensation was increased to $175,000 in
September 1999.
(2) Included in other annual compensation are auto allowances and payments
for medical insurance coverage.
(3) Mr. Nevin joined the Company in October 1997, with the execution of his
employment agreement. The annualized compensation for 1997 for
Mr. Nevin was $135,000.
(4) Mr. Cohen joined the Company in February 1998, with the execution of
his employment agreement. The annualized compensation for 1998 for
Mr. Cohen was $150,000.
(5) Mr. Akins joined the Company in May 1997, with the execution of his
employment agreement. The annualized compensation for 1999, 1998 and
1997 for Mr. Akins was $150,000. Mr. Akins took extra vacation
time in each year for which he was not compensated.
(6) Included in other annual compensation is amount related to incentive
plan.
Compensation of Directors
As compensation for serving as directors, Mssrs. Lake, Heidecorn and
Remington received options to purchase 75,000 shares of Guardian Class A Common
Stock. Mr. Lake received options in 1998 and Mssrs. Heidecorn and Remington
received options in 1999. Mssrs. Remington and Heidecorn receive compensation of
$1,000 for each meeting of the Board of Directors which they attend.
Options/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
Number of Percent of Total
Securities Options/SARs
Underlying Granted to Exercise of
Options/SARs Employees in SARs Price
Name Granted Fiscal Year ($/Share) Expiration Date
---- ------- --------------- ----------- ---------------
<S> <C> <C> <C> <C>
David Heidecorn 75,000 31.1% $0.81 May 12, 2009
William Remington 75,000 31.1% $0.69 September 13, 2009
</TABLE>
46
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
Security Ownership of Management
The following table sets forth information with respect to the
beneficial ownership as of March 24, 2000 of Class A Common Stock by (i) each
Director of the Company; (ii) the Chief Executive Officer; and (iii) all named
directors and executive officers of the Company as a group. On March 24, 2000,
there were 8,384,441shares of Class A Common Stock issued and outstanding.
<TABLE>
<CAPTION>
Amount and Nature of Percent of
--------------------- ----------
Name and Address of Beneficial Owner Beneficial Ownership (1) Class (2)
------------------------------------ -------------------- -----
<S> <C> <C>
Harold and Sheilah Ginsburg (3), (4) 1,857,066 22.1
Richard Ginsburg (3) 695,996 (5) 8.3
Darius G. Nevin (3) 172,000 (5) 2.0
William Remington (3) - *
Douglas T. Lake (3) 45,000 (6) *
Joel A. Cohen (7) 238,009 (8) 2.8
David Heidecorn (9) 40,000 (10) *
All Directors and Executive Officers as a Group (11) 3,624,840 43.2
* Represents less than 1% of outstanding Voting Stock.
</TABLE>
(1) Each director and executive officer has sole voting and investment
power with respect to the shares beneficially owned.
(2) For purposes of this table, a person is deemed to have "beneficial
ownership" of any shares of Class A Common Stock which such person has
the right to acquire on or within 60 days after March 24, 2000. For
purposes of computing the percentage of the class of Class A Common
Stock held by each person named above, any shares which such person has
or has the right to acquire on or within 60 days after March 24, 2000
are deemed to be outstanding for such person, but are not deemed to be
outstanding for the purpose of computing the percentage ownership of
any other person.
(3) The address of such shareholder is c/o the Company, 3880 North 28th
Terrace, Hollywood, Florida 33020-1118.
(4) The shares of Harold and Sheilah Ginsburg are owned jointly as tenants
by the entireties.
(5) Includes 60,000 options which are immediately exercisable.
(6) Comprised of 45,000 options which are immediately exercisable.
(7) The address of such shareholder is c/o Mutual Central Alarm Services,
Inc., 10 West 46th Street, New York, New York, 10036.
(8) Comprised of 40,000 options which are immediately exercisable.
(9) The address of such shareholder is c/o 9 Greenwich Office Park,
Greenwich, Connecticut, 06830.
(10) Includes 30,000 options which are immediately exercisable.
(11) Includes Messrs. Harold Ginsburg, Richard Ginsburg, Nevin, Remington,
Lake, Cohen, Heidecorn, Akins, Adams and Mrs. Ginsburg.
Security Ownership of Certain Beneficial Owners
The following table sets forth information with respect to the
beneficial ownership as of March 24, 2000 of any person (including any "group")
known by the Company to be the beneficial owner of more than 5% of any class of
stock.
47
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature of Percent of
Title of Class Name and Address of Beneficial Owner Beneficial Ownership (1) Class (2)(3)
-------------- ------------------------------------ ------------------------ ------------
<S> <C> <C> <C> <C>
Preferred Stock (4) Protection One (6) 10,725 (7) 100.0
Class A Common Stock Harold and Sheilah Ginsburg (8), (9) 1,857,066 22.1
Class A Common Stock Richard Ginsburg (8) 695,996 (10) 8.2
Class A Common Stock Rhonda Ginsburg (8) 629,245 7.5
Class A Common Stock Estate of Norman Rubin 501,827 6.0
Class B Non-Voting Common
Stock (5) Heller (11) 634,035 7.0(12)
</TABLE>
(1) Unless otherwise indicated, the Company believes that each beneficial
owner listed in the above table has sole voting and investment power
with respect to the shares beneficially owned.
(2) For purposes of this table, a person is deemed to have "beneficial
ownership" of any shares which such person has the right to acquire
on or within 60 days of March 24, 2000. For purposes of computing the
percentage of the class held by each person named above, any shares
which such person has or has the right to acquire on or within 60
days after March 24, 2000 are deemed to be outstanding for such
person, but are not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person.
(3) On a fully diluted basis as of March 24, 2000, Protection One holds
27.3%, Harold Ginsburg and Sheilah Ginsburg hold 14.2%, Richard
Ginsburg holds 5.3%, Rhonda Ginsburg holds 4.8% and Heller holds 4.8%
of the outstanding securities of the Company.
(4) Shares of Preferred Stock are not convertible until at least the
third anniversary of their issuance on October 21, 1998, at a rate of
one share for 333.3333 shares of Class A Common Stock.
(5) Class B Common Stock is immediately convertible into Class A Common
Stock on a share-for-share basis at any time.
(6) The address for Protection One is 818 S. Kansas Avenue, Topeka,
Kansas, 66601. Protection One is the sole holder of all of the
outstanding shares of Preferred Stock.
(7) The amount includes stock dividends accumulated through March 24,
2000.
(8) The address for such shareholder is c/o the Company, 3880 N. 28th
Terrace, Hollywood, Florida, 33020-1118.
(9) The shares of Harold and Sheilah Ginsburg are owned jointly as
tenants by the entireties.
(10) Includes 60,000 options which are immediately exercisable.
(11) Heller is the sole holder of all of the outstanding shares of Class B
Common Stock. The address for Heller is 500 West Monroe Street,
Chicago, Illinois, 60661.
(12) Represents the percent of outstanding shares of Common Stock.
Item 12. Certain Relationships and Related Transactions
- -------------------------------------------------------
The Company leases its corporate headquarters from Guardian
Investments, a Florida partnership owned by Harold and Sheilah Ginsburg, both of
whom are directors, officers and principal shareholders of the Company.
The corporate headquarters occupies a 12,000 square foot building, which
houses the Company's central monitoring station, offices and warehouse
facilities, located at 3880 North 28 Terrace, Hollywood, Florida 33020. The
telephone number is (954) 926-5200. The lease expires on December 31, 2002, but
has a renewal option for an additional five years under the same terms and
conditions. The annual rent is approximately $105,000, with annual increases not
to exceed three percent (3%). The terms of the lease are no less favorable to
the Company than those which could be obtained from an unaffiliated third party.
48
<PAGE>
Item 13. Exhibits and Reports on Form 8-K
- ------------------------------------------
Exhibits
- --------
3(i) Articles of Incorporation dated July 7, 1999 incorporated by reference
to Exhibit 3(i) of the Company's Form 10-QSB filed August 13, 1999.
3(ii) Amended and Restated By-Laws of the Company dated March 2, 2000
3(iii) Articles of Amendment to Articles of Incorporation of Guardian
International, Inc. as filed with the Florida Secretary of State on
March 9, 2000.
4(a) Specimen Stock Certificate incorporated by reference to Exhibit 4(a)
of the Company's Form 10-QSB filed August 13, 1999.
10(a) Amended and Restated Loan and Security Agreement with Heller Financial,
Inc. dated as of February 23, 1998, incorporated by reference to
Exhibit 10(j) of the Company's Form 10-KSB filed March 31, 1998.
10(b) Stock Purchase Agreement dated as of February 23, 1998 incorporated by
reference to Exhibit 10(a) of the Company's Form 8-K filed as of
March 10, 1998.
10(c) Registration Rights Agreement dated as of February 23, 1998
incorporated by reference to Exhibit 10(b) of the Company's Form 8-K
filed as of March 10, 1998.
10(d) Escrow and Pledge Agreement dated as of February 23, 1998 incorporated
by reference to Exhibit 10(c) of the Company's Form 8-K filed as of
March 10, 1998.
10(e) Employment Agreement with Joel A. Cohen dated as of February 1, 1998
incorporated by reference to Exhibit 10(d) of the Company's Form 8-K
filed as of March 10, 1998.
10(f) Employment Agreement with Raymond L. Adams dated as of February 1, 1998
incorporated by reference to Exhibit 10(e) of the Company's Form 8-K
filed as of March 10, 1998.
10(g) Asset Purchase Agreement effective as of March 9, 1998 incorporated by
reference to Exhibit 10(a) to the Company's Form 8-K filed as of
March 24, 1998.
10(h) Warranty Bill of Sale dated as of March 5, 1998 incorporated by
reference to Exhibit 10(b) to the Company's Form 8-K filed as of
March 24, 1998.
10(i) Assignment and Assumption Agreement dated as of March 5, 1998
incorporated by reference to Exhibit 10(c) to the Company's Form 8-K
filed as of March 24, 1998.
10(j) Guaranty Agreement dated as of March 9, 1998 incorporated by reference
to Exhibit 10(d) to the Company's Form 8-K filed as of March 24, 1998.
10(k) Escrow Agreement date March 9, 1998 incorporated by reference to
Exhibit 10(e) to the Company's Form 8-K filed as of March 24, 1998.
10(l) Employment Agreement with Dan Lawrence dated March 9, 1998 incorporated
by reference to Exhibit 10(f) to the Company's Form 8-K filed as of
March 24, 1998.
10(m) Amendment to Registration Rights Agreement dated as of February 23,
1998, incorporated by reference to Exhibit 10(gg) to the Company's
Form 10-KSB filed as of March 31, 1998.
10(n) Stock Subscription Agreement dated as of February 23, 1998, incorporated
by reference to Exhibit 10(hh) to the Company's Form 10-KSB filed as of
March 31, 1998.
10(o) Stock Purchase Agreement dated as of April 27, 1998, incorporated by
reference to Exhibit 10(a) to the Company's Form 10-QSB filed as of
August 14, 1998.
10(p) Employment Agreement with David Weston between Precision and the Company
dated as of April 27, 1998, incorporated by reference to Exhibit 10(b)
to the Company's Form 10-QSB filed as of August 14, 1998.
10(q) Indemnification Agreement between sellers of Precision and the Company
dated April 27, 1998, incorporated by reference to Exhibit 10(c) to the
Company's Form 10-QSB filed as of August 14, 1998.
10(r) Confidentiality, Noncompetition and Nonsolicitation Agreement with Alan
Dubow
49
<PAGE>
dated April 27, 1998, incorporated by reference to Exhibit 10(d)
to the Company's Form 10-QSB filed as of August 14, 1998.
10(s) Confidentiality, Noncompetition and Nonsolicitation Agreement with
Richard Clark dated April 27, 1998, incorporated by reference to Exhibit
10(e) to the Company's Form 10-QSB filed as of August 14, 1998.
10(t) Confidentiality, Noncompetition and Nonsolicitation Agreement with Jeff
Chivers dated April 27, 1998, incorporated by reference to Exhibit 10(f)
to the Company's Form 10-QSB filed as of August 14, 1998.
10(u) Stock Purchase Agreement dated as of August 13, 1998, incorporated by
reference to Exhibit 10(a) to the Company's Form 10-QSB filed as of
November 16, 1998.
10(v) Escrow Agreement dated as of August 13, 1998, incorporated by reference
to Exhibit 10(b) to the Company's Form 10-QSB filed as of November 16,
1998.
10(w) Employment Agreement between Vincent Monardo and the Company dated
August 13, 1998, incorporated by reference to Exhibit 10(c) to the
Company's Form 10-QSB filed as of November 16, 1998.
10(x) Employment Agreement between Kevin Killea and the Company dated
August 13, 1998, incorporated by reference to Exhibit 10(d) to the
Company's Form 10-QSB filed as of November 16, 1998.
10(y) Employment Agreement between Michael Assenza and the Company dated
August 13, 1998, incorporated by reference to Exhibit 10(e) to the
Company's Form 10-QSB filed as of November 16, 1998.
10(z) Employment Agreement between Paul Ferrara and the Company dated
August 13, 1998, incorporated by reference to Exhibit 10(f) to the
Company's Form 10-QSB filed as of November 16, 1998.
10(aa) 1999 Stock Option Plan incorporated by reference to Exhibit A to the
Company's Schedule 14-A filed as of May 27, 1999.
10(bb) Severance Agreement between Darius G. Nevin and the Company dated
January 19, 2000.
10(cc) Severance Agreement between Richard Ginsburg and the Company dated
January 19, 2000
10(dd) Non-Qualified Stock Option Agreement between Douglas T. Lake and the
Company, effective April 28, 1998.
10(ee) Non-Qualified Stock Option Agreement between David Heidecorn and the
Company, effective May 12, 1999.
10(ff) Non-Qualified Stock Option Agreement between William Remington and the
Company, effective September 13, 1999.
10(gg) Stock Option Agreement between Richard Ginsburg and the Company,
effective October 15, 1997.
10(hh) Stock Option Agreement between Darius G. Nevin and the Company,
effective October 15, 1997.
10(ii) Stock Option Agreement between Joel Cohen and the Company, effective
February 23, 1998.
10(jj) Stock Option Agreement between Raymond Adams and the Company, effective
February 23, 1998.
21 List of subsidiaries
Reports on Form 8-K
- -------------------
No reports were filed on Form 8-K during the three months ended December
31, 1999.
50
<PAGE>
SIGNATURES
----------
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
GUARDIAN INTERNATIONAL, INC.
By: /s/RICHARD GINSBURG
--------------------
Richard Ginsburg
President and Chief Executive Officer
In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/HAROLD GINSBURG
- ------------------------------------ Chairman of the Board of Directors March 30, 2000
Harold Ginsburg
/s/RICHARD GINSBURG Director, President and Chief Executive Officer March 30, 2000
- ------------------------------------
RICHARD GINSBURG
/s/DARIUS G. NEVIN Director, Vice President and Chief Financial March 30, 2000
- ------------------------------------
DARIUS G. NEVIN
/s/SHEILAH GINSBURG Director, Secretary and Treasurer March 30, 2000
- ------------------------------------
SHEILAH GINSBURG
</TABLE>
51
EXHIBIT 3(ii)
BYLAWS
OF
GUARDIAN INTERNATIONAL, INC.
(a Florida corporation)
ARTICLE I
Offices
Section 1.1 Registered Office. The registered office of Guardian
International, Inc., a Florida corporation (the "Corporation"), shall be located
in the State of Florida.
Section 1.2 Other Offices. The Corporation may also have offices at
such other places, either within or without the State of Florida, as the Board
of Directors of the Corporation (the "Board of Directors") may from time to time
determine or as the business of the Corporation may require.
ARTICLE II
Meetings of Shareholders
Section 2.1 Annual Meeting. An annual meeting of shareholders entitled
to vote shall be held for the election of directors and transaction of such
other business as may come properly before the meeting at such date, time and
place, either within or without the State of Florida, as may be designated by
resolution of the Board of Directors from time to time.
Section 2.2 Special Meetings. Special meetings of shareholders entitled
to vote for any purpose or purposes may be called at any time by the President
of the Corporation or by a majority of the Whole Board of Directors. The term
"Whole Board" means the total number of authorized directorships (whether or not
any vacancies exist in previously authorized directorships at the time such
resolution is presented to the Board of Directors for adoption). Special
meetings of the shareholders may be called by the shareholders of the
Corporation entitled to vote by written demand of the holders of at least 50% of
all the votes entitled to be cast on any issue proposed to be considered at the
proposed special meeting delivered to the secretary of the Corporation
describing the purpose or purposes for which the meeting is to be held. In the
event of the delivery to the Corporation of any request(s) or demand(s) by
shareholders with respect to a special meeting, and/or any related revocation or
revocations, the Corporation shall engage nationally recognized independent
inspectors of elections for the purpose of performing a prompt ministerial
review of the validity of the requests, demands and/or revocations. No business
shall be transacted and no corporate action shall be taken at a special meeting
other than that stated in the notice of the meeting.
Section 2.3 Notice of Meetings. Whenever shareholders are required or
permitted to take action at a meeting, a written notice of the meeting shall be
given which shall state the place, date and hour of the meeting and, in the case
of a special meeting, the purpose or purposes for which
<PAGE>
the meeting is called. Unless otherwise provided by law or the Corporation's
Articles of Incorporation, the written notice of any meeting shall be given not
less than 10 or more than 60 days before the date of the meeting to each
shareholder entitled to vote at such meeting. If mailed, notice is given when
deposited in the United States mail, postage prepaid, directed to the
shareholder at the address for that shareholder appearing on the records of the
Corporation.
Section 2.4 Adjournments. Any meeting of shareholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given for any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting, the Corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than 30 days, or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the meeting.
Section 2.5 Quorum. At each meeting of shareholders, except where
otherwise provided by law or the Articles of Incorporation or these Bylaws, the
holders of a majority of the outstanding shares of stock entitled to vote at the
meeting, present in person or by proxy, shall constitute a quorum. In the
absence of a quorum, the shareholders so present may, by majority vote, adjourn
the meeting from time to time in the manner provided in Section 2.4 of these
bylaws until a quorum is present.
Section 2.6 Organization. Meetings of shareholders shall be presided
over by the person designated by the Board of Directors. The Secretary shall act
as secretary of the meeting, but in his or her absence, the chairman of the
meeting may appoint any person to act as secretary of the meeting.
Section 2.7 Voting; Proxies. Except as otherwise provided in the
Articles of Incorporation, each shareholder entitled to vote at any meeting of
shareholders shall be entitled to one vote for each share of stock held by the
shareholder that has voting power upon the matter in question. Each shareholder
entitled to vote at a meeting of shareholders may authorize another person or
persons to act for him by proxy, but no such proxy shall be voted or acted upon
more than eleven months after its date, unless the proxy provides for a longer
period. If an appointment form designates two or more persons to act as proxies,
a majority of these persons present at the meeting, or if only one is present,
that one, has all of the powers conferred by the instrument upon all the persons
designated unless the instrument provides otherwise. A duly executed proxy shall
be irrevocable if it states that it is irrevocable and if, and only as long as,
it is coupled with an interest sufficient in law to support an irrevocable
power. A shareholder may revoke any proxy that is not irrevocable by attending
the meeting and voting in person or by filing an instrument in writing revoking
the proxy or another duly executed proxy bearing a later date with the Secretary
of the Corporation. Voting at meetings of shareholders need not be by written
ballot and need not be conducted by inspectors unless the holders of a majority
of the outstanding shares of all classes of stock entitled to vote thereon
present in person or by proxy at such meeting shall so determine. At all
meetings of shareholders for the election of Directors, a plurality of the votes
cast shall be
2
<PAGE>
sufficient to elect Directors, unless otherwise provided in the Articles of
Incorporation. All other elections and questions shall, unless otherwise
provided by law or by the Articles of Incorporation or these bylaws, be decided
by the vote of holders of a majority of the outstanding shares of stock entitled
to vote thereon present in person or by proxy at the meeting, provided that
(except as otherwise required by law or by the Articles of Incorporation) the
Board of Directors may require a larger vote upon any election or question.
Section 2.8 Fixing Date for Determination of Shareholders of Record. In
order that the Corporation may determine the shareholders entitled to notice of
or to vote at any meeting of shareholders or any adjournment thereof, the Board
of Directors may fix a record date, which shall not preclude the date upon which
the resolution fixing the record date is adopted by the Board of Directors. The
record date for determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, shall not be more than 70
nor less than 10 days before the date of such meeting. If no record date is
fixed, the record date for determining shareholders entitled to notice of or to
vote at a meeting of shareholders shall be at the close of business on the day
next preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. A determination of shareholders of record entitled to notice of or to vote
at a meeting of shareholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 2.9 List of Shareholders Entitled to Vote. The Secretary shall
prepare and make available, at least ten days before every meeting of
shareholders, a complete list of the shareholders entitled to vote at the
meeting, arranged in alphabetical order and showing the address of each
shareholder and the number of shares registered in the name of each shareholder.
This list shall be open to the examination of any shareholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list also shall be produced and kept at the time and place of the meeting
during the whole time thereof and may be inspected by any shareholder who is
present. The stock ledger shall be the only evidence as to who are the
shareholders entitled to examine the stock ledger, the list of shareholders or
the books of the Corporation, or to vote in person or by proxy at any meeting of
shareholders.
Section 2.10 Advance Notice of Shareholder Nominations and Business to
be Conducted at Meetings. Notice of nominations of persons for election to the
Board of Directors of the Corporation and of other business to be brought by
shareholders before a meeting of shareholders of the Corporation shall be given
in accordance with the notice procedures set forth in this Section. Such notice
of nominations and of other business to be conducted at a meeting of
shareholders shall be delivered or mailed to the Secretary of the Corporation at
the principal executive offices of the Corporation not less than 90 days prior
to the date of the meeting; provided, however, that in the event that less than
90 days notice or prior disclosure of the date of the meeting is given or
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made to shareholders by the Corporation, notice by the shareholder must be
received not later than the close of business on the tenth day after the day on
which the notice of the meeting was mailed or the public disclosure was made. A
shareholder's notice shall set forth (i) as to each person that the shareholder
proposes to nominate for election or re-election as a director, all information
relating to such person that is required to be disclosed in solicitations of
proxies for the election of directors or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(including such person's written consent to being named as a nominee and to
serving as a director if elected); and (ii) as to the shareholder giving the
notice, (a) the name and address of such shareholder as they appear on the
Corporation's books and (b) the class and number of shares of the Corporation's
capital stock that are beneficially owned by such shareholder. No later than the
15th day following the date of receipt of a shareholder notice pursuant to this
Section 2.10, the President of the Corporation shall, if the facts warrant,
determine and notify in writing the shareholder submitting such notice that such
notice was not made in accordance with the time limits and/or the procedures
prescribed by the Bylaws. If no such notification is mailed to such shareholder
within such 15-day period, such shareholder notice containing a matter of
business shall be deemed to have been made in accordance with the provisions of
this Section 2.10. Notwithstanding the foregoing provisions of this Section, a
shareholder shall also comply with all applicable requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations promulgated thereunder, with respect to the matters set forth in
this Section. Nothing in this Section shall be deemed to affect any rights of
shareholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to the applicable rules under the Exchange Act.
ARTICLE III
Board of Directors
Section 3.1 Number; Qualifications. Consistent with the Articles of
Incorporation, the number of directors shall be determined from time to time by
resolution of the Board of Directors adopted by a majority of the Whole Board.
Directors need not be shareholders.
Section 3.2 Elections; Resignation; Removal; Vacancies. Directors shall
be elected annually at the annual meeting of shareholders. Any director may
resign at any time upon written notice to the Corporation. Shareholders may
remove directors only for cause and only by the affirmative vote of a majority
of the then outstanding shares of capital stock of the Corporation entitled to
vote generally in the election of directors, voting together as a single class.
A director may be removed for cause by the shareholders at a meeting of
shareholders, provided the notice of the meeting states that the purpose, or one
of the purposes, of the meeting is the removal of the director. Any vacancy
occurring in the Board of Directors for any reason may be filled by a majority
of the directors then in office, though such majority is less than a quorum, and
each director so elected shall hold office until the next shareholders' meeting
at which directors are elected.
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Section 3.3 Regular Meetings. Regular meetings of the Board of
Directors may be held at such places within or without the State of Florida and
at such time as the Board of Directors may from time to time determine. Notices
of regular meetings need not be given.
Section 3.4 Special Meetings. Special meetings of the Board of
Directors may be held at any time or place within or without the State of
Florida whenever called by the President, any Vice President, the Secretary, or
any member of the Board of Directors. Reasonable notice of special meetings
shall be given by the person or persons calling the meeting but not later than
the second day before the date of the special meeting.
Section 3.5 Telephonic Meetings Permitted. Members of the Board of
Directors, or any committee designated by the Board, may participate in a
meeting of such Board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in a meeting pursuant to this bylaw
shall constitute presence in person at such meeting.
Section 3.6 Quorum; Vote Required for Action. At all meetings of the
Board of Directors, a majority of the Whole Board shall constitute a quorum for
the transaction of business. Except in cases in which the Articles of
Incorporation or these Bylaws otherwise provide, the vote of a majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
Section 3.7 Deemed Assent. A director who is present at a meeting of
the Board of Directors or a committee of the Board of Directors when corporate
action is taken is deemed to have assented to the action taken unless (i) the
director objects at the beginning of the meeting (or promptly upon his arrival)
to the holding of the meeting or transacting specified business at the meeting,
or (ii) the director votes against or abstains from the action taken.
Section 3.8 Organization. Meetings of the Board of Directors shall be
presided over by the President, if any, or in his absence by a chairman chosen
at the meeting. The Secretary shall act as secretary of the meeting, but in his
absence the chairman of the meeting may appoint any person to act as secretary
of the meeting.
Section 3.9 Action by Directors by Written Consent. Unless otherwise
restricted by the Articles of Incorporation or these bylaws, any action required
or permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all members of the Board or
such committee, as the case may be, consent thereto in writing, and the writing
or writings are filed with the minutes of proceedings of the Board or of the
committee.
Section 3.10 Compensation of Directors. Directors, as such, may
receive, pursuant to resolution of the Board of Directors, fixed fees and other
compensation for their services as directors including, without limitation,
their services as members of committees of the Board of Directors.
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ARTICLE IV
Committees
Section 4.1 Committees. The Board of Directors may, by resolution
passed by a majority of the Whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of the committee, the
member or members present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in place of any such
absent or disqualified member. Except as and to the extent limited by the
Florida Business Corporation Act, any such committee, to the extent provided in
the resolution of the Whole Board, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it.
Section 4.2 Committee Rules. Unless the Board of Directors otherwise
provides, each committee designated by the Board may make, alter and repeal
rules for the conduct of its business. In the absence of such rules, each
committee shall conduct its business in the same manner as the Board of
Directors conducts its business pursuant to Article II of these bylaws.
ARTICLE V
Officers
Section 5.1 Executive Officers; Election; Qualification; Term of
Office; Resignation; Removal; Vacancies. The Board of Directors shall elect a
President, Chief Executive Officer and Secretary, and it may, if it so
determines, elect a Chairman of the Board and a Vice Chairman of the Board from
among its members. The Board of Directors may also elect one or more Vice
Presidents, one or more Assistant Secretaries, a Treasurer and one or more
Assistant Treasurers. Each such officer shall hold office until the first
meeting of the Board of Directors after the annual meeting of shareholders next
succeeding his election, and until his successor is elected and qualified or
until his earlier resignation or removal. Any officer may resign at any time
upon written notice to the Corporation. The Board of Directors may remove any
officer with or without cause at any time, but such removal shall be without
prejudice to the contractual rights of such officer, if any, with the
Corporation. Any number of offices may be held by the same person. Any vacancy
occurring in any office of the Corporation by death, resignation, removal or
otherwise may be filled for the unexpired portion of the term by the Board of
Directors at any regular or special meeting.
Section 5.2 Powers and Duties of Executive Officers. The president
shall be the principal executive officer of the corporation and, subject to the
control of the directors, shall in general supervise and control all of the
business and affairs of the corporation. He shall,
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when present, preside at all meetings of the stockholders and of the directors.
He may sign, with the secretary or any other proper officer of the corporation
thereunto authorized by the directors, certificates for shares of the
corporation, any deeds, mortgages, bonds, contracts, or other instruments which
the directors have authorized to be executed, except in cases where the signing
and execution thereof shall be expressly delegated by the directors or by these
by-laws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of president and such other duties as may be
prescribed by the directors from time to time.
The remaining officers of the Corporation shall have such powers and
duties in the management of the Corporation as may be prescribed by the Board of
Directors and, to the extent not so provided, as generally pertain to their
respective offices, subject to the control of the Board of Directors.
Section 5.3 Compensation. The compensation of officers shall be fixed
from time to time at the discretion of the Board of Directors. The Corporation
may enter into employment agreements with any officer of the Corporation.
ARTICLE VI
Stock
Section 6.1 Certificates. Every holder of stock shall be entitled to
have a certificate representing the number of shares in the Corporation owned by
him signed by or in the name of the Corporation by the President or a Vice
President, and by the Treasurer or the Secretary of the Corporation. Any of or
all the signatures on the certificate may be a facsimile. In case any officer,
transfer agent, or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent, or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer, transfer agent, or
registrar at the date of issue.
Section 6.2 Lost, Stolen or Destroyed Stock Certificates; Issuance of
New Certificates. The Corporation may issue a new certificate of stock in the
place of any certificate issued by it that is alleged to have been lost, stolen
or destroyed, and the Corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the Corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of such certificate or the
issuance of the new certificate.
Section 6.3 Transfers of Stock. The shares of the Corporation shall be
transferable or assignable only on the books of the Corporation by the holder in
person or by attorney on surrender of the certificate for such shares duly
endorsed and, if sought to be transferred by attorney, accompanied by a written
power of attorney to have the same transferred on the books of the Corporation.
The Corporation will recognize the exclusive right of the person registered on
its books as the owner of shares to receive dividends and to vote as such owner,
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and, except as otherwise provided by the Laws of Florida, shall not be bound to
recognize any equitable or other claim to or interest in the shares.
Section 6.4 Record Date. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or entitled to receive payment of any dividend, or in order
to make a determination of shareholders for any other proper purpose, the Board
of Directors may fix a date in advance as the record date for such determination
of shareholders, such date in any case to be not more than 70 days prior to the
date on which the particular action, requiring such determination of
shareholders, is to be taken. If no record date is fixed for the determination
of shareholders entitled to receive payment of a dividend, the date on which
notices of the meeting are mailed or the date on which the resolution of the
Board of Directors declaring such dividend is adopted, as the case may be, shall
be the record date for such determination of shareholders. When a determination
of shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof unless the Board of Directors fixes a new record date, which it shall do
if the meeting is adjourned to a date more than 120 days after the date fixed
for the original meeting.
ARTICLE VII
Miscellaneous
Section 7.1 Fiscal Year. The fiscal year of the Corporation shall be
calendar year.
Section 7.2 Waiver of Notice of Meeting of Shareholders, Directors or
Committees. Any written waiver of notice, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business on the grounds that the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose of
any regular or special meeting of the shareholders, directors, or members of a
committee of directors need be specified in any written waiver of notice.
Section 7.3 Interested Directors; Quorum. Except as and to the extent
limited by the Florida Business Corporation Act, no contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely because
the director or officer is present at or participates in the meeting of the
Board or committee thereof which authorized the contract or transaction or
solely because his or their votes are counted for such purpose. Common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the Board of Directors or of a committee which authorizes the
contract or transaction.
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Section 7.4 Form of Records. All records maintained by the Corporation
in the regular course of its business, including its stock ledger, books of
account and minute books, may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, microphotographs, or any other information storage
device, provided that the records so kept can be converted into clearly legible
form within a reasonable time. The Corporation shall so convert any records so
kept upon the request of any person entitled to inspect the same.
Section 7.5 Amendment of Bylaws. These bylaws may be altered or
repealed, and new bylaws made, by the Board of Directors. The shareholders may
make additional bylaws and may alter and repeal any bylaws whether adopted by
them or otherwise at any meeting of shareholders, provided notice of the
proposed change or repeal was given to the Corporation as provided in Section
2.10 of these bylaws and to the shareholders in the notice of the meeting.
Section 7.6 Financial Statements for Shareholders.
-------------------------------------
(A) Unless modified by resolution of the shareholders within 120 days
after the close of each fiscal year, the Corporation shall furnish its
shareholders annual financial statements which may be consolidated or combined
statements of the Corporation and one or more of its subsidiaries, as
appropriate, that include a balance sheet as of the end of the fiscal year, an
income statement for that year and a statement of cash flows for that year. If
financial statements are prepared for the Corporation on the basis of generally
accepted accounting principles, the annual financial statements must also be
prepared on that basis.
(B) If the annual financial statements are reported upon by a public
accountant, his report must accompany them. If not, the statements must be
accompanied by a statement of the President, the Treasurer or the person
responsible for the Corporation's accounting records stating his reasonable
belief whether the statements were prepared on the basis of generally accepted
accounting principles and, if not, describing the basis of preparation and
describing any respects in which the statements were not prepared on a basis of
accounting consistent with the statements prepared for the preceding year.
(C) The Corporation shall mail the annual financial statements to each
shareholder within 120 days after the close of each fiscal year or within such
additional time thereafter as is reasonably necessary to enable the Corporation
to prepare its financial statements if, for reasons beyond the Corporation's
control, it is unable to prepare its financial statements within the prescribed
period. Thereafter, on written request from a shareholder who was not mailed the
statements, the Corporation shall mail him the latest annual financial
statements.
I certify that the Directors of the Corporation adopted and approved
these Bylaws by written consent effective as of March 2, 2000.
Sheilah Ginsburg, Secretary
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EXHIBIT 3(iii)
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
GUARDIAN INTERNATIONAL, INC.
I.
The name of the corporation is Guardian International, Inc. (the
"Corporation").
II.
Article III of the Articles of Incorporation of the Corporation is
hereby amended to read in its entirety as follows:
ARTICLE III
Capital Stock
-------------
Section 1. Total Authorized Shares.
-----------------------
The amount of the total authorized capital stock of the Corporation is
131,000,000 shares, consisting of (i) 100,000,000 shares of "Class A Voting
Common Stock", par value $.001 per share; (ii) 1,000,000 shares of "Class B
Nonvoting Common Stock", par value $.001 per share; and (iii) 30,000,000 shares
of Preferred Stock, par value $.001 per share.
Section 2. Class B Common Stock.
--------------------
Except as otherwise provided herein, all shares of Class A Voting
Common Stock and Class B Nonvoting Common Stock will be identical and will
entitle the holders thereof to the same rights and privileges:
(a) Voting Rights. The holders of Class A Voting Common Stock will be
entitled to one (1) vote per share on all matters to be voted on by the
Corporation's stockholders, and except as otherwise required by law, the holders
of Class B Nonvoting Common Stock will have no right to vote their shares of
Class B Nonvoting Common Stock on any matters to be voted on by the
Corporation's stockholders.
(b) Dividends. When and as dividends are declared thereon, whether
payable in cash, property or securities of the Corporation, the holders of Class
A Voting Common Stock and the holders of Class B Nonvoting Common Stock will be
entitled to share ratably according to the number of shares of Class A Voting
Common Stock or Class B Nonvoting Common Stock held by them, in such dividends;
provided, that if dividends are declared which are payable in shares of Class A
Voting Common Stock or Class B Nonvoting Common Stock, dividends will be
declared which
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are payable at the same rate on both classes of common stock, and the dividends
payable in shares of Class A Voting Common Stock to holders of Class A Voting
Common Stock, and the dividends payable in shares of Class B Nonvoting Common
Stock will be payable to the holders of Class B Nonvoting Common Stock.
(c) Liquidation Rights. In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders of
Class A Voting Common Stock and Class B Nonvoting Common Stock shall be entitled
to share ratably, according to the number of shares of Class A Voting Common
Stock or Class B Nonvoting Common Stock held by them, in the remaining assets of
the Corporation available for distribution to its stockholders.
(d) Conversion of Class B Nonvoting Common Stock.
--------------------------------------------
i. At any time and from time to time, each record holder of
Class B Nonvoting Common Stock will be entitled to convert any and all of the
shares of such holder's Class B Nonvoting Common Stock into the same number of
shares of Class A Voting Common Stock at holder's election, provided, that each
holder of Class B Nonvoting Common Stock shall only be entitled to convert any
share or shares of Class B Nonvoting Common Stock to the extent that after
giving effect to such conversion such holder or its affiliates shall not
directly or indirectly, own, control or have power to vote a greater quantity of
securities of any kind issued by the Corporation than such holder and its
affiliates are permitted to own, control or have power to vote under any law or
under any regulation, rule or other requirement of any governmental authority at
any time applicable to such holder and its affiliates.
ii. Each conversion of shares of Class B Nonvoting Common
Stock into shares of Class A Voting Common Stock will be effected by the
surrender of the certificate or certificates representing the shares to be
converted at the principal office of the Corporation at any time during normal
business hours, together with a written notice by the holder of such Class B
Nonvoting Common Stock stating that such holder desires to convert the shares,
or a stated number of the shares, of Class B Nonvoting Common Stock represented
by such certificate or certificates into Class A Voting Common Stock and a
written undertaking that upon such conversion such holder and its affiliates
will not directly or indirectly own, control or have the power to vote a greater
quantity of securities of any kind issued by the Corporation than such holders
and its affiliates are permitted to own, control or have the power to vote under
any applicable law, regulation, rule or other governmental requirement. Such
conversion will be deemed to have been effected as of the close of business on
the date on which certificate or certificates have been surrendered and such
notice has been received, and at such time the rights of the holder of the
converted Class B Nonvoting Common Stock as such holder will cease and the
person or persons in whose name or names the certificate or certificates for
shares of Class A Voting Common Stock are to be issued upon such conversion will
be deemed to have become the holder or holders of record of the shares of Class
A Voting Common Stock represented thereby.
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iii. Promptly after such surrender and the receipt of such
written notice, the Corporation will issue and deliver in accordance with the
surrendering holder's instructions (x) the certificate or certificates for the
Class A Voting Common Stock issuable upon such conversion and (y) a certificate
representing any Class B Nonvoting Common Stock which was represented by the
certificate or certificates delivered to the Corporation in connection with such
conversion but which was not converted.
iv. If the Corporation in any manner subdivides or combines
the outstanding shares of one class of either Class A Voting Common Stock or
Class B Nonvoting Common Stock, the outstanding shares of the other class will
be proportionately subdivided or combined.
v. In the case of, and as a condition to, any capital
reorganization of, or any reclassification of the capital stock of, the
Corporation (other than a subdivision or combination of shares of Class A Voting
Common Stock or Class B Nonvoting Common Stock into a greater or lesser number
of shares [whether with or without par value] or a change in the par value of
Class A Voting Common Stock or Class B Nonvoting Common Stock or from par value
to no par value) or in the case of, and as a condition to, the consolidation or
merger of the Corporation with or into another corporation (other than a merger
in which the Corporation is the continuing corporation and which does not result
in any reclassification of outstanding shares of Class A Voting Common Stock or
Class B Nonvoting Common Stock), each share of Class B Nonvoting Common Stock
shall be convertible into the number of shares of stock or other securities or
property receivable upon such reorganization, reclassification, consolidation or
merger by a holder of the number of shares of Class A Voting Common Stock of the
Corporation into which such shares of Class B Nonvoting Common Stock were
convertible immediately prior to such reorganization, reclassification,
consolidation or merger; and, in any such case, appropriate adjustment shall be
made in the application of the provisions set forth in this paragraph with
respect to the rights and interests thereafter of the holders of Class B
Nonvoting Common Stock to the end that the provisions set forth in this
paragraph (including provisions with respect to the conversion rate) shall
thereafter be applicable, as nearly as they reasonably may be, in relation to
any shares of stock or other securities or property thereafter deliverable upon
the conversion of the shares of Class B Nonvoting Common Stock.
vi. The shares of Class B Nonvoting Common Stock which are
converted into shares of Class A Voting Common Stock as provided herein shall
not be reissued.
vii. The Corporation will at all times reserve and keep
available out of its authorized but unissued shares of Class A Voting Common
Stock or its treasury shares, solely for the purpose of issue upon conversion of
the Class B Nonvoting Common Stock as provided above, such number of Class A
Voting Common Stock as shall then be issuable upon the conversion of all then
outstanding shares of Class B Nonvoting Common Stock (assuming that all such
shares of Class B Nonvoting Common Stock are held by persons entitled to convert
such shares into Class A Voting Common Stock).
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viii. The issuances of certificates for Class A Voting Common
Stock upon the conversion of Class B Nonvoting Common Stock will be made without
charge to the holders of such shares for any issuance tax in respect thereof or
other cost incurred by the Corporation in connection with such conversion and
the related issuance of Class A Voting Common Stock. The Corporation will not
close its books against the transfer of Class B Nonvoting Common Stock or Class
A Voting Common Stock issued or issuable upon the conversion of Class B
Nonvoting Common Stock in any manner which would interfere with the timely
conversion of Class B Nonvoting Common Stock.
Section 3. Preferred Stock.
---------------
(a) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of Directors,
each of said series to be distinctly designated. All shares of any one series of
Preferred Stock shall be alike in every particular, except that there may be
different dates from which dividends, if any, thereon shall be cumulative, if
made cumulative. The voting powers and the preferences and relative,
participating, optional and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, if any, may differ from
those of any and all other series at any time outstanding; and the Board of
Directors of the Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any shares of a
particular series of Preferred Stock, the voting powers and the designation,
preferences and relative, optional and other special rights, and the
qualifications, limitations and restrictions of such series, including, but
without limiting the generality of the foregoing, the following:
i. Designation and Number. The distinctive designation of, and
the number of shares of Preferred Stock which shall constitute such series,
which number may be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares thereof then
outstanding) from time to time by like action by the Board of Directors;
ii. Dividends. The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred Stock of such series shall
be paid, the extent of the preference or relation, if any, of such dividends to
the dividends payable on any other class or classes, or series of the same or
other classes of stock and whether such dividends shall be cumulative or
noncumulative;
iii. Conversion Privileges. The right, if any, of the holders
of Preferred Stock of such series to convert the same into or exchange the same
for, shares of any other class or classes, or of any series of the same or any
other class or classes of stock of the Corporation and the terms and conditions
of such conversion or exchange;
iv. Redemption. Whether or not Preferred Stock of such series
shall be subject to redemption, and the redemption price or prices and the time
or times at which, and the terms and conditions on which, Preferred Stock of
such series may be redeemed;
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v. Liquidation. The rights, if any, of the holders of
Preferred Stock of such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets, dissolution or winding
up, of the Corporation;
vi. Sinking Fund Requirements. The terms of the sinking fund
or redemption or purchase account, if any, to be provided for the Preferred
Stock of such series; and
vii. Voting Rights. The voting powers, if any, of the holders,
of such series of Preferred Stock which may, without limiting the generality of
the foregoing, include the right, voting as a series or by itself or together
with other series of Preferred Stock or all series of Preferred Stock as a
class, to elect one or more directors of the Corporation if there shall have
been a default in the payment of dividends on any one or more series of
Preferred Stock or under such other circumstances and on such conditions as the
Board of Directors may determine.
(b) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the powers, preferences and rights of each other
series of Preferred Stock shall, in each case, be as fixed from time to time by
the Board of Directors in the resolution or resolutions adopted pursuant to
authority granted in Section 3(a) of this Article III and the consent, by class
or series vote or otherwise, of the holders of such of the series of Preferred
Stock as are from time to time outstanding shall not be required for the
issuance by the Board of Directors of any other series of Preferred Stock
whether or not the powers, preferences and rights of such other series shall be
fixed by the Board of Directors as senior to, or on a parity with, the powers,
preferences and rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the resolution or
resolutions as to any series of Preferred Stock adopted pursuant to paragraph
3(a) of this Article III that the consent of the holders of a majority (or such
greater proportion as shall be therein fixed) of the outstanding shares of such
series voting therein shall be required for the issuance of any or all other
series of Preferred Stock.
Section 4. Subject to the provisions of Sections 2 and 3 of this
Article III, shares of Common Stock or any series of Preferred Stock may be
issued from time to time as the Board of Directors of the Corporation shall
determine and on such terms and for such consideration as shall be fixed by the
Board of Directors.
Section 5. The authorized amount of shares of Common Stock and of
Preferred Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a majority of the
stock of the Corporation entitled to vote thereon.
Section 6. Series C Cumulative Preferred Stock. 16,397 shares of
Preferred Stock shall be designated as Series C 7% Redeemable Cumulative
Preferred Stock, par value $.001 per share ("Series C Preferred Stock"), and
shall have the following rights and preferences:
(a) Designation and Rank.
--------------------
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All shares of Series C Preferred Stock shall rank equally and
be identical in all respects. So long as the Series C Preferred Stock is
outstanding, unless consented to by the affirmative vote of 2/3 of the holders
of the outstanding Series C Preferred Stock, the Corporation shall not authorize
or issue additional equity securities of any kind, including shares of Preferred
Stock of any class, series or designation ranking in priority or in parity as to
rights and preferences (including in respect of dividends or rights upon
liquidation, dissolution or winding-up of the Corporation) with the Series C
Preferred Stock now or hereafter authorized including, without limitation,
additional shares of Series C Preferred Stock (except for up to 30,000 shares of
Series D 6.00% Convertible Cumulative Preferred Stock, par value $0.001 per
share, with a liquidation value of $1,000.00 per share (the "Series D Preferred
Stock").
(b) Dividends.
---------
The holders of the Series C Preferred Stock, in preference to
the holders of Class A Voting Common Stock, par value $.001 per share (the
"Class A Common Stock"), of the Corporation and the Class B Non-Voting Common
Stock, par value $.001 per share (collectively, with the Class A Common Stock,
the "Common Stock"), of the Corporation and any other class or classes of stock
of the Corporation ranking junior in rights and preferences to the Series C
Preferred Stock as to payment of dividends and other distributions shall be
entitled to receive, but only out of any funds legally available for the
declaration of dividends, cumulative, preferential dividends at the annual rate
of 7.00% of the Liquidation Value (as hereinafter defined), in parity with the
holders of Preferred Stock ranking in parity with the Series C Preferred Stock,
payable as follows:
(i) Series C Preferred Stock dividends (the "Dividends") shall
commence to accrue on the shares of Series C Preferred Stock and be cumulative
from and after the date of issuance of such shares of Series C Preferred Stock
(the "Issuance Date") and shall be deemed to accumulate and accrue from day to
day thereafter. Dividends for any partial period shall be computed on the basis
of a 360-day year of twelve 30-day months and the actual number of days elapsed
in the period for which payable.
(ii) The Dividends shall be payable to the holders of the
Series C Preferred Stock quarterly on the 1st day of January, April, July and
October commencing January 1, 1999. The Corporation shall pay Dividends in cash;
provided, however, that if the provisions of the current credit agreement to
which the Corporation is a party, or any replacements thereof, prohibit the
Corporation from paying Dividends in cash, the Dividends shall be paid in shares
("Dividend Common Shares") of Class A Common Stock; provided further that in no
event shall the Corporation pay cash dividends with respect to any stock of the
Corporation ranking junior in rights or preferences to the Series C Preferred
Stock during any period in which cash dividends may not be paid or have not been
paid with respect to the Series C Preferred Stock. Once issued, any Dividend
Common
6
<PAGE>
Shares shall rank pari passu and have all of the rights and privileges
associated with all other shares of the Class A Common Stock. If Dividends are
paid in Dividend Common Shares, the price per share of the Class A Common Stock
for determining the number of Dividend Common Shares to be issued shall be equal
to the average of the daily bid and asked prices as of closing of the Class A
Common Stock averaged over the twenty (20) trading days prior to and including
the last day of the quarter immediately preceding the date on which Dividends
are payable. The Corporation shall at all times keep reserved such number of
shares of its authorized and unissued Class A Common Stock as necessary to pay
all Dividends remaining to be paid with respect to the Series C Preferred Stock
in shares of Class A Common Stock as contemplated by this Section 6(b)(ii).
(iii) So long as any share of Series C Preferred Stock remains
outstanding, the Corporation shall not declare, pay or set aside for payment any
dividend on any stock ranking junior in rights or preferences to the Series C
Preferred Stock or make any payment or set apart any fund for payment with
respect to the purchase, redemption or other retirement of any stock ranking
junior in rights or preferences to the Series C Preferred Stock unless all
accrued and unpaid dividends with respect to the Series C Preferred Stock have
been paid in full.
(c) Redemption.
----------
(i) Mandatory Redemption. The Corporation shall redeem all
outstanding shares of Series C Preferred Stock on the sixth anniversary of the
Issuance Date for an amount in cash equal to the sum of (1) $1,000.00 per share
(the "Liquidation Value") for each such share of Series C Preferred Stock to be
redeemed plus (2) any accrued and unpaid Dividends thereon.
(ii) Optional Redemption. The Corporation may redeem the
Series C Preferred Stock, in whole or in part, at any time and from time to
time, upon not less than 30 days' written notice, after the Issuance Date for an
amount in cash equal to the sum of (1) the Liquidation Value for each such share
of Series C Preferred Stock to be redeemed plus (2) any accrued and unpaid
Dividends thereon plus (3) a premium equal to the product of (i) the Liquidation
Value, (ii) 7.00% and (iii) a fraction, the numerator of which is of the number
of days remaining until (and excluding) the sixth anniversary of the Issuance
Date and the denominator of which is 2,160 (the "Optional Redemption Price
Calculation").
(iii) Redemption Upon a Change of Control. A holder of Series
C Preferred Stock may elect to cause the Corporation to redeem all or any part
of its shares of Series C Preferred stock upon a Change of Control (as defined
below) for an amount in cash equal to the amount determined by the Optional
Redemption Price Calculation (the "Redemption Price").
(iv) Procedures for Redemption.
-------------------------
(I) In the event that the Corporation redeems shares
of Series C Preferred Stock pursuant to Section 6(c)(i) or Section 6(c)(ii)
above, at least fifteen (15) days and not more than sixty (60) days prior to the
date fixed for any redemption of the Series C Preferred Stock, written notice
(the "Redemption Notice") shall be given by first class mail, postage prepaid,
to each holder of record on the record date fixed for such redemption of the
Series C Preferred Stock at such holder's address as it appears on the stock
books of the Corporation; provided, however, that no
7
<PAGE>
failure to give such notice nor any deficiency therein shall affect the validity
of the procedure for the redemption of any shares of Series C Preferred Stock to
be redeemed except as to the holder or holders to whom the Corporation has
failed to give said notice or except as to the holder or holders whose notice
was defective. The Redemption Notice shall state:
(1) the Redemption Price;
(2) whether all or less than all the
outstanding shares of the Series C Preferred Stock are to be redeemed and the
total number of shares of the Series C Preferred Stock being redeemed;
(3) the date fixed for redemption (the
"Redemption Date");
(4) that the holder is to surrender to the
Corporation, in the manner, at the place or places and at the price designated,
his certificate or certificates representing the shares of Series C Preferred
Stock to be redeemed; and
(5) that dividends on the shares of the
Series C Preferred Stock to be redeemed shall cease to accumulate on such
Redemption Date unless the Corporation defaults in the payment of the Redemption
Price.
(II) (1) In the event that a holder of Series C
Preferred Stock (the "Redeeming Series C Holder") elects to redeem its shares of
Series C Preferred Stock pursuant to Section 6(c)(iii) above, at least fifteen
(15) days and not more than sixty (60) days prior to the date of any such
redemption of the Series C Preferred Stock, written notice (the "Holder's
Redemption Notice") shall be given by first class mail, postage prepaid, to the
Corporation. The Redemption Notice shall state:
(A) whether all or less than all the
outstanding shares of the Series C Preferred Stock are to be redeemed and the
total number of shares of the Series C Preferred Stock being redeemed; and
(B) the date of the redemption (the
"Redemption Date").
(2) The Corporation shall, within 10 days of
receipt of the Holder's Redemption Notice, send a notice to the Redeeming Series
C Holder (the "Corporation's Redemption Notice"), stating:
(A) the Redemption Price; and
(B) that the Redeeming Series C Holder
is to surrender to the Corporation, in the manner, at the place or places and at
the price designated, his certificate or certificates representing the shares of
Series C Preferred Stock to be redeemed; and
8
<PAGE>
(C) that Dividends on the shares of
Series C Preferred Stock to be redeemed shall cease to accumulate on the
Redemption Date unless the Corporation defaults in the payment of the Redemption
Price.
(III) Each holder of Series C Preferred Stock
redeemed pursuant to the provisions of Section 6(c)(i), (ii) or (iii) hereof
shall surrender the certificate or certificates representing such shares of
Series C Preferred Stock to the Corporation, duly endorsed (or otherwise in
proper form for transfer, as determined by the Corporation), in the manner and
at the place designated in the Corporation's Redemption Notice, and on the
Redemption Date the full Redemption Price for such shares shall be payable in
cash to the person whose name appears on such certificate or certificates as the
owner thereof, and each surrendered certificate shall be canceled and retired.
In the event that less than all of the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares.
(IV) On and after the Redemption Date, unless the
Corporation defaults in the payment in full of the Redemption Price, Dividends
on the Series C Preferred Stock called for redemption shall cease to accumulate
on the Redemption Date, and all rights of the holders of redeemed shares shall
terminate with respect thereto on the Redemption Date, other than the right to
receive the Redemption Price, without interest; provided, however, that if
notices of redemption shall have been given as provided in Section 6(c)(iv)(I)
and (II) above and the funds necessary for redemption (including an amount in
respect of all dividends that will accrue to the Redemption Date) shall have
been irrevocably deposited in trust for the equal and ratable benefit for the
holders of the shares to be redeemed, then, at the close of business on the day
on which such funds are segregated and set aside, the holders of the shares to
be redeemed shall cease to be stockholders of the Corporation, shall have no
interest in or claims against the Corporation by virtue thereof and shall have
no rights with respect thereto, except the right to receive the Redemption
Price, without interest, upon surrender (and endorsement, if required by the
Corporation) of their certificates, and the shares evidenced thereby shall no
longer be outstanding.
(v) For purposes of Section 6(c)(iii) above, "Change of
Control" means (i) the acquisition directly or indirectly, by any "person" or
"group" (as used in Section 13(d) of the Securities Exchange Act of 1934, as
amended) of beneficial ownership (as defined in Section 13(d)) of in excess of
35% of the Corporation's combined voting power of all then-outstanding voting
securities, provided, however, that any acquisition or disposition (whether by
sale, transfer, assignment, pledge, hypothecation, gift, placement in trust
(voting or otherwise) or transfer by operation of law of, creation of a security
interest in or lien on, or any other encumbering or disposal, directly or
indirectly, whether with or without consideration and whether voluntarily or
involuntarily) of voting securities by Wester Security, Inc., a Kansas
corporation, Western Resources, Inc., a Kansas corporation, or Protection One,
Inc., a Delaware corporation, or any "affiliate" of any of such entities (as the
term "affiliate" is defined by Rule 405 promulgated under the Securities Act of
1933, as amended) (collectively, the "Westar Group") shall not be deemed to be a
"Change of Control"; (ii) the consummation of a merger, consolidation, or other
business combination of the Corporation with any other person (as defined
immediately above), other than a
9
<PAGE>
merger, consolidation or other business combination that would result in the
outstanding Common Stock immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into common stock of the
surviving entity or a parent or affiliate thereof) at least 65% of the
outstanding Common Stock or stock of the surviving entity or parent or affiliate
thereof outstanding immediately after such transaction; (iii) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of the Corporation; or
(iv) a majority of the Board of Directors of the Corporation shall consist of
persons other than persons who (V) are members of the Board on the Issuance
Date, (W) are nominated by David C. Wittig, at any time and from time to time,
(X) are elected or appointed to serve as Independent Directors (as defined
below) prior to December 31, 1998, including but not limited to, Joel A. Cohen,
(Y) were elected to the Board by a majority vote of directors on the Board on
the Issuance Date or their successors elected pursuant to this clause (Y), or
(Z) are elected by holders of either the Series C Preferred Stock or the Series
D Preferred Stock in accordance with the terms of these Articles of
Incorporation or are nominated by holders of the Series D Preferred Stock
pursuant to Section 2(a) of that certain Stockholders Agreement dated as of
October 21, 1998 by and among the Corporation, Westar Security, Inc., a Kansas
corporation ("Westar") and Harold Ginsburg, Sheilah Ginsburg, Richard Ginsburg
and Rhonda Ginsburg (collectively, the "Ginsburgs"). For purposes of this
Section 6(c)(v), the term "Independent Director" shall mean a person who is not
(i) an officer or employee of the Corporation or its Affiliates or of Westar or
its Affiliates, or (ii) related by blood or marriage to any of the Ginsburgs.
(d) Voting Rights. The holders of Series C Preferred Stock shall not be
entitled to vote or consent on any matters required or permitted to be submitted
to the stockholders of the Corporation for their approval, except to the extent
that voting rights are specifically provided by Florida law or Section 6(a) or
6(e) hereof.
(e) Special Voting Rights.
---------------------
(i) Amendment to Articles of Incorporation. The Corporation
shall not amend its Articles of Incorporation so as to adversely affect in any
manner the specified rights, preferences, privileges or voting rights of the
Series C Preferred Stock or to authorize additional shares of Series C Preferred
Stock unless consented to by the affirmative vote of 2/3 of the holders of the
outstanding Series C Preferred Stock.
(ii) Election of Directors.
---------------------
(I) Subject to the provisions of Section 6(e)(ii)(II)
below, upon the occurrence of a Default Event (hereafter defined) with respect
to the Series C Preferred Stock and for the duration of the Default Period
(hereafter defined), the holders of the Series C Preferred Stock, in addition to
any other voting rights they may have by law, shall be entitled to vote (voting
separately as a series by a majority of the outstanding shares thereof) for the
election to the Board of Directors of the smallest number of additional
directors necessary to constitute at any given time a majority of the total
number of members of the Board of Directors (after giving effect to such
election), and
10
<PAGE>
should such percentage when applied to the number of the members of the Board of
Directors result in a number that includes a fraction, then such number shall be
increased to the next whole number. In addition, during the Default Period, the
holders of the Series C Preferred Stock shall be entitled to designate (voting
as a series as aforesaid) the number of positions on the Board of Directors,
which shall be the smallest number of directors necessary for the nominees of
the holders of the Series C Preferred Stock to constitute a majority of the full
Board. In case the holders of the Series C Preferred Stock become entitled to
exercise such special voting rights, they may call a special meeting of
stockholders during the Default Period, in the manner provided in the bylaws or
otherwise as provided by law, for the purpose of increasing or decreasing the
number of positions on the Board of Directors and electing such members to the
Board of Directors. In addition, the holders of the Series C Preferred Stock
shall have such special voting rights at any annual or regular meeting of
stockholders (or any other special meeting not called by the holders of the
Series C Preferred Stock) held during the Default Period. In lieu of the
foregoing, the holders of the Series C Preferred Stock may take any of such
actions by a written consent signed by the holders of at least a majority of the
shares the Series C Preferred Stock outstanding and entitled to vote thereon.
(II) Notwithstanding the provisions of Section
6(e)(ii)(I) above, if during the Default Period, a Default Event occurs and is
continuing with respect to the Series D Preferred Stock, the holders of the
Series D Preferred Stock, in addition to any other voting rights they may have
by law, shall be entitled to vote (together, as a class, with the Series C
Preferred Stock) for the election of additional directors to the Board of
Directors, as described in Section 6(e)(ii)(I) above.
(III) Removal; Vacancies. During the Default Period,
each director elected by the holders of the Series C Preferred Stock may be
removed only by the vote of the holders of the majority of the outstanding
shares of such series of Preferred Stock, voting separately as a series, at a
meeting of the stockholders, or of the holders of the Series C Preferred Stock,
called for that purpose. During the Default Period, any vacancy in the office of
a director elected by the holders of the Series C Preferred Stock may be filled
by a vote of the remaining directors then in office elected by the holders of
such series of Preferred Stock, or, if not so filled, by the holders of such
series of Preferred Stock at any meeting, annual or special, for the election of
directors held thereafter. A special meeting of stockholders, or of the holders
of shares of Series C Preferred Stock, may be called for the purpose of filling
any such vacancy. In the case of removal of any such director, the vacancy may
be filled at the same meeting at which such removal shall be voted. Holders of
the Series C Preferred Stock shall be entitled to notice of each meeting of
stockholders at which they shall have any right to vote or notice of which is
otherwise required by law. In lieu of the foregoing, the holders of the Series C
Preferred Stock may take any of such actions by a written consent signed by the
holders of at least a majority of the shares of such series of Preferred Stock
outstanding and entitled to vote thereon.
(IV) Expiration of Right. Upon termination of the
Default Period, the special voting rights of the holders of the Series C
Preferred Stock in default provided hereunder shall be immediately divested, but
always subject to the revesting of such right in the holders of the Series C
Preferred Stock upon the occurrence of any subsequent Default Event. In the
event that such
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<PAGE>
rights of the holders of the Series C Preferred Stock shall cease as provided
above, then the directors elected to the Board of Directors by the holders of
the Series C Preferred Stock under this Section V shall be automatically removed
from office, and their respective positions terminated and the number of
positions on the Board of Directors reduced in accordance with such termination,
without further action on the part of the holders of Preferred Stock, the
holders of Common Stock or the Board of Directors.
(V) Default Event. For purposes hereof, a "Default
Event" occurs on the date that (A) (i) the Corporation has failed to pay a
Dividend when due and (ii) such Dividend remains unpaid for 30 days or (B) the
Corporation fails to discharge any redemption obligation with respect to the
Series C Preferred Stock.
(VI) Default Period. For purposes hereof, "Default
Period" means a period commencing on the date a Default Event occurs and ending
(i) with respect to a Dividend default upon the payment of the next quarterly
Dividend in full and any cumulative Dividends in arrears in full and (ii) with
respect to a redemption default, upon the discharge in full by the Corporation
of its obligations with respect to such redemption.
(f) Liquidation.
-----------
(i) The Series C Preferred Stock shall rank pari passu upon
liquidation with the Series D Preferred Stock and shall be preferred upon
liquidation over the Common Stock and any other class or classes of stock of the
Corporation which does not expressly rank senior in rights and preferences to
the Series C Preferred Stock or on a parity with the Series C Preferred Stock
upon liquidation. Holders of shares of Series C Preferred Stock shall be
entitled to be paid, after full payment is made on any stock ranking prior to
the Series C Preferred Stock as to rights and preferences (but before any
distribution is made to the holders of the Common Stock and any junior stock),
pro rata based on the Liquidation Value pari passu with the holders of shares of
the Series D Preferred Stock upon the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation (a "Liquidation").
(ii) The amount payable on each share of Series C Preferred
Stock in the event of Liquidation shall be the Liquidation Value plus any
accrued and unpaid Dividends.
(iii) Upon Liquidation, if the net assets of the Corporation
are insufficient to permit the payment in full of the amounts to which the
holders of all outstanding shares of Series C Preferred Stock are entitled as
provided above, the entire net assets of the Corporation remaining (after full
payment is made on any stock ranking prior to the Series C Preferred Stock as to
rights and preferences) shall be distributed among the holders of Series C
Preferred Stock and the holders of shares of Preferred Stock ranking in parity
with the Series C Preferred Stock as to rights and preferences to which they are
respectively entitled in amounts proportionate to the full preferential amounts.
12
<PAGE>
(iv) For purposes of this Section 6(f), the voluntary sale,
lease, exchange or transfer, for cash, shares of stock, securities or other
consideration, of all or substantially all the Corporation's property or assets
to, or its consolidation or merger with, one or more corporations shall not be
deemed to be a Liquidation.
(g) Notices to Holders of Series C Preferred Stock.
----------------------------------------------
In the event:
(i) of any consolidation or merger to which the Corporation is
a party and for which approval of any stockholders of the Corporation is
required, or of the conveyance or transfer of the properties and assets of the
Corporation 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);
(ii) of Liquidation;
(iii) of a Change of Control;
then the Corporation shall cause to be given to each of the
registered holders of the Series C Preferred Stock at its address appearing on
the Register for the Series C Preferred Stock, at least 20 calendar days prior
to the applicable record date hereinafter specified, by registered mail, postage
prepaid, return receipt requested, a written notice stating the date on which
any such consolidation, merger, conveyance, transfer or Liquidation or Change of
Control is expected to become effective, and the date as of which it is expected
that holders of record of Common Stock shall be entitled to exchange their
shares for securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, conveyance, transfer or Liquidation.
Section 7. Series D Cumulative Preferred Stock. 30,000 shares of
Preferred Stock shall be designated as Series D 6% Convertible Cumulative
Preferred Stock, par value $.001 per share ("Series D Preferred Stock"), and
shall have the following rights and preferences:
(a) Designation and Rank.
--------------------
All shares of Series D Preferred Stock shall rank equally and
be identical in all respects. So long as the Series D Preferred Stock is
outstanding, unless consented to by the affirmative vote of 2/3 of the holders
of the outstanding Series D Preferred Stock, the Corporation shall not authorize
or issue additional equity securities of any kind, including shares of Preferred
Stock of any class, series or designation ranking in priority or in parity as to
rights and preferences (including in respect of dividends or rights upon
liquidation, dissolution or winding-up of the Corporation) with the Series D
Preferred Stock now or hereafter authorized including, without limitation,
additional shares of Series D Preferred Stock other than Dividend Preferred
Shares, as defined below (except for up to 16,397 shares of Series C 7.00%
Redeemable Cumulative Preferred
13
<PAGE>
Stock, par value $0.001 per share, with a liquidation value of $1,000.00 per
share (the "Series C Preferred Stock")).
(b) Dividends.
---------
The holders of the Series D Preferred Stock, in preference to
the holders of Class A Voting Common Stock, par value $.001 per share (the
"Class A Common Stock"), of the Corporation and the Class B Non-Voting Common
Stock, par value $.001 per share (collectively, with the Class A Common Stock,
the "Common Stock"), of the Corporation and any other class or classes of stock
of the Corporation ranking junior in rights and preferences to the Series D
Preferred Stock as to payment of dividends and other distributions, shall be
entitled to receive, but only out of any funds legally available for the
declaration of dividends, cumulative, preferential dividends at the annual rate
of 6.00%, of the Liquidation Value (as hereinafter defined) in parity with the
holders of Preferred Stock ranking in parity with the Series D Preferred Stock,
payable as follows:
(i) Series D Preferred Stock dividends (the "Dividends") shall
commence to accrue on the shares of Series D Preferred Stock and be cumulative
from and after the date of issuance of such shares of Series D Preferred Stock
(the "Issuance Date") and shall be deemed to accumulate and accrue from day to
day thereafter. Dividends for any partial period shall be computed on the basis
of a 360-day year of twelve 30-day months and the actual number of days elapsed
in the period for which payable.
(ii) The Dividends shall be payable to the holders of the
Series D Preferred Stock annually on the 1st day of January commencing January
1, 1999 at the Corporation's option in cash or in additional shares of Series D
Preferred Stock ("Dividend Preferred Shares"). Once issued, any Dividend
Preferred Shares shall rank pari passu and have all of the rights and privileges
associated with all other shares of the Series D Preferred Stock, including the
right to receive dividends.
(iii) Notwithstanding the foregoing, in the event that any
holder of Series D Preferred Stock converts its shares of Series D Preferred
Stock to shares of Class A Common Stock pursuant to Section 7(g) hereof, the
right to preferential dividend rights pursuant to this Section II with respect
to such converted shares shall terminate upon conversion.
(iv) So long as any share of Series D Preferred Stock remains
outstanding, the Corporation shall not declare, pay or set aside for payment any
dividend on any stock ranking junior in rights or preferences to the Series D
Preferred Stock or make any payment or set apart any fund for payment with
respect to the purchase, redemption or other retirement of any stock ranking
junior in rights or preferences to the Series D Preferred Stock unless all
accrued and unpaid dividends with respect to the Series D Preferred Stock have
been paid in full.
(c) Optional Redemption.
-------------------
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<PAGE>
(i) Optional Redemption. The Series D Preferred Stock shall
not be redeemable by the Corporation at any time prior to the third anniversary
of the Issuance Date. After the third anniversary of the Issuance Date, the
Series D Preferred Stock shall be redeemable at the option of the Corporation,
in whole or in part, at any time and from time to time, upon not less than 30
days' written notice, for an amount in cash equal to the sum of (1) $1,000.00
per share (the "Liquidation Value") for each such share of Series D Preferred
Stock (including Dividend Preferred Shares) to be redeemed and (2) a premium
equal to the product of (i) the Liquidation Value, (ii) 6.00% and (iii) a
fraction, the numerator of which is the number of days remaining until (and
excluding) the sixth anniversary of the Issuance Date and the denominator of
which is 2,160 (the "Redemption Price Calculation").
(ii) Redemption Upon a Change of Control. A holder of Series D
Preferred Stock may elect to cause the Corporation to redeem its shares of
Series D Preferred Stock upon a Change of Control (as defined below) for an
amount in cash equal to the amount determined by the Redemption Price
Calculation.
(iii) Procedures for Redemption.
-------------------------
(I) In the event that the Corporation redeems shares
of Series D Preferred Stock pursuant to Section 7(c)(i) above, at least fifteen
(15) days and not more than sixty (60) days prior to the date fixed for any
redemption of the Series D Preferred Stock, written notice (the "Redemption
Notice") shall be given by first class mail, postage prepaid, to each holder of
record on the record date fixed for such redemption of the Series D Preferred
Stock at such holder's address as it appears on the stock books of the
Corporation; provided, however, that no failure to give such notice nor any
deficiency therein shall affect the validity of the procedure for the redemption
of any shares of Series D Preferred Stock to be redeemed except as to the holder
or holders to whom the Corporation has failed to give said notice or except as
to the holder or holders whose notice was defective. The Redemption Notice shall
state:
(1) the Redemption Price;
(2) whether all or less than all the
outstanding shares of the Series D
Preferred Stock are to be redeemed
and the total number of shares of
the Series D Preferred Stock being
redeemed;
(3) the date fixed for redemption (the
"Redemption Date");
(4) that the holder is to surrender to
the Corporation, in the manner, at
the place or places and at the price
designated, his certificate or
certificates representing the shares
of Series D Preferred Stock to be
redeemed; and
15
<PAGE>
(5) that dividends on the shares of the
Series D Preferred Stock to be
redeemed shall cease to accumulate
on such Redemption Date unless the
Corporation defaults in the payment
of the Redemption Price.
(II) (1) In the event that a holder of Series D
Preferred Stock (the "Redeeming Series D Holder") elects to redeem its shares of
Series D Preferred Stock pursuant to Section 7(c)(ii) above, at least fifteen
(15) days and not more than sixty (60) days prior to the date of any such
redemption of the Series D Preferred Stock, written notice (the "Holder's
Redemption Notice") shall be given by first class mail, postage prepaid, to the
Corporation. The Redemption Notice shall state:
(A) whether all or less than
all the outstanding shares
of the Series D Preferred
Stock are to be redeemed
and the total number of
shares of the Series D
Preferred Stock being
redeemed; and
(B) the date of the redemption
(the "Redemption Date").
(2) The Corporation shall, within 10 days of
receipt of the Holder's Redemption Notice, send a notice to the Redeeming Series
D Holder (the "Corporation's Redemption Notice"), stating:
(A) the Redemption Price;
(B) that the Redeeming Series D
Holder is to surrender to
the Corporation, in the
manner, at the place or
places and at the price
designated, his certificate
or certificates
representing the shares of
Series D Preferred Stock to
be redeemed; and
(C) that Dividends on the
shares of Series D
Preferred Stock to be
redeemed shall cease to
accumulate on the
Redemption Date unless the
Corporation defaults in the
payment of the Redemption
Price.
(III) Each holder of Series D Preferred Stock
redeemed pursuant to the provisions of Section 7(c)(i) or (ii) hereof shall
surrender the certificate or certificates representing such shares of Series D
Preferred Stock to the Corporation, duly endorsed (or otherwise in proper form
for transfer, as determined by the Corporation), in the manner and at the place
designated in the Corporation's Redemption Notice, and on the Redemption Date
the full Redemption Price for such shares shall be payable in cash to the person
whose name appears on such certificate or certificates as the owner thereof, and
each surrendered certificate shall be canceled and retired. In the event that
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<PAGE>
less than all of the shares represented by any such certificate are redeemed, a
new certificate shall be issued representing the unredeemed shares.
(IV) On and after the Redemption Date, unless the
Corporation defaults in the payment in full of the Redemption Price, dividends
on the Series D Preferred Stock called for redemption shall cease to accumulate
on the Redemption Date, and all rights of the holders of redeemed shares shall
terminate with respect thereto on the Redemption Date, other than the right to
receive the Redemption Price, without interest; provided, however, that if
notices of redemption shall have been given as provided in Section 7(c)(iii)(I)
and (II) above and the funds necessary for redemption (including an amount in
respect of all dividends that will accrue to the Redemption Date) shall have
been irrevocably deposited in trust for the equal and ratable benefit for the
holders of the shares to be redeemed, then, at the close of business on the day
on which such funds are segregated and set aside, the holders of the shares to
be redeemed shall cease to be stockholders of the Corporation, shall have no
interest in or claims against the Corporation by virtue thereof and shall have
no rights with respect thereto, except the right to receive the Redemption
Price, without interest, upon surrender (and endorsement, if required by the
Corporation) of their certificates, and the shares evidenced thereby shall no
longer be outstanding.
(iv) For purposes of Section 7(c)(ii) above, "Change of
Control" means (i) the acquisition directly or indirectly, by any "person" or
"group" (as used in Section 13(d) of the Securities Exchange Act of 1934, as
amended) of beneficial ownership (as defined in Section 13(d)) of in excess of
35% of the Corporation's combined voting power of all then-outstanding voting
securities, provided, however, that any acquisition or disposition (whether by
sale, transfer, assignment, pledge, hypothecation, gift, placement in trust
(voting or otherwise) or transfer by operation of law of, creation of a security
interest in or lien on, or any other encumbering or disposal, directly or
indirectly, whether with or without consideration and whether voluntarily or
involuntarily) of voting securities by Westar Security, Inc., a Kansas
corporation, Western Resources, Inc., a Kansas corporation, or Protection One,
Inc., a Delaware corporation, or any "affiliate" of any of such entities (as the
term "affiliate" is defined by Rule 405 promulgated under the Securities Act of
1933, as amended) (collectively, the "Westar Group") shall not be deemed to be a
"Change of Control"; (ii) the consummation of a merger, consolidation, or other
business combination of the Corporation with any other person (as defined
immediately above), other than a merger, consolidation or other business
combination that would result in the outstanding Common Stock immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into common stock of the surviving entity or a parent or affiliate
thereof) at least 65% of the outstanding Common Stock or stock of the surviving
entity or parent or affiliate thereof outstanding immediately after such
transaction; (iii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Corporation; or (iv) a majority of the Board of Directors of
the Corporation shall consist of persons other than persons who (V) are members
of the Board on the Issuance Date, (W) are nominated by David C. Wittig, at any
time and from time to time, (X) are elected or appointed to serve as Independent
Directors (as defined below) prior to December 31, 1998, including but not
limited to, Joel A. Cohen, (Y) were elected to the Board by a majority vote of
directors on the Board on the
17
<PAGE>
Issuance Date or their successors elected pursuant to this clause (Y), or (Z)
are elected by holders of either the Series C Preferred Stock or the Series D
Preferred Stock in accordance with the terms of these Articles of Incorporation
or are nominated by holders of the Series D Preferred Stock pursuant to Section
2(a) of that certain Stockholders Agreement dated as of October 21, 1998 (the
"Stockholders Agreement") by and among the Corporation, Westar Security, Inc., a
Kansas corporation ("Westar") and Harold Ginsburg, Sheilah Ginsburg, Richard
Ginsburg and Rhonda Ginsburg (collectively, the "Ginsburgs"). For purposes of
this Section 7(c)(iv), the term "Independent Director" shall mean a person who
is not (i) an officer or employee of the Corporation or its Affiliates or of
Westar or its Affiliates, or (ii) related by blood or marriage to any of the
Ginsburgs.
(d) Voting Rights. The holders of Series D Preferred Stock shall not be
entitled to vote or consent on any matters required or permitted to be submitted
to the stockholders of the Corporation for their approval, except to the extent
that voting rights are specifically provided by Florida law or Section 7(a) or
7(e) hereof.
(e) Special Voting Rights.
---------------------
(i) Amendment to Articles of Incorporation. The Corporation
shall not amend these Articles of Incorporation so as to adversely affect in any
manner the specified rights, preferences, privileges or voting rights of the
Series D Preferred Stock or to authorize additional shares of Series D Preferred
Stock unless consented to by the affirmative vote of 2/3 of the holders of the
outstanding Series D Preferred Stock.
(ii) Change of Control. Until the third anniversary of the
Issuance Date, so long as any shares of Series D Preferred Stock are
outstanding, the holders of the Series D Preferred Stock shall be entitled to
vote with the Common Stock, as a single class, on an "as converted" basis in
accordance with Section 7(g) hereof, on any Change of Control which is submitted
to a vote of the holders of the Common Stock for their approval.
(iii) Election of Directors.
---------------------
(I) Subject to the provisions of Section
7(e)(iii)(II) below, upon the occurrence of a Default Event (hereafter defined)
with respect to the Series D Preferred Stock and for the duration of the Default
Period (hereafter defined), the holders of the Series D Preferred Stock, in
addition to any other voting rights they may have by law, shall be entitled to
vote (voting separately as a series by a majority of the outstanding shares
thereof) for the election to the Board of Directors of the smallest number of
additional directors necessary to constitute at any given time a majority of the
total number of members of the Board of Directors (after giving effect to such
election), and should such percentage when applied to the number of the members
of the Board of Directors result in a number that includes a fraction, then such
number shall be increased to the next whole number. In addition, during the
Default Period the holders of the Series D Preferred Stock shall be entitled to
designate (voting as a series as aforesaid) the number of positions on the Board
of Directors, which
18
<PAGE>
shall be the smallest number of directors necessary for the nominees of the
holders of the Series D Preferred Stock to constitute a majority of the full
Board. In case the holders of the Series D Preferred Stock become entitled to
exercise such special voting rights, they may call a special meeting of
stockholders during the Default Period, in the manner provided in the bylaws or
otherwise as provided by law, for the purpose of increasing or decreasing the
number of positions on the Board of Directors and electing such members to the
Board of Directors. In addition, the holders of the Series D Preferred Stock
shall have such special voting rights at any annual or regular meeting of
stockholders (or any other special meeting not called by the holders of the
Series D Preferred Stock) held during the Default Period. In lieu of the
foregoing, the holders of the Series D Preferred Stock may take any of such
actions by a written consent signed by the holders of at least a majority of the
shares of the Series D Preferred Stock outstanding and entitled to vote thereon.
(II) Notwithstanding the provisions of Section
7(e)(iii)(I) above, if during the Default Period, a Default Event occurs and is
continuing with respect to the Series C Preferred Stock, the holders of the
Series C Preferred Stock, in addition to any other voting rights they may have
by law, shall be entitled to vote (together, as a class, with the Series D
Preferred Stock) for the election of additional directors to the Board of
Directors, as described in Section 7(e)(iii)(I) above.
(III) Removal; Vacancies. During the Default Period,
each director elected by the holders of the Series D Preferred Stock may be
removed only by the vote of the holders of the majority of the outstanding
shares of such series of Preferred Stock, voting separately as a series, at a
meeting of the stockholders, or of the holders of shares of such series of
Preferred Stock, called for that purpose. During the Default Period, any vacancy
in the office of a director elected by the holders of the Series D Preferred
Stock in default may be filled by a vote of the remaining directors then in
office elected by the holders of the Series D Preferred Stock, or, if not so
filled, by the holders of such series of Preferred Stock at any meeting, annual
or special, for the election of directors held thereafter. A special meeting of
stockholders, or of the holders of shares of Series D Preferred Stock, may be
called for the purpose of filling any such vacancy. In the case of removal of
any such director, the vacancy may be filled at the same meeting at which such
removal shall be voted. Holders of the Series D Preferred Stock shall be
entitled to notice of each meeting of stockholders at which they shall have any
right to vote or notice of which is otherwise required by law. In lieu of the
foregoing, the holders of the Series D Preferred Stock may take any of such
actions by a written consent signed by the holders of at least a majority of the
shares of such series of Preferred Stock outstanding and entitled to vote
thereon.
(IV) Expiration of Right. Upon termination of the
Default Period, the special voting rights of the holders of the Series D
Preferred Stock in default provided hereunder shall be immediately divested, but
always subject to the revesting of such right in the holders of the Series D
Preferred Stock upon the occurrence of any subsequent Default Event. In the
event that such rights of the holders of the Series D Preferred Stock shall
cease as provided above, then the directors elected to the Board of Directors by
the holders of the series of the Series D Preferred Stock in default under this
Section 7(e) shall be automatically removed from office, and their respective
positions terminated and the number of positions on the Board of Directors
reduced in accordance
19
<PAGE>
with such termination, without further action on the part of the holders of
Preferred Stock, the holders of Common Stock or the Board of Directors.
(V) Default Event. For purposes hereof, a "Default
Event" occurs on the date that (A)(i) the Corporation has failed to pay a
Dividend when due and (ii) such Dividend remains unpaid for 30 days or (B) the
Corporation fails to discharge any redemption obligation with respect to the
Series D Preferred Stock.
(VI) Default Period. For purposes hereof, "Default
Period" means a period commencing on the date a Default Event occurs and ending
(i) with respect to a Dividend default, upon the payment of the next annual
Dividend in full and any cumulative Dividends in arrears in full and (ii) with
respect to a redemption default, upon the discharge in full by the Corporation
of its obligations with respect to such redemption.
(f) Liquidation.
-----------
(i) The Series D Preferred Stock shall be rank pari passu upon
liquidation with the Series C Preferred Stock and shall be preferred upon
liquidation over the Common Stock and any other class or classes of stock of the
Corporation which does not expressly rank senior in rights and preferences to
the Series D Preferred Stock or on a parity with the Series D Preferred Stock
upon liquidation. Holders of shares of Series D Preferred Stock shall be
entitled to be paid, after full payment is made on any stock ranking prior to
the Series D Preferred Stock as to rights and preferences (but before any
distribution is made to the holders of the Common Stock and any junior stock),
pro rata based on the Liquidation Value pari passu with the holders of shares of
the Series C Preferred Stock upon the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation (a "Liquidation").
(ii) The amount payable on each share of Series D Preferred
Stock in the event of Liquidation shall be the Liquidation Value plus any
accrued and unpaid Dividends.
(iii) Upon Liquidation, if the net assets of the Corporation
are insufficient to permit the payment in full of the amounts to which the
holders of all outstanding shares of Series D Preferred Stock are entitled as
provided above, the entire net assets of the Corporation remaining (after full
payment is made on any stock ranking prior to the Series D Preferred Stock as to
rights and preferences) shall be distributed among the holders of Series D
Preferred Stock and holders of shares of Preferred Stock ranking in parity with
the Series D Preferred Stock as to rights and preferences to which they are
respectively entitled in amounts proportionate to the full preferential amounts.
(iv) For purposes of this Section 7(f), the voluntary sale,
lease, exchange or transfer, for cash, shares of stock, securities or other
consideration, of all or substantially all the Corporation's property or assets
to, or its consolidation or merger with, one or more corporations shall not be
deemed to be a Liquidation.
20
<PAGE>
(v) Notwithstanding the foregoing, in the event that any
holder of Series D Preferred Stock converts its shares of Series D Preferred
Stock to shares of Class A Common Stock pursuant to Section 7(g) hereof, the
right to preferential liquidation rights pursuant to this Section 7(f) with
respect to such converted shares shall terminate upon conversion.
(g) Conversion.
----------
(i) Optional Conversion. Subject to the provisions for
adjustment hereinafter set forth, all, and not less than all, of the outstanding
shares of Series D Preferred Stock (including any Dividend Preferred Shares then
outstanding and all Dividend Preferred Shares which would be issued with respect
to all accrued and unpaid Dividends as of the date of conversion) held by a
holder of the Series D Preferred Stock shall be convertible into Class A Common
Stock of the Corporation at any time after the third anniversary of the Issuance
Date at the option of such holder thereof, upon surrender to the transfer agent
for the Series D Preferred Stock or the Corporation of the certificate or
certificates evidencing the shares so to be converted, at the rate of 333.3333
fully paid and nonassessable shares of Class A Common Stock for each share of
Series D Preferred Stock. In the case of shares of Series D Preferred Stock
called for redemption, conversion rights will expire at the close of business on
the date on which the redemption is consummated.
(ii) Mandatory Conversion. Subject to the provisions for
adjustment hereinafter set forth, the Series D Preferred Stock (including any
Dividend Preferred Shares then outstanding and all Dividend Preferred Shares
which would be issued with respect to all accrued and unpaid Dividends as of the
date of conversion) shall be converted to Class A Common Stock at the rate of
333.3333 fully paid and nonassessable shares of Class A Common Stock for each
share of Series D Preferred Stock:
(I) upon a firm commitment underwritten public
offering by the Corporation of Class A Common Stock, which results in net
proceeds to the Corporation of in excess of $20 million in cash at $4.00 per
share or more; or
(II) if, at any time after the third anniversary of
the Issuance Date, the average of the daily bid and asked prices as of closing
of the Class A Common Stock exceeds $4.00 per share for twenty (20) consecutive
trading days on which trades actually occurred.
(iii) The number of shares of Class A Common Stock into which
an issued and outstanding share of Series D Preferred Stock is convertible shall
be subject to adjustment from time to time only as follows:
(I) In the event that the Corporation 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 D Preferred Stock outstanding at the time of the record
date for such dividend or of the effective date of such split, subdivision or
combination
21
<PAGE>
shall thereafter be convertible into the aggregate number of shares of Class A
Common Stock which, if such share of Series D Preferred Stock had been converted
immediately prior to such time, the holder of such share would have owned or
have been entitled to receive by virtue of such dividend, subdivision or
combination. Such adjustment shall be made successively whenever any event
listed above shall occur.
(II) No adjustment in the number of shares of Class A
Common Stock issuable upon conversion of a share of Series D Preferred Stock
shall be required unless such adjustment would require an increase or decrease
in the aggregate number of shares of Class A Common Stock so issuable of at
least 100 shares; provided that any adjustments which by reason of this
paragraph are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section
7(g)(iii) 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 Corporation, 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 Corporation with or the merger of the
Corporation with or into any other corporation or of the sale of the properties
and assets of the Corporation as, or substantially as, an entirety to any other
corporation, each share of Series D Preferred Stock shall after such capital
reorganization, reclassification of Common Stock, consolidation, merger or sale
be convertible upon the terms and conditions specified in this Section 7(g), for
the number of shares of stock or other securities or assets to which a holder of
the number of shares of Class A Common Stock into which a share of Series D
Preferred Stock is then convertible (at the time of such capital reorganization,
reclassification of Class A Common Stock, consolidation, merger or sale) would
have been entitled upon such capital reorganization, reclassification of Common
Stock, consolidation, merger or sale; and in any such case, if necessary, the
provisions set forth in this Section 7(g) with respect to the rights of
conversion thereafter of the Series D Preferred Stock shall be appropriately
adjusted so as to be applicable, as nearly as may reasonably be, to any shares
of stock or other securities or assets thereafter deliverable on the conversion
of the Series D Preferred Stock. The Corporation 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 Corporation)
resulting from such consolidation or merger or the corporation purchasing such
assets or the appropriate corporation or entity shall assume by written
instrument the obligation to deliver to the holder of each share of Series D
Preferred Stock the shares of stock, securities or assets to which, in
accordance with the foregoing provisions, such holder may be entitled upon
conversion of such Series D Preferred Stock and all other obligations of the
Corporation under this Section 7(g), and effective provisions are made in the
Articles or Certificate of Incorporation of such successor or transferee
corporation (or other governing document of any successor entity which is not a
corporation) providing for conversion privileges relating to the Series D
Preferred Stock equivalent to those set forth in this Section 7(g).
(IV) If any question at any time arises with respect
to the number of shares of Class A Common Stock into which a share of Series D
Preferred Stock is convertible following
22
<PAGE>
any adjustment pursuant to this Section 7(g), such question shall be determined
by agreement between the holders of a majority of the outstanding shares of
Series D Preferred Stock and the Corporation 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 Corporation)
reasonably acceptable to the Corporation and the holders of a majority of
outstanding shares of Series D Preferred Stock and such determination shall be
binding upon the Corporation and the holders of the Series D Preferred Stock.
(V) Anything in this Section 7(g) to the contrary
notwithstanding, the Corporation shall be entitled to make such increases in the
number of shares of Class A Common Stock issuable upon conversion of shares of
Series D Preferred Stock, in addition to those adjustments required by this
Section 7(g), as it in its sole discretion shall determine to be advisable in
order that any consolidation or subdivision of the Class A Common Stock, or any
issuance wholly for cash of any shares of Class A Common Stock at less than the
current market price, or any issuance wholly for cash of shares of Class A
Common Stock or securities which by their terms are convertible into or
exchangeable for shares of Class A Common Stock, or any issuance of rights,
options or warrants referred to hereinabove in this Section 7(g), hereinafter
made by the Corporation 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 D Preferred
Stock pursuant to this Section 7(g), the Corporation shall promptly but in any
event within 20 days thereafter, cause to be given to each of the registered
holders of the Series D Preferred Stock, at its address appearing on the
Register for the Series D Preferred Stock by registered mail, postage prepaid,
return receipt requested a certificate signed by its chairman, president or
chief financial officer setting forth the number of shares of Class A Common
Stock issuable upon conversion of shares of Series D Preferred Stock as so
adjusted and describing in reasonable detail the facts accounting for such
adjustment and the method of calculation used. Where appropriate, such
certificate may be given in advance and included as a part of the notice
required to be mailed under the other provisions of this resolution.
(VII) The Corporation will at all times have
authorized, and reserve and keep available, free from preemptive rights, for the
purpose of enabling it to satisfy any obligation to issue shares of Class A
Common Stock upon the conversion of the Series D Preferred Stock, the number of
shares of Class A Common Stock deliverable upon conversion of the Series D
Preferred Stock.
(VIII) The Corporation shall not be required to issue
fractional shares of Class A Common Stock upon conversion of the Series D
Preferred Stock but shall pay for any such fraction of a share an amount in cash
equal to the current market price per share of Class A Common Stock of such
share multiplied by such fraction.
(IX) The Corporation will pay all taxes attributable
to the issuance of shares of Class A Common Stock upon conversion of shares of
Series D Preferred Stock; provided that the
23
<PAGE>
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance of any shares of Class A Common Stock
in a name other than that of the registered holder of the Series D Preferred
Stock surrendered for conversion, and the Corporation 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 Corporation the amount of
such tax or shall have established to the satisfaction of the Corporation that
such tax has been paid.
(h) Notices to Holders of Series D Preferred Stock.
----------------------------------------------
In the event:
(i) of any consolidation or merger to which the Corporation is
a party and for which approval of any stockholders of the Corporation is
required, or of the conveyance or transfer of the properties and assets of the
Corporation 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
(ii) of Liquidation; or
(iii) that the Corporation proposes to take any other action
which would require an adjustment in the number of shares of Class A Common
Stock or other securities or assets issuable upon conversion of shares of Series
D Preferred Stock pursuant to Section 7(g);
then the Corporation shall cause to be given to each of the
registered holders of the Series D Preferred Stock at its address appearing on
the Register for the Series D Preferred Stock, at least 20 calendar days prior
to the applicable record date hereinafter specified, by registered mail, postage
prepaid, return receipt requested, a written notice stating (1) the date as of
which the holders of record of Common Stock entitled to participate in the event
contemplated by clause (iii) above are to be determined, or (2) 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.
24
<PAGE>
This Amendment to the Articles of Incorporation was duly adopted
pursuant to Section 607.1002 of the Florida Business Corporation Act by the
unanimous resolution of the Board of Directors on March 2, 2000.
IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment to be executed on March 2, 2000.
GUARDIAN INTERNATIONAL, INC.
By: /s/ RICHARD GINSBURG
-------------------------
Name: Richard Ginsburg
Title: President and Chief Executive Officer
25
EXHIBIT 10(bb)
SEVERANCE AGREEMENT
SEVERANCE AGREEMENT, dated as of the 19th day of January, 2000 (this
"Agreement"), among Guardian International, Inc., a Florida corporation (the
"Company"), and Darius G. Nevin (the "Executive").
WITNESSETH
----------
WHEREAS, the Board of Directors of thc Company (the "Board") has
determined that it is appropriate and in the best interests of the Company and
its stockholders to reinforce and encourage the continued attention and
dedication of members of the Company's management, including the Executive, to
their assigned duties; and
WHEREAS, the Executive is a party to the "Employment Agreement" with
the Company, dated as of October 21, 1997 (the "Prior Employment Agreement");
and
WHEREAS, the Company and the Executive desire that the Prior Employment
Agreement be terminated, and that the terms and conditions set forth herein
apply to the Executive in connection with his employment with the Company from
and after the date hereof.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
herein contained and in further consideration of services to be performed by the
Executive for the Company, the Company and the Executive do hereby agree as
follows:
1. Certain Definitions. For purposes of this Agreement, the following
terms have the meanings indicated:
(a) "Award" shall mean any award granted pursuant to the terms
of the Plan and pursuant to the non-Plan Stock Option Agreement dated
October 15, 1997, including but not limited to stock options, stock
appreciation rights ("SARs") (including Limited SARs), restricted
stock, deferred stock, stock granted as a bonus or in lieu of other
awards, dividend equivalents, and other stock-based awards.
(b) "Cause" shall mean: (i) the willful and continued failure by
the Executive to substantially perform his duties for the Company
(other than any such failure resulting from the Executive's incapacity
due to physical or mental illness, or any such actual or anticipated
failure after the Executive announces his intention to resign for Good
Reason), and such failure is not cured by the Executive within seven
days from the date the Company notifies the Executive thereof, (ii) the
willful engaging by the Executive in misconduct which is materially and
financially injurious to the Company, or (iii) the Executive's
conviction of a felony. No act, or failure to act, on the Executive's
part shall be considered "willful" unless done, or omitted to be done,
by him not in good faith and without reasonable belief that his action
or omission was in the best interest of the Company.
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<PAGE>
(c) "Change in Control" shall be deemed to have occurred upon:
(i) the date of the acquisition by any "person" (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act), excluding the Company or any of its subsidiaries or
affiliates or any employee benefit plan sponsored by any of the
foregoing, of beneficial ownership (within the meaning of Rule
13d-3 under the Exchange Act) of 50% or more of either (x) the
then outstanding shares of common stock of the Company or (y)
the then outstanding voting securities entitled to vote
generally in the election of directors; or
(ii) the date the individuals who constitute the Board as
of the date of this Agreement (the "Incumbent Board") cease for
any reason to constitute at least a majority of the members of
the Board, provided that any individual becoming a director
subsequent to the effective date of this Agreement whose
election, or nomination for election by thc Company's
stockholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board (other than
any individual whose nomination for election to Board membership
was not endorsed by the Company's management prior to, or at the
time of, such individual's initial nomination for election)
shall be, for purposes of this Agreement, considered as though
such person were a member of the Incumbent Board; or
(iii) the consummation of a merger, consolidation,
recapitalization, reorganization, sale or disposition of all or
a substantial portion of the Company's assets, a reverse stock
split of outstanding voting securities, the issuance of shares
of stock of the Company in connection with the acquisition of
the stock or assets of another entity, provided, however, that a
Change in Control shall not occur under this clause (iii) if
consummation of the transaction would result in at least 50% of
the total voting power represented by the voting securities of
the Company (or, if not the Company, the entity that succeeds to
all or substantially all of the Company's business) outstanding
immediately after such transaction being beneficially owned
(within the meaning of Rule 13d-3 promulgated pursuant to the
Exchange Act) by at least 50% of the holders of outstanding
voting securities of the Company immediately prior to the
transaction, with the voting power of each such continuing
holder relative to other such continuing holders not
substantially altered in the transaction.
(d) "Disability" shall mean the Executive's incapacity due to
physical or mental illness to substantially perform his duties on a
full-time basis for six consecutive months; provided, however, that if
the Executive shall not agree with a determination to terminate him
because of Disability, the question of the Executive's Disability shall
be subject to the certification of a qualified medical doctor agreed to
by the Company and the Executive or, in the event of the Executive's
incapacity to designate a doctor, the Executive's legal representative.
In the absence of agreement between the Company and the Executive (or
the Executive's representative, as the case may be), each party shall
nominate a qualified medical doctor and the two doctors shall select a
third doctor, who shall make the determination as to Disability.
(e) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from
2
<PAGE>
time to time. References to any provision of the Exchange Act shall be
deemed to include rules thereunder and successor provisions and rules
thereto.
(f) "Good Reason" shall mean (i) the assignment to the Executive
by the Company of duties inconsistent with the Executive's position,
duties, responsibilities and status with the Company as in effect on
the date of this Agreement or such later date on which the Executive
agrees in writing to a change in such position, duties,
responsibilities and/or status, or any removal of the Executive from or
any failure to reelect the Executive to any of such positions; or (ii)
any reduction by the Company in the Executive's base salary as in
effect on thc date hereof or as the same may be increased from time to
time; or (iii) any failure by the Company to continue in effect as to
the Executive, without a substantially comparable replacement, any
material compensation or benefit plan or program in which the Executive
was participating; or (iv) any attempted relocation of the Executive's
place of employment to a location more than 50 miles from the location
of such employment on the date of such attempted relocation; or (v) any
material breach by the Company of any provision of this Agreement. The
Executive shall not be deemed to have resigned for Good Reason
hereunder without (i) written notice by the Executive to the Company
setting forth the reasons for the Executive's intention to resign for
Good Reason, and (ii) an opportunity for the Company to cure the
reasons which give rise to such claim within seven (7) after the date
of such written notice.
(g) "Plan" shall mean the 1999 Stock Option Plan of Guardian
International, Inc.
2. Termination Without Cause or Resignation with Good Reason. In the
event of (i) the termination of the employment of the Executive without Cause
(for any reason other than by death or Disability) or (ii) the resignation of
the Executive from the Company for Good Reason, the Company shall pay or provide
to the Executive the following:
(a) any earned and accrued but unpaid installment of base salary
through the date of the Executive's resignation or termination at the
rate in effect at the time of such resignation or termination (or, if
greater, immediately prior to the occurrence of an event that
constitutes Good Reason) and all other unpaid amounts to which the
Executive is entitled as of such date under any compensation plan or
program of the Company, including, without limitation, all accrued
vacation time; such payments to be made in a lump sum within 30 days
following the date of resignation or termination; and
(b) in lieu of any further salary payments to the Executive for
periods subsequent to his date of resignation or termination, an amount
equal to the sum of (i) the greater of one hundred thirty five thousand
dollars ($135,000) or the Executive's annual base salary in effect
immediately prior to the occurrence of an event that constitutes Good
Reason, and (ii) the average of the annual bonus amounts that were
earned by the Executive as bonus compensation from the Company for the
most recent three years in which bonuses were paid to the Executive
which occurred prior to the year in which the Executive's resignation
or termination occurred; such payment to be made in a lump sum within
30 days following the date of Executive's resignation or termination;
and
(c) the Company shall maintain in full force and effect for one
year following the date of the Executive's resignation or termination,
for the continued benefit of the Executive, all employee
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welfare benefit plans and perquisite programs in which the Executive
was entitled to participate immediately prior to the Executive's
resignation or termination, provided that the Executive's continued
participation is possible under the general terms and provisions of
such plans and programs. In the event that the Executive's
participation in any such plan or program is barred, the Company shall,
at its sole cost and expense, arrange to provide the Executive with
benefits substantially similar to those which the Executive would
otherwise have been entitled to receive under such plans and programs
from which his continued participation is barred; and
(d) with respect to any Award granted to the Executive pursuant
to the Plan and/or pursuant to the non-Plan Stock Option Agreement
dated October 15, 1997, which is subject to future vesting and/or other
restrictions regarding the exercisability or full enjoyment of the
Award as of the date of the Executive's resignation or termination (if
any), then, notwithstanding the terms of the Plan or the certificate
evidencing the Award thereunder, the continued vesting or lapse of
restrictions with respect to such Award shall not cease with reference
to such termination or resignation, but shall continue during the
duration of the term of the Award in accordance with the schedule set
forth in the certificate evidencing such Award as if the Executive's
employment with the Company had continued throughout such vesting
and/or lapse of restriction period. In addition, with respect to each
Award granted to the Executive pursuant to the Plan or pursuant to the
non-Plan Stock Option Agreement dated October 15, 1997, (whether or not
fully vested or free of restrictions at the time of termination or
resignation hereunder), the exercisability and the full enjoyment of
such Award shall not terminate with reference to such termination or
resignation, but shall be extended for the duration of the entire term
of the Award in accordance with the Plan and/or non-Plan Stock Option
Agreement dated October 15, 1997, and/or the certificate evidencing
such Award as if the Executive's employment with the Company had
continued during such entire term, notwithstanding the terms of the
Plan or non-Plan Stock Option Agreement or the certificate evidencing
the Award thereunder.
3. Termination for Death. In the event of the termination of the
employment of the Executive by reason of his death, the Company shall pay to the
Executive's designated beneficiary or estate the amounts set forth in paragraphs
(a) and (b) of Section 2 above, pursuant to which the date of the Executive's
death shall be considered the date of his termination thereunder. In addition,
with respect to any Award granted to the Executive pursuant to the Plan, in the
event that such Award is subject to future vesting or other restrictions
regarding the exercisability or full enjoyment of the Award as of the date of
the Executive's death, then, notwithstanding the terms of the Plan or the Award
Agreement thereunder, all restrictions thereon shall immediately lapse, and each
such Award shall be deemed immediately and fully vested and exercisable under
the Plan, as of the date of such death.
4. Termination for Cause or Disability or Resignation without Good
Reason. In the event of the Executive's termination of employment for Cause or
Disability or his resignation without Good Reason, only the amount set forth in
paragraph (a) of Section 2 shall be payable to the Executive, except that, in
the case of the Executive's termination for Disability hereunder, the Executive
shall also receive the benefits set forth in Section 2(d) hereof. Other than in
the case of the Executive's conviction of a felony, the Executive shall not be
deemed to have been terminated for Cause by the Company hereunder without (i)
notice to the Executive setting forth the reasons for the Company's intention to
terminate the Executive for Cause, (ii) an opportunity for the Executive,
together with his counsel, to be heard before the Board, and (iii) delivery to
the Executive of written notice from the Board finding that in the reasonable
good faith opinion of the
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Board, the Executive was guilty of conduct set forth in the definition of Cause
in Section 1 hereof, and specifying the particulars thereof in detail.
5. Termination or Resignation in connection with a Change in Control.
(a) Notwithstanding the provisions of Sections 2 and 4, in the
event of the termination of the employment of the Executive for any
reason other than death, whether initiated by the Company with or
without Cause, or initiated by the Executive with or without Good
Reason, which termination occurs within the one year period following
the date of a Change in Control, then, in lieu of the amounts and
benefits specified in Sections 2 and 4, the Executive shall be entitled
to receive (i) the amount set forth in Section 2(a), (ii) the amount
set forth in Section 2(b), and (iii) the benefits provided for in
Section 2(c).
(b) Notwithstanding the provisions of Section 2, in the event
of the resignation or termination of the employment of the Executive
for any reason specified therein, and such resignation or termination
occurs within the four month period (i) prior to the date of a Change
in Control, (ii) following commencement (within the meaning of Rule
14d-2 as promulgated under the Exchange Act) of a "tender offer" for
stock of the Company subject to Section 14(d)(2) of the Exchange Act,
which if consummated, would result in an acquisition described in
clause (i) of Section l(b), (iii) following the execution by the
Company of an agreement the consummation of which would constitute a
Change in Control, (iv) following the solicitation of proxies for the
election of directors by anyone other than the Company, or (v)
following the approval by the Company's stockholders of any transaction
described in Section 1(b)(iii), then, in lieu of the amounts and
benefits specified in Section 2:
(x) the Executive shall be entitled to receive the amounts and
benefits specified in Section 5(a), and
(y) with respect to any Award granted to the Executive
pursuant to the Plan or the non-Plan Stock Option Agreement
dated October 15, 1997, in the event that such Award is
subject to future vesting or other restrictions regarding the
exercisability or full enjoyment of the Award as of the date
of such resignation or termination, then, notwithstanding the
terms of the Plan or the Award Agreement thereunder, the
accelerated vesting and lapse of restriction provisions set
forth in Section 4 of the Plan or the non-Plan Stock Option
Agreement dated October 15, 1997 shall bc applicable with
respect to such Awards as if a Change in Control had occurred
on the date of such resignation or termination.
Amounts and benefits payable by reason of clause (b)(i) of this Section 5 shall
be paid within ten days following the date of the Change in Control, but shall
be offset by any amounts previously paid pursuant to Section 2.
6. Certain Taxes. The Company shall have the right to deduct from any
amounts payable under this Agreement an amount necessary to satisfy its
obligation, under applicable laws, to withhold income or other taxes of the
Executive attributable to payments made hereunder.
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7. No Obligation to Mitigate Damages: No Effect on Other Contractual
Rights. The Executive shall not be required to mitigate damages or the amount of
any payment provided for under this Agreement by seeking other employment or
otherwise, nor shall the amount of any payment provided for under this Agreement
be reduced by any compensation earned by the Executive as the result of
employment by another employer after the date of resignation or termination, or
otherwise. The provisions of this Agreement, and any payment provided for
hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights the Executive may acquire in
the future, under any employee benefit plan, incentive plan, employment
agreement or other contract, plan or arrangement.
8. Indemnification. The Company shall indemnify the Executive within 60
days after receipt of a request therefor against all judgments, fines,
settlements, payments and expenses, including reasonable attorneys' fees, paid
or incurred in connection with any claim, action, suit or proceeding, civil,
criminal, administrative or investigatory ("Proceeding"), to which the Executive
may be made a party or with which he may be threatened by reason of his being or
having been an employee, officer or director of the Company or, at the Company's
request, an employee, officer or director of any other corporation, firm,
association or other organization, or by reason of any action or omission by the
Executive in such capacity, whether or not the Executive continues to hold such
position or act in such capacity at the time of incurring such expenses or at
the time the indemnification is made, other than in connection with actions
taken by the Executive which constitute gross negligence in the performance of
his duties for the Company which the Executive has undertaken without the
reasonable good faith belief that such actions were in the best interest of the
Company. The foregoing right of indemnification shall not be exclusive of other
rights to which the Executive may otherwise be entitled. The Company shall pay
the reasonable expenses (including reasonable attorneys' fees) incurred by the
Executive in defending any Proceeding in advance of the final disposition
thereof. The Company shall advance all such expenses by or on behalf of the
Executive within 15 days after receipt of his request therefor, accompanied or
preceded by reasonable evidence of such expenses. The Executive will also be
named as an insured under any directors and officers or similar insurance policy
that the Company may purchase.
9. Successor to the Company. The Company will require any successor or
assign (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance satisfactory to the Executive,
expressly, absolutely and unconditionally to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place. For
purposes of clarity, any failure of the Company to obtain such agreement prior
to the effectiveness of any such succession or assignment shall be a material
breach of this Agreement and shall entitle the Executive to terminate the
Executive's employment for Good Reason. As used in this Agreement, the term
"Company" shall mean the Company as hereinbefore defined and any successor or
assign to its business and/or assets as aforesaid which executes and delivers
the agreement provided for in this Section 9 or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law.
10. Enforcement.
(a) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal and legal representatives,
executors, administrators, successors, heirs, distributees,
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devisees and legatees. If the Executive should die while any
amounts are still payable to him hereunder, all such amounts shall be
paid in accordance with the terms of this Agreement to the Executive's
estate or beneficiary.
(b) In the event that the Company shall fail or refuse to make
payment of any amounts due the Executive hereunder within the
appropriate time period, the Company shall pay to the Executive, in
addition to the payment of any other sums provided in this Agreement,
interest, compounded daily, on any amount remaining unpaid from the
date payment is required until paid to the Executive, at the rate from
time to time announced by Chase Manhattan Bank as its "prime rate" plus
2%, each change in such rate to take effect on the effective date of
the change in such prime rate.
(c) The Company shall pay all reasonable fees and expenses
(including attorneys' fees) that the Executive may incur as a result of
the Company's contesting the validity, enforceability, or the
Executive's interpretation of, this Agreement (regardless of the
outcome of any litigation to enforce this Agreement).
11. Non-Competition.
(a) The Executive hereby acknowledges that the services which
he will perform for the Company are of a special and unique nature, and
that the Company would find it extremely difficult or impossible to
replace the Executive. Accordingly, the Executive agrees that, in
consideration of this Agreement and the payments to be received by him
hereunder in the event the occurrence of certain actions as specified
herein, the Executive will not (i) from and after the date hereof
through the period during which the Executive continues to be employed
by the Company (the "Employment Period"), and (ii) in the event of the
Executive's termination or resignation hereunder pursuant to the
provisions set forth in Sections 2 and 4 hereof, for the one-year
period thereafter (the "Non-Competition Period"), directly or
indirectly, own, manage, operate, join, control or participate in the
ownership, management, operation or control of, or be connected as a
director, officer, employee, partner, lender, consultant or Otherwise
("Participate" or a "Participation") with, any business or organization
in any part of the United States in which the Company sells products or
provides services, which Competes with the Company (as hereinafter
defined), except with the Company's prior written consent. For purposes
of this Agreement, a business or organization shall be deemed to
"Compete with the Company" if such business or entity is engaged in the
residential and/or commercial security business, and the residential
and/or commercial security business constitutes the majority of such
business or organization's business operations; provided, however, that
with respect to a business or organization in which the residential
and/or commercial security business constitutes less than the majority
of such business or organization's business operations, the Executive
shall be prohibited hereunder from Participating in the division,
segment or other portion of such business or entity which is engaged in
the residential and/or commercial security business during the
Non-Competition Period. Nothing in this paragraph shall prohibit the
Executive from owning for investment purposes an aggregate of up to 3%
of the publicly traded securities of any corporation listed on the New
York or American Stock Exchange or whose securities are quoted on the
NASDAQ National Market, provided that there shall be no limitation on
the percentage of ownership of the Company or any
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successor thereto that may be owned by the Executive hereunder.
Notwithstanding anything which may be to the contrary herein, the
Executive shall not be required to cease Participation in any business
or organization which begins to Compete with the Company subsequent to
the time when the Executive commences such Participation, provided that
such business or organization began to Compete with the Company through
no action, assistance, or plan of the Executive.
(b) It is the desire and intent of the parties that the
provisions of Section 11 of this Agreement shall be enforced under the
laws and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, if any particular provision of
Section 11 of this Agreement is adjudicated to be invalid or
unenforceable or shall for any reason be held to be excessively broad
as to duration, geographic scope, activity or subject, it shall be
construed by limiting and reducing it, so as to be enforceable to the
extent compatible with applicable law and such provision shall be
deemed modified and amended to the extent necessary to render such
provision enforceable in such jurisdiction.
(c) In the event of a breach or threatened breach by the
Executive of the provisions of Section 1 l(a), in addition to other
remedies available to the Company at law (the amount of which shall be
limited by this Section 11 (c)) or in equity, the Company shall be
entitled to a temporary or permanent injunction or injunctions, or
temporary restraining orders or orders to prevent breaches thereof, in
each case, without the need to post any security or bond. All remedies
available for breach of this Agreement are cumulative, and the pursuit
of any remedy shall not be construed as an election of such remedy or
as prohibiting the Company from or limiting the Company in pursuing any
other remedies available for any breach or threatened breach of this
Agreement. The parties hereto agree and stipulate in advance that in
any action brought by or on behalf of the Company to recover damages
against the Executive for a breach of the provisions of Section 11(a)
hereof, the maximum damages that may be awarded in the event that the
Executive is ultimately adjudged to have breached such provisions shall
be limited to the Executive's most recent annual salary multiplied by a
fraction, the numerator of which shall be the number of full months
that the Executive was finally adjudged to have been in breach of this
covenant, and the denominator of which shall be twelve.
12. Confidentiality. The Executive acknowledges that the Company will
be engaged in a business involving Confidential Information (as hereinafter
defined) that is proprietary to the Company. In addition, the Executive
acknowledges that through employment with the Company, he will have access to,
and will acquire or assist in the development of, Confidential Information
regarding the Company and its technologies, customers and plans, the disclosure
of which to others would cause the Company to suffer substantial damage. In
consideration of the obligations undertaken by the Company as set forth herein,
the Executive will not, at any time during or after the Employment Period,
publish, disclose or use, or authorize any other person or entity to publish,
disclose or use, any Confidential Information of or about the Company of which
the Executive has already become, or becomes, aware or informed during his
employment with the Company, whether or not developed by him, except (i) as
required by law (including but not limited to judicial or administrative
process), (ii) in the performance of the Executive's duties for the Company, or
(iii) in the event that the Confidential Information becomes generally known to
the public through no actions (either directly or indirectly) of the Executive.
For purposes hereof, the term "Confidential Information" shall include, without
limitation, matters of a technical nature, "know-how," formulas, secret
processes, works of authorship, computer programs, materials, patent
applications, new
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product plans, technical improvements, test data, progress reports and
research projects, and matters of a business nature, such as business
plans, prospects, financial information, marketing plans and
strategies, proprietary information about costs, profits, markets,
sales, lists of customers and suppliers of the Company, procurement and
promotional information, credit and financial data concerning customers
or suppliers of the Company, information relating to the management and
operation of the Company, and other information of a similar nature to
the extent not available to the public.
13. Non-Solicitation. During (a) the Employment Period, and (b) in the
event of the Executive's termination or resignation hereunder pursuant to the
provisions set forth in Sections 2 and 4 hereof, for the two-year period
thereafter (the "Non-Solicitation Period"), the Executive shall not, directly or
indirectly (i) solicit, entice or induce any individual that currently (i.e.,
currently at the time of any such restricted action during the Non-Solicitation
Period) is an employee of the Company to become employed by any individual,
business or entity other than the Company, or (ii) approach any such employee
for such purpose, or authorize or participate or assist with the taking of such
actions by any other individual, business or entity.
14. Notice. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, as follows:
If to the Company:
Guardian International, Inc.
3880 N. 28th Terrace
Hollywood, FL 33020
If to the Executive:
Darius G. Nevin
1410 Palancia Avenue
Coral Gables, FL 33146
or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
15. Modifications and Waivers. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the parties hereto. No waiver by any party hereto
at any time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed to be a waiver of similar or dissimilar provision or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida.
16. Validity. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement, which shall remain in full force and effect.
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17. Termination of Prior Severance Agreement. The Prior Employment
Agreement is hereby terminated, and shall be considered null and void as of the
date first above written.
18. 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
together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date and year first above written.
GUARDIAN INTERNATIONAL, INC.
By: /s/RICHARD GINSBURG
-----------------------
Name: Richard Ginsburg
-----------------
Title: President and Chief Executive Officer
-------------------------------------
/s/DARIUS G. NEVIN
------------------
Darius G. Nevin
--------------------
10
EXHIBIT 10(cc)
SEVERANCE AGREEMENT
SEVERANCE AGREEMENT, dated as of the 19th day of January, 2000 (this
"Agreement"), among Guardian International, Inc., a Florida corporation (the
"Company"), and Richard Ginsburg (the "Executive").
WITNESSETH
----------
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is appropriate and in the best interests of the Company and
its stockholders to reinforce and encourage the continued attention and
dedication of members of the Company's management, including the Executive, to
their assigned duties; and
WHEREAS, the Executive is a party to the "Employment Agreement" with
the Company, dated as of October 21, 1997 (the "Prior Employment Agreement");
and
WHEREAS, the Company and the Executive desire that the Prior Employment
Agreement be terminated, and that the terms and conditions set forth herein
apply to the Executive in connection with his employment with the Company from
and after the date hereof.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
herein contained and in further consideration of services to be performed by the
Executive for the Company, the Company and the Executive do hereby agree as
follows:
1. Certain Definitions. For purposes of this Agreement, the following
terms have the meanings indicated:
(a) "Award" shall mean any award granted pursuant to the terms
of the Plan and pursuant to the non-Plan Stock Option Agreement dated
October 15, 1997, including but not limited to stock options, stock
appreciation rights ("SARs") (including Limited SARs), restricted
stock, deferred stock, stock granted as a bonus or in lieu of other
awards, dividend equivalents, and other stock-based awards.
(b) "Cause" shall mean: (i) the willful and continued failure
by the Executive to substantially perform his duties for the Company
(other than any such failure resulting from the Executive's incapacity
due to physical or mental illness, or any such actual or anticipated
failure after the Executive announces his intention to resign for Good
Reason), and such failure is not cured by the Executive within seven
days from the date the Company notifies the Executive thereof, (ii) the
willful engaging by the Executive in misconduct which is materially and
financially injurious to the Company, or (iii) the Executive's
conviction of a felony. No act, or failure to act, on the Executive's
part shall be considered "willful" unless done, or omitted to be done,
by him not in good faith and without reasonable belief that his action
or omission was in the best interest of the Company.
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(c) "Change in Control" shall be deemed to have occurred upon:
(i) the date of the acquisition by any "person"
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act), excluding the Company or any of its
subsidiaries or affiliates or any employee benefit plan
sponsored by any of the foregoing, of beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act) of
50% or more of either (x) the then outstanding shares of
common stock of the Company or (y) the then outstanding voting
securities entitled to vote generally in the election of
directors; or
(ii) the date the individuals who constitute the
Board as of the date of this Agreement (the "Incumbent Board")
cease for any reason to constitute at least a majority of the
members of the Board, provided that any individual becoming a
director subsequent to the effective date of this Agreement
whose election, or nomination for election by thc Company's
stockholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board (other than
any individual whose nomination for election to Board
membership was not endorsed by the Company's management prior
to, or at the time of, such individual's initial nomination
for election) shall be, for purposes of this Agreement,
considered as though such person were a member of the
Incumbent Board; or
(iii) the consummation of a merger, consolidation,
recapitalization, reorganization, sale or disposition of all
or a substantial portion of the Company's assets, a reverse
stock split of outstanding voting securities, the issuance of
shares of stock of the Company in connection with the
acquisition of the stock or assets of another entity,
provided, however, that a Change in Control shall not occur
under this clause (iii) if consummation of the transaction
would result in at least 50% of the total voting power
represented by the voting securities of the Company (or, if
not the Company, the entity that succeeds to all or
substantially all of the Company's business) outstanding
immediately after such transaction being beneficially owned
(within the meaning of Rule 13d-3 promulgated pursuant to the
Exchange Act) by at least 50% of the holders of outstanding
voting securities of the Company immediately prior to the
transaction, with the voting power of each such continuing
holder relative to other such continuing holders not
substantially altered in the transaction.
(d) "Disability" shall mean the Executive's incapacity due to
physical or mental illness to substantially perform his duties on a
full-time basis for six consecutive months; provided, however, that if
the Executive shall not agree with a determination to terminate him
because of Disability, the question of the Executive's Disability shall
be subject to the certification of a qualified medical doctor agreed to
by the Company and the Executive or, in the event of the Executive's
incapacity to designate a doctor, the Executive's legal representative.
In the absence of agreement between the Company and the Executive (or
the Executive's representative, as the case may be), each party shall
nominate a qualified medical doctor and the two doctors shall select a
third doctor, who shall make the determination as to Disability.
(e) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time. References to any provision of the
Exchange Act shall be deemed to include rules
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thereunder and successor provisions and rules thereto.
(f) "Good Reason" shall mean (i) the assignment to the
Executive by the Company of duties inconsistent with the Executive's
position, duties, responsibilities and status with the Company as in
effect on the date of this Agreement or such later date on which the
Executive agrees in writing to a change in such position, duties,
responsibilities and/or status, or any removal of the Executive from or
any failure to reelect the Executive to any of such positions; or (ii)
any reduction by the Company in the Executive's base salary as in
effect on the date hereof or as the same may be increased from time to
time; or (iii) any failure by the Company to continue in effect as to
the Executive, without a substantially comparable replacement, any
material compensation or benefit plan or program in which the Executive
was participating; or (iv) any attempted relocation of the Executive's
place of employment to a location more than 50 miles from the location
of such employment on the date of such attempted relocation; or (v) any
material breach by the Company of any provision of this Agreement. The
Executive shall not be deemed to have resigned for Good Reason
hereunder without (i) written notice by the Executive to the Company
setting forth the reasons for the Executive's intention to resign for
Good Reason, and (ii) an opportunity for the Company to cure the
reasons which give rise to such claim within seven (7) after the date
of such written notice.
(g) "Plan" shall mean the 1999 Stock Option Plan of Guardian
International, Inc.
2. Termination Without Cause or Resignation with Good Reason. In the
event of (i) the termination of the employment of the Executive without Cause
(for any reason other than by death or Disability) or (ii) the resignation of
the Executive from the Company for Good Reason, the Company shall pay or provide
to the Executive the following:
(a) any earned and accrued but unpaid installment of base
salary through the date of the Executive's resignation or termination
at the rate in effect at the time of such resignation or termination
(or, if greater, immediately prior to the occurrence of an event that
constitutes Good Reason) and all other unpaid amounts to which the
Executive is entitled as of such date under any compensation plan or
program of the Company, including, without limitation, all accrued
vacation time; such payments to be made in a lump sum within 30 days
following the date of resignation or termination; and
(b) in lieu of any further salary payments to the Executive
for periods subsequent to his date of resignation or termination, an
amount equal to the sum of (i) the greater of two hundred thousand
dollars ($200,000) or the Executive's annual base salary in effect
immediately prior to the occurrence of an event that constitutes Good
Reason, and (ii) the average of the annual bonus amounts that were
earned by the Executive as bonus compensation from the Company for the
most recent three years in which bonuses were paid to the Executive
which occurred prior to the year in which the Executive's resignation
or termination occurred; such payment to be made in a lump sum within
30 days following the date of Executive's resignation or termination;
and
(c) the Company shall maintain in full force and effect for
one year following the date of the Executive's resignation or
termination, for the continued benefit of the Executive, all employee
welfare benefit plans and perquisite programs in which the Executive
was entitled to participate
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immediately prior to the Executive's resignation or termination,
provided that the Executive's continued participation is possible under
the general terms and provisions of such plans and programs. In the
event that the Executive's participation in any such plan or program is
barred, the Company shall, at its sole cost and expense, arrange to
provide the Executive with benefits substantially similar to those
which the Executive would otherwise have been entitled to receive under
such plans and programs from which his continued participation is
barred; and
(d) with respect to any Award granted to the Executive
pursuant to the Plan and/or pursuant to the non-Plan Stock Option
Agreement dated October 15, 1997, which is subject to future vesting
and/or other restrictions regarding the exercisability or full
enjoyment of the Award as of the date of the Executive's resignation or
termination (if any), then, notwithstanding the terms of the Plan or
the certificate evidencing the Award thereunder, the continued vesting
or lapse of restrictions with respect to such Award shall not cease
with reference to such termination or resignation, but shall continue
during the duration of the term of the Award in accordance with the
schedule set forth in the certificate evidencing such Award as if the
Executive's employment with the Company had continued throughout such
vesting and/or lapse of restriction period. In addition, with respect
to each Award granted to the Executive pursuant to the Plan or pursuant
to the non-Plan Stock Option Agreement dated October 15, 1997, (whether
or not fully vested or free of restrictions at the time of termination
or resignation hereunder), the exercisability and the full enjoyment of
such Award shall not terminate with reference to such termination or
resignation, but shall be extended for the duration of the entire term
of the Award in accordance with the Plan and/or non-Plan Stock Option
Agreement dated October 15, 1997, and/or the certificate evidencing
such Award as if the Executive's employment with the Company had
continued during such entire term, notwithstanding the terms of the
Plan or non-Plan Stock Option Agreement or the certificate evidencing
the Award thereunder.
3. Termination for Death. In the event of the termination of the
employment of the Executive by reason of his death, the Company shall pay to the
Executive's designated beneficiary or estate the amounts set forth in paragraphs
(a) and (b) of Section 2 above, pursuant to which the date of the Executive's
death shall be considered the date of his termination thereunder. In addition,
with respect to any Award granted to the Executive pursuant to the Plan, in the
event that such Award is subject to future vesting or other restrictions
regarding the exercisability or full enjoyment of the Award as of the date of
the Executive's death, then, notwithstanding the terms of the Plan or the Award
Agreement thereunder, all restrictions thereon shall immediately lapse, and each
such Award shall be deemed immediately and fully vested and exercisable under
the Plan, as of the date of such death.
4. Termination for Cause or Disability or Resignation without Good
Reason. In the event of the Executive's termination of employment for Cause or
Disability or his resignation without Good Reason, only the amount set forth in
paragraph (a) of Section 2 shall be payable to the Executive, except that, in
the case of the Executive's termination for Disability hereunder, the Executive
shall also receive the benefits set forth in Section 2(d) hereof. Other than in
the case of the Executive's conviction of a felony, the Executive shall not be
deemed to have been terminated for Cause by the Company hereunder without (i)
notice to the Executive setting forth the reasons for the Company's intention to
terminate the Executive for Cause, (ii) an opportunity for the Executive,
together with his counsel, to be heard before the Board, and (iii) delivery to
the Executive of written notice from the Board finding that in the reasonable
good faith opinion of the Board, the Executive was guilty of conduct set forth
in the definition of Cause in Section 1 hereof, and
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specifying the particulars thereof in detail.
5. Termination or Resignation in connection with a Change in Control.
(a) Notwithstanding the provisions of Sections 2 and 4, in the
event of the termination of the employment of the Executive for any
reason other than death, whether initiated by the Company with or
without Cause, or initiated by the Executive with or without Good
Reason, which termination occurs within the one year period following
the date of a Change in Control, then, in lieu of the amounts and
benefits specified in Sections 2 and 4, the Executive shall be entitled
to receive (i) the amount set forth in Section 2(a), (ii) the amount
set forth in Section 2(b), and (iii) the benefits provided for in
Section 2(c).
(b) Notwithstanding the provisions of Section 2, in the event
of the resignation or termination of the employment of the Executive
for any reason specified therein, and such resignation or termination
occurs within the four month period (i) prior to the date of a Change
in Control, (ii) following commencement (within the meaning of Rule
14d-2 as promulgated under the Exchange Act) of a "tender offer" for
stock of the Company subject to Section 14(d)(2) of the Exchange Act,
which if consummated, would result in an acquisition described in
clause (i) of Section l(b), (iii) following the execution by the
Company of an agreement the consummation of which would constitute a
Change in Control, (iv) following the solicitation of proxies for the
election of directors by anyone other than the Company, or (v)
following the approval by the Company's stockholders of any transaction
described in Section 1(b)(iii), then, in lieu of the amounts and
benefits specified in Section 2:
(x) the Executive shall be entitled to receive the
amounts and benefits specified in Section 5(a), and
(y) with respect to any Award granted to the
Executive pursuant to the Plan or the non-Plan Stock Option
Agreement dated October 15, 1997, in the event that such Award
is subject to future vesting or other restrictions regarding
the exercisability or full enjoyment of the Award as of the
date of such resignation or termination, then, notwithstanding
the terms of the Plan or the Award Agreement thereunder, the
accelerated vesting and lapse of restriction provisions set
forth in Section 4 of the Plan or the non-Plan Stock Option
Agreement dated October 15, 1997 shall bc applicable with
respect to such Awards as if a Change in Control had occurred
on the date of such resignation or termination.
Amounts and benefits payable by reason of clause (b)(i) of this Section 5 shall
be paid within ten days following the date of the Change in Control, but shall
be offset by any amounts previously paid pursuant to Section 2.
6. Certain Taxes. The Company shall have the right to deduct from any
amounts payable under this Agreement an amount necessary to satisfy its
obligation, under applicable laws, to withhold income or other taxes of the
Executive attributable to payments made hereunder.
7. No Obligation to Mitigate Damages: No Effect on Other Contractual
Rights. The Executive shall not be required to mitigate damages or the amount of
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any payment provided for under this Agreement by seeking other employment or
otherwise, nor shall the amount of any payment provided for under this Agreement
be reduced by any compensation earned by the Executive as the result of
employment by another employer after the date of resignation or termination, or
otherwise. The provisions of this Agreement, and any payment provided for
hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights the Executive may acquire in
the future, under any employee benefit plan, incentive plan, employment
agreement or other contract, plan or arrangement.
8. Indemnification. The Company shall indemnify the Executive within 60
days after receipt of a request therefor against all judgments, fines,
settlements, payments and expenses, including reasonable attorneys' fees, paid
or incurred in connection with any claim, action, suit or proceeding, civil,
criminal, administrative or investigatory ("Proceeding"), to which the Executive
may be made a party or with which he may be threatened by reason of his being or
having been an employee, officer or director of the Company or, at the Company's
request, an employee, officer or director of any other corporation, firm,
association or other organization, or by reason of any action or omission by the
Executive in such capacity, whether or not the Executive continues to hold such
position or act in such capacity at the time of incurring such expenses or at
the time the indemnification is made, other than in connection with actions
taken by the Executive which constitute gross negligence in the performance of
his duties for the Company which the Executive has undertaken without the
reasonable good faith belief that such actions were in the best interest of the
Company. The foregoing right of indemnification shall not be exclusive of other
rights to which the Executive may otherwise be entitled. The Company shall pay
the reasonable expenses (including reasonable attorneys' fees) incurred by the
Executive in defending any Proceeding in advance of the final disposition
thereof. The Company shall advance all such expenses by or on behalf of the
Executive within 15 days after receipt of his request therefor, accompanied or
preceded by reasonable evidence of such expenses. The Executive will also be
named as an insured under any directors and officers or similar insurance policy
that the Company may purchase.
9. Successor to the Company. The Company will require any successor or
assign (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance satisfactory to the Executive,
expressly, absolutely and unconditionally to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place. For
purposes of clarity, any failure of the Company to obtain such agreement prior
to the effectiveness of any such succession or assignment shall be a material
breach of this Agreement and shall entitle the Executive to terminate the
Executive's employment for Good Reason. As used in this Agreement, the term
"Company" shall mean the Company as hereinbefore defined and any successor or
assign to its business and/or assets as aforesaid which executes and delivers
the agreement provided for in this Section 9 or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law.
10. Enforcement.
(a) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal and legal representatives,
executors, administrators, successors, heirs, distributees, devisees
and legatees. If the Executive should die while any amounts are still
payable to him
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hereunder, all such amounts shall be paid in accordance with the terms
of this Agreement to the Executive's estate or beneficiary.
(b) In the event that the Company shall fail or refuse to make
payment of any amounts due the Executive hereunder within the
appropriate time period, the Company shall pay to the Executive, in
addition to the payment of any other sums provided in this Agreement,
interest, compounded daily, on any amount remaining unpaid from the
date payment is required until paid to the Executive, at the rate from
time to time announced by Chase Manhattan Bank as its "prime rate" plus
2%, each change in such rate to take effect on the effective date of
the change in such prime rate.
(c) The Company shall pay all reasonable fees and expenses
(including attorneys' fees) that the Executive may incur as a result of
the Company's contesting the validity, enforceability, or the
Executive's interpretation of, this Agreement (regardless of the
outcome of any litigation to enforce this Agreement).
11. Non-Competition.
(a) The Executive hereby acknowledges that the services which
he will perform for the Company are of a special and unique nature, and
that the Company would find it extremely difficult or impossible to
replace the Executive. Accordingly, the Executive agrees that, in
consideration of this Agreement and the payments to be received by him
hereunder in the event the occurrence of certain actions as specified
herein, the Executive will not (i) from and after the date hereof
through the period during which the Executive continues to be employed
by the Company (the "Employment Period"), and (ii) in the event of the
Executive's termination or resignation hereunder pursuant to the
provisions set forth in Sections 2 and 4 hereof, for the one-year
period thereafter (the "Non-Competition Period"), directly or
indirectly, own, manage, operate, join, control or participate in the
ownership, management, operation or control of, or be connected as a
director, officer, employee, partner, lender, consultant or Otherwise
("Participate" or a "Participation") with, any business or organization
in any part of the United States in which the Company sells products or
provides services, which Competes with the Company (as hereinafter
defined), except with the Company's prior written consent. For purposes
of this Agreement, a business or organization shall be deemed to
"Compete with the Company" if such business or entity is engaged in the
residential and/or commercial security business, and the residential
and/or commercial security business constitutes the majority of such
business or organization's business operations; provided, however, that
with respect to a business or organization in which the residential
and/or commercial security business constitutes less than the majority
of such business or organization's business operations, the Executive
shall be prohibited hereunder from Participating in the division,
segment or other portion of such business or entity which is engaged in
the residential and/or commercial security business during the
Non-Competition Period. Nothing in this paragraph shall prohibit the
Executive from owning for investment purposes an aggregate of up to 3%
of the publicly traded securities of any corporation listed on the New
York or American Stock Exchange or whose securities are quoted on the
NASDAQ National Market, provided that there shall be no limitation on
the percentage of ownership of the Company or any successor thereto
that may be owned by the Executive hereunder. Notwithstanding anything
which
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may be to the contrary herein, the Executive shall not be required to
cease Participation in any business or organization which begins to
Compete with the Company subsequent to the time when the Executive
commences such Participation, provided that such business or
organization began to Compete with the Company through no action,
assistance, or plan of the Executive.
(b) It is the desire and intent of the parties that the
provisions of Section 11 of this Agreement shall be enforced under the
laws and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, if any particular provision of
Section 11 of this Agreement is adjudicated to be invalid or
unenforceable or shall for any reason be held to be excessively broad
as to duration, geographic scope, activity or subject, it shall be
construed by limiting and reducing it, so as to be enforceable to the
extent compatible with applicable law and such provision shall be
deemed modified and amended to the extent necessary to render such
provision enforceable in such jurisdiction.
(c) In the event of a breach or threatened breach by the
Executive of the provisions of Section 1 l(a), in addition to other
remedies available to the Company at law (the amount of which shall be
limited by this Section 11 (c)) or in equity, the Company shall be
entitled to a temporary or permanent injunction or injunctions, or
temporary restraining orders or orders to prevent breaches thereof, in
each case, without the need to post any security or bond. All remedies
available for breach of this Agreement are cumulative, and the pursuit
of any remedy shall not be construed as an election of such remedy or
as prohibiting the Company from or limiting the Company in pursuing any
other remedies available for any breach or threatened breach of this
Agreement. The parties hereto agree and stipulate in advance that in
any action brought by or on behalf of the Company to recover damages
against the Executive for a breach of the provisions of Section 11(a)
hereof, the maximum damages that may be awarded in the event that the
Executive is ultimately adjudged to have breached such provisions shall
be limited to the Executive's most recent annual salary multiplied by a
fraction, the numerator of which shall be the number of full months
that the Executive was finally adjudged to have been in breach of this
covenant, and the denominator of which shall be twelve.
12. Confidentiality. The Executive acknowledges that the Company will
be engaged in a business involving Confidential Information (as hereinafter
defined) that is proprietary to the Company. In addition, the Executive
acknowledges that through employment with the Company, he will have access to,
and will acquire or assist in the development of, Confidential Information
regarding the Company and its technologies, customers and plans, the disclosure
of which to others would cause the Company to suffer substantial damage. In
consideration of the obligations undertaken by the Company as set forth herein,
the Executive will not, at any time during or after the Employment Period,
publish, disclose or use, or authorize any other person or entity to publish,
disclose or use, any Confidential Information of or about the Company of which
the Executive has already become, or becomes, aware or informed during his
employment with the Company, whether or not developed by him, except (i) as
required by law (including but not limited to judicial or administrative
process), (ii) in the performance of the Executive's duties for the Company, or
(iii) in the event that the Confidential Information becomes generally known to
the public through no actions (either directly or indirectly) of the Executive.
For purposes hereof, the term "Confidential Information" shall include, without
limitation, matters of a technical nature, "know-how," formulas, secret
processes, works of authorship, computer programs, materials, patent
applications, new product plans, technical improvements, test data, progress
reports and research projects, and matters of a
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business nature, such as business plans, prospects, financial information,
marketing plans and strategies, proprietary information about costs, profits,
markets, sales, lists of customers and suppliers of the Company, procurement and
promotional information, credit and financial data concerning customers or
suppliers of the Company, information relating to the management and operation
of the Company, and other information of a similar nature to the extent not
available to the public.
13. Non-Solicitation. During (a) the Employment Period, and (b) in the
event of the Executive's termination or resignation hereunder pursuant to the
provisions set forth in Sections 2 and 4 hereof, for the two-year period
thereafter (the "Non-Solicitation Period"), the Executive shall not, directly or
indirectly (i) solicit, entice or induce any individual that currently (i.e.,
currently at the time of any such restricted action during the Non-Solicitation
Period) is an employee of the Company to become employed by any individual,
business or entity other than the Company, or (ii) approach any such employee
for such purpose, or authorize or participate or assist with the taking of such
actions by any other individual, business or entity.
14. Notice. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, as follows:
If to the Company:
Guardian International, Inc.
3880 N. 28th Terrace
Hollywood, FL 33020
If to the Executive:
Richard Ginsburg
PO Box 800207
Miami, FL 33280-0207
or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
15. Modifications and Waivers. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the parties hereto. No waiver by any party hereto
at any time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed to be a waiver of similar or dissimilar provision or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida.
16. Validity. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement, which shall remain in full force and effect.
17. Termination of Prior Severance Agreement. The Prior Employment
Agreement is hereby
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terminated, and shall be considered null and void as of the date first above
written.
18. 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
together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date and year first above written.
GUARDIAN INTERNATIONAL, INC.
By: /s/HAROLD GINSBURG
-------------------
Name: Harold Ginsburg
----------------
Title: Chairman of the Board
----------------------
/s/RICHARD GINSBURG
-------------------
Richard Ginsburg
----------------
10
EXHIBIT 10(dd)
- --------------
NON-QUALIFIED STOCK OPTION AGREEMENT
------------------------------------
Section 1. Grant of Option. Guardian International, Inc., a Florida
corporation (the "Company"), hereby grants to Douglas T. Lake (the "Optionee") a
non-qualified stock option to purchase (the "Option") the number of shares (the
"Shares") of Common Stock, par value $.001 per share (the "Common Stock"), of
the Company set forth on Schedule 1, at the option exercise price per share
("Option Exercise Price") set forth on Schedule 1.
Section 2. Definitions. In addition to the terms defined elsewhere in
this Agreement, the following terms shall have the following meanings for
purposes of this Agreement:
a) "Beneficiary" means the person or persons designated in
writing by the Optionee as his beneficiary in respect of this Option
or, in the absence of such a designation or if the designated person or
persons predecease the Optionee, the person or persons who shall
acquire the Optionee's rights in respect of the Option by bequest or
inheritance in accordance with the applicable laws of descent and
distribution. In order to be effective, the Optionee's designation of a
beneficiary must be on file with the Company before the Optionee's
death. Any such designation may be revoked and a new designation
substituted therefor by the Optionee at any time before his death
without the consent of the previously designated beneficiary.
(b) "Board" means the Board of Directors of the Company.
(c) "Change of Control" means:
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 50% or more of either (i) the then
outstanding shares of Common Stock (the "Outstanding Company Common
Stock") or (ii) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities");
provided, however, that the following acquisitions shall not constitute
a Change of Control: (x) any acquisition by the Company or a
Subsidiary, (y) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or a Subsidiary,
or (z) any acquisition by any company with respect to which, following
such acquisition, more than 50% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation
entitled to vote
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generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such acquisition in substantially the
same proportions as their ownership, immediately prior to such
acquisition, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be; or
(ii) Individuals who, as of the date of grant set forth on
Schedule 1, constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or
threatened solicitation to which Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act applies or other actual or
threatened solicitation of proxies or consents; or
(iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, with respect to
which all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such reorganization, merger or consolidation do not, following such
reorganization, merger or consolidation, beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding shares
of Common Stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such
reorganization, merger or consolidation of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may
be; or
(iv) Approval by the shareholders of the Company of (A) a
complete liquidation or dissolution of the Company or (B) the sale or
other disposition of all or substantially all of the assets of the
Company, other than to a corporation, with respect to which following
such sale or other disposition, more than 50% of, respectively, the
then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the
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individuals and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately prior
to such sale or other disposition, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be.
The term "the sale or other disposition of all or substantially all of
the assets of the Company" shall mean a sale or other disposition
transaction or series of related transactions involving assets of the
Company or of any direct or indirect Subsidiary (including the stock of
any direct or indirect Subsidiary) in which the value of the assets or
stock being sold or otherwise disposed of (as measured by the purchase
price being paid therefor or by such other method as the Board
determines is appropriate in a case where there is no readily
ascertainable purchase price) constitutes more than two-thirds of the
fair market value of the Company (as hereinafter defined). The "fair
market value of the Company" shall be the aggregate market value of the
then Outstanding Company Common Stock (on a fully diluted basis) plus
the aggregate market value of the Company's other outstanding equity
securities. The aggregate market value of the shares of Outstanding
Company Common Stock shall be determined by multiplying the number of
shares of Outstanding Company Common Stock (on a fully diluted basis)
outstanding on the date of the execution and delivery of a definitive
agreement with respect to the transaction or series of related
transactions (the "Transaction Date") by the average closing price of
the shares of Outstanding Company Common Stock for the five trading
days immediately preceding the Transaction Date. The aggregate market
value of any other equity securities of the Company shall be determined
in a manner similar to that prescribed in the immediately preceding
sentence for determining the aggregate market value of the shares of
Outstanding Company Common Stock or by such other method as the Board
shall determine is appropriate.
(d) "Change of Control Price" means the highest price per share paid in
any transaction reported on the securities exchange or trading system on which
shares of Common Stock are then primarily listed or traded, or paid or offered
in any transaction related to a Change of Control of the Company at any time
during the preceding 60-day period as determined by the Committee.
(e) "Code" means the Internal Revenue Code of 1986, as amended from
time to time. References to any provision of the Code shall be deemed to include
successor provisions thereto and regulations thereunder.
(f) "Committee" means the Compensation Committee of the Board, or such
other Board committee as may be designated by the Board to administer the
Company's stock option plans and stock option agreements, or any subcommittee of
either.
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(g) "Common Stock" means the common stock, par value $.001 per share,
of the Company.
(h) "Disability" means the permanent and total disability of the
Optionee as defined in Section 22(e)(3) of the Code.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" means, with respect to Shares, the fair market
value of such Shares determined by such methods or procedures as shall be
established, in good faith, from time to time by the Committee. Unless otherwise
determined by the Committee, the fair market value of Shares as of any date
shall be the average of the closing bid and asked prices for Shares reported in
the OTC Bulletin Board(R), as applicable, for that date or, if no such prices
are so reported for that date, the average of such closing bid and asked prices
on the immediately preceding date for which such closing prices are so reported.
Fair market value shall be determined without regard to any restriction other
than a restriction which, by its terms, will never lapse. If Shares are listed
on any other exchange, the fair market value of Shares as of any date shall be
the closing sales price on that date of a Share as reported on that exchange as
reported in the composite transactions for such day by The Wall Street Journal
or, if such Shares were not traded on such date, on the next preceding day on
which such Shares were traded.
(k) "Subsidiary" means any corporation (other than the Company) with
respect to which the Company owns, directly or indirectly, 50% or more of the
total combined voting power of all classes of stock. In addition, any other
related entity may be designated by the Board as a Subsidiary, provided such
entity could be considered a subsidiary according to generally accepted
accounting principles.
(l) "Termination for Cause" or "Terminate for Cause" means the
termination of the Optionee's employment by, or service to, the Company because
the Committee determines, in its sole discretion, that (i) the Optionee engaged
in one or more acts constituting a felony; (ii) the Optionee willfully engaged
in one or more acts involving actual fraud; (iii) the Optionee willfully
misappropriated Company assets or willfully engaged in misconduct either of
which is materially injurious to the Company or its affiliates; or (iv) the
Optionee materially and willfully failed to perform his duties as an employee or
in any other capacity. For purposes of this Agreement, the term "willful" means
an act done, or omitted to be done, by the Optionee in bad faith, provided that
the Optionee knew or reasonably should have known that the act or omission was
not in the best interest of the Company.
(m) "Termination Without Cause" or "Terminate Without Cause" means that
the termination of the Optionee's employment or service occurred for a reason
other than Termination for Cause, death or Disability.
Section 3. Acceptance by Optionee. The exercise of the Option or any
portion thereof is conditioned upon acceptance by the Optionee of the terms and
conditions of
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this Agreement, as evidenced by the Optionee's delivery of an executed copy of
Schedule 1 to this Agreement to the Company.
Section 4. Vesting of Option. The Option shall vest and be exercisable
in accordance with the vesting schedule set forth in Schedule 1 or upon a Change
of Control as described in Section 11, subject to the provisions of Section 7
below. In the event that the Option shall terminate as set forth in Sections 5
and 7 below, the unvested portion of the Option shall be void and shall not be
exercisable by the Optionee. Notwithstanding the foregoing, the Optionee shall
vest in all Shares subject to the Option in the event of Optionee's death or
Disability.
Section 5. Expiration of the Option. This Option shall expire on the
date set forth in Schedule 1 (the "Expiration Date"), unless earlier terminated
as set forth in Section 7 below, and may not be exercised after such date.
Section 6. Conditions to Exercise of Option. Except as otherwise set
forth in Section 7 below, the Optionee may exercise this Option or any portion
thereof after it has vested and during his lifetime only while he is employed
by, or providing services to, the Company or a Subsidiary.
Section 7. Termination of Employment or Service. The Option shall
terminate upon the earlier of (a) its full exercise or (b) the Termination for
Cause of the Optionee's employment by, or service to, the Company or a
Subsidiary. In the event of the Optionee's Disability or death, the Option or
any unexercised, unvested portion thereof may be exercised by the Optionee (or
his estate, in the event of the Optionee's death) for up to 12 months after
Optionee's death, after which time the Option shall expire. In the event of the
Optionee's Termination Without Cause, the unexercised, vested portion of the
Option may be exercised by the Optionee for up to three months after the date of
the Termination Without Cause, and the unvested portion of the Option shall be
void and shall not be exercisable by the Optionee. Notwithstanding anything in
this Section 7 to the contrary, in no event may this Option be exercised
following the Expiration Date.
Section 8. Procedure for Exercise. The Option may be exercised for the
number of Shares specified in a written notice delivered to the Company at least
10 days prior to the date on which purchase is requested, accompanied by full
payment in cash, or, with the consent of the Committee, in Common Stock or by a
promissory note payable to the order of the Company which is acceptable to the
Committee. Such payment may, with the written consent of the Committee, also
consist of a cash down payment and delivery of such a promissory note in the
amount of the unpaid Option Exercise Price. In the discretion of and subject to
the conditions as may be established by the Committee, payment of the Option
Exercise Price may also be made by the Company retaining from the Shares to be
delivered upon exercise of the Option, or portion thereof, that number of Shares
having a Fair Market Value on the date of exercise equal to the
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Option Exercise Price of the number of Shares with respect to which the Optionee
exercises the Option, or portion thereof. Such payment may also be made in such
other manner as the Committee determines is appropriate, in its sole discretion,
subject to the restrictions set forth in this Agreement. If upon exercise of all
or a portion of the Option there shall be payable by the Company or a Subsidiary
any amount for income tax withholding, then, at the Company's option and as a
condition to such exercise, either (a) the Company shall reduce the number of
Shares to be issued to the Optionee by a number of Shares of Common Stock having
an aggregate Fair Market Value on the date of exercise equal to the amount of
such income tax withholding or (b) the Optionee shall pay such amount to the
Company or its Subsidiary, as applicable. If any applicable law requires the
Company to take any action with respect to the Shares specified in the written
notice of exercise, or if any action remains to be taken under the Articles of
Incorporation or Bylaws of the Company, as in effect at the time, to effect due
issuance of the Shares, then the Company shall take such action and the day for
delivery of such Shares shall be extended for the period necessary to take such
action.
Section 9. Exchange Provisions. The Committee may at any time offer to
exchange or buy out the Option for a payment in cash, Shares, other options or
other property based on such terms and conditions as the Committee shall
determine and communicate to the Optionee in writing at the time that such offer
is made.
Section 10. General Restrictions Applicable to this Option.
----------------------------------------------
(a) Limits on Transfer of Options; Beneficiaries. The Option shall not
be transferable or assignable by the Optionee other than by will or by the laws
of descent and distribution (except to the Company or its Subsidiary under the
terms of this Agreement), and the Option shall be exercisable during the
Optionee's lifetime only by the Optionee. No right or interest of the Optionee
in the Option shall be pledged, encumbered or hypothecated to or in favor of any
party (other than the Company or a Subsidiary), or shall be subject to any lien,
obligation or liability of the Optionee to any party (other than the Company or
a Subsidiary); provided, however, that the Optionee may, in the manner
established by the Committee, designate a Beneficiary or Beneficiaries to
exercise the rights of the Optionee, and to receive any distribution, with
respect to the Option, upon the death of the Optionee. A Beneficiary, guardian,
legal representative, or other person claiming any rights under this Agreement
from or through the Optionee shall be subject to all terms and conditions of
this Agreement.
(b) Registration. The Company shall not be obligated to deliver any
Shares with respect to the Option in a transaction subject to regulatory
approval, registration or any other applicable requirement of federal or state
law, until such laws, regulations and contractual obligations of the Company
have been complied with in full.
(c) Share Certificates. All certificates for Shares delivered pursuant
to the exercise of the Option shall be subject to such stop-transfer order and
other restrictions as the Committee may deem advisable under applicable federal
or state laws and rules
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and regulations promulgated thereunder. The Committee may cause a legend or
legends to be placed on any such certificates to make appropriate reference to
such restrictions or any other restrictions that may be applicable to Shares. In
addition, during any period in which the Option or Shares are subject to
restrictions under the terms of this Agreement, or during any period during
which delivery or receipt of Shares has been deferred by the Committee or the
Optionee, the Committee may require the Optionee to enter into an agreement
providing that certificates representing Shares issuable or issued pursuant to
this Agreement shall remain in the physical custody of the Company or such other
person or entity as the Committee may designate.
Section 11. Change of Control. As determined in its sole discretion by
the Committee in writing at any time after the grant of the Option and prior to
a Change of Control, in the event of a Change of Control and on the conditions
described in this Section, (a) Optionee's outstanding Option may be canceled,
and Optionee shall be paid in cash the Change of Control Price less the Option
Exercise Price multiplied by the number of shares which may be purchased under
the outstanding Option; (b) or any outstanding portion of the Option held by
Optionee may be immediately vested and exercisable and remain exercisable by the
Optionee as set forth in Schedule 1; or (c) the Committee may offer to exchange
the Option for a payment in Shares, other options or other property based on
such terms and conditions as the Committee shall determine and communicate in
writing to the Optionee.
Section 12. Adjustment Provisions. In the event that the Board shall
determine that any dividend or other distribution (whether in the form of cash,
Shares or other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, spinoff, combination, repurchase, or
share exchange, or other similar corporate transaction or event, affects the
Shares such that an adjustment is determined by the Committee to be appropriate
in order to prevent dilution or enlargement of the rights of the Optionee under
this Agreement, then the Committee shall, in such manner as it may deem
equitable, adjust any or all of (a) the number and kind of Shares which may
thereafter be issued in connection with the Option, and (b) the Option Exercise
Price or, if deemed appropriate, make provision for a cash payment with respect
to this Option.
Section 13. Miscellaneous.
--------------
(a) Changes to Options. The Committee may waive any conditions or
rights under, or amend, alter, suspend, discontinue, or terminate, this
Agreement; provided, however, that, without the consent of the Optionee, no such
amendment, alteration, suspension, discontinuation or termination of this Option
may impair the rights of Optionee under this Option.
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(b) No Shareholder Rights. The Option shall not confer on Optionee any
of the rights of a shareholder of the Company unless and until Shares are duly
issued or transferred to the Optionee in accordance with the terms of this
Agreement.
(c) Unfunded Status of Options. The Option is intended to constitute an
"unfunded" Option for incentive compensation. With respect to any payments not
yet made to the Optionee pursuant to this Agreement, nothing contained in this
Agreement shall give the Optionee any rights that are greater than those of a
general creditor of the Company; provided, however, that the Committee may
authorize the creation of trusts or make other arrangements to meet the
Company's obligations under this Agreement to deliver cash, Shares, other
options or other property pursuant to this Agreement, which trusts or other
arrangements shall be consistent with the "unfunded" status of the Option unless
the Committee determines otherwise with the written consent of the Optionee.
(d) Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to this Agreement. The Committee shall determine whether
cash, other options or other property shall be issued or paid in lieu of
fractional Shares or whether such fractional Shares or any rights thereto shall
be forfeited or otherwise eliminated.
(e) Compliance With Applicable Law; Governing Law. The validity,
construction and effect of this Agreement and the issuance of the Shares
pursuant to the exercise of the Option, are subject to compliance with all
applicable laws including, without limitation, laws governing withholding from
employees and nonresident aliens for income tax purposes. This Agreement shall
be governed by the laws of the State of Florida, without giving effect to
principles of conflicts of laws, and applicable federal law.
(f) No Obligations to Exercise Options. The granting of the Option
shall impose no obligation upon the Optionee to exercise the Option.
(g) No Right to Employment or Service. Nothing contained in this
Agreement, nor any action taken by the Committee, shall confer upon the Optionee
any right with respect to continuation of employment by, or service to, the
Company or a Subsidiary as an employee or in any other capacity nor interfere in
any way with the right of the Company or a Subsidiary to Terminate the
Optionee's employment or service at any time for Cause or Without Cause.
(h) Representations as to Purchase of Shares. As a condition of the
Company's obligation to issue Shares upon exercise of the Option, if requested
by the Company, the Optionee shall, concurrently with the delivery of the stock
certificate representing the Shares so purchased, give such written assurances
to the Company, in the form and substance that its counsel reasonably requests,
to the effect that the Optionee is acquiring the Shares for investment
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and without any present intention of reselling or redistributing the same in
violation of any applicable law, and the Company shall have the right to endorse
the certificate representing the Shares with an appropriate restrictive legend
as to compliance with such law. In the event that the Company registers the
Shares under the Securities Act of 1933, as amended, and any applicable state
laws, the issuance of such Shares shall not be subject to the restrictions
contained in this Section 13(h).
(i) Binding Agreement. This Agreement shall be binding upon and inure
to the benefit of all successors of the Company. This Agreement may not be
amended without the express written consent of both parties hereto.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed as of the Date of Grant set forth in Schedule 1.
GUARDIAN INTERNATIONAL, INC.
By: /s/ RICHARD GINSBURG
--------------------------
Richard Ginsburg, President and
Chief Executive Officer
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<PAGE>
Schedule 1
Stock Option Agreement
----------------------
<TABLE>
<CAPTION>
<S> <C>
Name of Optionee: Douglas T. Lake
Number of Shares: 75,000 (seventy five thousand)
shares of Common Stock
Option Exercise Price Per Share: $0.84
Date of Grant: April 28, 1998,
Expiration Date: April 28, 2008
Vesting Schedule: 15,000 shares of Common Stock April 28, 1998
15,000 shares of Common Stock April 28, 1999
15,000 shares of Common Stock April 28, 2000
15,000 shares of Common Stock April 28, 2001
15,000 shares of Common Stock April 28, 2002
</TABLE>
The undersigned agrees to the terms and conditions of the Non-Qualified
Stock Option Agreement of which this Schedule 1 is a part.
Date Accepted: October 10, 1999
- -------------- ----------------
By: /s/ DOUGLAS T. LAKE
-------------------
Name: Douglas T. Lake
----------------
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EXHIBIT 10(ee)
NON-QUALIFIED STOCK OPTION AGREEMENT
Section 1. Grant of Option. Guardian International, Inc., a Florida
corporation (the "Company"), hereby grants to David Heidecorn (the "Optionee") a
non-qualified stock option to purchase (the "Option") the number of shares (the
"Shares") of Common Stock, par value $.001 per share (the "Common Stock"), of
the Company set forth on Schedule 1, at the option exercise price per share
("Option Exercise Price") set forth on Schedule 1.
Section 2. Definitions. In addition to the terms defined elsewhere in
this Agreement, the following terms shall have the following meanings for
purposes of this Agreement:
(a) "Beneficiary" means the person or persons designated in writing by
the Optionee as his beneficiary in respect of this Option or, in the absence of
such a designation or if the designated person or persons predecease the
Optionee, the person or persons who shall acquire the Optionee's rights in
respect of the Option by bequest or inheritance in accordance with the
applicable laws of descent and distribution. In order to be effective, the
Optionee's designation of a beneficiary must be on file with the Company before
the Optionee's death. Any such designation may be revoked and a new designation
substituted therefor by the Optionee at any time before his death without the
consent of the previously designated beneficiary.
(b) "Board" means the Board of Directors of the Company.
(c) "Change of Control" means:
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 50% or more of either (i) the then
outstanding shares of Common Stock (the "Outstanding Company Common
Stock") or (ii) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities");
provided, however, that the following acquisitions shall not constitute
a Change of Control: (x) any acquisition by the Company or a
Subsidiary, (y) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or a Subsidiary,
or (z) any acquisition by any company with respect to which, following
such acquisition, more than 50% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then
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beneficially owned, directly or indirectly, by all or substantially all
of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such acquisition in
substantially the same proportions as their ownership, immediately
prior to such acquisition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be; or
(ii) Individuals who, as of the date of grant set forth on
Schedule 1, constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or
threatened solicitation to which Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act applies or other actual or
threatened solicitation of proxies or consents; or
(iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, with respect to
which all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such reorganization, merger or consolidation do not, following such
reorganization, merger or consolidation, beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding shares
of Common Stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such
reorganization, merger or consolidation of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may
be; or
(iv) Approval by the shareholders of the Company of (A) a
complete liquidation or dissolution of the Company or (B) the sale or
other disposition of all or substantially all of the assets of the
Company, other than to a corporation, with respect to which following
such sale or other disposition, more than 50% of, respectively, the
then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
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substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other disposition,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be. The term "the sale or other disposition
of all or substantially all of the assets of the Company" shall mean a
sale or other disposition transaction or series of related transactions
involving assets of the Company or of any direct or indirect Subsidiary
(including the stock of any direct or indirect Subsidiary) in which the
value of the assets or stock being sold or otherwise disposed of (as
measured by the purchase price being paid therefor or by such other
method as the Board determines is appropriate in a case where there is
no readily ascertainable purchase price) constitutes more than
two-thirds of the fair market value of the Company (as hereinafter
defined). The "fair market value of the Company" shall be the aggregate
market value of the then Outstanding Company Common Stock (on a fully
diluted basis) plus the aggregate market value of the Company's other
outstanding equity securities. The aggregate market value of the shares
of Outstanding Company Common Stock shall be determined by multiplying
the number of shares of Outstanding Company Common Stock (on a fully
diluted basis) outstanding on the date of the execution and delivery of
a definitive agreement with respect to the transaction or series of
related transactions (the "Transaction Date") by the average closing
price of the shares of Outstanding Company Common Stock for the five
trading days immediately preceding the Transaction Date. The aggregate
market value of any other equity securities of the Company shall be
determined in a manner similar to that prescribed in the immediately
preceding sentence for determining the aggregate market value of the
shares of Outstanding Company Common Stock or by such other method as
the Board shall determine is appropriate.
(d) "Change of Control Price" means the highest price per share paid in
any transaction reported on the securities exchange or trading system on which
shares of Common Stock are then primarily listed or traded, or paid or offered
in any transaction related to a Change of Control of the Company at any time
during the preceding 60-day period as determined by the Committee.
(e) "Code" means the Internal Revenue Code of 1986, as amended from
time to time. References to any provision of the Code shall be deemed to include
successor provisions thereto and regulations thereunder.
(f) "Committee" means the Compensation Committee of the Board, or such
other Board committee as may be designated by the Board to administer the
Company's stock option plans and stock option agreements, or any subcommittee of
either.
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(g) "Common Stock" means the common stock, par value $.001 per share,
of the Company.
(h) "Disability" means the permanent and total disability of the
Optionee as defined in Section 22(e)(3) of the Code.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" means, with respect to Shares, the fair market
value of such Shares determined by such methods or procedures as shall be
established, in good faith, from time to time by the Committee. Unless otherwise
determined by the Committee, the fair market value of Shares as of any date
shall be the average of the closing bid and asked prices for Shares reported in
the OTC Bulletin Board(R), as applicable, for that date or, if no such prices
are so reported for that date, the average of such closing bid and asked prices
on the immediately preceding date for which such closing prices are so reported.
Fair market value shall be determined without regard to any restriction other
than a restriction which, by its terms, will never lapse. If Shares are listed
on any other exchange, the fair market value of Shares as of any date shall be
the closing sales price on that date of a Share as reported on that exchange as
reported in the composite transactions for such day by The Wall Street Journal
or, if such Shares were not traded on such date, on the next preceding day on
which such Shares were traded.
(k) "Subsidiary" means any corporation (other than the Company) with
respect to which the Company owns, directly or indirectly, 50% or more of the
total combined voting power of all classes of stock. In addition, any other
related entity may be designated by the Board as a Subsidiary, provided such
entity could be considered a subsidiary according to generally accepted
accounting principles.
(l) "Termination for Cause" or "Terminate for Cause" means the
termination of the Optionee's employment by, or service to, the Company because
the Committee determines, in its sole discretion, that (i) the Optionee engaged
in one or more acts constituting a felony; (ii) the Optionee willfully engaged
in one or more acts involving actual fraud; (iii) the Optionee willfully
misappropriated Company assets or willfully engaged in misconduct either of
which is materially injurious to the Company or its affiliates; or (iv) the
Optionee materially and willfully failed to perform his duties as an employee or
in any other capacity. For purposes of this Agreement, the term "willful" means
an act done, or omitted to be done, by the Optionee in bad faith, provided that
the Optionee knew or reasonably should have known that the act or omission was
not in the best interest of the Company.
(m) "Termination Without Cause" or "Terminate Without Cause" means that
the termination of the Optionee's employment or service occurred for a reason
other than Termination for Cause, death or Disability.
Section 3. Acceptance by Optionee. The exercise of the Option or any
portion thereof is conditioned upon acceptance by the Optionee of the terms and
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<PAGE>
conditions of this Agreement, as evidenced by the Optionee's delivery of an
executed copy of Schedule 1 to this Agreement to the Company.
Section 4. Vesting of Option. The Option shall vest and be exercisable
in accordance with the vesting schedule set forth in Schedule 1 or upon a Change
of Control as described in Section 11, subject to the provisions of Section 7
below. In the event that the Option shall terminate as set forth in Sections 5
and 7 below, the unvested portion of the Option shall be void and shall not be
exercisable by the Optionee. Notwithstanding the foregoing, the Optionee shall
vest in all Shares subject to the Option in the event of Optionee's death or
Disability.
Section 5. Expiration of the Option. This Option shall expire on the
date set forth in Schedule 1 (the "Expiration Date"), unless earlier terminated
as set forth in Section 7 below, and may not be exercised after such date.
Section 6. Conditions to Exercise of Option. Except as otherwise set
forth in Section 7 below, the Optionee may exercise this Option or any portion
thereof after it has vested and during his lifetime only while he is employed
by, or providing services to, the Company or a Subsidiary.
Section 7. Termination of Employment or Service. The Option shall
terminate upon the earlier of (a) its full exercise or (b) the Termination for
Cause of the Optionee's employment by, or service to, the Company or a
Subsidiary. In the event of the Optionee's Disability or death, the Option or
any unexercised, unvested portion thereof may be exercised by the Optionee (or
his estate, in the event of the Optionee's death) for up to 12 months after
Optionee's death, after which time the Option shall expire. In the event of the
Optionee's Termination Without Cause, the unexercised, vested portion of the
Option may be exercised by the Optionee for up to three months after the date of
the Termination Without Cause, and the unvested portion of the Option shall be
void and shall not be exercisable by the Optionee. Notwithstanding anything in
this Section 7 to the contrary, in no event may this Option be exercised
following the Expiration Date.
Section 8. Procedure for Exercise. The Option may be exercised for the
number of Shares specified in a written notice delivered to the Company at least
10 days prior to the date on which purchase is requested, accompanied by full
payment in cash, or, with the consent of the Committee, in Common Stock or by a
promissory note payable to the order of the Company which is acceptable to the
Committee. Such payment may, with the written consent of the Committee, also
consist of a cash down payment and delivery of such a promissory note in the
amount of the unpaid Option Exercise Price. In the discretion of and subject to
the conditions as may be established by the Committee, payment of the Option
Exercise Price may also be made by the Company retaining from the Shares to be
delivered upon exercise of the Option, or portion thereof, that number of Shares
having a Fair Market Value on the date of exercise equal to the Option Exercise
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Price of the number of Shares with respect to which the Optionee exercises the
Option, or portion thereof. Such payment may also be made in such other manner
as the Committee determines is appropriate, in its sole discretion, subject to
the restrictions set forth in this Agreement. If upon exercise of all or a
portion of the Option there shall be payable by the Company or a Subsidiary any
amount for income tax withholding, then, at the Company's option and as a
condition to such exercise, either (a) the Company shall reduce the number of
Shares to be issued to the Optionee by a number of Shares of Common Stock having
an aggregate Fair Market Value on the date of exercise equal to the amount of
such income tax withholding or (b) the Optionee shall pay such amount to the
Company or its Subsidiary, as applicable. If any applicable law requires the
Company to take any action with respect to the Shares specified in the written
notice of exercise, or if any action remains to be taken under the Articles of
Incorporation or Bylaws of the Company, as in effect at the time, to effect due
issuance of the Shares, then the Company shall take such action and the day for
delivery of such Shares shall be extended for the period necessary to take such
action.
Section 9. Exchange Provisions. The Committee may at any time offer to
exchange or buy out the Option for a payment in cash, Shares, other options or
other property based on such terms and conditions as the Committee shall
determine and communicate to the Optionee in writing at the time that such offer
is made.
Section 10. General Restrictions Applicable to this Option.
(a) Limits on Transfer of Options; Beneficiaries. The Option shall not
be transferable or assignable by the Optionee other than by will or by the laws
of descent and distribution (except to the Company or its Subsidiary under the
terms of this Agreement), and the Option shall be exercisable during the
Optionee's lifetime only by the Optionee. No right or interest of the Optionee
in the Option shall be pledged, encumbered or hypothecated to or in favor of any
party (other than the Company or a Subsidiary), or shall be subject to any lien,
obligation or liability of the Optionee to any party (other than the Company or
a Subsidiary); provided, however, that the Optionee may, in the manner
established by the Committee, designate a Beneficiary or Beneficiaries to
exercise the rights of the Optionee, and to receive any distribution, with
respect to the Option, upon the death of the Optionee. A Beneficiary, guardian,
legal representative, or other person claiming any rights under this Agreement
from or through the Optionee shall be subject to all terms and conditions of
this Agreement.
(b) Registration. The Company shall not be obligated to deliver any
Shares with respect to the Option in a transaction subject to regulatory
approval, registration or any other applicable requirement of federal or state
law, until such laws, regulations and contractual obligations of the Company
have been complied with in full.
(c) Share Certificates. All certificates for Shares delivered pursuant
to the exercise of the Option shall be subject to such stop-transfer order and
other restrictions as the Committee may deem advisable under applicable federal
or state laws and rules and regulations promulgated thereunder. The Committee
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may cause a legend or legends to be placed on any such certificates to make
appropriate reference to such restrictions or any other restrictions that may be
applicable to Shares. In addition, during any period in which the Option or
Shares are subject to restrictions under the terms of this Agreement, or during
any period during which delivery or receipt of Shares has been deferred by the
Committee or the Optionee, the Committee may require the Optionee to enter into
an agreement providing that certificates representing Shares issuable or issued
pursuant to this Agreement shall remain in the physical custody of the Company
or such other person or entity as the Committee may designate.
Section 11. Change of Control. As determined in its sole discretion by
the Committee in writing at any time after the grant of the Option and prior to
a Change of Control, in the event of a Change of Control and on the conditions
described in this Section, (a) Optionee's outstanding Option may be canceled,
and Optionee shall be paid in cash the Change of Control Price less the Option
Exercise Price multiplied by the number of shares which may be purchased under
the outstanding Option; (b) or any outstanding portion of the Option held by
Optionee may be immediately vested and exercisable and remain exercisable by the
Optionee as set forth in Schedule 1; or (c) the Committee may offer to exchange
the Option for a payment in Shares, other options or other property based on
such terms and conditions as the Committee shall determine and communicate in
writing to the Optionee.
Section 12. Adjustment Provisions. In the event that the Board shall
determine that any dividend or other distribution (whether in the form of cash,
Shares or other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, spinoff, combination, repurchase, or
share exchange, or other similar corporate transaction or event, affects the
Shares such that an adjustment is determined by the Committee to be appropriate
in order to prevent dilution or enlargement of the rights of the Optionee under
this Agreement, then the Committee shall, in such manner as it may deem
equitable, adjust any or all of (a) the number and kind of Shares which may
thereafter be issued in connection with the Option, and (b) the Option Exercise
Price or, if deemed appropriate, make provision for a cash payment with respect
to this Option.
Section 13. Miscellaneous.
(a) Changes to Options. The Committee may waive any conditions or
rights under, or amend, alter, suspend, discontinue, or terminate, this
Agreement; provided, however, that, without the consent of the Optionee, no such
amendment, alteration, suspension, discontinuation or termination of this Option
may impair the rights of Optionee under this Option.
7 of 10
<PAGE>
(b) No Shareholder Rights. The Option shall not confer on Optionee any
of the rights of a shareholder of the Company unless and until Shares are duly
issued or transferred to the Optionee in accordance with the terms of this
Agreement.
(c) Unfunded Status of Options. The Option is intended to constitute an
"unfunded" Option for incentive compensation. With respect to any payments not
yet made to the Optionee pursuant to this Agreement, nothing contained in this
Agreement shall give the Optionee any rights that are greater than those of a
general creditor of the Company; provided, however, that the Committee may
authorize the creation of trusts or make other arrangements to meet the
Company's obligations under this Agreement to deliver cash, Shares, other
options or other property pursuant to this Agreement, which trusts or other
arrangements shall be consistent with the "unfunded" status of the Option unless
the Committee determines otherwise with the written consent of the Optionee.
(d) Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to this Agreement. The Committee shall determine whether
cash, other options or other property shall be issued or paid in lieu of
fractional Shares or whether such fractional Shares or any rights thereto shall
be forfeited or otherwise eliminated.
(e) Compliance With Applicable Law; Governing Law. The validity,
construction and effect of this Agreement and the issuance of the Shares
pursuant to the exercise of the Option, are subject to compliance with all
applicable laws including, without limitation, laws governing withholding from
employees and nonresident aliens for income tax purposes. This Agreement shall
be governed by the laws of the State of Florida, without giving effect to
principles of conflicts of laws, and applicable federal law.
(f) No Obligations to Exercise Options. The granting of the Option
shall impose no obligation upon the Optionee to exercise the Option.
(g) No Right to Employment or Service. Nothing contained in this
Agreement, nor any action taken by the Committee, shall confer upon the Optionee
any right with respect to continuation of employment by, or service to, the
Company or a Subsidiary as an employee or in any other capacity nor interfere in
any way with the right of the Company or a Subsidiary to Terminate the
Optionee's employment or service at any time for Cause or Without Cause.
(h) Representations as to Purchase of Shares. As a condition of the
Company's obligation to issue Shares upon exercise of the Option, if requested
by the Company, the Optionee shall, concurrently with the delivery of the stock
certificate representing the Shares so purchased, give such written assurances
to the Company, in the form and substance that its counsel reasonably requests,
to the effect that the Optionee is acquiring the Shares for investment and
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without any present intention of reselling or redistributing the same in
violation of any applicable law, and the Company shall have the right to endorse
the certificate representing the Shares with an appropriate restrictive legend
as to compliance with such law. In the event that the Company registers the
Shares under the Securities Act of 1933, as amended, and any applicable state
laws, the issuance of such Shares shall not be subject to the restrictions
contained in this Section 13(h).
(i) Binding Agreement. This Agreement shall be binding upon and inure
to the benefit of all successors of the Company. This Agreement may not be
amended without the express written consent of both parties hereto.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed as of the Date of Grant set forth in Schedule 1.
GUARDIAN INTERNATIONAL, INC.
By: /s/RICHARD GINSBURG
-----------------------
Richard Ginsburg, President and
Chief Executive Officer
9 of 10
<PAGE>
<TABLE>
<CAPTION>
Schedule 1
Stock Option Agreement
----------------------
<S> <C>
Name of Optionee: David Heidecorn
Number of Shares: 75,000 (seventy five thousand) shares of Common Stock
Option Exercise Price Per Share: $0.81
Date of Grant: May 12, 1999,
Expiration Date: May 12, 2009,
Vesting Schedule: 15,000 shares of Common Stock May 12, 1999
15,000 shares of Common Stock May 12, 2000
15,000 shares of Common Stock May 12, 2001
15,000 shares of Common Stock May 12, 2002
15,000 shares of Common Stock May 12, 2003
</TABLE>
Upon Termination Without Cause by the Company of Optionee's employment
or service and provided that all Shares subject to this Option have not yet
vested, 50% of the unvested _______ shares of Common Stock shall vest
immediately as of the date of such termination.
The undersigned agrees to the terms and conditions of the Non-Qualified
Stock Option Agreement of which this Schedule 1 is a part.
Date Accepted: October 14, 1999
----------------
By: /s/DAVID HEIDECORN
------------------
Name: David Heidecorn
---------------
10 of 10
EXHIBIT 10(ff)
GUARDIAN INTERNATIONAL, INC.
Nonqualified Stock Option Agreement
-----------------------------------
1. Grant of Option. In accordance with and subject to the terms and
conditions of (a) the 1999 Stock Option Plan of Guardian International, Inc., as
it may be amended from time to time (the "Plan"), a copy of which is attached
hereto as Exhibit A, and (b) this Nonqualified Stock Option Agreement (the
"Agreement"), Guardian International, Inc., a Florida corporation (the
"Company"), grants to the optionee identified on Schedule 1 attached hereto (the
"Optionee") a nonqualified stock option (the "Option") to purchase the number of
shares (the "Shares") of its Class A Voting Common Stock, $.001 par value
("Common Stock"), set forth on Schedule 1, at the option exercise price set
forth in Schedule 1. Capitalized terms not otherwise defined in this Agreement
shall have the meanings set forth in the Plan.
2. Acceptance by Optionee. The exercise of the Option or any portion
thereof is conditioned upon acceptance by the Optionee of the terms and
conditions of this Agreement, as evidenced by the Optionee's execution of
Schedule 1 to this Agreement and the delivery of an executed copy of Schedule 1
to the Company.
3. Vesting of Option. The Option shall vest in accordance with the
vesting schedule set forth in Schedule 1. In the event that the Optionee's
employment with or service to the Company or a Subsidiary is terminated prior to
the date on which the Option or any portion thereof becomes vested, the
non-vested portion of the Option will be void, and will not become exercisable
by the Optionee.
4. Expiration of Option. The Option shall expire on the date set forth
in Schedule 1 (the "Expiration Date"), unless earlier terminated as set forth in
Section 6 below, and may not be exercised after such date.
5. Conditions to Exercise of Option. Except as otherwise set forth in
Section 6 below, the Optionee may exercise the Option or any portion thereof
after it has vested and during his lifetime only while he is employed by, or
provides service to, the Company or a Subsidiary or within a period of three
months from the date of cessation of employment or service to the Company or a
Subsidiary. To be entitled to exercise the Option, the Optionee must have
remained an employee of, or provided service to, the Company or a Subsidiary at
all times since the date of this Agreement and at the time the Optionee
exercises the Option or any portion thereof.
6. Termination of Employment or Service.
(i) Upon termination by the Company or a Subsidiary of the
Optionee's employment or service for Cause (as defined below), the Option shall
terminate as of the date of such termination and may not be exercised after such
date; (ii) upon the resignation by the Optionee of Optionee's employment or
service or upon termination by the Company or a Subsidiary of the Optionee's
employment or service other than for Cause, the Option shall terminate on the
date three months after Optionee's resignation or termination other than for
Cause; and (iii) upon termination of the Optionee's employment or service
because Optionee is permanently and totally disabled (as defined in Section
22(e)(3) of the Code) or Optionee dies, the Optionee (or Optionee's estate, in
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<PAGE>
the event of the Optionee's death) may exercise the Option or any unexercised,
vested portion thereof within the period ending on the sooner of (a) one year
after such termination, and (b) the Expiration Date, after which time any
unexercised portion of the Option shall expire.
For purposes of this Agreement, the Company shall have "Cause" to terminate the
Optionee's employment or service if (i) the Optionee engages in one or more acts
constituting a felony; (ii) the Optionee willfully engages in one or more acts
involving actual fraud; (iii) the Optionee willfully misappropriates Company
assets or willfully engages in misconduct either of which is materially
injurious to the Company or its affiliates; or (iv) the Optionee has materially
and willfully failed to perform his/her duties under this Agreement. For
purposes of this Agreement, the term "willful" means an act done, or omitted to
be done, by the Optionee in bad faith, provided that the Optionee knew or
reasonably should have known that the act or omission was not in the best
interest of the Company.
7. Procedure for Exercise. The Option may be exercised for the number
of Shares specified in a written notice delivered to the Company at least ten
days prior to the date on which purchase is requested, accompanied by full
payment in cash, or, with the consent of the Committee, in Common Stock or by a
promissory note payable to the order of the Company which is acceptable to the
Committee. Such payment may, with the consent of the Committee, also consist of
a cash down payment and delivery of such a promissory note in the amount of the
unpaid option exercise price. In the discretion of and subject to the conditions
as may be established by the Committee, payment of the option exercise price may
also be made by the Company retaining from the Shares to be delivered upon
exercise of the Option, or portion thereof, that number of Shares having a fair
market value on the date of exercise equal to the option exercise price of the
number of Shares with respect to which the Optionee exercises the Option, or
portion thereof. Such payment may also be made in such other manner as the
Committee determines is appropriate, in its sole discretion, subject to the
restrictions set forth in the Plan. If upon exercise of all or a portion of the
Option there shall be payable by the Company or a Subsidiary any amount for
income tax withholding, then, at the Company's option and as a condition to such
exercise, either (i) the Company shall reduce the number of Shares to be issued
to the Optionee by a number of Shares of Common Stock having an aggregate fair
market value on the date of exercise equal to the amount of such income tax
withholding or (ii) the Optionee shall pay such amount to the Company or its
Subsidiary, as applicable. If any applicable law requires the Company to take
any action with respect to the Shares specified in the written notice of
exercise, or if any action remains to be taken under the Articles of
Incorporation or Bylaws of the Company, as in effect at the time, to effect due
issuance of the Shares, then the Company shall take such action and the day for
delivery of such Shares shall be extended for the period necessary to take such
action. No Optionee shall have any of the rights of a shareholder of the Company
under any Option unless and until the Shares are issued or transferred to the
Optionee in accordance with the terms of the Award.
8. Non-Transferability of Stock Options. No Option granted hereunder to
the Optionee shall be transferable by the Optionee otherwise than by will, or by
the laws of descent and distribution, and such Option shall be exercisable,
during the lifetime of the Optionee, only by the Optionee; provided, however,
that in the event of the Optionee's disability, his or her legal representative
may exercise the Option on the Optionee's behalf.
9. No Right to Employment or Service. Nothing contained in the Plan or
in this Agreement, nor any action taken by the Committee, shall confer upon the
Optionee any right with respect to continuation of employment by, or service to,
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<PAGE>
the Company or a Subsidiary as an employee or in any other capacity nor
interfere in any way with the right of the Company or a Subsidiary to terminate
the Optionee's employment or service at any time with or without Cause.
10. Representations as to Purchase of Shares. As a condition of the
Company's obligation to issue Shares upon exercise of the Option, if requested
by the Company, the Optionee shall, concurrently with the delivery of the stock
certificate representing the Shares so purchased, give such written assurances
to the Company, in the form and substance that its counsel reasonably requests,
to the effect that the Optionee is acquiring the Shares for investment and
without any present intention of reselling or redistributing the same in
violation of any applicable law, and the Company shall have the right to endorse
the certificate representing the Shares with an appropriate restrictive legend
as to compliance with such law. In the event that the Company registers the
Shares under the Securities Act of 1933, as amended, and any applicable state
laws, the issuance of such Shares shall not be subject to the restrictions
contained in this paragraph 10.
11. Compliance With Applicable Law. The issuance of the Shares pursuant
to the exercise of this Option is subject to compliance with all applicable laws
including, without limitation laws governing withholding from employees and
nonresident aliens for income tax purposes. This Agreement shall be governed by
the laws of the State of Florida and the federal laws of the United States.
12. Incorporation of Plan Provisions. This Agreement is made pursuant
to the Plan and is subject to all the terms and provisions of the Plan as if the
same were fully set forth in this Agreement. The Optionee hereby acknowledges
that he has received, read and understood the copy of the Plan attached to this
Agreement. If there is a conflict between the terms of the Plan and the terms of
this Agreement, the terms of the Plan shall govern.
13. Miscellaneous. This Agreement shall be binding upon and inure to
the benefit of all successors of the Company. This Agreement may not be amended
without the express written consent of both parties hereto.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed as of the date of grant set forth in Schedule 1.
GUARDIAN INTERNATIONAL, INC.
By: /s/RICHARD GINSBURG
-------------------
Richard Ginsburg, President
and Chief Executive Officer
3
<PAGE>
<TABLE>
<CAPTION>
Schedule 1
Nonqualified Stock Option Agreement
-----------------------------------
<S> <C>
Name of Optionee: William Remington
Number of Shares: 75,000 (seventy-five thousand) shares of Common Stock
Option Exercise Price Per Share: $0.69
Date of Grant: September 13, 1999
Expiration Date: September 13, 2009
Vesting Schedule: 15,000 shares of Common Stock September 13, 1999
15,000 shares of Common Stock September 13, 2000
15,000 shares of Common Stock September 13, 2001
15,000 shares of Common Stock September 13, 2002
15,000 shares of Common Stock September 13, 2003
</TABLE>
The undersigned agrees to the terms and conditions of the Nonqualified
Stock Option Agreement of which this Schedule 1 is a part, and acknowledges
receipt of (a) the 1999 Stock Option Plan of Guardian International, Inc. and
(b) Guardian International, Inc.'s most recent Annual Report on Form 10-KSB.
Date Accepted: September 13, 1999
------------------
By: /s/WILLIAM REMINGTON
--------------------
Name: William Remington
-----------------
EXHIBIT 10(gg)
STOCK OPTION AGREEMENT
----------------------
Section 1. Grant of Option. Guardian International, Inc., a Florida
corporation (the "Company"), hereby grants to Richard Ginsburg (the "Optionee")
a stock option to purchase (the "Option") the number of shares (the "Shares") of
Common Stock, par value $.001 per share (the "Common Stock"), of the Company set
forth on Schedule 1, at the option exercise price per share ("Option Exercise
Price") set forth on Schedule 1.
Section 2. Definitions. In addition to the terms defined elsewhere in
this Agreement, the following terms shall have the following meanings for
purposes of this Agreement:
(a) "Beneficiary" means the person or persons designated in writing by
the Optionee as his beneficiary in respect of this Option or, in the absence of
such a designation or if the designated person or persons predecease the
Optionee, the person or persons who shall acquire the Optionee's rights in
respect of the Option by bequest or inheritance in accordance with the
applicable laws of descent and distribution. In order to be effective, the
Optionee's designation of a beneficiary must be on file with the Company before
the Optionee's death. Any such designation may be revoked and a new designation
substituted therefor by the Optionee at any time before his death without the
consent of the previously designated beneficiary.
(b) "Board" means the Board of Directors of the Company.
(c) "Change of Control" means:
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 50% or more of either (i) the then
outstanding shares of Common Stock (the "Outstanding Company Common
Stock") or (ii) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities");
provided, however, that the following acquisitions shall not constitute
a Change of Control: (x) any acquisition by the Company or a
Subsidiary, (y) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or a Subsidiary,
or (z) any acquisition by any company with respect to which, following
such acquisition, more than 50% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting
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power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all
of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such acquisition in
substantially the same proportions as their ownership, immediately
prior to such acquisition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be; or
(ii) Individuals who, as of the date of grant set forth on
Schedule 1, constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or
threatened solicitation to which Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act applies or other actual or
threatened solicitation of proxies or consents; or
(iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, with respect to
which all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such reorganization, merger or consolidation do not, following such
reorganization, merger or consolidation, beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding shares
of Common Stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such
reorganization, merger or consolidation of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may
be; or
(iv) Approval by the shareholders of the Company of (A) a
complete liquidation or dissolution of the Company or (B) the sale or
other disposition of all or substantially all of the assets of the
Company, other than to a corporation, with respect to which following
such sale or other disposition, more than 50% of, respectively, the
then outstanding shares of common stock of such corporation and the
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<PAGE>
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other disposition,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be. The term "the sale or other disposition
of all or substantially all of the assets of the Company" shall mean a
sale or other disposition transaction or series of related transactions
involving assets of the Company or of any direct or indirect Subsidiary
(including the stock of any direct or indirect Subsidiary) in which the
value of the assets or stock being sold or otherwise disposed of (as
measured by the purchase price being paid therefor or by such other
method as the Board determines is appropriate in a case where there is
no readily ascertainable purchase price) constitutes more than
two-thirds of the fair market value of the Company (as hereinafter
defined). The "fair market value of the Company" shall be the aggregate
market value of the then Outstanding Company Common Stock (on a fully
diluted basis) plus the aggregate market value of the Company's other
outstanding equity securities. The aggregate market value of the shares
of Outstanding Company Common Stock shall be determined by multiplying
the number of shares of Outstanding Company Common Stock (on a fully
diluted basis) outstanding on the date of the execution and delivery of
a definitive agreement with respect to the transaction or series of
related transactions (the "Transaction Date") by the average closing
price of the shares of Outstanding Company Common Stock for the five
trading days immediately preceding the Transaction Date. The aggregate
market value of any other equity securities of the Company shall be
determined in a manner similar to that prescribed in the immediately
preceding sentence for determining the aggregate market value of the
shares of Outstanding Company Common Stock or by such other method as
the Board shall determine is appropriate.
(d) "Change of Control Price" means the highest price per share paid in
any transaction reported on the securities exchange or trading system on which
shares of Common Stock are then primarily listed or traded, or paid or offered
in any transaction related to a Change of Control of the Company at any time
during the preceding 60-day period as determined by the Committee.
(e) "Code" means the Internal Revenue Code of 1986, as amended from
time to time. References to any provision of the Code shall be deemed to include
successor provisions thereto and regulations thereunder.
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<PAGE>
(f) "Committee" means the Compensation Committee of the Board, or such
other Board committee as may be designated by the Board to administer the
Company's stock option plans and stock option agreements, or any subcommittee of
either.
(g) "Common Stock" means the common stock, par value $.001 per share,
of the Company.
(h) "Disability" means the permanent and total disability of the
Optionee as defined in Section 22(e)(3) of the Code.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" means, with respect to Shares, the fair market
value of such Shares determined by such methods or procedures as shall be
established, in good faith, from time to time by the Committee. Unless otherwise
determined by the Committee, the fair market value of Shares as of any date
shall be the average of the closing bid and asked prices for Shares reported in
the OTC Bulletin Board(R), as applicable, for that date or, if no such prices
are so reported for that date, the average of such closing bid and asked prices
on the immediately preceding date for which such closing prices are so reported.
Fair market value shall be determined without regard to any restriction other
than a restriction which, by its terms, will never lapse. If Shares are listed
on any other exchange, the fair market value of Shares as of any date shall be
the closing sales price on that date of a Share as reported on that exchange as
reported in the composite transactions for such day by The Wall Street Journal
or, if such Shares were not traded on such date, on the next preceding day on
which such Shares were traded.
(k) "Subsidiary" means any corporation (other than the Company) with
respect to which the Company owns, directly or indirectly, 50% or more of the
total combined voting power of all classes of stock. In addition, any other
related entity may be designated by the Board as a Subsidiary, provided such
entity could be considered a subsidiary according to generally accepted
accounting principles.
(l) "Termination for Cause" or "Terminate for Cause" means the
termination of the Optionee's employment by, or service to, the Company because
the Committee determines, in its sole discretion, that (i) the Optionee engaged
in one or more acts constituting a felony; (ii) the Optionee willfully engaged
in one or more acts involving actual fraud; (iii) the Optionee willfully
misappropriated Company assets or willfully engaged in misconduct either of
which is materially injurious to the Company or its affiliates; or (iv) the
Optionee materially and willfully failed to perform his duties as an employee or
in any other capacity. For purposes of this Agreement, the term "willful" means
an act done, or omitted to be done, by the Optionee in bad faith, provided that
the Optionee knew or reasonably should have known that the act or omission was
not in the best interest of the Company.
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<PAGE>
(m) "Termination Without Cause" or "Terminate Without Cause" means that
the termination of the Optionee's employment or service occurred for a reason
other than Termination for Cause, death or Disability.
Section 3. Acceptance by Optionee. The exercise of the Option or any
portion thereof is conditioned upon acceptance by the Optionee of the terms and
conditions of this Agreement, as evidenced by the Optionee's execution of this
Agreement and the delivery of an executed copy of this Agreement together with
Schedule 1 to this Agreement to the Company.
Section 4. Vesting of Option. The Option shall vest and be exercisable
in accordance with the vesting schedule set forth in Schedule 1 or upon a Change
of Control as described in Section 11, subject to the provisions of Section 7
below. In the event that the Option shall terminate as set forth in Sections 5
and 7 below, the unvested portion of the Option shall be void and shall not be
exercisable by the Optionee. Notwithstanding the foregoing, the Optionee shall
vest in all Shares subject to the Option in the event of Optionee's death or
Disability.
Section 5. Expiration of the Option. This Option shall expire on the
date set forth in Schedule 1 (the "Expiration Date"), unless earlier terminated
as set forth in Section 7 below, and may not be exercised after such date.
Section 6. Conditions to Exercise of Option. Except as otherwise set
forth in Section 7 below, the Optionee may exercise this Option or any portion
thereof after it has vested and during his lifetime only while he is employed
by, or providing services to, the Company or a Subsidiary.
Section 7. Termination of Employment or Service. The Option shall
terminate upon the earlier of (a) its full exercise or (b) the Termination for
Cause of the Optionee's employment by, or service to, the Company or a
Subsidiary. In the event of the Optionee's Disability or death, the Option or
any unexercised, unvested portion thereof may be exercised by the Optionee (or
his estate, in the event of the Optionee's death) for up to 12 months after
Optionee's death, after which time the Option shall expire. In the event of the
Optionee's Termination Without Cause, the unexercised, vested portion of the
Option may be exercised by the Optionee for up to three months after the date of
the Termination Without Cause, and the unvested portion of the Option shall be
void and shall not be exercisable by the Optionee. Notwithstanding anything in
this Section 7 to the contrary, in no event may this Option be exercised
following the Expiration Date.
5
<PAGE>
Section 8. Procedure for Exercise. The Option may be exercised for the
number of Shares specified in a written notice delivered to the Company at least
10 days prior to the date on which purchase is requested, accompanied by full
payment in cash, or, with the consent of the Committee, in Common Stock or by a
promissory note payable to the order of the Company which is acceptable to the
Committee. Such payment may, with the written consent of the Committee, also
consist of a cash down payment and delivery of such a promissory note in the
amount of the unpaid Option Exercise Price. In the discretion of and subject to
the conditions as may be established by the Committee, payment of the Option
Exercise Price may also be made by the Company retaining from the Shares to be
delivered upon exercise of the Option, or portion thereof, that number of Shares
having a Fair Market Value on the date of exercise equal to the Option Exercise
Price of the number of Shares with respect to which the Optionee exercises the
Option, or portion thereof. Such payment may also be made in such other manner
as the Committee determines is appropriate, in its sole discretion, subject to
the restrictions set forth in this Agreement. If upon exercise of all or a
portion of the Option there shall be payable by the Company or a Subsidiary any
amount for income tax withholding, then, at the Company's option and as a
condition to such exercise, either (a) the Company shall reduce the number of
Shares to be issued to the Optionee by a number of Shares of Common Stock having
an aggregate Fair Market Value on the date of exercise equal to the amount of
such income tax withholding or (b) the Optionee shall pay such amount to the
Company or its Subsidiary, as applicable. If any applicable law requires the
Company to take any action with respect to the Shares specified in the written
notice of exercise, or if any action remains to be taken under the Articles of
Incorporation or Bylaws of the Company, as in effect at the time, to effect due
issuance of the Shares, then the Company shall take such action and the day for
delivery of such Shares shall be extended for the period necessary to take such
action.
Section 9. Exchange Provisions. The Committee may at any time offer to
exchange or buy out the Option for a payment in cash, Shares, other options or
other property based on such terms and conditions as the Committee shall
determine and communicate to the Optionee in writing at the time that such offer
is made.
Section 10. General Restrictions Applicable to this Option.
(a) Limits on Transfer of Options; Beneficiaries. The Option shall not
be transferable or assignable by the Optionee other than by will or by the laws
of descent and distribution (except to the Company or its Subsidiary under the
terms of this Agreement), and the Option shall be exercisable during the
Optionee's lifetime only by the Optionee. No right or interest of the Optionee
in the Option shall be pledged, encumbered or hypothecated to or in favor of any
party (other than the Company or a Subsidiary), or shall be subject to any lien,
obligation or liability of the Optionee to any party (other than the Company or
a Subsidiary); provided, however, that the Optionee may, in the manner
established by the Committee, designate a Beneficiary or Beneficiaries to
exercise the rights of the Optionee, and to receive any distribution, with
respect to the Option, upon the death of the Optionee. A Beneficiary, guardian,
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<PAGE>
legal representative, or other person claiming any rights under this Agreement
from or through the Optionee shall be subject to all terms and conditions of
this Agreement.
(b) Registration. The Company shall not be obligated to deliver any
Shares with respect to the Option in a transaction subject to regulatory
approval, registration or any other applicable requirement of federal or state
law, until such laws, regulations and contractual obligations of the Company
have been complied with in full.
(c) Share Certificates. All certificates for Shares delivered pursuant
to the exercise of the Option shall be subject to such stop-transfer order and
other restrictions as the Committee may deem advisable under applicable federal
or state laws and rules and regulations promulgated thereunder. The Committee
may cause a legend or legends to be placed on any such certificates to make
appropriate reference to such restrictions or any other restrictions that may be
applicable to Shares. In addition, during any period in which the Option or
Shares are subject to restrictions under the terms of this Agreement, or during
any period during which delivery or receipt of Shares has been deferred by the
Committee or the Optionee, the Committee may require the Optionee to enter into
an agreement providing that certificates representing Shares issuable or issued
pursuant to this Agreement shall remain in the physical custody of the Company
or such other person or entity as the Committee may designate.
Section 11. Change of Control. As determined in its sole discretion by
the Committee in writing at any time after the grant of the Option and prior to
a Change of Control, in the event of a Change of Control and on the conditions
described in this Section, (a) Optionee's outstanding Option may be canceled,
and Optionee shall be paid in cash the Change of Control Price less the Option
Exercise Price multiplied by the number of shares which may be purchased under
the outstanding Option; (b) or any outstanding portion of the Option held by
Optionee may be immediately vested and exercisable and remain exercisable by the
Optionee as set forth in Schedule 1; or (c) the Committee may offer to exchange
the Option for a payment in Shares, other options or other property based on
such terms and conditions as the Committee shall determine and communicate in
writing to the Optionee.
Section 12. Adjustment Provisions. In the event that the Board shall
determine that any dividend or other distribution (whether in the form of cash,
Shares or other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, spinoff, combination, repurchase, or
share exchange, or other similar corporate transaction or event, affects the
Shares such that an adjustment is determined by the Committee to be appropriate
in order to prevent dilution or enlargement of the rights of the Optionee under
this Agreement, then the Committee shall, in such manner as it may deem
7
<PAGE>
equitable, adjust any or all of (a) the number and kind of Shares which may
thereafter be issued in connection with the Option, and (b) the Option Exercise
Price or, if deemed appropriate, make provision for a cash payment with respect
to this Option.
Section 13. Miscellaneous.
(a) Changes to Options. The Committee may waive any conditions or
rights under, or amend, alter, suspend, discontinue, or terminate, this
Agreement; provided, however, that, without the consent of the Optionee, no such
amendment, alteration, suspension, discontinuation or termination of this Option
may impair the rights of Optionee under this Option.
(b) No Shareholder Rights. The Option shall not confer on Optionee any
of the rights of a shareholder of the Company unless and until Shares are duly
issued or transferred to the Optionee in accordance with the terms of this
Agreement.
(c) Unfunded Status of Options. The Option is intended to constitute an
"unfunded" Option for incentive compensation. With respect to any payments not
yet made to the Optionee pursuant to this Agreement, nothing contained in this
Agreement shall give the Optionee any rights that are greater than those of a
general creditor of the Company; provided, however, that the Committee may
authorize the creation of trusts or make other arrangements to meet the
Company's obligations under this Agreement to deliver cash, Shares, other
options or other property pursuant to this Agreement, which trusts or other
arrangements shall be consistent with the "unfunded" status of the Option unless
the Committee determines otherwise with the written consent of the Optionee.
(d) Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to this Agreement. The Committee shall determine whether
cash, other options or other property shall be issued or paid in lieu of
fractional Shares or whether such fractional Shares or any rights thereto shall
be forfeited or otherwise eliminated.
(e) Compliance With Applicable Law; Governing Law. The validity,
construction and effect of this Agreement and the issuance of the Shares
pursuant to the exercise of the Option, are subject to compliance with all
applicable laws including, without limitation, laws governing withholding from
employees and nonresident aliens for income tax purposes. This Agreement shall
be governed by the laws of the State of Florida, without giving effect to
principles of conflicts of laws, and applicable federal law.
8
<PAGE>
(f) No Obligations to Exercise Options. The granting of the Option
shall impose no obligation upon the Optionee to exercise the Option.
(g) No Right to Employment or Service. Nothing contained in this
Agreement, nor any action taken by the Committee, shall confer upon the Optionee
any right with respect to continuation of employment by, or service to, the
Company or a Subsidiary as an employee or in any other capacity nor interfere in
any way with the right of the Company or a Subsidiary to Terminate the
Optionee's employment or service at any time for Cause or Without Cause.
(h) Representations as to Purchase of Shares. As a condition of the
Company's obligation to issue Shares upon exercise of the Option, if requested
by the Company, the Optionee shall, concurrently with the delivery of the stock
certificate representing the Shares so purchased, give such written assurances
to the Company, in the form and substance that its counsel reasonably requests,
to the effect that the Optionee is acquiring the Shares for investment and
without any present intention of reselling or redistributing the same in
violation of any applicable law, and the Company shall have the right to endorse
the certificate representing the Shares with an appropriate restrictive legend
as to compliance with such law. In the event that the Company registers the
Shares under the Securities Act of 1933, as amended, and any applicable state
laws, the issuance of such Shares shall not be subject to the restrictions
contained in this Section 13(h).
(i) Binding Agreement. This Agreement shall be binding upon and inure
to the benefit of all successors of the Company. This Agreement may not be
amended without the express written consent of both parties hereto.
9
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date of grant set forth in Schedule 1.
GUARDIAN INTERNATIONAL, INC.
By: /s/ DARIUS G. NEVIN
-------------------
Darius G. Nevin, Vice President and
Chief Financial Officer
10
<PAGE>
<TABLE>
<CAPTION>
Schedule 1
Stock Option Agreement
<S> <C>
Name of Optionee: Richard Ginsburg
Number of Shares: 100,000 (one hundred thousand) shares of Common Stock
Option Exercise Price Per Share: $0.84
Date of Grant: October 15, 1997,
Expiration Date: October 15, 2007,
Vesting Schedule: 20,000 shares of Common Stock: October 15, 1997,
20,000 shares of Common Stock: October 15, 1998,
20,000 shares of Common Stock: October 15, 1999,
20,000 shares of Common Stock: October 15, 2000, and
20,000 shares of Common Stock: October 15, 2001.
</TABLE>
In the event of a conflict in any of the terms of this Agreement with the terms
of Optionee's employment agreement, if any, the terms of the employment
agreement shall govern.
The undersigned agrees to the terms and conditions of the Stock Option Agreement
of which this Schedule 1 is a part.
Date Accepted: December 22, 1999
-----------------
By: /s/RICHARD GINSBURG
-------------------
Name: Richard Ginsburg
EXHIBIT 10(hh)
STOCK OPTION AGREEMENT
Section 1. Grant of Option. Guardian International, Inc., a Florida
corporation (the "Company"), hereby grants to Darius G. Nevin (the "Optionee") a
stock option to purchase (the "Option") the number of shares (the "Shares") of
Common Stock, par value $.001 per share (the "Common Stock"), of the Company set
forth on Schedule 1, at the option exercise price per share ("Option Exercise
Price") set forth on Schedule 1.
Section 2. Definitions. In addition to the terms defined elsewhere in
this Agreement, the following terms shall have the following meanings for
purposes of this Agreement:
(a) "Beneficiary" means the person or persons designated in writing by
the Optionee as his beneficiary in respect of this Option or, in the absence of
such a designation or if the designated person or persons predecease the
Optionee, the person or persons who shall acquire the Optionee's rights in
respect of the Option by bequest or inheritance in accordance with the
applicable laws of descent and distribution. In order to be effective, the
Optionee's designation of a beneficiary must be on file with the Company before
the Optionee's death. Any such designation may be revoked and a new designation
substituted therefor by the Optionee at any time before his death without the
consent of the previously designated beneficiary.
(b) "Board" means the Board of Directors of the Company.
(c) "Change of Control" means:
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 50% or more of either (i) the then
outstanding shares of Common Stock (the "Outstanding Company Common
Stock") or (ii) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities");
provided, however, that the following acquisitions shall not constitute
a Change of Control: (x) any acquisition by the Company or a
Subsidiary, (y) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or a Subsidiary,
or (z) any acquisition by any company with respect to which, following
such acquisition, more than 50% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting
1
<PAGE>
power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all
of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such acquisition in
substantially the same proportions as their ownership, immediately
prior to such acquisition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be; or
(ii) Individuals who, as of the date of grant set forth on
Schedule 1, constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or
threatened solicitation to which Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act applies or other actual or
threatened solicitation of proxies or consents; or
(iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, with respect to
which all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such reorganization, merger or consolidation do not, following such
reorganization, merger or consolidation, beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding shares
of Common Stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such
reorganization, merger or consolidation of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may
be; or
(iv) Approval by the shareholders of the Company of (A) a
complete liquidation or dissolution of the Company or (B) the sale or
other disposition of all or substantially all of the assets of the
Company, other than to a corporation, with respect to which following
such sale or other disposition, more than 50% of, respectively, the
then outstanding shares of common stock of such corporation and the
2
<PAGE>
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other disposition,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be. The term "the sale or other disposition
of all or substantially all of the assets of the Company" shall mean a
sale or other disposition transaction or series of related transactions
involving assets of the Company or of any direct or indirect Subsidiary
(including the stock of any direct or indirect Subsidiary) in which the
value of the assets or stock being sold or otherwise disposed of (as
measured by the purchase price being paid therefor or by such other
method as the Board determines is appropriate in a case where there is
no readily ascertainable purchase price) constitutes more than
two-thirds of the fair market value of the Company (as hereinafter
defined). The "fair market value of the Company" shall be the aggregate
market value of the then Outstanding Company Common Stock (on a fully
diluted basis) plus the aggregate market value of the Company's other
outstanding equity securities. The aggregate market value of the shares
of Outstanding Company Common Stock shall be determined by multiplying
the number of shares of Outstanding Company Common Stock (on a fully
diluted basis) outstanding on the date of the execution and delivery of
a definitive agreement with respect to the transaction or series of
related transactions (the "Transaction Date") by the average closing
price of the shares of Outstanding Company Common Stock for the five
trading days immediately preceding the Transaction Date. The aggregate
market value of any other equity securities of the Company shall be
determined in a manner similar to that prescribed in the immediately
preceding sentence for determining the aggregate market value of the
shares of Outstanding Company Common Stock or by such other method as
the Board shall determine is appropriate.
(d) "Change of Control Price" means the highest price per share paid in
any transaction reported on the securities exchange or trading system on which
shares of Common Stock are then primarily listed or traded, or paid or offered
in any transaction related to a Change of Control of the Company at any time
during the preceding 60-day period as determined by the Committee.
(e) "Code" means the Internal Revenue Code of 1986, as amended from
time to time. References to any provision of the Code shall be deemed to include
successor provisions thereto and regulations thereunder.
3
<PAGE>
(f) "Committee" means the Compensation Committee of the Board, or such
other Board committee as may be designated by the Board to administer the
Company's stock option plans and stock option agreements, or any subcommittee of
either.
(g) "Common Stock" means the common stock, par value $.001 per share,
of the Company.
(h) "Disability" means the permanent and total disability of the
Optionee as defined in Section 22(e)(3) of the Code.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" means, with respect to Shares, the fair market
value of such Shares determined by such methods or procedures as shall be
established, in good faith, from time to time by the Committee. Unless otherwise
determined by the Committee, the fair market value of Shares as of any date
shall be the average of the closing bid and asked prices for Shares reported in
the OTC Bulletin Board(R), as applicable, for that date or, if no such prices
are so reported for that date, the average of such closing bid and asked prices
on the immediately preceding date for which such closing prices are so reported.
Fair market value shall be determined without regard to any restriction other
than a restriction which, by its terms, will never lapse. If Shares are listed
on any other exchange, the fair market value of Shares as of any date shall be
the closing sales price on that date of a Share as reported on that exchange as
reported in the composite transactions for such day by The Wall Street Journal
or, if such Shares were not traded on such date, on the next preceding day on
which such Shares were traded.
(k) "Subsidiary" means any corporation (other than the Company) with
respect to which the Company owns, directly or indirectly, 50% or more of the
total combined voting power of all classes of stock. In addition, any other
related entity may be designated by the Board as a Subsidiary, provided such
entity could be considered a subsidiary according to generally accepted
accounting principles.
(l) "Termination for Cause" or "Terminate for Cause" means the
termination of the Optionee's employment by, or service to, the Company because
the Committee determines, in its sole discretion, that (i) the Optionee engaged
in one or more acts constituting a felony; (ii) the Optionee willfully engaged
in one or more acts involving actual fraud; (iii) the Optionee willfully
misappropriated Company assets or willfully engaged in misconduct either of
which is materially injurious to the Company or its affiliates; or (iv) the
Optionee materially and willfully failed to perform his duties as an employee or
in any other capacity. For purposes of this Agreement, the term "willful" means
an act done, or omitted to be done, by the Optionee in bad faith, provided that
the Optionee knew or reasonably should have known that the act or omission was
not in the best interest of the Company.
4
<PAGE>
(m) "Termination Without Cause" or "Terminate Without Cause" means that
the termination of the Optionee's employment or service occurred for a reason
other than Termination for Cause, death or Disability.
Section 3. Acceptance by Optionee. The exercise of the Option or any
portion thereof is conditioned upon acceptance by the Optionee of the terms and
conditions of this Agreement, as evidenced by the Optionee's execution of this
Agreement and the delivery of an executed copy of this Agreement together with
Schedule 1 to this Agreement to the Company.
Section 4. Vesting of Option. The Option shall vest and be exercisable
in accordance with the vesting schedule set forth in Schedule 1 or upon a Change
of Control as described in Section 11, subject to the provisions of Section 7
below. In the event that the Option shall terminate as set forth in Sections 5
and 7 below, the unvested portion of the Option shall be void and shall not be
exercisable by the Optionee. Notwithstanding the foregoing, the Optionee shall
vest in all Shares subject to the Option in the event of Optionee's death or
Disability.
Section 5. Expiration of the Option. This Option shall expire on the
date set forth in Schedule 1 (the "Expiration Date"), unless earlier terminated
as set forth in Section 7 below, and may not be exercised after such date.
Section 6. Conditions to Exercise of Option. Except as otherwise set
forth in Section 7 below, the Optionee may exercise this Option or any portion
thereof after it has vested and during his lifetime only while he is employed
by, or providing services to, the Company or a Subsidiary.
Section 7. Termination of Employment or Service. The Option shall
terminate upon the earlier of (a) its full exercise or (b) the Termination for
Cause of the Optionee's employment by, or service to, the Company or a
Subsidiary. In the event of the Optionee's Disability or death, the Option or
any unexercised, unvested portion thereof may be exercised by the Optionee (or
his estate, in the event of the Optionee's death) for up to 12 months after
Optionee's death, after which time the Option shall expire. In the event of the
Optionee's Termination Without Cause, the unexercised, vested portion of the
Option may be exercised by the Optionee for up to three months after the date of
the Termination Without Cause, and the unvested portion of the Option shall be
void and shall not be exercisable by the Optionee. Notwithstanding anything in
this Section 7 to the contrary, in no event may this Option be exercised
following the Expiration Date.
5
<PAGE>
Section 8. Procedure for Exercise. The Option may be exercised for the
number of Shares specified in a written notice delivered to the Company at least
10 days prior to the date on which purchase is requested, accompanied by full
payment in cash, or, with the consent of the Committee, in Common Stock or by a
promissory note payable to the order of the Company which is acceptable to the
Committee. Such payment may, with the written consent of the Committee, also
consist of a cash down payment and delivery of such a promissory note in the
amount of the unpaid Option Exercise Price. In the discretion of and subject to
the conditions as may be established by the Committee, payment of the Option
Exercise Price may also be made by the Company retaining from the Shares to be
delivered upon exercise of the Option, or portion thereof, that number of Shares
having a Fair Market Value on the date of exercise equal to the Option Exercise
Price of the number of Shares with respect to which the Optionee exercises the
Option, or portion thereof. Such payment may also be made in such other manner
as the Committee determines is appropriate, in its sole discretion, subject to
the restrictions set forth in this Agreement. If upon exercise of all or a
portion of the Option there shall be payable by the Company or a Subsidiary any
amount for income tax withholding, then, at the Company's option and as a
condition to such exercise, either (a) the Company shall reduce the number of
Shares to be issued to the Optionee by a number of Shares of Common Stock having
an aggregate Fair Market Value on the date of exercise equal to the amount of
such income tax withholding or (b) the Optionee shall pay such amount to the
Company or its Subsidiary, as applicable. If any applicable law requires the
Company to take any action with respect to the Shares specified in the written
notice of exercise, or if any action remains to be taken under the Articles of
Incorporation or Bylaws of the Company, as in effect at the time, to effect due
issuance of the Shares, then the Company shall take such action and the day for
delivery of such Shares shall be extended for the period necessary to take such
action.
Section 9. Exchange Provisions. The Committee may at any time offer to
exchange or buy out the Option for a payment in cash, Shares, other options or
other property based on such terms and conditions as the Committee shall
determine and communicate to the Optionee in writing at the time that such offer
is made.
Section 10. General Restrictions Applicable to this Option.
(a) Limits on Transfer of Options; Beneficiaries. The Option shall not
be transferable or assignable by the Optionee other than by will or by the laws
of descent and distribution (except to the Company or its Subsidiary under the
terms of this Agreement), and the Option shall be exercisable during the
Optionee's lifetime only by the Optionee. No right or interest of the Optionee
in the Option shall be pledged, encumbered or hypothecated to or in favor of any
party (other than the Company or a Subsidiary), or shall be subject to any lien,
obligation or liability of the Optionee to any party (other than the Company or
a Subsidiary); provided, however, that the Optionee may, in the manner
established by the Committee, designate a Beneficiary or Beneficiaries to
exercise the rights of the Optionee, and to receive any distribution, with
6
<PAGE>
respect to the Option, upon the death of the Optionee. A Beneficiary, guardian,
legal representative, or other person claiming any rights under this Agreement
from or through the Optionee shall be subject to all terms and conditions of
this Agreement.
(b) Registration. The Company shall not be obligated to deliver any
Shares with respect to the Option in a transaction subject to regulatory
approval, registration or any other applicable requirement of federal or state
law, until such laws, regulations and contractual obligations of the Company
have been complied with in full.
(c) Share Certificates. All certificates for Shares delivered pursuant
to the exercise of the Option shall be subject to such stop-transfer order and
other restrictions as the Committee may deem advisable under applicable federal
or state laws and rules and regulations promulgated thereunder. The Committee
may cause a legend or legends to be placed on any such certificates to make
appropriate reference to such restrictions or any other restrictions that may be
applicable to Shares. In addition, during any period in which the Option or
Shares are subject to restrictions under the terms of this Agreement, or during
any period during which delivery or receipt of Shares has been deferred by the
Committee or the Optionee, the Committee may require the Optionee to enter into
an agreement providing that certificates representing Shares issuable or issued
pursuant to this Agreement shall remain in the physical custody of the Company
or such other person or entity as the Committee may designate.
Section 11. Change of Control. As determined in its sole discretion by
the Committee in writing at any time after the grant of the Option and prior to
a Change of Control, in the event of a Change of Control and on the conditions
described in this Section, (a) Optionee's outstanding Option may be canceled,
and Optionee shall be paid in cash the Change of Control Price less the Option
Exercise Price multiplied by the number of shares which may be purchased under
the outstanding Option; (b) or any outstanding portion of the Option held by
Optionee may be immediately vested and exercisable and remain exercisable by the
Optionee as set forth in Schedule 1; or (c) the Committee may offer to exchange
the Option for a payment in Shares, other options or other property based on
such terms and conditions as the Committee shall determine and communicate in
writing to the Optionee.
Section 12. Adjustment Provisions. In the event that the Board shall
determine that any dividend or other distribution (whether in the form of cash,
Shares or other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, spinoff, combination, repurchase, or
share exchange, or other similar corporate transaction or event, affects the
Shares such that an adjustment is determined by the Committee to be appropriate
in order to prevent dilution or enlargement of the rights of the Optionee under
this Agreement, then the Committee shall, in such manner as it may deem
7
<PAGE>
equitable, adjust any or all of (a) the number and kind of Shares which may
thereafter be issued in connection with the Option, and (b) the Option Exercise
Price or, if deemed appropriate, make provision for a cash payment with respect
to this Option.
Section 13. Miscellaneous.
(a) Changes to Options. The Committee may waive any conditions or
rights under, or amend, alter, suspend, discontinue, or terminate, this
Agreement; provided, however, that, without the consent of the Optionee, no such
amendment, alteration, suspension, discontinuation or termination of this Option
may impair the rights of Optionee under this Option.
(b) No Shareholder Rights. The Option shall not confer on Optionee any
of the rights of a shareholder of the Company unless and until Shares are duly
issued or transferred to the Optionee in accordance with the terms of this
Agreement.
(c) Unfunded Status of Options. The Option is intended to constitute an
"unfunded" Option for incentive compensation. With respect to any payments not
yet made to the Optionee pursuant to this Agreement, nothing contained in this
Agreement shall give the Optionee any rights that are greater than those of a
general creditor of the Company; provided, however, that the Committee may
authorize the creation of trusts or make other arrangements to meet the
Company's obligations under this Agreement to deliver cash, Shares, other
options or other property pursuant to this Agreement, which trusts or other
arrangements shall be consistent with the "unfunded" status of the Option unless
the Committee determines otherwise with the written consent of the Optionee.
(d) Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to this Agreement. The Committee shall determine whether
cash, other options or other property shall be issued or paid in lieu of
fractional Shares or whether such fractional Shares or any rights thereto shall
be forfeited or otherwise eliminated.
(e) Compliance With Applicable Law; Governing Law. The validity,
construction and effect of this Agreement and the issuance of the Shares
pursuant to the exercise of the Option, are subject to compliance with all
applicable laws including, without limitation, laws governing withholding from
employees and nonresident aliens for income tax purposes. This Agreement shall
be governed by the laws of the State of Florida, without giving effect to
principles of conflicts of laws, and applicable federal law.
8
<PAGE>
(f) No Obligations to Exercise Options. The granting of the Option
shall impose no obligation upon the Optionee to exercise the Option.
(g) No Right to Employment or Service. Nothing contained in this
Agreement, nor any action taken by the Committee, shall confer upon the Optionee
any right with respect to continuation of employment by, or service to, the
Company or a Subsidiary as an employee or in any other capacity nor interfere in
any way with the right of the Company or a Subsidiary to Terminate the
Optionee's employment or service at any time for Cause or Without Cause.
(h) Representations as to Purchase of Shares. As a condition of the
Company's obligation to issue Shares upon exercise of the Option, if requested
by the Company, the Optionee shall, concurrently with the delivery of the stock
certificate representing the Shares so purchased, give such written assurances
to the Company, in the form and substance that its counsel reasonably requests,
to the effect that the Optionee is acquiring the Shares for investment and
without any present intention of reselling or redistributing the same in
violation of any applicable law, and the Company shall have the right to endorse
the certificate representing the Shares with an appropriate restrictive legend
as to compliance with such law. In the event that the Company registers the
Shares under the Securities Act of 1933, as amended, and any applicable state
laws, the issuance of such Shares shall not be subject to the restrictions
contained in this Section 13(h).
(i) Binding Agreement. This Agreement shall be binding upon and inure
to the benefit of all successors of the Company. This Agreement may not be
amended without the express written consent of both parties hereto.
9
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date of grant set forth in Schedule 1.
GUARDIAN INTERNATIONAL, INC.
By: /s/RICHARD GINSBURG
-------------------
Richard Ginsburg, President and
Chief Executive Officer
10
<PAGE>
<TABLE>
<CAPTION>
Schedule 1
Stock Option Agreement
----------------------
<S> <C>
Name of Optionee: Darius G. Nevin
Number of Shares: 100,000 (one hundred thousand) shares of Common Stock
Option Exercise Price Per Share: $0.84
Date of Grant: October 15, 1997,
Expiration Date: October 15, 2007,
Vesting Schedule: 20,000 shares of Common Stock: October 15, 1997,
20,000 shares of Common Stock: October 15, 1998,
20,000 shares of Common Stock: October 15, 1999,
20,000 shares of Common Stock: October 15, 2000, and
20,000 shares of Common Stock: October 15, 2001.
</TABLE>
In the event of a conflict in any of the terms of this Agreement with the terms
of Optionee's employment agreement, if any, the terms of the employment
agreement shall govern.
The undersigned agrees to the terms and conditions of the Stock Option Agreement
of which this Schedule 1 is a part.
Date Accepted: December 7, 1999
----------------
By: /s/DARIUS G. NEVIN
------------------
Name: Darius G. Nevin
EXHIBIT 10(ii)
STOCK OPTION AGREEMENT
Section 1. Grant of Option. Guardian International, Inc., a Florida
corporation (the "Company"), hereby grants to Joel Cohen (the "Optionee") a
stock option to purchase (the "Option") the number of shares (the "Shares") of
Common Stock, par value $.001 per share (the "Common Stock"), of the Company set
forth on Schedule 1, at the option exercise price per share ("Option Exercise
Price") set forth on Schedule 1.
Section 2. Definitions. In addition to the terms defined elsewhere in
this Agreement, the following terms shall have the following meanings for
purposes of this Agreement:
(a) "Beneficiary" means the person or persons designated in writing by
the Optionee as his beneficiary in respect of this Option or, in the absence of
such a designation or if the designated person or persons predecease the
Optionee, the person or persons who shall acquire the Optionee's rights in
respect of the Option by bequest or inheritance in accordance with the
applicable laws of descent and distribution. In order to be effective, the
Optionee's designation of a beneficiary must be on file with the Company before
the Optionee's death. Any such designation may be revoked and a new designation
substituted therefor by the Optionee at any time before his death without the
consent of the previously designated beneficiary.
(b) "Board" means the Board of Directors of the Company.
(c) "Change of Control" means:
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 50% or more of either (i) the then
outstanding shares of Common Stock (the "Outstanding Company Common
Stock") or (ii) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities");
provided, however, that the following acquisitions shall not constitute
a Change of Control: (x) any acquisition by the Company or a
Subsidiary, (y) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or a Subsidiary,
or (z) any acquisition by any company with respect to which, following
such acquisition, more than 50% of, respectively, the then outstanding
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shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all
of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such acquisition in
substantially the same proportions as their ownership, immediately
prior to such acquisition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be; or
(ii) Individuals who, as of the date of grant set forth on
Schedule 1, constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or
threatened solicitation to which Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act applies or other actual or
threatened solicitation of proxies or consents; or
(iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, with respect to
which all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such reorganization, merger or consolidation do not, following such
reorganization, merger or consolidation, beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding shares
of Common Stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such
reorganization, merger or consolidation of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may
be; or
(iv) Approval by the shareholders of the Company of (A) a
complete liquidation or dissolution of the Company or (B) the sale or
other disposition of all or substantially all of the assets of the
Company, other than to a corporation, with respect to which following
such sale or other disposition, more than 50% of, respectively, the
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then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other disposition,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be. The term "the sale or other disposition
of all or substantially all of the assets of the Company" shall mean a
sale or other disposition transaction or series of related transactions
involving assets of the Company or of any direct or indirect Subsidiary
(including the stock of any direct or indirect Subsidiary) in which the
value of the assets or stock being sold or otherwise disposed of (as
measured by the purchase price being paid therefor or by such other
method as the Board determines is appropriate in a case where there is
no readily ascertainable purchase price) constitutes more than
two-thirds of the fair market value of the Company (as hereinafter
defined). The "fair market value of the Company" shall be the aggregate
market value of the then Outstanding Company Common Stock (on a fully
diluted basis) plus the aggregate market value of the Company's other
outstanding equity securities. The aggregate market value of the shares
of Outstanding Company Common Stock shall be determined by multiplying
the number of shares of Outstanding Company Common Stock (on a fully
diluted basis) outstanding on the date of the execution and delivery of
a definitive agreement with respect to the transaction or series of
related transactions (the "Transaction Date") by the average closing
price of the shares of Outstanding Company Common Stock for the five
trading days immediately preceding the Transaction Date. The aggregate
market value of any other equity securities of the Company shall be
determined in a manner similar to that prescribed in the immediately
preceding sentence for determining the aggregate market value of the
shares of Outstanding Company Common Stock or by such other method as
the Board shall determine is appropriate.
(d) "Change of Control Price" means the highest price per share paid in
any transaction reported on the securities exchange or trading system on which
shares of Common Stock are then primarily listed or traded, or paid or offered
in any transaction related to a Change of Control of the Company at any time
during the preceding 60-day period as determined by the Committee.
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(e) "Code" means the Internal Revenue Code of 1986, as amended from
time to time. References to any provision of the Code shall be deemed to include
successor provisions thereto and regulations thereunder.
(f) "Committee" means the Compensation Committee of the Board, or such
other Board committee as may be designated by the Board to administer the
Company's stock option plans and stock option agreements, or any subcommittee of
either.
(g) "Common Stock" means the common stock, par value $.001 per share,
of the Company.
(h) "Disability" means the permanent and total disability of the
Optionee as defined in Section 22(e)(3) of the Code.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" means, with respect to Shares, the fair market
value of such Shares determined by such methods or procedures as shall be
established, in good faith, from time to time by the Committee. Unless otherwise
determined by the Committee, the fair market value of Shares as of any date
shall be the average of the closing bid and asked prices for Shares reported in
the OTC Bulletin Board(R), as applicable, for that date or, if no such prices
are so reported for that date, the average of such closing bid and asked prices
on the immediately preceding date for which such closing prices are so reported.
Fair market value shall be determined without regard to any restriction other
than a restriction which, by its terms, will never lapse. If Shares are listed
on any other exchange, the fair market value of Shares as of any date shall be
the closing sales price on that date of a Share as reported on that exchange as
reported in the composite transactions for such day by The Wall Street Journal
or, if such Shares were not traded on such date, on the next preceding day on
which such Shares were traded.
(k) "Subsidiary" means any corporation (other than the Company) with
respect to which the Company owns, directly or indirectly, 50% or more of the
total combined voting power of all classes of stock. In addition, any other
related entity may be designated by the Board as a Subsidiary, provided such
entity could be considered a subsidiary according to generally accepted
accounting principles.
(l) "Termination for Cause" or "Terminate for Cause" means the
termination of the Optionee's employment by, or service to, the Company because
the Committee determines, in its sole discretion, that (i) the Optionee engaged
in one or more acts constituting a felony; (ii) the Optionee willfully engaged
in one or more acts involving actual fraud; (iii) the Optionee willfully
misappropriated Company assets or willfully engaged in misconduct either of
which is materially injurious to the Company or its affiliates; or (iv) the
Optionee materially and willfully failed to perform his duties as an employee or
in any other capacity. For purposes of this Agreement, the term "willful" means
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an act done, or omitted to be done, by the Optionee in bad faith, provided that
the Optionee knew or reasonably should have known that the act or omission was
not in the best interest of the Company.
(m) "Termination Without Cause" or "Terminate Without Cause" means that
the termination of the Optionee's employment or service occurred for a reason
other than Termination for Cause, death or Disability.
Section 3. Acceptance by Optionee. The exercise of the Option or any
portion thereof is conditioned upon acceptance by the Optionee of the terms and
conditions of this Agreement, as evidenced by the Optionee's execution of this
Agreement and the delivery of an executed copy of this Agreement together with
Schedule 1 to this Agreement to the Company.
Section 4. Vesting of Option. The Option shall vest and be exercisable
in accordance with the vesting schedule set forth in Schedule 1 or upon a Change
of Control as described in Section 11, subject to the provisions of Section 7
below. In the event that the Option shall terminate as set forth in Sections 5
and 7 below, the unvested portion of the Option shall be void and shall not be
exercisable by the Optionee. Notwithstanding the foregoing, the Optionee shall
vest in all Shares subject to the Option in the event of Optionee's death or
Disability.
Section 5. Expiration of the Option. This Option shall expire on the
date set forth in Schedule 1 (the "Expiration Date"), unless earlier terminated
as set forth in Section 7 below, and may not be exercised after such date.
Section 6. Conditions to Exercise of Option. Except as otherwise set
forth in Section 7 below, the Optionee may exercise this Option or any portion
thereof after it has vested and during his lifetime only while he is employed
by, or providing services to, the Company or a Subsidiary.
Section 7. Termination of Employment or Service. The Option shall
terminate upon the earlier of (a) its full exercise or (b) the Termination for
Cause of the Optionee's employment by, or service to, the Company or a
Subsidiary. In the event of the Optionee's Disability or death, the Option or
any unexercised, unvested portion thereof may be exercised by the Optionee (or
his estate, in the event of the Optionee's death) for up to 12 months after
Optionee's death, after which time the Option shall expire. In the event of the
Optionee's Termination Without Cause, the unexercised, vested portion of the
Option may be exercised by the Optionee for up to three months after the date of
the Termination Without Cause, and the unvested portion of the Option shall be
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void and shall not be exercisable by the Optionee. Notwithstanding anything in
this Section 7 to the contrary, in no event may this Option be exercised
following the Expiration Date.
Section 8. Procedure for Exercise. The Option may be exercised for the
number of Shares specified in a written notice delivered to the Company at least
10 days prior to the date on which purchase is requested, accompanied by full
payment in cash, or, with the consent of the Committee, in Common Stock or by a
promissory note payable to the order of the Company which is acceptable to the
Committee. Such payment may, with the written consent of the Committee, also
consist of a cash down payment and delivery of such a promissory note in the
amount of the unpaid Option Exercise Price. In the discretion of and subject to
the conditions as may be established by the Committee, payment of the Option
Exercise Price may also be made by the Company retaining from the Shares to be
delivered upon exercise of the Option, or portion thereof, that number of Shares
having a Fair Market Value on the date of exercise equal to the Option Exercise
Price of the number of Shares with respect to which the Optionee exercises the
Option, or portion thereof. Such payment may also be made in such other manner
as the Committee determines is appropriate, in its sole discretion, subject to
the restrictions set forth in this Agreement. If upon exercise of all or a
portion of the Option there shall be payable by the Company or a Subsidiary any
amount for income tax withholding, then, at the Company's option and as a
condition to such exercise, either (a) the Company shall reduce the number of
Shares to be issued to the Optionee by a number of Shares of Common Stock having
an aggregate Fair Market Value on the date of exercise equal to the amount of
such income tax withholding or (b) the Optionee shall pay such amount to the
Company or its Subsidiary, as applicable. If any applicable law requires the
Company to take any action with respect to the Shares specified in the written
notice of exercise, or if any action remains to be taken under the Articles of
Incorporation or Bylaws of the Company, as in effect at the time, to effect due
issuance of the Shares, then the Company shall take such action and the day for
delivery of such Shares shall be extended for the period necessary to take such
action.
Section 9. Exchange Provisions. The Committee may at any time offer to
exchange or buy out the Option for a payment in cash, Shares, other options or
other property based on such terms and conditions as the Committee shall
determine and communicate to the Optionee in writing at the time that such offer
is made.
Section 10. General Restrictions Applicable to this Option.
(a) Limits on Transfer of Options; Beneficiaries. The Option shall not
be transferable or assignable by the Optionee other than by will or by the laws
of descent and distribution (except to the Company or its Subsidiary under the
terms of this Agreement), and the Option shall be exercisable during the
Optionee's lifetime only by the Optionee. No right or interest of the Optionee
in the Option shall be pledged, encumbered or hypothecated to or in favor of any
party (other than the Company or a Subsidiary), or shall be subject to any lien,
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obligation or liability of the Optionee to any party (other than the Company or
a Subsidiary); provided, however, that the Optionee may, in the manner
established by the Committee, designate a Beneficiary or Beneficiaries to
exercise the rights of the Optionee, and to receive any distribution, with
respect to the Option, upon the death of the Optionee. A Beneficiary, guardian,
legal representative, or other person claiming any rights under this Agreement
from or through the Optionee shall be subject to all terms and conditions of
this Agreement.
(b) Registration. The Company shall not be obligated to deliver any
Shares with respect to the Option in a transaction subject to regulatory
approval, registration or any other applicable requirement of federal or state
law, until such laws, regulations and contractual obligations of the Company
have been complied with in full.
(c) Share Certificates. All certificates for Shares delivered pursuant
to the exercise of the Option shall be subject to such stop-transfer order and
other restrictions as the Committee may deem advisable under applicable federal
or state laws and rules and regulations promulgated thereunder. The Committee
may cause a legend or legends to be placed on any such certificates to make
appropriate reference to such restrictions or any other restrictions that may be
applicable to Shares. In addition, during any period in which the Option or
Shares are subject to restrictions under the terms of this Agreement, or during
any period during which delivery or receipt of Shares has been deferred by the
Committee or the Optionee, the Committee may require the Optionee to enter into
an agreement providing that certificates representing Shares issuable or issued
pursuant to this Agreement shall remain in the physical custody of the Company
or such other person or entity as the Committee may designate.
Section 11. Change of Control. As determined in its sole discretion by
the Committee in writing at any time after the grant of the Option and prior to
a Change of Control, in the event of a Change of Control and on the conditions
described in this Section, (a) Optionee's outstanding Option may be canceled,
and Optionee shall be paid in cash the Change of Control Price less the Option
Exercise Price multiplied by the number of shares which may be purchased under
the outstanding Option; (b) or any outstanding portion of the Option held by
Optionee may be immediately vested and exercisable and remain exercisable by the
Optionee as set forth in Schedule 1; or (c) the Committee may offer to exchange
the Option for a payment in Shares, other options or other property based on
such terms and conditions as the Committee shall determine and communicate in
writing to the Optionee.
Section 12. Adjustment Provisions. In the event that the Board shall
determine that any dividend or other distribution (whether in the form of cash,
Shares or other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, spinoff, combination, repurchase, or
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share exchange, or other similar corporate transaction or event, affects the
Shares such that an adjustment is determined by the Committee to be appropriate
in order to prevent dilution or enlargement of the rights of the Optionee under
this Agreement, then the Committee shall, in such manner as it may deem
equitable, adjust any or all of (a) the number and kind of Shares which may
thereafter be issued in connection with the Option, and (b) the Option Exercise
Price or, if deemed appropriate, make provision for a cash payment with respect
to this Option.
Section 13. Miscellaneous.
(a) Changes to Options. The Committee may waive any conditions or
rights under, or amend, alter, suspend, discontinue, or terminate, this
Agreement; provided, however, that, without the consent of the Optionee, no such
amendment, alteration, suspension, discontinuation or termination of this Option
may impair the rights of Optionee under this Option.
(b) No Shareholder Rights. The Option shall not confer on Optionee any
of the rights of a shareholder of the Company unless and until Shares are duly
issued or transferred to the Optionee in accordance with the terms of this
Agreement.
(c) Unfunded Status of Options. The Option is intended to constitute an
"unfunded" Option for incentive compensation. With respect to any payments not
yet made to the Optionee pursuant to this Agreement, nothing contained in this
Agreement shall give the Optionee any rights that are greater than those of a
general creditor of the Company; provided, however, that the Committee may
authorize the creation of trusts or make other arrangements to meet the
Company's obligations under this Agreement to deliver cash, Shares, other
options or other property pursuant to this Agreement, which trusts or other
arrangements shall be consistent with the "unfunded" status of the Option unless
the Committee determines otherwise with the written consent of the Optionee.
(d) Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to this Agreement. The Committee shall determine whether
cash, other options or other property shall be issued or paid in lieu of
fractional Shares or whether such fractional Shares or any rights thereto shall
be forfeited or otherwise eliminated.
(e) Compliance With Applicable Law; Governing Law. The validity,
construction and effect of this Agreement and the issuance of the Shares
pursuant to the exercise of the Option, are subject to compliance with all
applicable laws including, without limitation, laws governing withholding from
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employees and nonresident aliens for income tax purposes. This Agreement shall
be governed by the laws of the State of Florida, without giving effect to
principles of conflicts of laws, and applicable federal law.
(f) No Obligations to Exercise Options. The granting of the Option
shall impose no obligation upon the Optionee to exercise the Option.
(g) No Right to Employment or Service. Nothing contained in this
Agreement, nor any action taken by the Committee, shall confer upon the Optionee
any right with respect to continuation of employment by, or service to, the
Company or a Subsidiary as an employee or in any other capacity nor interfere in
any way with the right of the Company or a Subsidiary to Terminate the
Optionee's employment or service at any time for Cause or Without Cause.
(h) Representations as to Purchase of Shares. As a condition of the
Company's obligation to issue Shares upon exercise of the Option, if requested
by the Company, the Optionee shall, concurrently with the delivery of the stock
certificate representing the Shares so purchased, give such written assurances
to the Company, in the form and substance that its counsel reasonably requests,
to the effect that the Optionee is acquiring the Shares for investment and
without any present intention of reselling or redistributing the same in
violation of any applicable law, and the Company shall have the right to endorse
the certificate representing the Shares with an appropriate restrictive legend
as to compliance with such law. In the event that the Company registers the
Shares under the Securities Act of 1933, as amended, and any applicable state
laws, the issuance of such Shares shall not be subject to the restrictions
contained in this Section 13(h).
(i) Binding Agreement. This Agreement shall be binding upon and inure
to the benefit of all successors of the Company. This Agreement may not be
amended without the express written consent of both parties hereto.
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date of grant set forth in Schedule 1.
GUARDIAN INTERNATIONAL, INC.
By: /s/RICHARD GINSBURG
-----------------------
Richard Ginsburg, President and
Chief Executive Officer
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<TABLE>
<CAPTION>
Schedule 1
Stock Option Agreement
----------------------
<S> <C>
Name of Optionee: Joel Cohen
Number of Shares: 100,000 (one hundred thousand) shares of Common Stock
Option Exercise Price Per Share: $0.84
Date of Grant: February 23, 1998,
Expiration Date: February 23, 2008,
Vesting Schedule: 20,000 shares of Common Stock: February 23, 1999,
20,000 shares of Common Stock: February 23, 2000,
20,000 shares of Common Stock: February 23, 2001,
20,000 shares of Common Stock: February 23, 2002, and
20,000 shares of Common Stock: February 23, 2003.
</TABLE>
In the event of a conflict in any of the terms of this Agreement with the terms
of Optionee's employment agreement, if any, the terms of the employment
agreement shall govern.
The undersigned agrees to the terms and conditions of the Stock Option Agreement
of which this Schedule 1 is a part.
Date Accepted: October 4, 1999
----------------
By: /s/JOEL COHEN
-------------
Name: Joel Cohen
EXHIBIT 10(jj)
STOCK OPTION AGREEMENT
Section 1. Grant of Option. Guardian International, Inc., a Florida
corporation (the "Company"), hereby grants to Raymond Adams (the "Optionee") a
stock option to purchase (the "Option") the number of shares (the "Shares") of
Common Stock, par value $.001 per share (the "Common Stock"), of the Company set
forth on Schedule 1, at the option exercise price per share ("Option Exercise
Price") set forth on Schedule 1.
Section 2. Definitions. In addition to the terms defined elsewhere in
this Agreement, the following terms shall have the following meanings for
purposes of this Agreement:
(a) "Beneficiary" means the person or persons designated in writing by
the Optionee as his beneficiary in respect of this Option or, in the absence of
such a designation or if the designated person or persons predecease the
Optionee, the person or persons who shall acquire the Optionee's rights in
respect of the Option by bequest or inheritance in accordance with the
applicable laws of descent and distribution. In order to be effective, the
Optionee's designation of a beneficiary must be on file with the Company before
the Optionee's death. Any such designation may be revoked and a new designation
substituted therefor by the Optionee at any time before his death without the
consent of the previously designated beneficiary.
(b) "Board" means the Board of Directors of the Company.
(c) "Change of Control" means:
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 50% or more of either (i) the then
outstanding shares of Common Stock (the "Outstanding Company Common
Stock") or (ii) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities");
provided, however, that the following acquisitions shall not constitute
a Change of Control: (x) any acquisition by the Company or a
Subsidiary, (y) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or a Subsidiary,
or (z) any acquisition by any company with respect to which, following
such acquisition, more than 50% of, respectively, the then outstanding
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shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all
of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such acquisition in
substantially the same proportions as their ownership, immediately
prior to such acquisition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be; or
(ii) Individuals who, as of the date of grant set forth on
Schedule 1, constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or
threatened solicitation to which Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act applies or other actual or
threatened solicitation of proxies or consents; or
(iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, with respect to
which all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such reorganization, merger or consolidation do not, following such
reorganization, merger or consolidation, beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding shares
of Common Stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such
reorganization, merger or consolidation of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may
be; or
(iv) Approval by the shareholders of the Company of (A) a
complete liquidation or dissolution of the Company or (B) the sale or
other disposition of all or substantially all of the assets of the
Company, other than to a corporation, with respect to which following
such sale or other disposition, more than 50% of, respectively, the
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then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other disposition,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be. The term "the sale or other disposition
of all or substantially all of the assets of the Company" shall mean a
sale or other disposition transaction or series of related transactions
involving assets of the Company or of any direct or indirect Subsidiary
(including the stock of any direct or indirect Subsidiary) in which the
value of the assets or stock being sold or otherwise disposed of (as
measured by the purchase price being paid therefor or by such other
method as the Board determines is appropriate in a case where there is
no readily ascertainable purchase price) constitutes more than
two-thirds of the fair market value of the Company (as hereinafter
defined). The "fair market value of the Company" shall be the aggregate
market value of the then Outstanding Company Common Stock (on a fully
diluted basis) plus the aggregate market value of the Company's other
outstanding equity securities. The aggregate market value of the shares
of Outstanding Company Common Stock shall be determined by multiplying
the number of shares of Outstanding Company Common Stock (on a fully
diluted basis) outstanding on the date of the execution and delivery of
a definitive agreement with respect to the transaction or series of
related transactions (the "Transaction Date") by the average closing
price of the shares of Outstanding Company Common Stock for the five
trading days immediately preceding the Transaction Date. The aggregate
market value of any other equity securities of the Company shall be
determined in a manner similar to that prescribed in the immediately
preceding sentence for determining the aggregate market value of the
shares of Outstanding Company Common Stock or by such other method as
the Board shall determine is appropriate.
(d) "Change of Control Price" means the highest price per share paid in
any transaction reported on the securities exchange or trading system on which
shares of Common Stock are then primarily listed or traded, or paid or offered
in any transaction related to a Change of Control of the Company at any time
during the preceding 60-day period as determined by the Committee.
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(e) "Code" means the Internal Revenue Code of 1986, as amended from
time to time. References to any provision of the Code shall be deemed to include
successor provisions thereto and regulations thereunder.
(f) "Committee" means the Compensation Committee of the Board, or such
other Board committee as may be designated by the Board to administer the
Company's stock option plans and stock option agreements, or any subcommittee of
either.
(g) "Common Stock" means the common stock, par value $.001 per share,
of the Company.
(h) "Disability" means the permanent and total disability of the
Optionee as defined in Section 22(e)(3) of the Code.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" means, with respect to Shares, the fair market
value of such Shares determined by such methods or procedures as shall be
established, in good faith, from time to time by the Committee. Unless otherwise
determined by the Committee, the fair market value of Shares as of any date
shall be the average of the closing bid and asked prices for Shares reported in
the OTC Bulletin Board(R), as applicable, for that date or, if no such prices
are so reported for that date, the average of such closing bid and asked prices
on the immediately preceding date for which such closing prices are so reported.
Fair market value shall be determined without regard to any restriction other
than a restriction which, by its terms, will never lapse. If Shares are listed
on any other exchange, the fair market value of Shares as of any date shall be
the closing sales price on that date of a Share as reported on that exchange as
reported in the composite transactions for such day by The Wall Street Journal
or, if such Shares were not traded on such date, on the next preceding day on
which such Shares were traded.
(k) "Subsidiary" means any corporation (other than the Company) with
respect to which the Company owns, directly or indirectly, 50% or more of the
total combined voting power of all classes of stock. In addition, any other
related entity may be designated by the Board as a Subsidiary, provided such
entity could be considered a subsidiary according to generally accepted
accounting principles.
(l) "Termination for Cause" or "Terminate for Cause" means the
termination of the Optionee's employment by, or service to, the Company because
the Committee determines, in its sole discretion, that (i) the Optionee engaged
in one or more acts constituting a felony; (ii) the Optionee willfully engaged
in one or more acts involving actual fraud; (iii) the Optionee willfully
misappropriated Company assets or willfully engaged in misconduct either of
4
<PAGE>
which is materially injurious to the Company or its affiliates; or (iv) the
Optionee materially and willfully failed to perform his duties as an employee or
in any other capacity. For purposes of this Agreement, the term "willful" means
an act done, or omitted to be done, by the Optionee in bad faith, provided that
the Optionee knew or reasonably should have known that the act or omission was
not in the best interest of the Company.
(m) "Termination Without Cause" or "Terminate Without Cause" means that
the termination of the Optionee's employment or service occurred for a reason
other than Termination for Cause, death or Disability.
Section 3. Acceptance by Optionee. The exercise of the Option or any
portion thereof is conditioned upon acceptance by the Optionee of the terms and
conditions of this Agreement, as evidenced by the Optionee's execution of this
Agreement and the delivery of an executed copy of this Agreement together with
Schedule 1 to this Agreement to the Company.
Section 4. Vesting of Option. The Option shall vest and be exercisable
in accordance with the vesting schedule set forth in Schedule 1 or upon a Change
of Control as described in Section 11, subject to the provisions of Section 7
below. In the event that the Option shall terminate as set forth in Sections 5
and 7 below, the unvested portion of the Option shall be void and shall not be
exercisable by the Optionee. Notwithstanding the foregoing, the Optionee shall
vest in all Shares subject to the Option in the event of Optionee's death or
Disability.
Section 5. Expiration of the Option. This Option shall expire on the
date set forth in Schedule 1 (the "Expiration Date"), unless earlier terminated
as set forth in Section 7 below, and may not be exercised after such date.
Section 6. Conditions to Exercise of Option. Except as otherwise set
forth in Section 7 below, the Optionee may exercise this Option or any portion
thereof after it has vested and during his lifetime only while he is employed
by, or providing services to, the Company or a Subsidiary.
Section 7. Termination of Employment or Service. The Option shall
terminate upon the earlier of (a) its full exercise or (b) the Termination for
Cause of the Optionee's employment by, or service to, the Company or a
Subsidiary. In the event of the Optionee's Disability or death, the Option or
any unexercised, unvested portion thereof may be exercised by the Optionee (or
his estate, in the event of the Optionee's death) for up to 12 months after
Optionee's death, after which time the Option shall expire. In the event of the
Optionee's Termination Without Cause, the unexercised, vested portion of the
Option may be exercised by the Optionee for up to three months after the date of
the Termination Without Cause, and the unvested portion of the Option shall be
5
<PAGE>
void and shall not be exercisable by the Optionee. Notwithstanding anything in
this Section 7 to the contrary, in no event may this Option be exercised
following the Expiration Date.
Section 8. Procedure for Exercise. The Option may be exercised for the
number of Shares specified in a written notice delivered to the Company at least
10 days prior to the date on which purchase is requested, accompanied by full
payment in cash, or, with the consent of the Committee, in Common Stock or by a
promissory note payable to the order of the Company which is acceptable to the
Committee. Such payment may, with the written consent of the Committee, also
consist of a cash down payment and delivery of such a promissory note in the
amount of the unpaid Option Exercise Price. In the discretion of and subject to
the conditions as may be established by the Committee, payment of the Option
Exercise Price may also be made by the Company retaining from the Shares to be
delivered upon exercise of the Option, or portion thereof, that number of Shares
having a Fair Market Value on the date of exercise equal to the Option Exercise
Price of the number of Shares with respect to which the Optionee exercises the
Option, or portion thereof. Such payment may also be made in such other manner
as the Committee determines is appropriate, in its sole discretion, subject to
the restrictions set forth in this Agreement. If upon exercise of all or a
portion of the Option there shall be payable by the Company or a Subsidiary any
amount for income tax withholding, then, at the Company's option and as a
condition to such exercise, either (a) the Company shall reduce the number of
Shares to be issued to the Optionee by a number of Shares of Common Stock having
an aggregate Fair Market Value on the date of exercise equal to the amount of
such income tax withholding or (b) the Optionee shall pay such amount to the
Company or its Subsidiary, as applicable. If any applicable law requires the
Company to take any action with respect to the Shares specified in the written
notice of exercise, or if any action remains to be taken under the Articles of
Incorporation or Bylaws of the Company, as in effect at the time, to effect due
issuance of the Shares, then the Company shall take such action and the day for
delivery of such Shares shall be extended for the period necessary to take such
action.
Section 9. Exchange Provisions. The Committee may at any time offer to
exchange or buy out the Option for a payment in cash, Shares, other options or
other property based on such terms and conditions as the Committee shall
determine and communicate to the Optionee in writing at the time that such offer
is made.
Section 10. General Restrictions Applicable to this Option.
(a) Limits on Transfer of Options; Beneficiaries. The Option shall not
be transferable or assignable by the Optionee other than by will or by the laws
of descent and distribution (except to the Company or its Subsidiary under the
terms of this Agreement), and the Option shall be exercisable during the
Optionee's lifetime only by the Optionee. No right or interest of the Optionee
in the Option shall be pledged, encumbered or hypothecated to or in favor of any
6
<PAGE>
party (other than the Company or a Subsidiary), or shall be subject to any lien,
obligation or liability of the Optionee to any party (other than the Company or
a Subsidiary); provided, however, that the Optionee may, in the manner
established by the Committee, designate a Beneficiary or Beneficiaries to
exercise the rights of the Optionee, and to receive any distribution, with
respect to the Option, upon the death of the Optionee. A Beneficiary, guardian,
legal representative, or other person claiming any rights under this Agreement
from or through the Optionee shall be subject to all terms and conditions of
this Agreement.
(b) Registration. The Company shall not be obligated to deliver any
Shares with respect to the Option in a transaction subject to regulatory
approval, registration or any other applicable requirement of federal or state
law, until such laws, regulations and contractual obligations of the Company
have been complied with in full.
(c) Share Certificates. All certificates for Shares delivered pursuant
to the exercise of the Option shall be subject to such stop-transfer order and
other restrictions as the Committee may deem advisable under applicable federal
or state laws and rules and regulations promulgated thereunder. The Committee
may cause a legend or legends to be placed on any such certificates to make
appropriate reference to such restrictions or any other restrictions that may be
applicable to Shares. In addition, during any period in which the Option or
Shares are subject to restrictions under the terms of this Agreement, or during
any period during which delivery or receipt of Shares has been deferred by the
Committee or the Optionee, the Committee may require the Optionee to enter into
an agreement providing that certificates representing Shares issuable or issued
pursuant to this Agreement shall remain in the physical custody of the Company
or such other person or entity as the Committee may designate.
Section 11. Change of Control. As determined in its sole discretion by
the Committee in writing at any time after the grant of the Option and prior to
a Change of Control, in the event of a Change of Control and on the conditions
described in this Section, (a) Optionee's outstanding Option may be canceled,
and Optionee shall be paid in cash the Change of Control Price less the Option
Exercise Price multiplied by the number of shares which may be purchased under
the outstanding Option; (b) or any outstanding portion of the Option held by
Optionee may be immediately vested and exercisable and remain exercisable by the
Optionee as set forth in Schedule 1; or (c) the Committee may offer to exchange
the Option for a payment in Shares, other options or other property based on
such terms and conditions as the Committee shall determine and communicate in
writing to the Optionee.
7
<PAGE>
Section 12. Adjustment Provisions. In the event that the Board shall
determine that any dividend or other distribution (whether in the form of cash,
Shares or other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, spinoff, combination, repurchase, or
share exchange, or other similar corporate transaction or event, affects the
Shares such that an adjustment is determined by the Committee to be appropriate
in order to prevent dilution or enlargement of the rights of the Optionee under
this Agreement, then the Committee shall, in such manner as it may deem
equitable, adjust any or all of (a) the number and kind of Shares which may
thereafter be issued in connection with the Option, and (b) the Option Exercise
Price or, if deemed appropriate, make provision for a cash payment with respect
to this Option.
Section 13. Miscellaneous.
(a) Changes to Options. The Committee may waive any conditions or
rights under, or amend, alter, suspend, discontinue, or terminate, this
Agreement; provided, however, that, without the consent of the Optionee, no such
amendment, alteration, suspension, discontinuation or termination of this Option
may impair the rights of Optionee under this Option.
(b) No Shareholder Rights. The Option shall not confer on Optionee any
of the rights of a shareholder of the Company unless and until Shares are duly
issued or transferred to the Optionee in accordance with the terms of this
Agreement.
(c) Unfunded Status of Options. The Option is intended to constitute an
"unfunded" Option for incentive compensation. With respect to any payments not
yet made to the Optionee pursuant to this Agreement, nothing contained in this
Agreement shall give the Optionee any rights that are greater than those of a
general creditor of the Company; provided, however, that the Committee may
authorize the creation of trusts or make other arrangements to meet the
Company's obligations under this Agreement to deliver cash, Shares, other
options or other property pursuant to this Agreement, which trusts or other
arrangements shall be consistent with the "unfunded" status of the Option unless
the Committee determines otherwise with the written consent of the Optionee.
(d) Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to this Agreement. The Committee shall determine whether
cash, other options or other property shall be issued or paid in lieu of
fractional Shares or whether such fractional Shares or any rights thereto shall
be forfeited or otherwise eliminated.
8
<PAGE>
(e) Compliance With Applicable Law; Governing Law. The validity,
construction and effect of this Agreement and the issuance of the Shares
pursuant to the exercise of the Option, are subject to compliance with all
applicable laws including, without limitation, laws governing withholding from
employees and nonresident aliens for income tax purposes. This Agreement shall
be governed by the laws of the State of Florida, without giving effect to
principles of conflicts of laws, and applicable federal law.
(f) No Obligations to Exercise Options. The granting of the Option
shall impose no obligation upon the Optionee to exercise the Option.
(g) No Right to Employment or Service. Nothing contained in this
Agreement, nor any action taken by the Committee, shall confer upon the Optionee
any right with respect to continuation of employment by, or service to, the
Company or a Subsidiary as an employee or in any other capacity nor interfere in
any way with the right of the Company or a Subsidiary to Terminate the
Optionee's employment or service at any time for Cause or Without Cause.
(h) Representations as to Purchase of Shares. As a condition of the
Company's obligation to issue Shares upon exercise of the Option, if requested
by the Company, the Optionee shall, concurrently with the delivery of the stock
certificate representing the Shares so purchased, give such written assurances
to the Company, in the form and substance that its counsel reasonably requests,
to the effect that the Optionee is acquiring the Shares for investment and
without any present intention of reselling or redistributing the same in
violation of any applicable law, and the Company shall have the right to endorse
the certificate representing the Shares with an appropriate restrictive legend
as to compliance with such law. In the event that the Company registers the
Shares under the Securities Act of 1933, as amended, and any applicable state
laws, the issuance of such Shares shall not be subject to the restrictions
contained in this Section 13(h).
(i) Binding Agreement. This Agreement shall be binding upon and inure
to the benefit of all successors of the Company. This Agreement may not be
amended without the express written consent of both parties hereto.
9
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date of grant set forth in Schedule 1.
GUARDIAN INTERNATIONAL, INC.
By: /s/RICHARD GINSBURG
-------------------
Richard Ginsburg, President and
Chief Executive Officer
10
<PAGE>
<TABLE>
<CAPTION>
Schedule 1
Stock Option Agreement
----------------------
<S> <C>
Name of Optionee: Raymond Adams
Number of Shares: 100,000 (one hundred thousand) shares of Common Stock
Option Exercise Price Per Share: $3.25
Date of Grant: February 23, 1998,
Expiration Date: February 23, 2008,
Vesting Schedule: 33,333 shares of Common Stock: February 23, 1999,
33,333 shares of Common Stock: February 23, 2000, and
33,334 shares of Common Stock: February 23, 2001.
</TABLE>
In the event of a conflict in any of the terms of this Agreement with the terms
of Optionee's employment agreement, if any, the terms of the employment
agreement shall govern.
The undersigned agrees to the terms and conditions of the Stock Option Agreement
of which this Schedule 1 is a part.
Date Accepted: September 30, 1999
------------------
By: /s/ RAYMOND ADAMS
-----------------
Name: Raymond Adams
Exhibit 21 List of Subsidiaries
--------------------
Mutual Central Alarm Services, Inc.
New York, New York.
Stat-Land Burglar Alarm Systems & Devices, Inc.
Staten Island, New York
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 578,034
<SECURITIES> 0
<RECEIVABLES> 3,445,673
<ALLOWANCES> 549,356
<INVENTORY> 0
<CURRENT-ASSETS> 4,243,997
<PP&E> 5,390,742
<DEPRECIATION> 1,288,932
<TOTAL-ASSETS> 40,507,593
<CURRENT-LIABILITIES> 7,670,472
<BONDS> 10,608,280
0
10
<COMMON> 9,019
<OTHER-SE> 4,165,960
<TOTAL-LIABILITY-AND-EQUITY> 40,507,593
<SALES> 6,605,175
<TOTAL-REVENUES> 18,233,485
<CGS> 5,259,775
<TOTAL-COSTS> 7,378,556
<OTHER-EXPENSES> 6,714,440
<LOSS-PROVISION> 452,450
<INTEREST-EXPENSE> 1,050,922
<INCOME-PRETAX> (3,041,655)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,041,655)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,041,655)
<EPS-BASIC> (0.52)
<EPS-DILUTED> 0
</TABLE>
