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