STOCK SUBSCRIPTION AGREEMENT
STOCK SUBSCRIPTION AGREEMENT dated as of October 21, 1998, between
Guardian International, Inc., a Nevada corporation (the "Company"), and
Westar Security, Inc., a Kansas corporation (the "Purchaser").
RECITALS
1. Westar Capital, Inc., a Kansas corporation ("Westar Capital") and
affiliate of the Purchaser, acquired 2,500,000 shares (the "Acquired Common
Stock") of the Company's Class A Voting Common Stock, $.001 par value per
share (the "Common Stock") and 1,875,000 shares of the Company's Series A
9 3/4% Convertible Cumulative Preferred Stock, $.001 par value per share (the
"Series A Preferred Stock"), pursuant to the Stock Subscription Agreement
dated as of October 14, 1997 between Westar Capital and the Company (the
"Prior Subscription Agreement"). On November 24, 1997, Westar Capital
assigned its rights and obligations under the Prior Subscription Agreement,
and all of its right, title and interest in and to the Acquired Common Stock
and Series A Preferred Stock, to the Purchaser. The Purchaser later acquired
1,600,000 shares of Series B 10 1/2% Convertible Cumulative Preferred Stock,
$.001 par value per share (the "Series B Preferred Stock") pursuant to the
Stock Subscription Agreement dated as of February 23, 1998 between the
Company and the Purchaser. To date, the Company has issued 162,132 shares of
Series A Preferred Stock as PIK dividends on the Series A Preferred Stock and
104,232 shares of Series B Preferred Stock as PIK dividends on the Series B
Preferred Stock (collectively, the "PIK Shares"). From time to time, the
Purchaser has acquired in the open market, and as of the date hereof
currently owns, an aggregate of 480,000 shares of Common Stock (the "Open
Market Common Stock"). Collectively, the Open Market Common Stock, the
Acquired Common Stock, the Series A Preferred Stock, the Series B Preferred
Stock and the PIK Shares are hereinafter collectively referred to as the
"Exchange Securities."
2. The Purchaser desires to acquire from the Company, and the
Company wishes to sell to the Purchaser, a series of redeemable preferred
stock to be issued by the Company in exchange for the Exchange Securities, on
the terms and conditions set forth below.
3. In addition, the Purchaser desires to acquire from the Company,
and the Company wishes to sell to the Purchaser, a series of convertible
preferred stock to be issued by the Company for cash, on the terms and
conditions set forth below.
AGREEMENT
1. AUTHORIZATION OF SECURITIES; PURCHASE PRICE.
1.1 REDEEMABLE PREFERRED STOCK. The Company has authorized the
issuance and sale to the Purchaser of 16,397 shares of Series C 7.00%
Redeemable Cumulative Preferred Stock, par value $.001 per share (the
"Redeemable Preferred"), for the surrender to the Company for cancellation of
the Exchange Securities. The Redeemable Preferred will have the terms and
conditions set forth in the Certificate of Designations attached hereto as
EXHIBIT A (the "Redeemable Preferred Certificate of Designations").
1.2 CONVERTIBLE PREFERRED STOCK. The Company has authorized the
issuance and sale to the Purchaser of 10,000 shares of Series D 6.00%
Convertible Cumulative Preferred Stock, par value $.001 per share (the
"Convertible Preferred" and together with the Redeemable Preferred, the
"Preferred Shares"), for an aggregate cash purchase price of $10,000,000 (the
"Cash Consideration"). The Convertible Preferred will have the terms and
conditions set forth in the Certificate of Designations attached hereto as
EXHIBIT B (the "Convertible Preferred Certificate of Designations," and
together with the Redeemable Preferred Certificate of Designations, the
"Certificates of Designations").
2. CLOSING. The Company will sell to the Purchaser and, subject to
the terms and conditions hereof, the Purchaser will purchase from the
Company, at the closing provided for in this Section 2, the Preferred Shares.
The closing of the sale and purchase of the Preferred Shares (the "Closing")
shall take place on the date hereof at the offices of the Company at 0000 X.
00xx Xxxxxxx, Xxxxxxxxx, Xxxxxxx, 00000 or by mail if the parties agree,
unless otherwise agreed between the Purchaser and the Company. At the
Closing, the Company will deliver to the Purchaser one or more stock
certificates (as the Purchaser may designate), each dated the date of the
Closing (the "Closing Date") and duly registered in the Purchaser's name (or
in the name of any nominee the Purchaser designates to hold the Preferred
Shares for its account), representing (i) the Redeemable Preferred against
the surrender for cancellation to the Company of all certificates
representing the Exchange Securities together with stock powers duly executed
in blank, and (ii) the Convertible Preferred against the receipt of the Cash
Consideration from the Purchaser by wire transfer of immediately available
funds payable to the Company.
3. DELIVERIES AT CLOSING.
3.1 OPINIONS OF COUNSEL. The Purchaser shall have received an
opinion from Steel Xxxxxx & Xxxxx LLP, counsel to the Company, dated the
Closing Date and substantially in the form of EXHIBIT C, and an opinion from
Xxxxxx Xxxxxx & Xxxxxxx, Nevada counsel to the Company, dated the Closing
Date in the form of EXHIBIT D. The Company shall have received an opinion
from Xxxxxxx X. Xxxxxxx, Esq. and Xxxxx X. Xxxxxxxx, Esq., counsel to the
Purchaser, dated the Closing Date and substantially in the form of EXHIBIT E.
-2-
3.2 WAIVERS AND CONSENTS. All waivers and consents required to be
obtained by the Company in connection with the Closing shall be satisfactory
in substance and form to the Purchaser, including but not limited to the
consent of Xxxxxx Financial, Inc. ("Xxxxxx").
3.3 CORPORATE ACTION.
a. The Company shall have delivered to the Purchaser certified
copies of (a) the resolutions duly adopted by an independent committee (the
"Independent Committee") of the board of directors of the Company (the "Board
of Directors") comprised of directors who shall not be officers or employees
of the Company or its affiliates or of the Purchaser or its affiliates or
related by blood or marriage to or affiliated with any of Xxxxxx Xxxxxxxx,
Xxxxxxx Xxxxxxxx, Xxxxxxx Xxxxxxxx or Xxxxxx Xxxxxxxx (collectively, the
"Ginsburgs") and by the full board of directors of the Company authorizing
the execution, delivery and performance of this Agreement, the issuance and
sale of the Preferred Shares, the reservation for issuance upon conversion of
the Convertible Preferred of an aggregate of 6,000,000 shares of Common
Stock, and the consummation of all other transactions contemplated by this
Agreement, (b) the Articles of Incorporation (the "Articles") and Bylaws of
the Company, each as amended to date, (c) a certificate executed by an
officer of the Company confirming the incumbency of the Company's officers
and (d) such other items as reasonably requested by the Purchaser or its
counsel.
b. The Purchaser shall have delivered to the Company a
secretary's certificate confirming the authority of Xxxx X. Xxxxx,
Secretary/Treasurer of the Purchaser, to execute and deliver this Agreement,
all the agreements referenced herein and any instrument required to
consummate the sale and purchase of the Preferred Shares.
3.4 CERTIFICATES OF DESIGNATIONS. The Certificates of Designations
shall have been filed with the Secretary of State of the State of Nevada and
shall be in full force and effect under the laws of such state.
3.5 SURRENDER AND CANCELLATION OF EXCHANGE SECURITIES. The Purchaser
shall surrender for cancellation to the Company all certificates representing
the Exchange Securities, along with stock powers duly executed in blank. The
Certificate of Amendment to the Articles reflecting the cancellation of the
Series A Preferred Stock, the Series B Preferred Stock and the PIK Shares
shall be filed with the Secretary of State of the State of Nevada and shall
be in full force and effect under the laws of such state.
3.6 FAIRNESS OPINION. Xxxxxxx Xxxxx & Associates, Inc. shall have
delivered a fairness opinion stating that the transactions contemplated
hereby are fair from a financial point of view to the shareholders of the
Company. The Company shall bear all costs associated with such fairness
opinion.
-3-
3.7 OTHER AGREEMENTS.
(a) The Stockholders Agreement attached hereto as EXHIBIT F
(the "Stockholders Agreement") shall have been executed and delivered by the
Company, the Ginsburgs and the Purchaser, and the Stockholders Agreement
dated as of October 21, 1997 by and among the Company, Westar Capital and the
Ginsburgs shall have been terminated and of no further force and effect.
(b) The Registration Rights Agreement attached hereto as
EXHIBIT G (the "Registration Rights Agreement") shall have been executed and
delivered by the Company and the Purchaser, and the Registration Rights
Agreement dated October 21, 1997 between the Company and Westar Capital, as
amended by the Amendment to Registration Rights Agreement dated as of
February 23, 1998, shall have been terminated and of no further force and
effect.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants that:
4.1 ORGANIZATION; GOOD STANDING; VALID AND BINDING. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Nevada and has all requisite corporate power and
authority to own and operate its properties, to carry on its business as now
conducted and proposed to be conducted, to enter into this Agreement, to
issue and sell the Preferred Shares, and to carry out the terms hereof. Each
of the Company's subsidiaries is duly organized, validly existing and in good
standing under the laws of its state of incorporation. Each of the Company
and its subsidiaries is duly qualified as a foreign corporation to do
business, and is in good standing in each jurisdiction where the character of
its properties owned or leased or the nature of its activities makes
qualification necessary, except where failure to so qualify would not
individually or in the aggregate have a material adverse effect on the
business, assets, liabilities, prospects, results of operations or condition,
financial or otherwise, of the Company and its subsidiaries, taken as a whole
("Material Adverse Effect"). The execution, delivery and performance of this
Agreement, the Stockholders Agreement, the Registration Rights Agreement and
all other agreements contemplated hereby to which the Company is a party have
been duly authorized by the Company. Each of such agreements has been duly
and validly executed and delivered by the Company and constitutes a valid and
binding obligation of the Company, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, liquidation, moratorium,
receivership, conservatorship, readjustment of debts, fraudulent conveyance
or similar laws affecting the enforcement of creditors rights generally and
general equitable principles. The Preferred Shares have been duly authorized,
and when issued as contemplated by the Agreement, will be validly issued,
fully paid, non-assessable and entitled to the rights and privileges of the
applicable Certificate of Designations relating thereto. When shares of
Common Stock shall be issued pursuant to the terms of the Convertible
Preferred Certificate of
-4-
Designations, such shares shall be duly authorized, validly issued, fully
paid and non-assessable shares of Common Stock.
4.2 INFORMATION FURNISHED; BUSINESS. The Company has furnished the
Purchaser with true and complete copies of (a) the Company's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1997, as amended to date,
(b) any and all of the Company's Current Reports on Form 8-K which have been
filed with the Securities and Exchange Commission ("SEC") since December 31,
1997, (c) the Company's Quarterly Reports on Form 10-QSB for the quarters
ended March 31, 1998 and June 30, 1998, as amended to date, (d) unaudited
financial statements for the quarter ended September 30, 1998 and (e) all
other reports and documents filed by the Company with the SEC under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), since
January 1, 1998 (collectively, "SEC Documents"). The financial statements
contained in the SEC Documents have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
(except as stated in the notes thereto), and present fairly (consisting, in
the case of unaudited statements, only of normal recurring adjustments) the
financial condition of the Company as of their respective dates and the
results of operations and cash flows for the respective periods. Except as
disclosed in the SEC Documents or as set forth on Schedule 4.2, since January
1, 1998 there has been no Material Adverse Effect. Since January 1, 1998, the
Company has made all filings required to be made in compliance with the
Exchange Act, and such filings, as modified by subsequent reports filed
pursuant to the Exchange Act conformed in all material respects to the
requirements of the Exchange Act, and the rules and regulations of the SEC
thereunder, and such filings did not contain any untrue statement of a
material fact and did not omit to state any material fact necessary in order
to make the statements contained therein not misleading in light of the
circumstances under which such statements were made as of their respective
dates of filing.
4.3 LITIGATION. Except as disclosed on Schedule 4.3, there are no
actions, proceedings or investigations nor any judgment, decree, injunction,
rule, or order pending or threatened to which the Company or any of its
subsidiaries is a party or which question or affect the validity of this
Agreement, the Preferred Shares or any action taken or to be taken pursuant
hereto, or which might have, either in any case or in the aggregate, a
Material Adverse Effect, or in any liabilities on the part of the Company
which, either in any case or in the aggregate, are or might be material and
which liabilities have not been disclosed in the notes to the Company's
financial statements contained in the SEC Documents and adequately reserved
for on the Company's balance sheet at September 30, 1998.
4.4 COMPLIANCE WITH OTHER INSTRUMENTS. Except for consents and
approvals required to be obtained as set forth on Schedule 4.4, the
execution, delivery and performance of this Agreement, the Stockholders
Agreement, the Registration Rights Agreement and the other agreements
contemplated hereby, the issuance of the Preferred Shares and the application
of proceeds from the sale of the Convertible Preferred do not and will not
result in any violation of or be in conflict with or constitute (with or
without due notice or lapse of time or both) a default or result in an
adverse event under any term of the Articles of Incorporation, as amended
(the
-5-
"Charter"), or By-Laws of the Company or its subsidiaries, or of any material
agreement, instrument, obligation, license, judgment, decree, order, statute,
rule or governmental regulation applicable to the Company or its
subsidiaries, its assets or properties or result in the imposition or
creation of any lien or encumbrance upon any asset or property of the Company
or its subsidiaries. The Company is not in violation of any term of its
Charter or By-Laws, or of any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation which is material to the business,
operations, prospects or affairs of the Company or its subsidiaries.
4.5 GOVERNMENTAL CONSENTS. Except for such consents, approvals,
authorizations, registrations or qualifications as are set forth on Schedule
4.5, neither the Company nor any of its subsidiaries is or will be required
to obtain any consent, approval or authorization of, or to make any
declaration or filing with, any governmental authority as a condition
precedent to the valid execution and delivery of this Agreement and the other
agreements contemplated hereby, and the valid offer, issue and delivery of
the Preferred Shares, including Blue Sky laws. Schedule 4.5 correctly sets
forth the names and jurisdictions of domicile of each subsidiary of the
Company.
4.6 CAPITAL STOCK. Schedule 4.6 correctly describes each class of
the authorized capital stock of the Company on the date hereof after giving
effect to the transactions contemplated hereby, including, as to each such
class, the number of shares thereof authorized and the number of shares
thereof issued and outstanding. Except as disclosed on schedule 4.6, all of
the outstanding shares of the Company are validly authorized and issued and
outstanding, fully paid and non-assessable and free of preemptive rights. The
Company and its subsidiaries do not have any outstanding securities
convertible into or exchangeable for capital stock and no outstanding
options, warrants or other rights to subscribe for or purchase, or agreements
for the purchase from or the issue or sale by the Company or its subsidiaries
of, capital stock, other than as set forth in such Schedule 4.6, which
correctly describes each such security, right or agreement and the number of
shares subject thereto, whether or not reserved for on the books of the
Company. Schedule 4.6 also sets forth all shares of capital stock reserved or
required for issuance pursuant to any employee benefit, stock option or other
similar plan.
4.7 DISCLOSURE. There is no fact known to the Company which
materially adversely affects the business, operations, affairs, prospects,
properties, assets or condition of the Company which has not been set forth
in this Agreement or in the schedules attached hereto. No representation or
warranty contained in this Agreement, the other agreements contemplated
hereby, or the Schedules hereto or thereto, or any officer's certificate
furnished hereunder or thereunder, at the date hereof, or at the Closing
Date, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading.
4.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
SEC Documents or as set forth on the Schedules attached hereto, since
September 30, 1998, the Company has conducted its business in the ordinary
course consistent with past practices in all material respects.
-6-
4.9 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on
Schedule 4.9 and in the SEC Documents, and except for liabilities incurred
after September 30, 1998 in the ordinary course of business and consistent
with past practices, the Company does not have any liabilities or obligations
(whether absolute, accrued, contingent or otherwise) of a nature required by
GAAP to be reflected in a consolidated balance sheet (or reflected in the
notes thereto).
4.10 NO DEFAULT. Except as set forth on Schedule 4.10 hereto,
neither the Company nor any of its subsidiaries is in violation, breach of,
or default under (and no event has occurred which with notice or the lapse of
time or both would constitute a violation, breach of, or default under) any
term, condition or provision of (i) any material note, bond, mortgage, deed
of trust, security interests, indenture, license, contract, agreement, plan
or other instrument or obligation to which the Company or any such subsidiary
is a party or by which the Company or any such subsidiary or any of their
respective properties or assets may be bound or affected, (ii) any order,
writ, injunction, decree, statute, rule or regulation applicable to the
Company, any subsidiary of the Company or any of their respective properties
or assets or (iii) any registration, license, permit or other consent or
approval of any governmental agency, except in each case for breaches,
defaults or violations which would not individually or in the aggregate have
a material adverse effect on the business, assets, liabilities, results of
operations or condition, financial or otherwise, of the Company and its
subsidiaries, taken as a whole.
4.11 NO GENERAL SOLICITATION. The Preferred Shares have not been
offered or sold by any form of general solicitation or general advertising
which would result in the violation of the federal securities laws or any
applicable state securities laws.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
represents and warrants that:
5.1 NO DISTRIBUTION. The Purchaser is acquiring the Preferred Shares
for its own account with the present intention of holding such securities for
purposes of investment, and it has no intention of selling such securities in
a public distribution in violation of the federal securities laws or any
applicable state securities laws. The Purchaser understands that the
Preferred Shares are "restricted securities" as defined in Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), and have not been
registered pursuant to the provisions of the Securities Act, in as much as
the proposed purchase of the Preferred Shares is taking place in a
transaction not involving any public offering.
5.2 SOPHISTICATION. The Purchaser is knowledgeable, experienced and
sophisticated in financial and business matters and is able to evaluate the
risks and benefits of the investment in the Preferred Shares.
5.3 ECONOMIC RISK. The Purchaser is able to bear the economic risk
of its investment in the Preferred Shares for an indefinite period of time
because the Preferred Shares have not
-7-
been registered under the Securities Act and, therefore, cannot be sold
unless subsequently registered under the Securities Act or an exemption from
such registration is available.
5.4 ACCESS TO INFORMATION. The Purchaser has been furnished or
otherwise had full access to such other information concerning the Company
and its subsidiaries as it has requested and that was necessary to enable the
Purchaser to evaluate the merits and risks of an investment in the Company,
and after a review of this information, has had an opportunity to ask
questions and receive answers concerning the financial condition and business
of the Company and the terms and conditions of the securities purchased
hereunder, and has had access to and has obtained such additional information
concerning the Company and the securities as it deemed necessary. The
Purchaser has carefully reviewed the information furnished pursuant to
Section 4.2.
5.5 ACCREDITED INVESTOR. The Purchaser is an "accredited investor"
as defined in Rule 501(a) of Regulation D promulgated under the Securities
Act.
5.6 RESTRICTIVE LEGEND.
a. The Purchaser understands that the certificate(s)
representing the Preferred Shares (and any Common Stock issued upon
conversion of the Convertible Preferred or as dividends on the Preferred
Shares) will bear a restrictive legend thereon (the "Restrictive Legend") as
follows:
"The securities represented by this certificate have been acquired
directly or indirectly from the Company without being registered under
the Securities Act of 1933, as amended (the "Act"), or any other
applicable securities laws, and are restricted securities as that term
is defined under Rule 144 promulgated under the Act. These securities
may not be sold, pledged, transferred, distributed or otherwise
disposed of in any manner unless they are registered under the Act and
all other applicable securities laws, or unless the request for
transfer is accompanied by a favorable opinion of counsel, reasonably
satisfactory to the Company, stating that the transfer will not result
in a violation of the Act and all other applicable state securities
law."
b. REMOVAL OF RESTRICTIVE LEGEND. Subject to the provisions
of the Stockholders Agreement and this Section 5.6(b), Preferred Shares are
transferable in (i) a public offering registered under the Securities Act (a
"Public Offering"), (ii) in a transaction pursuant to Rule 144, or (iii) any
other legally available means of transfer under federal and state securities
laws. In connection with the transfer of any Preferred Shares pursuant to
subsections (ii) and (iii) above, a holder must first satisfy the following
conditions: (i) delivery of written notice to the Company describing in
reasonable detail the transfer or proposed transfer, (ii) together with a
favorable opinion of counsel which (to the Company's reasonable satisfaction)
is knowledgeable in securities laws matters stating that the transfer will
not result in a violation of the Act and all
-8-
other applicable state securities law and that such transfer of Preferred
Shares may be effected without registration of such Preferred Shares under
the Securities Act. Upon satisfaction of such conditions to the reasonable
satisfaction of the Company, the holder shall submit certificates
representing the number of Preferred Shares to be so transferred to the
Company and the Company shall reissue certificates for such Preferred Shares
without the Restrictive Legend.
5.7 ADDITIONAL PURCHASER REPRESENTATIONS. The Purchaser is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. The execution, delivery and performance of
this Agreement, the Stockholders Agreement, the Registration Rights Agreement
and all other agreements contemplated hereby to which such Purchaser is a
party have been duly authorized by the Purchaser. Each of such agreements
constitutes a valid and binding obligation of the Purchaser, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
liquidation, moratorium, receivership, conservatorship, readjustment of
debts, fraudulent conveyance or similar laws affecting the enforcement of
creditors rights generally and general equitable principles. The Purchaser
has made or obtained all material third party and governmental filings,
consents and approvals to be made or obtained prior to the Closing by the
Purchaser in connection with the consummation of the transactions hereunder.
The execution and delivery by the Purchaser of the Agreement and the
fulfillment of and compliance with the respective terms thereof by the
Purchaser do not and shall not (a) conflict with or result in a breach of the
terms, conditions or provisions of, (b) constitute a default under or (c)
result in a violation of the organizational documents of the Purchaser or any
material agreement or instrument to which Purchaser is subject.
5.8 REPRESENTATIONS REGARDING EXCHANGE SECURITIES. The Purchaser has
good and marketable title to the Exchange Securities, free and clear of all
liens, encumbrances, claims, options or other agreements.
6. INDEMNIFICATION.
6.1 INDEMNIFICATION BY THE COMPANY. In addition to all other sums
due hereunder or provided for in this Agreement and any other rights and
remedies available to Purchaser under applicable law, the Company agrees to
hold harmless and indemnify the Purchaser and all directors, officers and
controlling persons of the Purchaser (within the meaning of Section 15 of the
Securities Act or Section 20 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (individually referred to as an "Indemnified
Person") from and against any losses, claims, damages, costs and expenses,
and liabilities (including attorneys' fees and expenses of investigation)
incurred by each Indemnified Person pursuant to any action, suit, proceeding
or investigation against any one or more of the Company and such Indemnified
Person, and arising out of or in connection with a breach by the Company of
any agreement, representation, warranty, covenant or obligation contained in
this Agreement and any and all costs and expenses incurred by any Indemnified
Person in connection with the enforcement of its rights under this Agreement
and the other agreements contemplated hereby. The Company further agrees,
promptly upon demand by an Indemnified Person, from time to time, to
reimburse
-9-
each Indemnified Person for, or pay, any loss, claim, damage, liability or
expense as to which the Company has indemnified the Indemnified Person
pursuant to this Agreement.
6.2 INDEMNIFICATION BY THE PURCHASER. In addition to all other sums
due hereunder or provided for in this Agreement, the Purchaser agrees to hold
harmless and indemnify the Company and all directors, officers and
controlling persons of the Company (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) (individually referred to
as an "Indemnified Person") from and against any losses, claims, damages,
costs and expenses and liabilities (including attorneys' fees and expenses of
investigation) incurred by each Indemnified Person pursuant to any action,
suit, proceeding or investigation against any one or more of the Purchaser
and such Indemnified Person, and arising out of or in connection with a
breach by the Purchaser of any agreement, representation, warranty, covenant
or obligation contained in this Agreement and any and all costs and expenses
incurred by any Indemnified Person in connection with the enforcement of its
rights under this Agreement. The Purchaser further agrees, promptly upon
demand by an Indemnified Person, from time to time, to reimburse each
Indemnified Person for, or pay, any loss, claim, damage, liability or expense
as to which the Purchaser has indemnified the Indemnified Person pursuant to
this Agreement.
6.3 PROCEDURE. Each Indemnified Person agrees to give prompt written
notice to the indemnifying party after the receipt by the Indemnified Person
of any written notice of the commencement of any action, suit, proceeding or
investigation or threat thereof made in writing for which such Indemnified
Person will claim indemnification or contribution pursuant to this Agreement,
provided that the failure of any Indemnified Person to give notice shall not
relieve the indemnifying party of its obligations except to the extent that
the indemnifying party is actually prejudiced by the failure to give notice.
If any such action is brought against an indemnified party, the indemnifying
party will be entitled to participate in and to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its election
so to assume the defense thereof, the indemnifying party will not be liable
to such indemnified party for any legal or other expenses incurred by the
latter in connection with the defense thereof unless (i) in the reasonable
opinion of counsel for the indemnified party a conflict or potential conflict
of interest exists between the indemnified party and indemnifying party, (ii)
the indemnified party reasonably objects to such assumption on the basis that
there may be defenses available to it which are different from or in addition
to the defenses available to the indemnifying party, (iii) the indemnifying
party has failed to timely assume the defense of any such action or
proceeding or (iv) the indemnifying party and its counsel do not actively and
vigorously pursue the defense of such action, in the sole discretion of the
indemnified party. Whether or not such defense is assumed by the indemnifying
party, the indemnifying party will not be subject to any liability for any
settlement made without its consent. No indemnifying party will consent to
entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or
litigation. An indemnifying party who elects not to assume the defense of an
action or where a potential conflict of interest or other defenses may able
available, shall
-10-
not be obligated to pay the fees and expenses of more than one national
counsel and any local counsel where appropriate for all parties indemnified
by such indemnifying party with respect to such action, unless in the
reasonable judgment of any indemnified party a conflict of interest may exist
between such indemnified party and any other of such indemnified parties with
respect to such action. Cost and expenses incurred by the indemnified party
shall be reimbursed, from time to time, by the indemnifying party as and when
bills are received or expenses are incurred.
6.4 GROSS UP. Any payment required to be made under this Section 6
shall be increased so that the net amount retained by the Indemnified Person,
after deduction of any federal, state, local or foreign tax due thereon
(assuming a maximum effective total statutory tax rate), shall be equal to
the amount otherwise due.
7. EXCHANGE AND REPLACEMENT OF SECURITIES. Upon surrender of any
Preferred Share certificate by the Purchaser for exchange at the office of
the Company, the Company, at its expense (exclusive of applicable transfer
taxes or other similar taxes), will issue or cause to be issued, in exchange,
a new Preferred Share certificate in such denominations as may be requested
for the same number of Preferred Shares and registered as the Purchaser may
request. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any Preferred Share certificate, upon
delivery of a written agreement of indemnity reasonably satisfactory to the
Company in form or amount, or, in the case of any such mutilation upon
surrender and cancellation thereof, the Company, at its expense, will issue
or cause to be issued a new Preferred Share certificate in replacement of
such lost, stolen, destroyed or mutilated Preferred Share certificate.
8. SURVIVAL. All agreements, representations and warranties
contained herein or made in writing by or on behalf of the Company or by or
on behalf of the Purchaser in connection with the transactions contemplated
hereby shall survive the execution and delivery of this Agreement, all
investigations made by Purchaser or on Purchaser's behalf, and the issuance
and delivery of the Preferred Shares.
9. NO BROKER. Each party hereto represents and warrants that it has
incurred no obligation or liability, contingent or otherwise, for brokerage
or finders' fees or agents' commissions or other similar payment in
connection with this Agreement.
10. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
hand delivered or sent by first class registered or certified mail (return
receipt requested), postage prepaid, to the respective addresses of the
Company and the Purchaser set forth below, unless subsequently changed by
written notice. Any notice shall be deemed to be effective when it is
received.
-11-
To the Purchaser:
Westar Security, Inc.
0000 X. Xxxxx Xxx 000, Xxx. 000
Xxxxxx, Xxxxx 00000
Attention: Chief Financial Officer
Phone: 000-000-0000
Fax: 000-000-0000
With a copy to:
Xxxxx X. Xxxxxxxx, Esq.
Protection One, Inc.
0000 X. Xxxxx Xxx 000, Xxx. 000
Xxxxxx, Xxxxx 00000
Phone: 000-000-0000
Fax: 000-000-0000
To the Company:
Guardian International, Inc.
0000 Xxxxx 00xx Xxxxxxx
Xxxxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxxx Xxxxxxxx, President and Chief Executive Officer
Phone: 000-000-0000
Fax: 000-000-0000
With a copy to:
Xxxxxx Xxxxxxx, Esq.
Steel Xxxxxx & Xxxxx LLP
000 Xxxxx Xxxxxxxx Xxxxxxxxx
00xx Xxxxx
Xxxxx, XX 00000-0000
Phone: 000-000-0000
Fax: 000-000-0000
11. COSTS AND EXPENSES. Whether or not the transactions contemplated
hereby close, each party will bear its own costs and expenses for due
diligence and for the preparation and negotiation of this Agreement and the
other agreements contemplated hereby. The Company agrees to pay, or cause to
be paid, all documentary and similar taxes levied under the laws of the
United States of America or any state or local taxing authority thereof or
therein in connection with the issuance and sale of the Preferred Shares and
the execution and delivery of the other
-12-
documents contemplated hereby and any modification of any of such documents
and will hold the Purchaser harmless without limitation as to time against
any and all liabilities with respect to all such taxes.
12. MUTUAL COVENANTS. Each of the Company and Purchaser agrees to
promptly use its best efforts to secure such consents as may be necessary to
effect the transactions contemplated hereunder.
13. PRESS RELEASES. Simultaneously with the execution of this
Agreement, the parties hereto shall issue a press release in mutually
acceptable form (the "Press Release"). The parties hereto agree to consult
with each other prior to the release of any other press release regarding the
transactions contemplated herein, and no such other press release shall be
made unless it is mutually acceptable to the parties hereto, provided,
however, that information may be released in a press release without the
prior approval of the other party only if and only to the extent, in the
reasonable opinion of legal counsel to the releasing party, that the release
of such information in a press release is required by law. In any such event,
the non-releasing party shall receive no less than 24 hours prior written
notice of the release of any such information (which notice shall contain the
language to be released).
14. ASSIGNMENT, SUCCESSORS AND NO THIRD-PARTY RIGHTS. Neither party
may assign any of its rights under this Agreement, and any assignment will be
null and void, without the prior written consent of the other party, except
that the Purchaser may assign any of its rights under this Agreement to any
"affiliate" of the Purchaser as defined in Regulation D promulgated under the
Securities Act of 1933, as amended. This Agreement will apply to, be binding
in all respects upon, and inure to the benefit of the successors and
permitted assigns of the parties. Nothing expressed or referred to in this
Agreement will be construed to give any person other than the parties to this
Agreement any legal or equitable right, remedy or claim under or with respect
to this Agreement or any provision of this Agreement. This Agreement and all
of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
15. SEVERABILITY. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions
of this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable. In the
event any provision of this Agreement shall be held invalid, the parties
agree to enter into such further agreements as may be necessary in order to
carry out the intent and purposes of the parties herein.
16. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Florida without
regard to conflicts of law principles thereunder.
-13-
17. ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a
complete and exclusive statement of the terms of the agreement between the
parties with respect to its subject matter. This Agreement may be not amended
except by a written agreement executed by the party to be charged with the
Amendment.
18. WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor the delay by any
party in exercising any right, power, or privilege under this Agreement or
the documents referred to in this Agreement will operate as a waiver of such
right, power or privilege, and no single or partial exercise of any such
right, power or privilege will preclude any other or further exercise of such
right, power or privilege or the exercise of any other right, power or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement or the documents referred to in this
Agreement can be discharged by any party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other
party; (b) no waiver that may be given by a party will be applicable except
in the specific instance for which it is given; and (c) no notice to or
demand on one party will be deemed to be a waiver of an obligation of such
party or of the right of the party giving such notice or demand to take
further notice or demand as provided in this Agreement or the documents
referred to in this Agreement.
19. SECTION HEADINGS; COUNTERPARTS. The headings in this Agreement
are for purposes of reference only and shall not limit or otherwise affect
the meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
20. DISPUTE RESOLUTION. Any dispute arising from, relating to, or in
connection with the matters contained herein shall be resolved in accordance
with procedures set forth in EXHIBIT H hereto.
21. USE OF PROCEEDS. The Company agrees that it will use the Cash
Consideration for the following purposes: (i) repayment of amounts due and
owing from time to time to Xxxxxx pursuant to the Second Amended and Restated
Loan and Security Agreement with Xxxxxx dated as of February 23, 1998; (ii)
for working capital purposes; (iii) for acquisitions, whether of accounts,
assets or of other companies; and (iv) for the repurchase by the Company in
the open market of Common Stock from time to time as market conditions
warrant within the sole discretion of the Independent Committee; provided,
however, that the Board of Directors shall have full and unfettered
discretion as to the timing and amount of such use of proceeds, and provided,
further, however, that in no event shall in excess of 10% of the cash
proceeds (i) from the issuance of the Convertible Preferred Stock pursuant to
this Agreement, or (ii) from issuances in the future of additional shares of
the series of Convertible Preferred Stock, be used for open market purchases
described in subsection (iv) above.
-14-
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on their behalf as of the date first written above.
GUARDIAN INTERNATIONAL, INC.
By: /s/ Xxxxxxx Xxxxxxxx
-------------------------------------------
Xxxxxxx Xxxxxxxx,
President and Chief Executive Officer
WESTAR SECURITY, INC.
By: /s/ Xxxx X. Xxxxx
---------------------------------------
Name: Xxxx X. Xxxxx
-------------------------------------
Its: Secretary and Treasurer
--------------------------------------
-15-
