UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. __)
File No. 0-28238
[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-12
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
(Name of Registrant As Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
N/A
2) Aggregate number of securities to which transaction applies:
N/A
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
N/A
4) Proposed maximum aggregate value of transaction:
N/A
5) Total fee paid: $______________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration number, or
the Form or Schedule and the date of its filing.
1) Amount previously paid:
N/A
2) Form, Schedule or Registration Statement No.:
N/A
3) Filing Party:
N/A
4) Date Filed:
N/A
2
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
October __, 2004
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Guardian Technologies International, Inc. on November __, 2004, beginning at
10.00 a.m. local time, in the ______________________, at the _________________,
________________, Dulles, Virginia 20166. We look forward to greeting those of
you who are able to attend.
Please vote on all the matters listed in the enclosed Notice of Annual
Meeting of Stockholders. Your Board of Directors recommends a vote FOR the
proposals listed as items 1 through 3 in the Notice as described in the enclosed
proxy statement.
Whether or not you plan to attend in person, it is important that your
shares be represented and voted at the Annual Meeting. If you choose to vote by
traditional proxy or instruction card, please sign, date and mail the card in
the envelope enclosed.
We have established September __, 2004 as the record date for the
Annual Meeting. Accordingly, all stockholders of record on September __, 2004,
may vote at, and are invited to attend, the Annual Meeting. No ticket is
required for admission. As a result of heightened security, however, to gain
admission to the Annual Meeting, you will be required to present photo
identification. Packages and bags will be inspected and may have to be checked,
among other measures that may be employed to enhance the security of those
attending the Annual Meeting. Please plan accordingly.
Sincerely,
/s/ Michael W. Trudnak
Michael W. Trudnak
Chairman of the Board and Chief Executive Officer
YOUR VOTE IS IMPORTANT TO US. PLEASE
PROMPTLY SUBMIT YOUR PROXY BY MAIL.
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GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
-----------------------------------------
21351 Ridgetop Circle
Suite 300
Dulles, Virginia 20166
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER __, 2004
The Annual Meeting (Annual Meeting) of Stockholders of Guardian
Technologies International, Inc. (Guardian) will be held:
Date: November __, 2004
Place:
---------------------
---------------------
---------------------
Time: 10.00 a.m. local time
for the following purposes:
1. To elect two (2) directors for a term of three years, and until
their successors are duly elected and qualified or until their
earlier resignation or removal;
2. To ratify the appointment of the firm of Aronson & Company as
independent accountants of Guardian for 2004;
3. To approve an Amendment to Guardian's Certificate of Designations,
Preferences and Rights of Series A Convertible Preferred Stock
amending the terms of conversion of the Series A Convertible
Preferred Stock to provide for the automatic mandatory conversion
of each outstanding share of Series A Convertible Preferred Stock
into 1,000 shares of common stock effective November 30, 2004; and
4. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
Only holders of the Company's common stock and Series A Convertible
Preferred Stock at the close of business on September __, 2004, the record date,
are entitled to vote on some or all of the matters listed in this Notice of
Annual Meeting.
This proxy statement and the enclosed form of proxy are being mailed to
stockholders beginning October __, 2004
Guardian Technologies International, Inc.
Michael W. Trudnak
Secretary
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TABLE OF CONTENTS
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING..............................
What is a proxy?.............................................................
Why did you send me this proxy statement?................................. ..
How many votes do I have?....................................................
What proposals will be addressed at the Annual Meeting?......................
Why would the Annual Meeting be postponed?...................................
How do I vote in person?.....................................................
What is the difference between a stockholder of record and a "street name"
holder?....................................................................
How do I vote by proxy?......................................................
May I revoke my proxy?.......................................................
Where are Guardian's principal executive offices.............................
How many votes can be cast by all stockholders?..............................
What vote is required to approve each proposal?..............................
Are there any dissenters' rights of appraisal?...............................
Who bears the cost of soliciting proxies?....................................
How can I obtain additional information regarding Guardian?..................
Has there been a change of control of Guardian since the beginning of the
last fiscal year?..........................................................
INFORMATION ABOUT GUARDIAN STOCK OWNERSHIP...................................
Which stockholders own at least 5% of Guardian?..............................
How much stock is owned by directors and executive officers?.................
Do any of the officers and directors have an interest in the matters to
be acted upon?.............................................................
Did directors, executive officers and greater than 10% stockholders
comply with Section 16(a) beneficial ownership reporting requirements in
2003?......................................................................
INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS...........................
Directors and Executive Officers.............................................
The Board of Directors.......................................................
Committees of the Board of Directors.........................................
Report of the Board..........................................................
Compensation Committee.......................................................
Nominating Committee.........................................................
CORPORATE GOVERNANCE.........................................................
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF OUR CERTIFICATE OF
INCORPORATION, BYLAWS AND DELAWARE LAW.......................................
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS.............................
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...............................
INDEPENDENT PUBLIC ACCOUNTANTS ..............................................
DISCUSSIONS OF PROPOSALS RECOMMENDED FOR CONSIDERATION BY
STOCKHOLDERS...............................................................
1. Election of two (2) directors for a term of three years, and until their
successors are duly elected and qalified..................................
2. To ratify the appointment of Aronson & Company as the independent public
accountants for 2004......................................................
3. To approve an Amendment to Guardian's Certificate of Designations,
Preferences and Rights of Series A Convertible Preferred Stock amending
the terms of conversion of the Series A Convertible Preferred Stock to
provide for the automatic mandatory conversion of each outstanding share
of Series A Convertible Preferred Stock into 1,000 shares of common stock
effective November 30, 2004...............................................
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OTHER PROPOSED ACTION........................................................
STOCKHOLDER PROPOSALS AND SUBMISSIONS........................................
INCORPORATION OF INFORMATION BY REFERENCE ...................................
APPENDIX A: AUDIT COMMITTEE CHARTER
APPENDIX B: Compensation Committee Charter
APPENDIX C: Nominating Committee Charter
APPENDIX D: CERTIFICATE OF AMENDMENT TO CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS TO THE SERIES A CONVERTIBLE PREFERRED
STOCK
ATTACHMENT: PROXY CARD
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-----------------------------------------
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
-----------------------------------------
PROXY STATEMENT
DATED OCTOBER __, 2004
ANNUAL MEETING OF STOCKHOLDERS
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
WHAT IS A PROXY?
A proxy is another person that you legally designate to vote your
stock. If you designate someone as your proxy in a written document, that
document also is called a proxy or a proxy card.
WHY DID YOU SEND ME THIS PROXY STATEMENT?
We sent you this proxy statement and the enclosed proxy card because the
board of directors of Guardian Technologies International, Inc., a Delaware
corporation (Guardian), is soliciting your vote at our Annual Meeting of
Stockholders (Annual Meeting). This proxy statement summarizes the information
you need to vote in an informed manner on the proposals to be considered at the
Annual Meeting. However, you do not need to attend the Annual Meeting to vote
your shares. Instead you may simply complete, date, sign and return the enclosed
proxy card.
HOW MANY VOTES DO I HAVE?
We will be sending this proxy statement, the attached Notice of Annual
Meeting and the enclosed proxy card on or about October __, 2004 to all
stockholders. Stockholders who owned Guardian common stock at the close of
business on September __, 2004 (Record Date) are entitled to one vote for each
share of common stock they held on that date on all matters properly brought
before the Annual Meeting. Stockholders who owned Guardian Series A Convertible
Preferred Stock at the close of business on the Record Date are entitled to vote
with the common stock, voting together and not as separate classes, on an
"as-converted" basis, and will be entitled to 1,000 votes for each share held on
that date. In addition, stockholders who owned Guardian Series A Convertible
Preferred Stock are entitled to vote as a separate class on Proposal 3, in which
the Board recommends an amendment to the conversion terms of the Series A
Convertible Preferred Stock. When voting as a separate class, the holders of the
Series A Convertible Preferred Stock are entitled to one vote for each share
held on the Record Date.
On the Record Date, the following classes of stock were issued and
outstanding, and had the voting powers indicated. Each share of common stock is
entitled to one vote and each share of Series A Convertible Preferred Stock,
when voting as single class with the common stock is entitled to 1,000 votes.
When voting as a separate class on Proposal 3, each share of Series A
Convertible Preferred Stock is entitled to one vote.
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- ------------------------------------ --------------------- ------------------------- ------------------------------
CLASS OF STOCK SHARES ISSUED AND EQUIVALENT VOTES EQUIVALENT VOTES
OUTSTANDING (COMMON STOCK AND (SERIES A VOTING AS A SINGLE
SERIES A CONVERTIBLE CLASS)
PREFERRED STOCK VOTING
AS A SINGLE CLASS)
- ------------------------------------ --------------------- ------------------------- ------------------------------
Common Stock, par value $.001 per ________ __________ __________
share
- ------------------------------------ --------------------- ------------------------- ------------------------------
Series A Convertible Preferred 5,527 5,527,000 5,527
Stock, par value $.20 par value
per share
- ------------------------------------ --------------------- ------------------------- ------------------------------
Total Votes That May be Cast at _______ __________ 5,527
Annual Meeting of Stockholders
- ------------------------------------ --------------------- ------------------------- ------------------------------
WHAT PROPOSALS WILL BE ADDRESSED AT THE ANNUAL MEETING?
We will address the following proposals at the Annual Meeting:
1. Election of two (2) directors for a term of three years, and
until their successors are duly elected and qualified or until
their earlier resignation or removal.
2. Ratification of the appointment of the firm Aronson & Company
as the independent accountants of Guardian for 2004.
3. To approve an Amendment to Guardian's Certificate of
Designations, Preferences and Rights of Series A Convertible
Preferred Stock amending the terms of conversion of the Series
A Convertible Preferred Stock to provide for the automatic
mandatory conversion of each outstanding share of Series A
Convertible Preferred Stock into 1,000 shares of common stock
effective November 30, 2004.
4. The transaction of such other business as may properly come
before the Annual Meeting or any adjournment thereof.
WHY WOULD THE ANNUAL MEETING BE POSTPONED?
The Annual Meeting will be postponed if a quorum is not present on
November __, 2004. If shares representing more than 50% of the votes entitled to
be cast at the Annual Meeting are present in person or represented by proxy, a
quorum will be present and business can be transacted. If a quorum is not
present, the Annual Meeting may be postponed to a later date when a quorum is
obtained. Abstentions and broker non-votes are counted for purposes of
8
determining the presence of a quorum for the transaction of business but are not
counted as an affirmative vote for purposes of determining whether a proposal
has been approved.
HOW DO I VOTE IN PERSON?
If you plan to attend the Annual Meeting on November __, 2004, or at a
later date if it is postponed, in the ________________ at the _____________,
Dulles, Virginia _____ and vote in person, we will give you a ballot when you
arrive. However, if your shares are held in "street name," you must bring a
power of attorney executed by the broker, bank or other nominee that owns the
shares of record for your benefit, authorizing you to vote the shares.
WHAT IS THE DIFFERENCE BETWEEN A STOCKHOLDER OF RECORD AND A "STREET NAME"
HOLDER?
If you shares are registered directly in your name with Signature Stock
Transfer, Inc., our stock transfer agent, you are considered the stockholder of
record with respect to those shares.
If your shares are held in a stock brokerage account or by a bank or
other nominee, you are considered the beneficial owner of those shares, and your
shares are held in "street name."
HOW DO I VOTE BY PROXY?
If you hold your shares of record, whether you plan to attend the
Annual Meeting or not, we urge you to complete, sign and date the enclosed proxy
card and return it promptly in the envelope provided. Returning the proxy card
will not affect your right to attend the Annual Meeting and vote in person.
If you properly fill in your proxy card and send it to us in time to
vote, your "proxy" (one of the individuals named on your proxy card) will vote
your shares as you have directed. If you sign the proxy card but do not make
specific choices, your proxy will vote your shares as recommended by the Board
of Directors as follows:
"FOR" the election of two (2) directors for a term of three years, and
until their successors are duly elected and qualified, or until their
earlier resignation or removal.
"FOR" the ratification of the appointment of the firm Aronson & Company
as the independent accountants of Guardian for 2004.
"FOR" the approval of an Amendment to Guardian's Certificate of
Designations, Preferences and Rights of Series A Convertible Preferred
Stock amending the terms of conversion of the Series A Convertible
Preferred Stock to provide for the automatic mandatory conversion of
each outstanding share of Series A Convertible Preferred Stock into
1,000 shares of common stock effective November 30, 2004.
If any other matter is presented, your proxy will vote in accordance
with his best judgment. At the time this proxy statement went to press, we knew
of no matters that needed to be acted on at the Annual Meeting other than those
discussed in this Proxy Statement.
A vote to "abstain" on any matter other than the election of directors
will have the effect of a vote "against."
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If you hold your shares in "street name," you must vote your shares in
the manner prescribed by your broker or nominee. Your broker or nominee has
enclosed or provided a voting instruction card for you to use in directing the
broker or nominee how to vote your shares.
MAY I REVOKE MY PROXY?
If you give a proxy, you may revoke it at any time before it is
exercised. You may revoke your proxy in any one of three ways:
o You may send in another proxy with a later date.
o You may notify Guardian in writing (by you or your attorney
authorized in writing, or if the stockholder is a corporation,
under its corporate seal, by an officer or attorney of the
corporation) at our principal executive offices, before the
Annual Meeting, that you are revoking your proxy.
o You may vote in person at the Annual Meeting.
WHERE ARE GUARDIAN'S PRINCIPAL EXECUTIVE OFFICES?
Our principal executive offices are located at 21351 Ridgetop Circle,
Suite 300, Dulles, Virginia 20166. Our telephone number is (703) 654-6000.
HOW MANY VOTES CAN BE CAST BY ALL STOCKHOLDERS?
When the common stock and Series A Convertible Preferred Stock vote as
a single class, _________________ consisting of:
o One (1) vote for each of the _______________ shares of
Guardian's common stock outstanding on the Record Date; and
o 1,000 votes for each of the 5,527 shares of Guardian's Series
A Convertible Preferred Stock outstanding on the Record Date.
The common stock and Series A Convertible Preferred Stock will vote as
a single class on all matters scheduled to be voted on at the Annual Meeting,
except that the Series A Convertible Preferred Stock shall be entitled to vote
as a separate class on Proposal 3. There is no cumulative voting.
When voting as a separate class, each share of Series A Convertible
Preferred Stock shall be entitled to one (1) vote for each of the 5,527 shares
of Guardian Series A Convertible Preferred Stock outstanding on the Record Date.
WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL?
PROPOSAL 1: ELECTION OF TWO DIRECTORS.
A plurality of votes cast is required to elect each of the two (2)
director nominees for a term of three years. A nominee who receives a
"plurality" means he has received more votes than any other nominee for the same
10
director's seat. There are two (2) nominees for the Class I seats. In the event
no other nominations are received, management's nominees will be elected upon
receiving one or more votes. So, if you do not vote for the nominee, or you
indicate "withhold authority to vote" for the nominee on your proxy card, your
vote will not count either "for" or "against" the nominee.
PROPOSAL 2: RATIFICATION OF INDEPENDENT ACCOUNTANTS.
The affirmative vote of a majority of the votes cast is required for
ratification of the engagement of our independent accountants, Aronson &
Company. Therefore, any shares that are not voted, including shares represented
by a proxy who is marked "abstain," will not count either "for" or "against"
Proposal 2.
PROPOSAL 3: AMENDMENT OF THE TERMS OF THE SERIES A CONVERTIBLE
PREFERRED STOCK.
The affirmative vote of a majority of the votes cast of (i) all shares
of Guardian's common stock, including the Series A Convertible Preferred Stock
(voting on an as-converted basis), and (ii) all shares of Guardian's Series A
Convertible Preferred Stock (voting on an unconverted basis) voting as a
separate class, is required for ratification of an Amendment to Guardian's
Certificate of Designations, Preferences and Rights of Series A Convertible
Preferred stock amending the terms of conversion of the Series A Convertible
Preferred Stock to provide for the automatic mandatory conversion of each of
such shares of Series A Convertible Preferred Stock into 1,000 shares of common
stock effective November 30, 2004. Therefore, any shares that are not voted,
including shares represented by a proxy that is marked "abstain," will not count
either "for" or "against" Proposal 3.
ARE THERE ANY DISSENTERS' RIGHTS OF APPRAISAL?
The Board of Directors has not proposed any action for which the laws
of the State of Delaware, the Certificate of Incorporation or By-laws of
Guardian provide a right of a stockholder to dissent and obtain payment for
shares.
WHO BEARS THE COST OF SOLICITING PROXIES?
Guardian will bear the cost of soliciting proxies in the accompanying
form and will reimburse brokerage firms and others for expenses involved in
forwarding proxy materials to beneficial owners or soliciting their execution.
HOW CAN I OBTAIN ADDITIONAL INFORMATION REGARDING GUARDIAN?
An annual report for 2003 and Form 10-QSB for the quarter ended June
30, 2004, precedes or accompanies this proxy statement. Also, we would be
pleased to furnish you with a copy of our Annual Report on Form 10-KSB for the
year ended December 31, 2003 and our Quarterly Report on Form 10-QSB for the
quarter ended June 30, 2004, free of charge. A copy of either of such documents
may be obtained by calling us at (703) 654-6000 or sending us an email at
info@guardiantechintl.com. Guardian is subject to the informational requirements
of the Securities Exchange Act of 1934 (Exchange Act), which requires that
Guardian file reports, proxy statements and other information with the
Securities and Exchange Commission (SEC). The SEC maintains a website on the
Internet that contains reports, proxy and information statements and other
information regarding registrants, including Guardian, that file electronically
11
with the SEC. The SEC's website address is www.sec.gov. In addition, Guardian's
Exchange Act filings may be inspected and copied at the public reference
facilities of the SEC located at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549; and at the SEC's regional office at: 233 Broadway,
Suite 600, New York, NY 10279. Copies of the material may also be obtained upon
request and payment of the appropriate fee from the Public Reference Section of
the SEC located at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549.
HAS THERE BEEN A CHANGE OF CONTROL OF GUARDIAN SINCE THE BEGINNING OF THE LAST
FISCAL YEAR?
Since the beginning of the last fiscal year there has been a change of
control of Guardian. The material terms of the transaction resulting in such
change of control are as follows.
On June 26, 2003, pursuant to the terms of an Amended and Restated
Agreement and Plan of Reorganization, dated effective June 12, 2003, by and
among Guardian, RJL Marketing Services Inc., a privately held Delaware
corporation (RJL), and all of the shareholders of RJL, Guardian acquired all of
the outstanding capital stock of RJL (Reverse Acquisition) in exchange for the
issuance of shares of common stock and shares of preferred stock of Guardian.
The stockholders of RJL exchanged all of their shares in RJL for 5,511,500
shares of our common stock and 4,097 shares of our Series A Convertible
Preferred Stock. The shares of Series A Convertible Preferred Stock have a
preferential liquidation value of $20.00 per share and each share will be
automatically converted into 1,000 shares of our common stock (subject to
certain anti-dilution adjustments) upon our attaining Earnings Before Income
Taxes and Depreciation (EBITDA) aggregating $2,500,000 following the Reverse
Acquisition in the period commencing on the date of issuance through June 26,
2005, as evidenced by Guardian's financial statement contained in its reports
filed with the SEC under the Exchange Act. As a condition to the closing of the
Reverse Acquisition, all of the former directors and executive directors of
Guardian resigned and were replaced by persons designated by RJL.
As a condition to the closing, Mr. Moorer, the former President, Chief
Financial Officer and a director of Guardian, and Messrs. Houtz and Stevens, the
former directors of Guardian entered into lock up agreements with RJL and
Guardian pursuant to which they agreed not to sell their shares of Guardian for
a period of six (6) months, except that they may, during such period, sell an
aggregate of 50,000 shares a calendar month.
Concurrently with the closing of the Reverse Acquisition, Guardian
closed on an equity financing pursuant to which it placed an aggregate of
1,000,000 shares of common stock at a price of $.50 per share for aggregate
proceeds of $500,000. Such financing was required as a condition to closing of
the Reverse Acquisition. Guardian has granted to investors in such offering a
five (5) year piggy back registration right (except for underwritten offerings
and offerings other than for cash registered on a Form S-8 or S-4).
Immediately prior to the closing, and effective as of June 23, 2003,
Guardian assigned all of its pre-closing assets and liabilities to a newly
formed subsidiary, Black Mountain Holding, Inc. All of the shares of Black
Mountain Holdings, Inc., owned by Guardian will be spun off to Guardian's
stockholders, pro rata, in the nature of a stock dividend distribution.
Shareholders of Guardian entitled to participate in the spin-off distribution
will receive one share of Black Mountain for each share of Guardian that they
hold as of the record date. Guardian established June 23, 2003, as the record
date for the spin off. Following that date, the shares of Guardian have traded
"ex dividend." Guardian has been advised by prior management of Guardian that
Black Mountain intends to file a registration statement with the SEC to register
under the Securities Act the distribution of the spin off shares Guardian
shareholders pro rata and the spin off will not occur until such registration
statement is declared effective by the SEC. Pending effectiveness of the
12
registration statement, the shares of Black Mountain will be held in a spin off
trust for the benefit of Guardian's shareholders. The trustee of the trust is J.
Andrew Moorer, the former President and Chief Financial Officer of Guardian.
RJL was incorporated on October 23, 2002. RJL is a development stage
company and has not generated any revenues as of the date of this proxy
statement.
Although Guardian is the legal acquirer in the acquisition, and remains
the registrant with the SEC, under generally accepted accounting principles, the
acquisition was accounted for as a reverse acquisition, whereby RJL is
considered the "acquirer" of Guardian for financial reporting purposes since
RJL's shareholders controlled more than 50% of the post acquisition combined
entity, the management of Guardian was that of RJL after the acquisition,
Guardian had no assets or liabilities as of the transaction date, and the
continuing operations of the entity are those of RJL. In addition, Guardian is
required to present in all financial statements and other public information
filings, from the date of completion of the acquisition, prior historical
financial statements and information of RJL. It also requires a retroactive
restatement of RJL's historical stockholders' equity to reflect the equivalent
number of shares of common stock received in the acquisition.
In view of the foregoing, unless we indicate otherwise, the information
we present in this proxy statement relates to RJL and its management, except
that (i) the executive compensation information relates to current and prior
management of Guardian, (ii) we have furnished information under the caption
"Certain Relationships and Related Transactions" for (a) transactions involving
related parties of Guardian occurring prior to the Reverse Acquisition, (b)
transactions involving related parties of RJL occurring prior to the Reverse
Acquisition, and (c) transactions involving related parties of Guardian
post-Reverse Acquisition. However, and by way of example, we have not included
the Audit Committee Report or Compensation Committee Report and related
disclosures of "old" Guardian, since we do not think this information will be
helpful to a consideration or evaluation of the post-Reverse Acquisition
Guardian and its management.
INFORMATION ABOUT GUARDIAN STOCK OWNERSHIP
WHICH STOCKHOLDERS OWN AT LEAST 5% OF GUARDIAN?
Our common stock and the Series A Convertible Preferred Stock (which
votes on an as-converted basis with our common stock) constitute the only voting
securities of Guardian. As of the Record Date, each share of Series A
Convertible Preferred Stock entitles the holder to 1,000 votes on all matters
submitted to our stockholders for a vote. The following table shows, as of the
Record Date and to the best of our knowledge, all persons we know to be
"beneficial owners" of more than 5% of our common stock. On the Record Date,
there were _____________ shares of common stock issued and outstanding and 5,527
shares of Series A Convertible Preferred Stock issued and outstanding.
- --------------------------------------------------------------------------------
NAME OF BENEFICIAL OWNER (1) NUMBER OF SHARES % OF COMMON STOCK
BENEFICIALLY BENEFICIALLY OWNED
OWNED(1)
- --------------------------------------------------------------------------------
Robert A. Dishaw 3,155,500(2) %
- --------------------------------------------------------------------------------
Michael W. Trudnak 3,026,000(3) %
- --------------------------------------------------------------------------------
Max Tobin 2,300,000(4) %
- --------------------------------------------------------------------------------
13
(1) Beneficial ownership is determined in accordance with Rule 13d-3 under
the Exchange Act, and is generally (1) determined by voting powers
and/or investment powers with respect to securities. Unless otherwise
noted, all shares of common stock listed above are owned of record by
each individual named as beneficial owner and such individual has sole
voting and dispositive power with respect to the shares of common stock
owned by each of them. Such person or entity's percentage of ownership
is determined by assuming that any options or convertible securities
held by such person or entity which are exercisable within 60 days from
the date hereof have been exercised or converted as the case may be.
All addresses, except as hereinafter noted, are c/o Guardian
Technologies International, Inc., 21351 Ridgetop Circle, Suite 300,
Dulles, Virginia 20166. Mr. Tobin's address is 7805 Bayview Avenue,
Suite 614, Ontario, Canada.
(2) Includes shares underlying options to purchase an aggregate of 210,000
shares of common stock which are currently exercisable. Does not
include 2,212,000 shares of common stock issuable upon conversion of
2,212 shares of Series A Convertible Preferred Stock upon our
satisfying certain performance criteria during the two (2) year period
ending June 26, 2005. Each such share of Series A Convertible Preferred
Stock entitles the holder to 1,000 votes (subject to certain
anti-dilution adjustments) on all matters presented to stockholders for
a vote. Mr. Dishaw's 2,212 shares of Series A Convertible Preferred
Stock will entitle him to cast 2,212,000 votes at the Annual Meeting.
Accordingly, Mr. Dishaw will be entitled to cast an aggregate of
5,157,500 votes on all matters submitted to stockholders or [___%] of
the total votes that may be cast at the Annual Meeting.
(3) Includes shares underlying options to purchase an aggregate of 460,000
shares of common stock which are currently exercisable. Does not
include 1,885,000 shares of common stock issuable upon conversion of
1,885 shares of Series A Convertible Preferred Stock upon our
satisfying certain performance criteria during the two (2) year period
ending June 26, 2005. Each share of Series A Convertible Preferred
Stock entitles the holder to 1,000 votes (subject to certain
anti-dilution adjustments) on all matters presented to the holders of
common stock for a vote. Mr. Trudnak's 1,885 shares of Series A
Convertible Preferred Stock will entitle him to cast 1,885,000 votes at
the Annual Meeting. Accordingly, Mr. Trudnak will be entitled to cast
an aggregate of 4,451,000 votes on all matters submitted to
stockholders or [___%] of the total votes that may be cast at the
Annual Meeting.
(4) Represents 1,568,761 shares of common stock held by the Tobin Family
Trust of which Mr. Tobin is the trustee and 731,239 shares of common
stock held by the Max Tobin Family Trust of which Mr. Tobin is the
trustee. Does not include 1,430,000 shares of common stock issuable
upon conversion of 1,430 shares of Series A Convertible Preferred Stock
upon our satisfying certain performance criteria during the two (2)
year period ending June 26, 2005, of which 970 are held by the Tobin
Family Trust and 460 are held by the Max Tobin Family Trust.
Accordingly, Mr. Tobin will be entitled to cast an aggregate of
3,730,000 votes on all matters submitted to stockholders or [___%] of
the total votes that may be cast at the Annual Meeting.
HOW MUCH STOCK IS OWNED BY DIRECTORS AND EXECUTIVE OFFICERS?
The following table sets forth certain information with respect to the
beneficial ownership of our common stock owned as of the Record Date, by: (i)
beneficial owners of more than 5% of our common stock; (ii) each of our
executive officers and directors; and (iii) all of our executive officers and
directors as a group:
14
- --------------------------------------------------------------------------------
NAME BENEFICIAL OWNER(1) NUMBER OF SHARES % OF COMMON STOCK
BENEFICIALLY BENEFICIALLY OWNED
OWNED (1)
- --------------------------------------------------------------------------------
Robert A. Dishaw 3,155,500(2) %
- --------------------------------------------------------------------------------
Michael W. Trudnak 3,026,000(3) ____%
- --------------------------------------------------------------------------------
Sean W. Kennedy 10,000 ____%
- --------------------------------------------------------------------------------
M. Riley Repko 0 0%
- --------------------------------------------------------------------------------
Charles Theodore Nash 2,000 ____%
- --------------------------------------------------------------------------------
William J. Donovan 200,000(4) ____%
- --------------------------------------------------------------------------------
Darrell H. Hill 400,000(5) ____%
- --------------------------------------------------------------------------------
Steven V. Lancaster 400,000(5) ____%
- --------------------------------------------------------------------------------
Max Tobin 2,300,000(6) ____%
- --------------------------------------------------------------------------------
All executive officers and directors 7,193,500(8) ____%
as a group (8 people)(7)
- --------------------------------------------------------------------------------
* Represents less than 1%.
(1) Beneficial ownership is determined in accordance with Rule 13d-3 under
the Exchange Act, and is generally (1) determined by voting powers
and/or investment powers with respect to securities. Unless otherwise
noted, all shares of common stock listed above are owned of record by
each individual named as beneficial owner and such individual has sole
voting and dispositive power with respect to the shares of common stock
owned by each of them. Such person or entity's percentage of ownership
is determined by assuming that any options or convertible securities
held by such person or entity which are exercisable within 60 days from
the date hereof have been exercised or converted as the case may be.
All addresses, except as noted, are c/o Guardian Technologies
International, Inc., 21351 Ridgetop Circle, Suite 300, Dulles, Virginia
20166. Mr. Tobin's address is 7805 Bayview Avenue, Suite 614, Ontario,
Canada.
(2) Includes shares underlying options to purchase an aggregate of 210,000
shares of common stock which are currently exercisable. Does not
include 2,212,000 shares of common stock issuable upon conversion of
2,212 shares of Series A Convertible Preferred Stock upon our
satisfying certain performance criteria during the two year period
ending June 26, 2005. Each such share of Series A Convertible Preferred
Stock entitles the holder to 1,000 votes (subject to certain
anti-dilution adjustments) on all matters presented to stockholders for
a vote. Mr. Dishaw's 2,212 shares of Series A Convertible Preferred
Stock will entitle him to cast 2,212,000 votes at the Annual Meeting.
Accordingly, Mr. Dishaw will be entitled to cast an aggregate of
5,157,500 votes on all matters submitted to stockholders or [__%] of
the total votes that may be cast at the Annual Meeting.
(3) Includes shares underlying options to purchase an aggregate of 460,000
shares of common stock which are currently exercisable. Does not
include 1,885,000 shares of common stock issuable upon conversion of
1,885 shares of Series A Convertible Preferred Stock upon our
satisfying certain performance criteria during the two year period
ending June 26, 2005. Each share of Series A Convertible Preferred
Stock entitles the holder to 1,000 votes (subject to certain
anti-dilution adjustments) on all matters presented to the holders of
common stock for a vote. Mr. Trudnak's 1,885 shares of Series A
Convertible Preferred Stock will entitle him to cast 1,885,000 votes at
the Annual Meeting. Accordingly, Mr. Trudnak will be entitled to cast
an aggregate of 4,451,000 votes on all matters submitted to
stockholders or _____% of the total votes that may be case at the
Annual Meeting.
(4) Represents shares underlying options to purchase 200,000 shares of
common stock which are currently exercisable.
15
(5) Includes shares underlying options to purchase an aggregated of 200,000
shares of common stock which are currently exercisable.
(6) Represents 1,568,761 shares of common stock held by the Tobin Family
Trust of which Mr. Tobin is the trustee and 731,239 shares of common
stock held by the Max Tobin Family Trust of which Mr. Tobin is the
trustee. Does not include 1,430,000 shares of common stock issuable
upon conversion of 1,430 shares of Series A Convertible Preferred Stock
upon our satisfying certain performance criteria during the two year
period ending June 26, 2005, of which 970 are held by the Tobin Family
Trust and 460 are held by the Max Tobin Family Trust. Accordingly, Mr.
Tobin will be entitled to cast an aggregate of [3,730,000] votes on all
matters submitted to stockholders or ___% of the total votes that may
be cast at the Annual Meeting.
(7) Includes Messrs. Dishaw, Trudnak, Repko, Kennedy, Nash, Donovan, Hill,
and Lancaster,.
(8) Includes shares underlying options to purchase an aggregate of 460,000,
210,000, 200,000, 200,000, 200,000 shares of common stock which are
currently exercisable granted to Messrs. Trudnak, Dishaw, Donovan, Hill
and Lancaster, respectively. Does not include an aggregate of 4,097,000
shares of common stock issuable upon conversion of 2,212 shares of
Series A Convertible Preferred Stock held by Mr. Dishaw and 1,885
shares of Series A Preferred Stock held by Mr. Trudnak.
DO ANY OF THE OFFICERS OR DIRECTORS HAVE AN INTEREST IN THE MATTERS TO BE ACTED
UPON?
M. Riley Repko and Charles T. Nash have been nominated for election as
Class I directors and, therefore, have an interest in the outcome of Proposal 1.
Mr. Dishaw and Mr. Trudnak own, respectively, 2,212 and 1,885 shares of
Series A Convertible Preferred Stock. In the event stockholders approve the
amendment to the Certificate of Designations for the Series A Preferred Stock
submitted as Proposal 3 at the Annual Meeting, on November 30, 2004, the shares
of Series A Convertible Preferred Stock then held by Messrs. Dishaw and Trudnak
will automatically convert into shares of common stock of Guardian and Mr.
Dishaw will receive 2,212,000 shares of common stock and Mr. Trudnak will
receive 1,885,000 shares of common stock. Accordingly, Mr. Dishaw and Mr.
Trudnak have an interest in the outcome of Proposal 3.
Except as set forth above, to the best of Guardian's knowledge, no
director or officer has an interest, direct or indirect, in any of the other
matters to be acted upon. DID DIRECTORS, EXECUTIVE OFFICERS AND GREATER-THAN-10%
STOCKHOLDERS COMPLY WITH SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING
REQUIREMENTS IN 2003?
Section 16(a) of the Exchange Act requires our officers and directors,
and persons who own more than ten percent of a registered class of our equity
securities, to file reports of ownership and changes in ownership of equity
securities of Guardian with the SEC. Officers, directors, and greater than ten
percent stockholders are required by the SEC regulation to furnish us with
copies of all Section 16(a) forms that they file.
Based upon information provided to Guardian from Reporting Persons,
during the year ended December 31, 2003, Mr. Repko failed to file forms 3 and 5
in a timely fashion. Other than the foregoing, Guardian is not aware of any
failure on the part of any Reporting Persons to timely file reports required
pursuant to Section 16(a).
16
INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of Guardian are:
- -----------------------------------------------------------------------------
NAME AGE TITLE
- -----------------------------------------------------------------------------
Michael W. Trudnak 51 Chairman of the Board, Chief
Executive Officer, Secretary, and
Treasurer
- -----------------------------------------------------------------------------
Robert A. Dishaw 58 President, Chief Operating
Officer, and Director
- -----------------------------------------------------------------------------
Sean W. Kennedy 54 Director
- -----------------------------------------------------------------------------
M. Riley Repko 46 Director
- -----------------------------------------------------------------------------
Charles T. Nash 54 Director
- -----------------------------------------------------------------------------
William J. Donovan 52 Chief Financial Officer
- -----------------------------------------------------------------------------
Darrell H. Hill 51 Vice President, Healthcare
Services
- -----------------------------------------------------------------------------
Steven V. Lancaster 50 Vice President, Business
Development
- -----------------------------------------------------------------------------
Guardian's Certificate of Incorporation provides that the board of
directors shall be divided into three classes and that, if the board consists of
five directors, that the first class shall consist of two directors to hold
office for a term of one year from the date of the ratification of their
election by stockholders at the next meeting of stockholders held to consider
such matter, the second class shall consist of one director to hold office for a
term of two years from the date of the ratification of his election by
stockholders at the next meeting of stockholders held to consider such matter,
and the third class shall consist of two directors to hold office for a term of
three years from the date of the ratification of their election by stockholders
at the next meeting of stockholders held to consider such matter. At each
succeeding annual meeting of stockholders, the successors to the class of
directors whose terms shall then expire shall be elected to hold office for a
term expiring at the third succeeding annual meeting. Messrs. Nash and Repko
have been designated by the board as Class I directors, Mr. Kennedy has been
designated as a Class II director, and Messrs. Trudnak and Dishaw have been
designated as Class III directors.
Biographical information with respect to the present executive officers
and directors of Guardian are set forth below. There are no family relationships
between any present executive officers or directors.
MICHAEL W. TRUDNAK, CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER, SECRETARY,
TREASURER AND DIRECTOR. Mr. Trudnak was appointed Chairman of the Board,
Secretary, and Chief Executive Officer and designated as a Class III director of
Guardian effective June, 2003. From March 2003 and until the present, Trudnak
has been Chairman of the Board, Chief Executive Officer, Secretary, Treasurer
and a director of RJL. From October 2002 to March 2003, Mr. Trudnak was a
consultant to certain telecommunications services companies. From April 2002 to
October 2002, Mr. Trudnak was Chief Operating Officer and subsequently
President, Chief Executive Officer and a director of Advanced Data Centers,
Inc., a privately held telecommunications services company. From July 2001 to
March 2002, Mr. Trudnak served as Vice President of Mid-Atlantic Sales for
Equant N.V, a leading provider of global IP and data services to multinational
17
companies. Prior to Equant's acquisition of Global One, Inc., in July 2001, Mr.
Trudnak served as an Executive Director for South East Region Sales for Global
One from June 1998 to July 2001, and from January 1996 to June 1998, served as
Managing Director of Global One's sales and operations in France and Germany.
From November 1989 through December 1995, Mr. Trudnak served as director of
facilities engineering and then Senior Group Manager for Sprint International, a
global telecommunications services provider. Mr. Trudnak has over twenty-five
years of diversified executive management, sales, business operations, technical
and administrative experience in the telecommunications industry. Mr. Trudnak
served in the Marine Corps from April 1972 through January 1976.
ROBERT A. DISHAW, PRESIDENT, CHIEF OPERATING OFFICER AND DIRECTOR. Mr. Dishaw
was appointed President and Chief Operating Officer and designated as a Class
III director of Guardian effective as of June, 2003. From October 2002 and until
the present, Mr. Dishaw has been President and a director of RJL. From December
2000 to April 2002, Mr. Dishaw was the Executive Vice President and General
Manager of Diagnos, Inc., a publicly held Canadian company, which has developed
and markets certain knowledge extraction software technology. From June 1999 to
November 2000, Mr. Dishaw was a management consultant to certain public and
private companies in the U.S. and Canada, providing capital raising,
operational, sales and marketing services to such companies. From April 1997 to
January 1999, Mr. Dishaw was President of HDB Communications, Inc., a private
corporation that provided installation services for Canadian digital satellite
providers. Mr. Dishaw served for more than seven years in the U.S. Air Force and
for ten years in the U.S. Diplomatic Service serving as a Second Secretary for
Administration/Political reporting at U.S. Embassies in Brazil, Guyana, Zaire,
Burma and Czechoslovakia.
SEAN W. KENNEDY, DIRECTOR. Mr. Kennedy was designated as a Class II director of
Guardian effective in July, 2003. From January 2001 to the present Mr. Kennedy
has been President and Chief Executive Officer of BND Group, Inc., a privately
held software development company. From October 1999 to December 2000, Mr.
Kennedy was divisional Vice President of Votenet Solutions a Web development and
consultant for trade associations, political parties and related organizations.
From April 1994 to October 1999, Mr. Kennedy was President and CEO of Raintree
Communications Corporation, a privately held telecommunication services company,
focused on providing technology tools for legislative lobbying to Trade
Associations and Fortune 500 companies. From June, 1989 to April 1994 Mr.
Kennedy was President and CEO of Electronic Funds Transfer Association, a trade
association for the electronic payments systems industry. Mr. Kennedy is a
graduate of Mount Saint Mary's College in Emmitsburg, Maryland.
CHARLES T. NASH, DIRECTOR. Mr. Nash was designated as a Class I director of
Guardian effective as of June 17, 2004 to fill a vacancy on the board of
directors created by the resignation of Mr. Walter Ludwig. From October 2000 to
present, Mr. Nash has been President of Emerging Technologies International,
Inc., a privately held technology consulting company. From April 1998 to October
2000, Mr. Nash was vice president of Emerging Technology Group, a defense
consulting and emerging technology marketing company. From November 1994 to
January 1998, Mr. Nash was head of Strike/Anti-surface Unite Warfare and Air to
Air/Strike Support sections on the staff of the Chief of Naval Operations,
Pentagon. Prior to that Mr. Nash held various military leadership roles in the
United States and Europe. Mr. Nash retired from the U.S. Navy in 1998 with the
rank of Captain U.S.N. Mr. Nash received a BS Aeronautics from the Parks College
of Aeronautical Technology, Saint Louis University in 1973, and is a 1989
graduate of the National War College.
18
M. RILEY REPKO. Mr. Repko was designated as a Class I director of Guardian
effective as of October 1, 2003. Mr. Repko was elected Chairman of the Board of
Directors of IQBiometrix in June 2003, a public company. From June 2001 through
April 2003, Mr. Repko served as Vice President - Sales & Business Development
for TRW Systems, Inc., Global IT Division. From December 1998 through June 2001,
Mr. Repko served as Managing Director, Asia-Pacific Channels for Siebel Systems,
Inc. Since June 1994, Mr. Repko has been a principal of The Repko Group, a
business consulting firm. Mr. Repko's academic credentials include attending the
Senior Military School at the National Defense University; an MS from the U.S.
Air Force's Air War College; an M.B.A. (summa cum laude) from St. Mary's
University, Texas in Operations Management; a B.S. in Electrical Engineering
from the Air Force Institute of Technology, Ohio; and a B.S. in Physics/Math
(cum laude) from St. Bonaventure University, New York.
WILLIAM J. DONOVAN, CHIEF FINANCIAL OFFICER. Mr. Donovan has been Chief
Financial Officer of Guardian since August 18, 2003. From January 2003 until
August 2003, Mr. Donovan was an independent consultant to an affiliate of
American Express Small Business Services. From September 1999 through December
2002, Mr. Donovan was CFO of Streampipe.com, Inc., a privately held streaming
communications media company, which was sold to Tentv, Inc., in December 2002.
From October 1996 to August 1999, Mr. Donovan was Chief Operating and Financial
Officer for TDI, Inc., a privately held international wireless
telecommunications services company. From October 1986 to October 1996, Mr.
Donovan was the CFO, Secretary, Treasurer and a Director at Riparius
Corporation, a privately held holding company with operating subsidiaries in the
areas of real estate development, property management, general contracting,
government contracting, and telecommunications engineering. From October 1980 to
October 1986, Mr. Donovan was the Controller for McCormick Properties, Inc., a
publicly held commercial real estate subsidiary of McCormick & Company. From
July 1973 to October 1980, Mr. Donovan was the Controller for AMF Head Sports
Wear, Inc., a privately held international sporting goods manufacturer and a
subsidiary of AMF, Inc., a publicly held company. Mr. Donovan received a
Bachelor of Arts in History in 1973, from the University of Maryland, an MBA
from the Sellinger School of Business, Loyola College, Baltimore Maryland in
1982, and a Certificate in Accounting from the University of Maryland in 1978.
Mr. Donovan has been a Certified Public Accountant since 1982. He is also a
Certified Business Valuation & Transfer Agent, Business Brokers Network, 2002.
He has been on the Board as an Advisor for Nogika Corporation, a privately held
software company since 2001.
DARRELL H. HILL, VICE PRESIDENT, GUARDIAN HEALTH CARE SYSTEMS. Mr. Hill was
hired as Vice President of Guardian Technologies in May 2003. From December 2000
to January 2002 Mr. Hill served as Director of Network Services for Global One
Telecommunications, an international telecommunications company. From October
1998 until December 2000 Mr. Hill was Head of Program Management for the United
States, Canada and Latin America for Global One. From 1993 until October 1998
Mr. Hill was Sr. Group Manager of Partnership Marketing for Sprint International
in Reston, VA. From 1979 to 1993, Mr. Hill held various positions within Sprint
International, including management positions within Marketing, Systems
Development, Customer Service, Order Fulfillment and Billing. Mr. Hill has
developed a wide breadth of experience as a business executive responsible for
large project management, operations support and IT development in his 23 years
in the telecommunications industry.
19
STEVEN V. LANCASTER, VICE PRESIDENT, BUSINESS DEVELOPMENT. Mr. Lancaster was
hired as Vice President of Guardian Technologies in May 2003. From February 2001
to December 2002 Mr. Lancaster served as Assistant Vice President Global Large
Account Sales for Global One Telecommunications, an international
telecommunications company. From November 1997 until February 2001 Mr. Lancaster
was Executive Director Multinational Sales Management for the US, Asia, Europe
and Latin America regions or Global One. From 1990 until November 1997 Mr.
Lancaster was Group Manager, Global Account Management for Sprint International
in Reston, VA. From 1981 to 1990, Mr. Lancaster held various Engineering,
Marketing and Sales positions with GTE, British Telecom and Sprint
International. Mr. Lancaster has developed a wide breadth of experience as a
business executive responsible for international business development,
marketing, large account sales and management in his 22 years in the
telecommunications industry.
Each officer of Guardian is appointed by the board of directors and
holds his office at the pleasure and direction of the board of directors or
until his earlier resignation, removal or death.
There are no material proceedings to which any director, officer or
affiliate of Guardian, any owner of record or beneficially of more than five
percent of any class of voting securities of Guardian, or any associate of any
such director, officer, affiliate of Guardian or security holder is a party
adverse to Guardian or any of its subsidiaries or has a material interest
adverse to Guardian or any of its subsidiaries.
THE BOARD OF DIRECTORS
The Board oversees the business affairs of Guardian and monitors the
performance of management. During the fiscal year ended December 31, 2003, and
following the Reverse Acquisition, the Board held 25 meetings and handled
certain business through unanimous written consents of its board in accordance
with its by-laws and applicable Delaware law. No director attended less than 75%
of such meetings. Guardian has a policy of requesting all directors to attend
annual meetings of stockholders. All of Guardian's directors, except Mr. Repko
who was traveling, attended our special meeting of stockholders on February 13,
2004.
COMMITTEES OF THE BOARD OF DIRECTORS
Prior to the Reverse Acquisition, Guardian had an audit committee and a
compensation committee. We have been advised by prior management of Guardian,
that the audit committee met once during fiscal 2003 and that the compensation
committee met once during fiscal 2003. Following the Reverse Merger, the new
Board of Directors did not create an audit committee, nominating committee and
compensation committee until September 14, 2004. Accordingly, for the period
following the Reverse Merger in fiscal 2003, the entire board of directors
performed the functions of an audit committee, nominating committee, and
compensation committee.
The audit committee functions the entire board performed were as
follows:
The Board of Directors' authority included the engagement of and
approval of services provided by Guardian's independent accountants as well as
the review of (i) the professional services provided by, independence and
qualifications of Guardian's independent auditors; (ii) material changes in
20
accounting polices and financial reporting practices and material developments
in financial reporting standards in consultation with the independent auditors
and management; (iii) the plan and scope of annual external audit as recommended
by the independent auditors; (iv) the adequacy of Guardian's internal accounting
controls and the results of material internal audits in consultations with the
independent auditors and any internal auditor; (v) Guardian's financial
statements and the results of each external audit in consultation with
management and the independent auditors; (vi) the auditing and accounting
principles and practices to be used in the preparation of Guardian's financial
statements in consultation with Guardian's independent auditors and Guardian's
principal financial and accounting officer; (vii) the financial structure,
condition and strategy of Guardian, including making recommendations with
respect thereto and approving such matters that are consistent with general
financial policies and direction from time to time determined by the board of
directors; and (viii) the compliance by Guardian with legal and regulatory
requirements, including Guardian's disclosure controls and procedures.
On September 14, 2004, the Board of Directors created an audit
committee, a compensation committee, and a nominating committee. Copies of the
charters for such committees are attached as Appendix A, Appendix B, and
Appendix C.
REPORT OF THE BOARD
The following paragraphs constitute information that shall not be
deemed to be "soliciting material," or to be "filed" with the SEC or subject to
Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act.
This information shall also not be deemed to be incorporated by reference into
any filings by Guardian with the SEC, notwithstanding the incorporation of this
Proxy Statement into any filings.
With regard to the fiscal year ended December 31, 2003, the board of
directors performed the following functions:
o reviewed audit services and selection of Guardian's
independent auditors;
o reviewed and discussed the audited financial statements with
management;
o discussed with Guardian's independent auditors the matters
required to be discussed by SAS 61 (Codification of Statements
on Auditing Standards, AU ss.380); SAS 61 requires independent
auditors to communicate certain matters related to the conduct
of an audit to those who have responsibility for oversight of
the financial reporting process, specifically the audit
committee. Among the matters to be communicated to the audit
committee are: (1) methods used to account for significant
unusual transactions; (2) the effect of significant accounting
policies in controversial or emerging areas for which there is
a lack of authoritative guidance or consensus; (3) the process
used by management in formulating particularly sensitive
accounting estimates and the basis for the auditor's
conclusions regarding the reasonableness of those estimates;
and (4) disagreements with management over the application of
accounting principles, the basis for management's accounting
estimates, and the disclosures in the financial statements;
21
o received the written disclosures and the letter from the
independent auditors required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit
Committees), and discussed with the independent auditors their
independence; and
o based on the review and discussions above, the entire board of
directors approved the audited financial statements for the
last fiscal year.
By the entire Board of Directors
Michael W. Trudnak
Robert A. Dishaw
Sean W. Kennedy
M. Riley Repko
AUDIT COMMITTEE
The current Audit Committee was formed in September 14, 2004 and
consists of Sean W. Kennedy and Charles T. Nash, each of whom are qualified to
serve on the Audit Committee under rules of the American Stock Exchange. Mr.
Kennedy was appointed chairman on September 14, 2004. The Audit Committee that
existed prior to the Reverse Merger held one meetings during fiscal 2003. The
Board of Directors has determined that each member of the Audit Committee is
independent, as independence is defined in Section 121A of the American Stock
Exchange listing standards. The Audit Committee is established in accordance
with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended.
The Board of Directors has adopted a written charter for the Audit
Committee, which provides that the Audit Committee's primary functions are to
(a) oversee the integrity of Guardian's financial statements and Guardian's
compliance with legal and regulatory reporting requirements, (b) appoint a firm
of certified public accountants whose duty it is to audit Guardian's financial
records for the fiscal year for which it is appointed, (c) evaluate the
qualifications and independence of the independent auditors, (d) oversee the
performance of Guardian's internal audit function and independent auditors, and
(e) determine the compensation and oversee the work of the independent auditors.
It is not the duty of the Audit Committee to plan or conduct audits or to
determine that Guardian's financial statements are complete and accurate and are
prepared in accordance with generally accepted accounting principles in the
United States. Management is responsible for preparing Guardian's financial
statements, and the independent auditors are responsible for auditing those
financial statements.
COMPENSATION COMMITTEE
The current Compensation Committee was formed in July, 2004 and
consists of Sean W Kennedy, M. Riley Repko, and Charles T, Nash. Mr. Kennedy was
appointed chairman on September 14, 2004. The Board has adopted a written
charter for the Compensation Committee which is attached as Appendix B to this
Proxy Statement. The Compensation Committee that existed prior to the Reverse
Merger held one meeting during fiscal 2003.
The Compensation Committee's primary functions are to:
22
o evaluate the performance of the CEO and determine the CEO's
total compensation and individual elements thereof;
o determine the compensation level of the CEO and President and
review and approve corporate goals and objectives relevant to
senior executive compensation (including that of the CEO),
evaluate senior management's performance in light of those
goals and objectives, and determine and approve senior
management's compensation level based on their evaluation;
o evaluate the performance of other executive officers and
determine their total compensation and individual elements
thereof;
o make all grants of restricted stock or other equity based
compensation to executive officers;
o administer Guardian's compensation plans and programs;
o recommend to the Board for approval equity based plans an
incentive compensation plans;
o review management development and succession programs; and
o review appropriate structure and amount of compensation for
Board members.
The Board of Directors has determined that all members of the
Compensation Committee currently are independent within the meaning set forth in
Section 121A of the American Stock Exchange Company Guide.
NOMINATING COMMITTEE
The Board created the Nominating Committee on September 14, 2004. The
Nominating Committee consists of three members, Messrs. Kennedy, Repko and Nash.
Mr. Nash was appointed chairman on September 14, 2004. The Board has adopted a
written charter for the Nominating Committee which is attached as Appendix C to
this Proxy Statement.
The Nominating Committee's primary functions are to
o consider, recommend and recruit candidates to serve on the
Board and to recommend the director nominees selected by the
Committee for approval by the Board and the stockholders of
Guardian;
o recommend to the Board when new members should be added to the
Board;
o recommend to the Board the director nominees for the next
annual meeting;
o when vacancies occur or otherwise at the direction of Board,
actively seek individuals whom the Committee determines meet
the criteria and standards for recommendation to the Board;
o consider recommendations of director nominees by stockholders
and establish procedures for shareholders to submit
recommendations to the Committee in accordance with applicable
SEC rules and applicable listing standards;
o report, on a periodic basis, to the Board regarding compliance
with the Committee's Charter, the activities of the Committee
and any issues with respect to the duties and responsibilities
of the Committee;
o establish a process for interviewing and considering a
director candidate for nomination to the Board;
o recommend to the Board guidelines and criteria as to the
desired qualifications of potential Board members;
23
o provide comments and suggestions to the Board concerning Board
committee structure, committee operations, committee member
qualifications, and committee member appointment;
o review and update the Committee's charter at least annually,
or more frequently as may be necessary or appropriate; and
o perform such other activities and functions related to the
selection and nomination of directors as may be assigned from
time to time by the Board of Directors, including, but not
limited to preparing or causing to be prepared any reports or
other disclosure required with respect to the Committee by any
applicable proxy or other rules of the SEC or as required by
the rules and regulations of the American Stock Exchange.
The Board of Directors has determined that all members of the Nominating
Committee currently are independent within the meaning set forth in Section 121A
of the American Stock Exchange Company Guide.
CORPORATE GOVERNANCE
BOARD AND COMMITTEE GOVERNING DOCUMENTS
The Board has adopted charters for its Audit Committee, Compensation
Committee, and Nominating Committee which you may review on our corporate
website at www.guardiantechintl.com webpage. In addition, these documents also
are available in print to any stockholder who requests a copy from Guardian.
Guardian has determined that the "independence" of a director shall be
determined in accordance with the director independence requirements set forth
in the American Stock Exchange Company Guide, Section 121A.
NOMINATION PROCESS FOR DIRECTOR CANDIDATES
The Nominating Committee is, among other things, responsible for
identifying and evaluating potential candidates and recommending candidates to
the Board for nomination.
The Committee regularly reviews the composition of the Board and
whether the addition of directors with particular experiences, skills, or
characteristics would make the Board more effective. When a need arises to fill
a vacancy or it is determined that a director possessing particular experience,
skills, or characteristics would make the Board more effective, the Committee
initiates a search. As a part of the search process, the Committee may consult
with other directors and members of senior management, and may hire a search
firm to assist in identifying and evaluating potential candidates. To date, the
Committee has not retained any such consultant but may do so in the future.
The Committee may at its discretion retain an outside director
candidate search consultant. Such a consultant will seek out candidates who have
the experiences, skills, and characteristics that the Committee has determined
are necessary to serve as a member of Guardian's Board. Such a consultant will
research the background of all candidates, conduct extensive interviews with
candidates and their references, and then presents the most qualified candidates
to the Committee and Guardian's management.
When considering a candidate, the Committee reviews the candidate's
integrity, commitment, business judgment, financial literacy, expertise in
finance and accounting, experience, skills, industry knowledge, diversity, and
other criteria and characteristics. The Committee also considers whether a
24
potential candidate will otherwise qualify for membership on the Board, and
whether the potential candidate would likely satisfy the independence
requirements established by the Board and any exchange or other market on which
Guardian's stock is then listed or traded.
Candidates are selected on the basis of outstanding achievement in
their professional careers, broad experience, wisdom, personal and professional
integrity, ability to make independent, analytical inquiries, and their
experience with and understanding of the business environment. With respect to
the minimum experiences, skills, or characteristics necessary to serve on the
Board, the Committee will only consider candidates who:
a. have the experience, skills, and characteristics necessary to
gain a basic understanding of the:
(i) principal operational and financial objectives and plans
of Guardian;
(ii) results of operations and financial condition of
Guardian and of any significant subsidiaries or business
segments; and
(iii) relative standing of Guardian and its business segments
in relation to its competitors;
b. have a perspective that will enhance the Board's strategic
discussions; and
c. are capable of and committed to devoting adequate time to
Board duties, and are available to attend Guardian's
regularly-scheduled Board and committee meetings.
All potential candidates are interviewed by the CEO, the Chairman of
the Board, and the Chair of the Committee, and may be interviewed by other
directors and members of senior management as desired and as schedules permit.
The Committee then meets to consider and approve the final candidates, and
either makes its recommendation to the Board to fill a vacancy, add an
additional member or recommend a slate of candidates to the Board for nomination
for election to the Board. The selection process for candidates is intended to
be flexible, and the Committee, in the exercise of its discretion, may deviate
from the selection process when particular circumstances warrant a different
approach.
Walter Ludwig was appointed to the Board on June 26, 2003, and M. Riley
Repko was appointed to the Board on October 1, 2003, both as Class I directors.
Charles T. Nash was appointed to the Board on June 17, 2004, as a Class I
director to replace Mr. Ludwig who resigned on May 18, 2004. Mr. Repko was
elected to the Board by stockholders at Guardian's Special Meeting of
stockholders on February 13, 2004 and is being nominated for election at the
2004 Annual Meeting. Mr. Nash has been nominated for election to the Board at
the 2004 Annual Stockholders Meeting. Mr. Nash was recommended by the Chairman
of the Board, the CEO, non-management directors, and other executive officers
prior to the formation of the Nominating Committee. All of Guardian's directors
participated in the consideration of the appointment of Mr. Nash. Mr. Nash's
initial interview was conducted by Mr. Trudnak and Mr. Dishaw after which he was
introduced and his credentials reviewed by all Board members.
Each of Michael W. Trudnak and Robert A. Dishaw are beneficial owners
of more than five percent of the outstanding shares of Guardian. Any
participation by them in the nomination process was considered to be in their
capacities as directors of Guardian, and not as recommendations from security
holders that beneficially own more than five percent of the outstanding shares.
25
STOCKHOLDER RECOMMENDATIONS OF CANDIDATES
Stockholders may recommend candidates by writing to the Secretary of
Guardian Technologies International, Inc., 21351 Ridgetop Circle, Suite 300,
Dulles, Virginia 20166. The recommendation must include the following
information:
a. The candidate's name and business address;
b. A resume describing the candidate's qualifications, and which
clearly indicates that he or she has the minimum experiences,
skills, and qualifications that the Committee has determined
are necessary to serve as a director;
c A statement as to whether or not, during the past ten years,
the candidate has been convicted in a criminal proceeding
(excluding traffic violations) and, if so, the dates, the
nature of the conviction, the name or other disposition of the
case, and whether the individual has been involved in any
other legal proceeding during the past five years;
d. A statement from the candidate that he or she consents to
serve on the Board if elected; and
e. A statement from the person submitting the candidate that he
or she is the registered holder of shares, or if the
shareholder is not the registered holder, a written statement
from the "record holder" of the shares (usually a broker or
bank) verifying that at the time the shareholder submitted the
candidate that he or she was a beneficial owner of shares.
All candidates nominated by a stockholder pursuant to the requirements
above will be submitted to the Committee for its review, which may include an
analysis of the candidate from Guardian's management.
AUDIT COMMITTEE FINANCIAL EXPERT
Guardian does not have an "audit committee financial expert" as that
term is defined in Item 401(e) of Regulation S-B promulgated by the SEC.
Guardian has been unable to identify a qualified candidate for nomination to the
Board. Guardian is committed to identifying a qualified candidate during 2004.
BOARD PRE-APPROVAL POLICY WITH REGARD TO INDEPENDENT AUDITOR AND AUDIT AND OTHER
SERVICES
To ensure the independence of Guardian's independent auditor and to
comply with applicable securities laws, the Board is responsible for reviewing,
deliberating and, if appropriate, pre-approving all audit, audit-related, and
non-audit services to be performed by Guardian's independent accountants. For
that purpose, the Board has established a policy and related procedures
regarding the pre-approval of all audits, audit-related, and non-audit services
to be performed by Guardian's independent accountants (the "Policy"). The Board
fulfilled such responsibilities during the period following the Reverse
26
Acquisition and until the formation of the new Audit Committee on September 14,
2004, and that the new Audit Committee will fulfill such responsibilities
following its formation.
The Policy provides that Guardian's independent accountant may not
perform any audit, audit-related, or non-audit service for Guardian, subject to
those exceptions that may be permitted by applicable law, unless: (1) the
service has been pre-approved by the Board, or (2) Guardian engaged the
independent accountant to perform the service pursuant to the pre-approval
provisions of the Policy. In addition, the Policy prohibits the Board from
pre-approving certain non-audit services that are prohibited from being
performed by Guardian's independent accountant by applicable securities laws.
The Policy also provides that the Chief Financial Officer will periodically
update the Board as to services provided by the independent auditor. With
respect to each such service, the independent accountant provides detailed
back-up documentation to the Board and the Chief Financial Officer.
Pursuant to its Policy, the Board has pre-approved certain categories
of services to be performed by the independent accountant and a maximum amount
of fees for each category. The Board annually re-assesses these service
categories and the associated fees. Individual projects within the approved
service categories have been pre-approved only to the extent that the fees for
each individual project do not exceed a specified dollar limit, which amount is
re-assessed annually. Projects within a pre-approved service category with fees
in excess of the specified fee limit for individual projects may not proceed
without the specific prior approval of the Board (or a member to whom
pre-approval authority has been delegated). In addition, no project within a
pre-approved service category will be considered to have been pre-approved by
the Board if the project causes the maximum amount of fees for the service
category to be exceeded, and the project may only proceed with the prior
approval of the Board (or a member to whom pre-approval authority has been
granted) to increase the aggregate amount of fees for the service category.
At least annually, the Board designates a member of the Board to whom
it delegates its pre-approval responsibilities. That member has the authority to
approve interim requests as set forth above within the defined, pre-approved
service categories, as well as interim requests to engage Guardian's independent
accountant for services outside the Board's pre-approved service categories. The
member has the authority to pre-approve any audit, audit-related, or non-audit
service that falls outside the pre-approved service categories, provided that
the member determines that the service would not compromise the independent
accountant's independence and the member informs the Board of his or her
decision at the Board's next regular meeting.
CODE OF ETHICS FOR THE CHIEF EXECUTIVE OFFICER AND OTHER EXECUTIVE OFFICERS
Guardian has adopted a Code of Ethics for its Chief Executive Officer,
Chief Financial Officer, principal accounting officer or controller, and any
person performing similar functions. A copy of the Code of Ethics is available
on our website at www.guardiantechintl.com, click on Corporate Governance, and
then click on "Code of Ethics for CEO/Senior Financial Officers."
COMMUNICATION WITH DIRECTORS
The Board of Directors welcomes communications from its stockholders
and other interested parties and has adopted a procedure for receiving and
addressing those communications. Stockholders and other interested parties may
communicate any concerns they may have about Guardian directly to either the
full Board of Directors or one or more directors by mailing their communications
to Guardian at the following address: Guardian Technologies International, Inc.,
27
21351 Ridgetop Circle, Suite 300, Dulles, Virginia 20166, Attention: Corporate
Secretary (Board Matters). The Secretary promptly will forward all stockholder
communications and other communications from interested parties unopened to the
intended recipient.
Anti-Takeover Effects Of Certain Provisions Of Our Certificate Of Incorporation,
Bylaws And Delaware Law
Our certificate of incorporation, provisions of our bylaws and Delaware
law could discourage takeover attempts and prevent stockholders from changing
our management.
Our certificate of incorporation authorizes the issuance of up to
1,000,000 shares of preferred stock, of which 6,000 have been designated as
Series A Convertible Preferred Stock, of which 5,527 are issued and outstanding.
The board of directors, without further action by the stockholders, is
authorized to issue the remaining shares of preferred stock in one or more
series and to fix and determine as to any series, any and all of the relative
rights and preferences of shares in each series, including without limitation,
preferences, limitations or relative rights with respect to redemption rights,
conversion rights, voting rights, dividend rights and preferences on
liquidation. The issuance of additional shares of preferred stock with voting
and conversion rights could materially adversely affect the voting power of the
holders of common stock and may have the effect of delaying, deferring or
preventing a change in control of Guardian.
We are subject to Section 203 of the Delaware General Corporation Law,
an anti-takeover law. In general, Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years following the date the person became an
interested stockholder, unless (with certain exceptions) the "business
combination" or the transaction in which the person became an "interested
stockholder" is approved in a prescribed manner. Generally, a "business
combination" includes a merger, asset or stock sale, or other transaction
resulting in a financial benefit to the interested stockholder. Generally, an
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years prior to the determination of interested
stockholder status, did own) 15% or more of the corporation's voting stock. The
existence of this provision would be expected to have an anti-takeover effect
with respect to transactions not approved in advance by the board of directors,
including discouraging takeover attempts that might result in a premium over the
market price for the shares of common stock held by stockholders.
We also have a staggered Board of Directors and vacancies resulting
from an increase in the size of our Board may be filled by a majority of our
directors then in office.
The affirmative vote of two-thirds of our issued and outstanding shares
of common stock is required to call a special meeting of our stockholders.
Guardian's Board of Directors and stockholders have concurrent power to
make, alter, amend, change, add to or repeal our bylaws, provided that any such
change must be authorized by a majority of our authorized directors or receive
the affirmative vote of not less than 80% of our voting stock.
No action required or permitted to be taken at a meeting of our
stockholders may be taken by written consent without a meeting.
28
We have no plans or proposal to adopt any other provision or enter into
any arrangements that may have a material anti-takeover consequence.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the aggregate cash compensation paid for
services rendered during the last three years by each person serving as our
President and Chief Executive Officer during the last year and our other most
highly compensated executive officers serving as such at the end of the year
ended December 31, 2003 whose compensation was in excess of $100,000 (Named
Executive Officers). The information below is provided with regard to Messrs.
Trudnak, Dishaw, Donovan, Hill, Lancaster, and Moorer. Mr. Moorer resigned as
our President, CEO and as a director upon the closing of the Reverse
Acquisition, effective June 26, 2003.
TABLE 1
SUMMARY COMPENSATION TABLE
-------------------------
ANNUAL COMPENSATION(1) AWARDS PAYOUTS
------------------------------ -------- -------
OTHER STOCK
NAME AND PRINCIPAL YEAR SALARY BONUS COMPENSATION AWARD(S) OPTIONS/
POSITION ENDED ($) ($) ($)(8) ($) SARs
- --------------------- ----- -------- ----- ------------ -------- --------
J. Andrew Moorer, 2003 $ 72,600 -0- -0- $ 33,814 -0-
President and
CEO(2)
2002 $ 75,000 -0- -0- $ 45,000 -0-
2001 $ 75,000 -0- -0- $ 45,000 -0-
Michael W. Trudnak 2003 $275,059 -0- $ 6,000 $400,000 -0-
CEO(3)
Robert A. Dishaw 2003 $275,059 -0- $ 6,000 $400,000 -0-
President and Chief
Operating Officer(4)
2002 $ 70,865 -0- $70,865 $ 1,546 -0-
William J. Donovan 2003 $ 57,560 -0- -0- $200,000 -0-
Chief Financial
OFFICER(5)
2003 $ 76,923 -0- -0- $200,000 -0-
Darrell H. Hill
Vice President,
Guardian Health Care
Systems(6)
Steven V. Lancaster 2003 $ 76,923 -0- -0- $200,000 -0-
Vice President,
Business Development(7)
29
(1) The above table reflects salary expenses as recorded on Guardian's
financial statements in accordance with generally accepted accounting
principles. As such, the amounts may differ from the base salary rates
discussed below.
(2) Mr. Moorer's compensation reflects cash compensation paid towards his base
salary, as well as, other compensation which reflects stock grants in lieu
of salary and bonuses. Mr. Moorer accepted a reduction in his base salary
in exchange for stock grants.
(3) Mr. Trudnak became the Chief Executive Officer of RJL on January 1, 2003.
Mr. Trudnak earned $226,622 of salary during 2003, which is accrued and
unpaid as of December 31, 2003.
(4) Mr. Dishaw, the founder of RJL Marketing Services Inc. earned $77,844 of
salary during 2002 and $226,622 during 2003, which are accrued and unpaid
as of December 31, 2003.
(5) Mr. Donovan became an executive officer on August 18, 2003.
(6) Mr. Hill became Vice President, Guardian Health Care Systems on May 19,
2003. Mr. Hill earned $49,746 of (6) salary during 2003, which was earned,
accrued and unpaid as of December 31, 2003.
(7) Mr. Lancaster became Vice President, Business Development on May 19, 2003.
Mr. Lancaster earned $49,746 of salary during 2003, which was earned,
accrued and unpaid as of December 31, 2003.
(8) Represents automobile allowance payments.
TABLE 2
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
% OF TOTAL
OPTIONS/SARS
GRANTED TO EXERCISABLE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION DATE
NAME GRANTED (#)(1) FISCAL YEAR ($/SH)
Michael W. Trudnak 400,000 19.23% 0.50 June 25, 2013
Robert A. Dishaw - 0.00% - -
William J. Donovan 200,000 9.62% 0.50 August 17, 2013
Darrell E. Hill 200,000 9.62% 0.50 June 25, 2013
Steven V. Lancaster 200,000 9.62% 0.50 June 25, 2013
(1) Options granted were non-qualified options to acquire shares of common
stock. With the exception of Mr. Donovan, these options vested
immediately upon employment and were exercisable for ten years. Mr.
Donovan's immediately vested in 50% of his options and the remaining
50% vest at his one-year anniversary. His options are exercisable for
ten years. The foregoing options represent options that we have
committed to issue pursuant to certain employment agreements and other
arrangements, but were not outstanding on December 31, 2003. The
options were granted by the Board on June 25, 2004.
30
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 2003 AND FISCAL YEAR 2003 YEAR-END
OPTION VALUES
The following table sets forth information concerning option exercises
and option holdings for each of the named executive officers during the fiscal
year ended December 31, 2003. All of the listed options were exercisable at
December 31, 2003.
TABLE 3
AGGREGATED OPTIONS/SAR EXERCISED IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
VALUE OF
SHARES NUMBER OF SECURITIES UNEXERCISED
ACQUIRED VALUE UNDERLYING UNEXERCISED IN-THE-MONEY
ON REALIZED OPTIONS AT OPTIONS
NAME EXERCISE ($) 12/31/03 AT 12/31/03(1)
-------- --- ----------------- --------------
EXERCISABLE/UNEXERCISABLE
-------------------------
Michael W. Trudnak - - 400,000 $1,340,000
Robert A. Dishaw - - - -
William J. Donovan - - 100,000/100,000 $335,000/$335,000
Darrell E. Hill - - 200,000 $670,000
Steven V. Lancaster - - 200,000 $670,000
(1) Calculated on the basis of the fair market value of $3.85 of the Common
Stock on December 31, 2003, minus the per share exercise price. The
foregoing options represent options that we have committed to issue
pursuant to certain employment agreements and other arrangements, but
were outstanding on December 31, 2003.
EQUITY COMPENSATION PLAN INFORMATION
The following table gives information about Guardian's common stock issued upon
exercise of options, warrants and rights under all of Guardian's equity
compensation plans as of December 31, 2003. Information is included for equity
compensation plans approved by Guardian's shareholders and equity compensation
plans not approved by Guardian's shareholders.
31
NUMBER OF
SECURITIES
REMAINING
AVAILABLE FOR
FUTURE ISSUANCES
NUMBER OF WEIGHTED AVERAGE UNDER EQUITY
SECURITIES TO BE EXERCISE PRICE OF COMPENSATION PLANS
ISSUED UPON OUTSTANDING (EXCLUDING
EXERCISE OF OPTIONS, WARRANTS SECURITIES
OUTSTANDING OPTIONS, AND RIGHTS REFLECTED IN
WARRANTS AND RIGHTS (b) COLUMN (a))
(a) (c)
-------------------- ----------------- ------------------
Equity compensation plans approved by
security holders 2,080,000(1) $0.527 27,920,000(2)
Equity compensation plans not approved
by security holders -- [5.00] --
Total 2,080,000 $0.527 27,920,000
(1) Includes options to purchase shares outstanding under the Guardian 2003
Amended and Restated Incentive Stock Option Plan.
(2) Includes shares available, as of December 31, 2003, for future issuance
under the Guardian 2003 Amended and Restated Incentive Stock Option Plan;
excludes securities reflected in column (a). Subject to the terms and
provisions of the Plan, options may be granted to eligible employees and
nonqualified stock options may be granted to directors or consultants of
the Company and its Subsidiaries at any time.
DIRECTOR COMPENSATION
Non-employee directors do not currently receive any compensation for
attending meetings of the board but will be reimbursed for expenses incurred in
attending Board meetings, including those for travel, food and lodging, if any.
Directors who are officers of or employed by Guardian or any of its
subsidiaries are not additionally compensated for their board activities.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
We have entered into employment agreements with Mr. Dishaw and Mr.
Trudnak. Mr. Dishaw's employment agreement commenced on October 23, 2002, and
Mr. Trudnak's employment agreement commenced on January 1, 2003. The agreements
are for a three year term and are renewable for one year terms thereafter. The
employment agreements provide for annual compensation to Messrs. Dishaw and
Trudnak of $275,000 provided that such compensation will be reduced by
commissions that they earn on sales of our products. The agreements provide for
32
the payment of commissions on sales of our products at a flat rate of 14%, a
signing bonus of $20,000, and an automobile allowance. The employment agreements
may be terminated upon the death or disability of the employee or for cause. In
the event the agreements are terminated by us other than by reason of the death
or disability of the employee or for cause, the employee is entitled to payment
of his base salary for one year following termination. The employee may
terminate the agreement on 30 days' prior notice to Guardian. Each employee has
entered into a non-compete, confidentiality, proprietary rights and
non-solicitation agreement pursuant to which the employee agrees not to disclose
confidential information regarding Guardian and not to compete with the business
of Guardian or solicit employees or customers of Guardian for a period of one
year following his termination of employment.
We have also entered into employment agreements with Mr. Darrell E.
Hill, Vice President, Program Management, and Mr. Steve Lancaster, Vice
President, Business Development. The agreements are essentially the same as the
agreements with Messrs. Dishaw and Trudnak, except that the agreements provide
for base salaries of $125,000 per annum, for the payment of commissions on the
sales of our products at the flat rate of 5%, and for performance based bonuses.
We have also entered into an employment agreement with Mr. Donovan,
Chief Financial Officer of Guardian. Mr. Donovan's employment agreement is
essentially the same as the agreements with Messrs. Dishaw and Trudnak, except
that Mr. Donovan's agreement provides for a base salary of $150,000 per annum.
Further, if Mr. Donovan terminates his employment agreement by reason of: a
change in the location of his workplace beyond a 50 mile radius of Guardian's
principal address; a material reduction in his responsibilities or number of
persons reporting to him; a material demotion; or an adverse change in his
title, Mr. Donovan is entitled to be paid his base salary for one year following
any such termination. Also, in the event of a change in control of Guardian and,
within 12 months of such change of control, his employment is terminated by the
acquirer or one of the events in the immediately preceding sentence occurs, Mr.
Donovan is entitled to be paid his base salary for eighteen months from the date
of such termination or event. A "change of control" would include the occurrence
of one of the following events:
o the approval of the shareholders for a complete liquidation or
dissolution of Guardian;
o the acquisition of 20% or more of the outstanding common stock of
Guardian or of voting power by any person, except for purchases
directly from Guardian, any acquisition by Guardian, any acquisition
by a Guardian employee benefit plan, or a permitted business
combination;
o if two-thirds of the incumbent board members as of the date of the
agreement cease to be board members, unless the nomination of any
such additional board member was approved by three-quarters of the
incumbent board members;
o upon the consummation of a reorganization, merger, consolidation, or
sale or other disposition of all or substantially all of the assets
of Guardian, except if all of the beneficial owners of Guardian's
outstanding common stock or voting securities who were beneficial
owners before such transaction own more than 50% of the outstanding
common stock or voting power entitled to vote in the election of
directors resulting from such transaction in substantially the same
proportions, no person owns more than 20% of the outstanding common
stock of Guardian or the combined voting power of voting securities
except to the extent it existed before such transaction, and at
least a majority of the members of the board before such transaction
were members of the board at the time the employment agreement was
executed or the action providing for the transaction.
33
Effective as of December 19, 2003, we entered into employment
agreements with Walter Ludwig, a director of Guardian, and Victor T. Hamilton in
connection with the acquisition of certain assets of Difference Engines
Corporation by Guardian. The employment agreements are essentially similar to
the employment agreements with Mr. Dishaw and Mr. Trudnak, except that they
provide for an annual base salary of $120,000 for Mr. Ludwig and $90,000 for Mr.
Hamilton. The agreements also include a change of control provision similar to
that contained in Mr. Donovan's employment agreement, except that Guardian is
obligated to pay the annual base salary for twelve (12) months following the
change of control termination. Mr. Ludwig resigned as a director, officer and
employee of Guardian on May 18, 2004 and his employment agreement terminated as
of such date.
Each of the foregoing agreements provides that the employee shall be
entitled to participate in any stock option plan that we subsequently adopt,
including the 2003 Stock Incentive Plan. Moreover, Mr. Trudnak's agreement
provides for the grant of an aggregate of 400,000 shares of our restricted
stock. However, effective June 21 2004, Mr. Trudnak agreed to accept in lieu of
the issuance of such shares, ten year nonqualified options to purchase an
aggregate of 400,000 shares of common stock at an exercise price of $.50 per
share. Also, each of Messrs. Hill's and Lancaster's employment agreements
provide for the grant of 200,000 shares of our restricted stock. However,
effective June 21 2004, each of Messrs. Hill and Lancaster agreed to accept in
lieu of the issuance of such shares, ten year nonqualified options to purchase
an aggregate of 200,000 shares of common stock at an exercise price of $.50 per
share.
On June 26, 2003, the effective date of the Reverse Acquisition,
Messrs. J. Andrew Moorer, President, Chief Executive Officer and a director,
Kevin L. Houtz, Secretary and a director, and David W. Stevens, a director,
resigned as officers and directors of Guardian and were replaced by officers and
directors designated by RJL. As a condition to closing, Mr. Moorer entered into
a settlement agreement pursuant to which Mr. Moorer's employment agreement,
dated February 19, 1999, was terminated and Mr. Moorer agreed to release
Guardian from any and all claims for future compensation thereunder. Mr. Moorer
and Guardian entered into mutual releases for claims arising in connection with
Mr. Moorer's employment with Guardian. In addition, as a condition to the
closing, Mr. Moorer, and Messrs Houtz and Stevens, the former directors of
Guardian entered into lock up agreements with RJL and Guardian pursuant to which
they agreed not to sell their shares of Guardian for a period of six months,
except that they may, during such period, sell an aggregate of 50,000 shares a
calendar month.
AMENDED AND RESTATED 2003 STOCK INCENTIVE PLAN
On August 29, 2003, our board of directors adopted our 2003 Stock
Incentive Plan and amended and restated the plan on December 2, 2003 (Plan). The
Plan was approved by stockholders at the special meeting of our stockholders
that was held on February 13, 2004.
The Plan is intended to foster the success of Guardian and its
subsidiaries by providing incentives to Eligible Employees, directors and
consultants to promote the long-term financial success of Guardian. The Plan is
designed to provide flexibility to Guardian in our ability to motivate, attract,
and retain the services of Eligible Employees, directors and consultants upon
whose judgment, interest, and special effort the successful conduct of our
operation is largely dependent. The Plan applies to all grants of stock options
granted on or after the date the Plan is approved or adopted by our directors
unless otherwise indicated. As of August 31, 2004, the market value of the
30,000,000 shares underlying the options issuable under the Plan was
$82,500,000.
34
The Plan is administered by the Board of Directors of Guardian or a
committee designated by the board consisting of two or more directors appointed
by the board (Committee), each of whom is a non-employee director and an outside
director with the meaning of Section 162(m) of the Code. The Plan is currently
administered by the Compensation Committee and awards are made by the committee.
The Committee has all powers necessary or desirable to administer the Plan. The
Committee has the power to determine the terms and conditions upon which awards
may be made, interpret the Plan, accelerate the exercisability of any award,
establish, amend or waive rules or regulations for the Plan's administration,
and make all other determinations and take all other actions necessary or
advisable for the administration of the Plan in its sole judgment and
discretion. The Committee has the authority to grant awards to employees,
directors and consultants selected by it, which awards are to be evidenced by an
agreement.
Under the Plan, Guardian may issue options which will result in the
issuance of up to an aggregate of 30,000,000 shares of Guardian common stock,
$.001 par value per share. The Plan provides for options which qualify as
incentive stock options (Incentive Options or ISOs) under Section 422 of the
Internal Revenue Code of 1986, as well as the issuance of non-qualified options
(Non-Qualified Options) which do not so qualify. The shares issued by Guardian
under the Plan may be either treasury shares or authorized but unissued shares
as Guardian's board of directors or a committee thereof may determine from time
to time.
Pursuant to the terms of the Plan, Guardian may grant Non-Qualified
Options to directors or consultants of Guardian and its subsidiaries at any time
and from time to time as shall be determined by the Committee. The Plan also
provides for the Incentive Options available to any officer or other employee of
Guardian or its subsidiaries as selected by the Committee.
Options granted under the Plan must be evidenced by a stock option
agreement in a form consistent with the provisions of the Plan. Each option
shall expire on the earliest of (a) ten (10) years from the date it is granted,
(b) sixty (60) days after the optionee dies or becomes disabled, (c) immediately
upon the optionee's termination of employment or service or cessation of Board
service, whichever is applicable, or (d) such date as the board of directors or
a committee appointed by the board shall determine, as set forth in the relevant
option agreement; provided, however, that no ISO which is granted to an optionee
who, at the time such option is granted, owns stock possessing more than ten
(10) percent of the total combined voting power of all classes of stock of
Guardian or any of its subsidiaries, shall be exercisable after the expiration
of five (5) years from the date such option is granted.
The price at which shares of common stock covered by the option can be
purchased is determined by the Committee. In the case of an Incentive Option,
the exercise price shall not be less than the fair market value of Guardian's
common stock on the date the option was granted or in the case of any optionee
who, at the time such incentive stock option is granted, owns stock possessing
more than ten percent (10%) of the total combined voting power of all classes of
stock of his employer corporation or of its parent or subsidiary corporation,
not less than one hundred ten percent (110%) of the fair market value of such
stock on the date the incentive stock option is granted.
To the extent that an Incentive Option or Non-Qualified Option is not
exercised within the period in which it may be exercised in accordance with the
terms and provisions of the Plan described above, the Incentive Option or
Non-Qualified Option will expire as to any then unexercised portion. To exercise
an option, the Plan participant must tender an amount equal to the total option
exercise price of the underlying shares and provide written notice of the
exercise to Guardian. The right to purchase shares is cumulative so that once
35
the right to purchase any shares has vested, those shares or any portion of
those shares may be purchased at any time thereafter until the expiration or
termination of the option.
Awards may be made to approximately twenty-three employees and former
employees of Guardian, our three non-employee directors, and to consultants to
Guardian. Because awards under the Plan are determined by the board, we cannot
determine the benefits or amounts of awards that will be received or granted in
the future under the Plan. As of the date of this proxy statement, 2,080,000
options have been granted under the Plan. The Plan is the only plan pursuant to
which options and shares may be granted or issued.
The following is a brief summary of the principal income tax
consequences of awards under the Plan. This summary is based on current federal
income tax laws and interpretations thereof, all of which are subject to change
at any time, possibly with retroactive effect. This summary is not intended to
be exhaustive.
Non-qualified Options. A participant who receives Non-Qualified Options
does not recognize taxable income upon the grant of an option, and Guardian is
not entitled to a tax deduction. The participant will recognize ordinary income
upon the exercise of the option in an amount equal to the excess of the fair
market value of the option shares on the exercise date over the option price.
Such income will be treated as compensation to the participant subject to
applicable withholding tax requirements. Guardian is generally entitled to tax a
deduction in an amount equal to the amount taxable to the participant as
ordinary income in the year the income is taxable to the participant. Any
appreciation in value after the time of exercise will be taxable to the
participant as capital gain and will not result in a deduction by Guardian.
Incentive Options. A participant who receives an Incentive Option does
not recognize taxable income upon the grant or exercise of the option, and
Guardian is not entitled to a tax deduction. The difference between the option
price and the fair market value of the option shares on the date of exercise,
however, will be treated as a tax preference item for purposes of determining
the alternative minimum tax liability, if any, of the participant in the year of
exercise. Guardian will not be entitled to a deduction with respect to any item
of tax preference.
A participant will recognize gain or loss upon the disposition of shares
acquired from the exercise of ISOs. The nature of the gain or loss depends on
how long the option shares were held. If the option shares are not disposed of
pursuant to a "disqualifying disposition" (i.e., no disposition occurs within
two years from the date the option was granted nor one year from the date of
exercise), the participant will recognize long-term capital gain or capital loss
depending on the selling price of the shares. If the option shares are sold or
disposed of as part of a disqualifying disposition, the participant must
recognize ordinary income in an amount equal to the lesser of the amount of gain
recognized on the sale, or the difference between the fair market value of the
option shares on the date of exercise and the option price. Any additional gain
will be taxable to the participant as a long-term or short term capital gain,
depending on how long the option shares were held. Guardian is generally
entitled to a deduction in computing its federal income taxes for the year of
disposition in an amount equal to any amount taxable to the participant as
ordinary income.
36
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Repko, Nash, and Kennedy are non-employee directors of Guardian.
Messrs. Trudnak, and Dishaw are employed by Guardian. See "Information About
Directors and Executive Officers" and "Information About Directors and Executive
Officers--Compensation of Executive Officers and Directors" as well as
"Information About Guardian Stock Ownership."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 2002, Mr. Moorer exercised 2,700 options to purchase common
stock at $5.00 per share. At December 31, 2002, Mr. Moorer had outstanding
advances from the Company of approximately $23,500.
During the fiscal years ended December 31, 2002 and 2001, Mr. Moorer
received a cash salary of $75,000 per year, rather than his $120,000 per year
entitlement under his employment agreement. Mr. Moorer was granted shares of
common stock totaling 270,000 shares for fiscal 2002 and 83,299 shares for
fiscal 2001, such shares having a fair market value on the date of issuance of
$45,000 in each instance, representing the difference between Mr. Moorer's
entitlement under his employment agreement and the cash salary actually paid.
In May 2003, we made an exchange offer to all of the investors who
purchased units in our January 2000 private offering described above. Pursuant
to the exchange offer, all investors who purchased units are being given the
right to exchange all of the warrants received as part of those units for shares
of our common stock. The exchange offer consists of one share of common stock
for each unit purchased in the private offering conducted in January 2000.
Messrs. Houtz and Stevens, two of our directors, purchased 10,000 units and
2,000 units, respectively, in the offering and those persons accepted the
exchange offer.
The following disclosures relate to transactions to which RJL (and
Guardian Technologies International, Inc. post Reverse Acquisition) and its
directors, executive officers, nominees for election as a director, or any five
percent beneficial owner is or was a party.
On October 3, 2002, Mr. Dishaw acquired 1,500 shares of common stock of
RJL for cash nominal consideration.
On March 21, 2003, RJL entered into a consulting agreement, as amended,
with ten brokers in connection with services to be provided in connection with
locating and negotiating the proposed Reverse Acquisition between RJL, its
stockholders and the Company. RJL agreed to issue, at closing of the
acquisition, an aggregate of 2,000,000 shares of the Company for such services.
Such shares were issued by the Company during July 2003.
On April 3, 2003, as part of the initial capitalization of the Company,
Mr. Dishaw and Mr. Trudnak acquired 3,326 and 4,279 shares of common stock of
RJL, respectively, for nominal cash consideration.
On May 19, 2003, RJL entered into a consulting agreement with Mr.
Tobin pursuant to which Mr. Tobin agreed to provide consulting services in
connection with strategic selling related to our business, marketing and market
development in the bio-medical industry in North America and Europe, business
continuity, finance and accounting. The consulting agreement is for a term that
ends on May 1, 2005, and may be terminated by Guardian in the event a material
37
misrepresentation by Mr. Tobin or the commencement of any action by the SEC
against Mr. Tobin or any entity owned or controlled by Mr. Tobin; or by either
party on not less than 30 days prior written notice. As compensation for his
services under the agreement, Mr. Tobin is entitled to receive an aggregate of
1,820,000 shares of common stock, 1,430 shares of Series A Convertible Preferred
Stock, and 480 shares of Series B Convertible Preferred Stock of Guardian. The
shares of Series B Convertible Preferred Stock were issued to Mr. Tobin during
August 2003 and the shares of Common Stock and Series B Convertible Preferred
Stock were issued on November 19, 2003.
Effective October 23, 2003, RJL entered into a three year employment
agreement with Mr. Dishaw. Other material terms of the employment are described
under "Employment Agreements," above.
Effective as of January 1, 2003, RJL entered into a three year
employment agreement with Mr. Trudnak. Under the employment agreement, as
amended, Mr. Trudnak is entitled to receive 400,000 shares of our common stock
as additional compensation for his services under the agreement. Other material
terms of the employment agreement, as amended, are described under "Employment
Agreements," above.
Upon the closing of the Reverse Acquisition and effective June 26,
2003, we issued to Mr. Dishaw 2,945,500 shares of our common stock and 2,212
shares of our Series A Convertible Preferred Stock and we issued to Mr. Trudnak
2,566,000 shares of our common stock and 1,885 shares of our Series A
Convertible Preferred Stock, in exchange for all of their stock in RJL. Also
effective as of June 26, 2003, Mr. Trudnak purchased 400,000 shares of our
common stock for cash consideration of $200,000 in a private placement conducted
by us.
On July 30, 2003, the Company entered into a consulting agreement with
Mr. Moorer, the former President and Chief Financial Officer of the Company to
provide consulting services in connection with, among other things, business
continuity, finance and accounting, strategic planning, market development, and
related services. The agreement terminates on July 1, 2004, unless sooner
terminated by the parties by mutual agreement, upon thirty (30) days notice and
in certain other events. As compensation for such services, the Company has
agreed to issue to Mr. Moorer 150,000 shares of common stock.
On October 23, 2003, the Company entered into an agreement with
Difference Engines Corporation, a Maryland corporation, pursuant to which the
Company agreed to purchase certain intellectual property owned by Difference
Engines, including certain compression software technology. The transaction
closed on December 19, 2003. Mr. Ludwig, a director of the Company, is also the
president, a director and a principal stockholder of Difference Engines. The
Company issued 587,000 shares of its common stock as consideration for the
purchase of the intellectual property and cancelled a convertible note that
Difference Engines had issued to the Company in the amount of approximately
$25,000 representing advances the Company made to Difference Engines. The
587,000 shares of common stock will be subject to a two (2) year lock up. The
Company has granted Difference Engines piggy-back registration rights for a
period of three (3) years commencing on the date of the expiration of the lock
up period with regard to the shares to be issued in the transaction. Upon
expiration of the two (2) year lock up period, in the event that the shares are
not eligible for resale under Rule 144 and have not been registered under the
Securities Act, the holder of the shares may demand redemption of the shares.
The redemption price is to be calculated on the basis of the average of the
closing bid and asked prices of the Company's common stock for the 20
38
consecutive business days ending on the day prior to the date of the exercise of
the holder's right of redemption. The founders of Difference Engines, including
Messrs. Ludwig and Hamilton, provided certain releases to the Company related to
their contribution of the technology to Difference Engines. The closing of the
acquisition of the software was subject to certain conditions, including a
requirement that Difference Engines obtain approval of its stockholders for the
transaction and that Messrs Ludwig and Hamilton enter into two (2) year and one
(1) year employment agreements, respectively, with the Company at base salaries
of $120,000 and $90,000 per annum, respectively. Other material terms of the
employment agreements are described under "Employment Agreements," above.
On August 18, 2003, William J. Donovan entered into a three year
employment agreement with the Company. Under the employment agreement, as
amended, Mr. Donovan is entitled to options to purchase 200,000 shares of our
common stock as additional compensation for his services under the agreement of
which 100,000 are immediately exercisable and 100,000 will be exercisable on the
one year of anniversary of his employment with Guardian. Other material terms of
the employment agreement, as amended, are described under "Employment
Agreements," above.
On May 19, 2003, Darrell E. Hill and Steven V. Lancaster entered
Guardian entered into two year employment agreements, respectively with the
Company. Mr. Hill is Vice President, Health Care Services and Mr. Lancaster is
Vice President, Business Development. Each received options to purchase 200,000
shares of Common Stock that are immediately exercisable as part of their
compensation. Other material terms of the employment agreement, as amended, are
described under "Employment Agreements," above.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board has selected Aronson & Company as the independent accountants
of Guardian for the fiscal year ending December 31, 2004. Aronson & Company also
acted as Guardian's independent accountants for 2003. A representative of
Aronson & Company is expected to be present at the Annual Meeting. He or she
will have an opportunity, if he or she so desires, to make a statement and
respond to appropriate questions from the stockholders. The board of directors
has considered the compatibility of non-audit services provided to us by Aronson
& Company in relationship to maintaining the auditor's independence.
Audit Fees
During the fiscal years ended December 31, 2003 and 2002, respectively,
the aggregate fees billed by Aronson & Company for professional services
rendered for the audit of the Company's annual financial statements and for the
reviews of the financial statements included in the Company's Form 10-QSB were
approximately $41,516 and $8,500, respectively.
Audit-Related Fees
"Audit-related" fees include assurance and related services reasonably
related to the performance of the audit or review of the Company's financial
statements, such as reports on internal control, review of SEC filings, merger
and acquisition due diligence and related services. The aggregate fees billed by
Aronson & Company for services related to the performance of their audit and
review of financial statements that are not included in "audit fees" above were
approximately $14,599 and $0 for the fiscal years ended December 31, 2003 and
2002, respectively.
39
During the fiscal year ended December 31, 2003, we paid audit related
fees of $700 to Schumacher & Associates, the Company's previous auditors.
Tax Fees
Tax fees include tax-related services, such as tax return review,
preparation and compliance, as well as strategic tax planning services, and
structuring of acquisitions. The aggregate fees billed by Aronson & Company for
these services were approximately $2,436 and $0 for the fiscal years ended
December 31, 2003 and 2002, respectively.
All Other Fees
During the fiscal years ended December 31, 2003 and 2002, there were no
other fees paid to Aronson & Company for other products or services, not listed
above.
None of such services were approved pursuant to the de minimis
exception provided in Rule 1-01(7)(i)(C) of Regulation S-X.
CHANGE OF ACCOUNTANTS
Effective July 9, 2003, Guardian dismissed its principal independent
accountants, Schumacher & Associates, Inc. Schumacher & Associates, Inc., had
been engaged by Guardian as the principal independent accountants to audit the
financial statements of Guardian for the fiscal year ended December 31, 2002.
Schumacher & Associates, Inc.'s reports on the financial statements of Guardian
filed with the Securities and Exchange Commission with regard to the fiscal year
ended December 31, 2002, contained no adverse or disclaimer of opinion; however,
its report did contain a going concern explanatory paragraph.
The action to dismiss Schumacher & Associates, Inc., as Guardian's
principal independent accountants has been taken primarily as a result of the
change of control of Guardian arising from the reverse acquisition of Guardian
by RJL Marketing Services Inc. (RJL), on June 26, 2003. As a condition of the
acquisition, the previous executive officers and members of the board of
directors of Guardian resigned effective as of the closing of the acquisition
and were replaced by officers and directors designated by RJL. The new board of
directors of Guardian has decided to engage the independent public accountants
of RJL to audit the financial statements of Guardian for the fiscal year ended
December 31, 2003.
The decision to change accountants was recommended and approved by the
board of directors of Guardian.
In connection with the audit of Guardian's financial statements for
the fiscal year ended December 31, 2002, and in connection with the subsequent
interim period up to the date of dismissal, there were no disagreements with
Schumacher & Associates, Inc., on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure,
which, if not resolved to the satisfaction of Schumacher & Associates, Inc.,
would have caused Schumacher & Associates, Inc., to make reference to the
subject matter of the disagreements in its report.
40
Effective July 10, 2003, Guardian's Board of Director's approved the
engagement of Aronson & Company to serve as Guardian's independent public
accountants and to be the principal accountants to conduct the audit of
Guardian's financial statements for the fiscal year ending December 31, 2003,
replacing the firm of Schumacher & Associates, Inc.
During Guardian's two most recent fiscal years ended December 31, 2002
and 2003, Guardian did not consult with Aronson & Company regarding any of the
matters or events set forth in Item 304(a)(2)(i) and (ii) of Regulation S-B.
However, Aronson & Company were engaged by RJL to audit RJL's financial
statements for the period ended December 31, 2002.
There were no disagreements with our accountants on accounting and
financial disclosure in 2003.
41
DISCUSSIONS OF PROPOSALS RECOMMENDED FOR
CONSIDERATION BY STOCKHOLDERS
PROPOSAL 1
ELECTION OF TWO (2) DIRECTORS FOR A THREE YEAR TERM, AND
UNTIL THEIR SUCCESSORS ARE DULY ELECTED AND QUALIFIED
The board of directors seeks the election by the stockholders of the
following designated directors: M. Riley Repko and Charles T. Nash, Class I
directors. Messrs. Repko and Nash as Class I directors will be elected to hold
office for a term expiring at the third succeeding annual meeting following the
2004 Annual Meeting. Biographical information concerning Messrs. Repko and Nash
can be found under "Information About Directors and Executive Officers."
Unless otherwise instructed or unless authority to vote is withheld,
the enclosed proxy will be voted FOR the election of Messrs. Repko and Nash.
Although the Board of directors of Guardian does not contemplate that any of
these individuals will be unable to serve, if such a situation arises prior to
the Annual Meeting, the persons named in the enclosed proxy will vote for the
election of any other person the Board may choose as a substitute nominee.
VOTE REQUIRED FOR APPROVAL
All shares of Guardian's common stock and Series A Convertible
Preferred Stock (voting on an as-converted basis) voting as a single class will
be entitled to vote. Each of Messrs. Repko, and Nash must receive a plurality of
the votes cast in order to be elected. The board of directors unanimously
recommends a vote FOR the election of Mr. M. Riley Repko and Mr. Charles T.
Nash.
PROPOSAL 2
TO RATIFY THE APPOINTMENT OF ARONSON & COMPANY AS INDEPENDENT
PUBLIC ACCOUNTANTS FOR 2004
The Board has concluded that the appointment of Aronson & Company as
Guardian's independent public accountants is in the best interests of Guardian.
A representative of Aronson & Company will be present at the Annual Meeting and
will have the opportunity to make a statement if he or she desires to do so.
Such representative is expected to be available to respond to appropriate
questions.
VOTE REQUIRED FOR APPROVAL
All shares of Guardian's common stock and Series A Convertible
Preferred Stock (voting on an as-converted basis) and voting as a single class
will be entitled to vote. Proposal 2 must be approved by the affirmative vote of
a majority of the votes cast for ratification of the engagement of our
independent accountants, Aronson & Company. The Board of Directors unanimously
recommends a vote FOR the ratification of its selection of Aronson & Company as
independent accountants for Guardian.
42
PROPOSAL 3
TO APPROVE AN AMENDMENT TO GUARDIAN'S CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES A CONVERTIBLE PREFERRED STOCK AMENDING THE TERMS OF
CONVERSION OF THE SERIES A CONVERTIBLE PREFERRED STOCK TO PROVIDE FOR THE
AUTOMATIC MANDATORY CONVERSION OF EACH OUTSTANDING SHARE OF SERIES A CONVERTIBLE
PREFERRED STOCK INTO 1,000 SHARES OF COMMON STOCK EFFECTIVE NOVEMBER 30, 2004.
The Board of Directors has adopted and is proposing an amendment to
Guardian's Certificate of Designations, Preferences and Rights of the Series A
Convertible Preferred Stock, $0.20 par value per share ("Series A Certificate of
Designations"), to provide for the automatic conversion of each outstanding
share of Series A Convertible Preferred stock into 1,000 shares of common stock,
$0.001 par value per share, effective 5:00 p.m. Washington, D.C. time on
November 30, 2004.
The Board of Directors recommends amending Section 7(a) of the Series A
Certificate of Designations by deleting the section in its entirety and
inserting in lieu thereof the following language:
"(a) Automatic Mandatory Conversion. Each share of Preferred Stock
shall automatically convert into 1,000 shares of Common Stock effective 5:00
p.m. Washington, D.C. time on November 30, 2004 (the "Conversion Date")."
Attached as Exhibit C is the proposed form of Certificate of Amendment
to Guardian's Certificate of Designations, Preferences and Rights of the Series
A Convertible Preferred Stock ("Certificate of Amendment"). The proposed
Certificate of Amendment will be filed with the Secretary of State of the State
of Delaware if this Proposal 3 is approved. We reserve the right to modify the
form of the proposed amendment to the extent that it may be necessary to do so
in order to comply with applicable law.
EFFECT OF AMENDING THE TERMS OF CONVERSION OF THE SERIES A CONVERTIBLE PREFERRED
STOCK
Background
Our Certificate of Incorporation authorizes the issuance of up to
200,000,000 shares of common stock, of which ___________ shares were issued and
outstanding on the Record Date.
Our Certificate of Incorporation authorizes the issuance of up to
1,000,000 shares of preferred stock. The Board is authorized to fix the number,
designations, powers, preferences, and rights of any class or series of
preferred stock by filing a certificate under Delaware law. Guardian executed
and filed, on June 26, 2003 the Series A Certificate of Designations providing
for the designations, preferences and relative, participating, optional or other
43
rights, and the qualifications, limitations or restrictions of 6,000 shares of
its Series A Convertible Preferred Stock.
Terms of Series A Convertible Preferred Stock
As of the date of this proxy statement, we have issued 5,527 shares of
Series A Convertible Preferred Stock. There are currently no other series of
preferred stock issued or outstanding. Under the Series A Certificate of
Designations, holders of our Series A Convertible Preferred Stock are not
entitled to receive dividends, except to the extent declared by the Board but
are entitled to participate in dividends paid on outstanding common stock if,
when and as deemed advisable by the Board. Dividends if and when declared and
paid shall be cumulative. In the event of any liquidation, dissolution or
winding up of Guardian, holders of shares of Series A Convertible Preferred
Stock are entitled to be paid an amount equal to $20 per share, out of the
assets of Guardian available for distribution to shareholders and before payment
to any holders of junior preferred stock or to holders of our common stock If
the assets are insufficient to permit the payment of the full amount of the
preferential payment, then the assets of Guardian will be distributed ratably
between the holders of shares of Series A Convertible Preferred Stock. We are
not obligated to redeem any shares of Series A Convertible Preferred Stock.
Under the Series A Certificate of Designations, each share of our Series A
Convertible Preferred Stock will be automatically converted into 1,000 shares of
common stock (subject to certain anti-dilution adjustments) upon our attaining
Earnings Before Income Taxes and Depreciation (EBITDA) of $2.5 million during
the period commencing on June 26, 2003, and ending on June 26, 2005. The shares
are not otherwise convertible.
Effect of Changes to Terms of Conversion of Series A Convertible Preferred Stock
As of the date of this proxy statement, the shares of Series A
Convertible Preferred Stock are not convertible as we have not satisfied the
criterion for conversion and it is uncertain whether Guardian will satisfy this
criterion on or before June 26, 2005. If we amend the Certificate of
Designations to provide for the immediate conversion of the outstanding shares
of Series A Convertible Preferred Stock, effective November 30, 2004, we will be
obligated to issue 5,527,000 additional shares of common stock to the holders of
our Series A Convertible Preferred Stock. As of the Record Date, the issuance of
such additional shares of common stock will result in a __% increase in the
number of outstanding shares of common stock of Guardian, assuming no exercise
or conversion of outstanding options or warrants.
In addition, the issuance of such additional shares of common stock
will result in dilution to existing investors. The pro forma net tangible value
of our common stock as of June 30, 2004, (after giving effect to the issuance of
shares in connection with the acquisition of Wise Systems Ltd. and without
giving effect to the exercise or conversion of outstanding options or warrants),
was approximately $7,001,323 or $0.32 per share. Pro forma net tangible value
per share represents the amount of our total pro forma tangible assets, less
total pro forma liabilities, divided by the number of shares of common stock
outstanding prior to the issuance of the 5,527,000 shares upon conversion of the
Series A Convertible Preferred Stock. Without giving effect to any other changes
in the pro forma net tangible book value after June 30, 2004, our pro forma net
tangible book value per share following the issuance of 5,527,000 shares of
common stock upon mandatory conversion of the outstanding shares of Series A
Convertible Preferred Stock would be $0.26, resulting in dilution of
approximately $0.06 per share to existing stockholders as illustrated by the
following table:
44
AS OF
JUNE 30, 2004
-------------
Net tangible book value $ 7,001,323
Net tangible book value per share $ 0.32
Pro forma net tangible book value per share after
conversion of preferred shares $ 0.26
-------------
Dilution per share to current common shareholders $ 0.06
=============
Common shares outstanding 21,855,456
Pro forma common shares outstanding after conversion of
preferred shares 27,382,456
Interest of Executive Officers and Directors in Outcome of Proposal 3
Two of the holders of the Series A Convertible Preferred Stock, Messrs.
Dishaw, and Trudnak, are directors, executive officers, and principal
stockholders of Guardian, and are interested persons and directly affected by
the outcome of Proposal 3. Moreover, Mr. Tobin the third holder of the Series A
Convertible Preferred Stock, is a principal stockholder of Guardian. Robert A.
Dishaw, the President, the Chief Operating Officer, a director, and a principal
stockholder of Guardian, owns beneficially and of record 2,212 shares of Series
A Convertible Preferred Stock. Michael W. Trudnak, the CEO, Chairman, Secretary,
a director, and a principal stockholder of Guardian, owns beneficially and of
record 1,885 shares of Series A Convertible Preferred Stock. Upon approval of
Proposal 3 by the stockholders of Guardian at the Annual Meeting and filing of
the Certificate of Amendment (as hereinafter defined), effective November 30,
2004, and without further action of the board or such stockholders, Mr. Dishaw
will receive, upon conversion of all of the shares of Series A Convertible
Preferred Stock owned beneficially and of record by him as of the date hereof,
an aggregate of 2,212,000 shares of common stock of Guardian, and Mr. Trudnak
will receive, upon conversion of all of the shares of Series A Convertible
Preferred Stock owned beneficially and of record by him as of the date hereof,
an aggregate of 1,885,000 shares of common stock of Guardian. Mr. Tobin owns
beneficially and of record 1,430 shares of Series A Convertible Preferred Stock
as of the date hereof and will receive an aggregate of 1,430,000 shares of
common stock of Guardian.
REVIEW AND CONSIDERATION OF PROPOSAL 3 BY DISINTERESTED DIRECTORS AND BOARD
On August 31, 2004, a proposal to amend the Series A Certificate of
Designations to amend the conversion rights of the holder of our Series A
Convertible Preferred Stock and the related Certificate of Amendment were
separately reviewed and considered by Guardian's disinterested directors
(specifically, Messrs. Kennedy, Nash and Repko) at a meeting held at Guardian's
offices. Full disclosure to such disinterested directors was made of the
material facts as to Mr. Dishaw's and Mr. Trudnak's relationship or interest in
45
the proposed amendment to the Series A Certificate of Designations. Such
disinterested directors had the opportunity to, and did, discuss the proposed
amendment with management of Guardian, including Messrs. Dishaw and Trudnak. The
disinterested directors were advised that the Series A Convertible Preferred
Stock had been issued to Messrs. Dishaw and Trudnak in consideration for the
sale of their shares of stock in RJL Marketing Services Inc. to Guardian and in
connection with the Reverse Acquisition on June 26, 2003. The subsequent
issuance of the Series A Convertible Preferred Stock to Mr. Tobin was in
consideration of valuable consulting services rendered by Mr. Tobin to RJL and
subsequently to Guardian. In connection with their review of the amendment, the
disinterested directors considered, among other things, the dilutive impact on
holders of our outstanding shares of common stock arising from the issuance of
the additional shares of common stock upon conversion of the Series A
Convertible Preferred Stock and the possible impact on the market for Guardian's
common stock.
The disinterested directors considered the following additional factors
related to achievements of senior management, specifically Messrs. Dishaw and
Trudnak, in implementing Guardian's business plan: the successful development of
Pinpoint (Guardian's integrated image data analysis solution and knowledge
engine for image data), the closing of two acquisitions, the closing of several
financing transactions by Guardian, including an approximately $7.9 million
private placement of securities, and other factors. The directors noted the
important contributions made by Messrs. Trudnak and Dishaw to the management of
Guardian since the closing of the Reverse Acquisition and their roles in
enhancing stockholder value and the contributions of Mr. Tobin as a consultant.
Following the disinterested directors' review of the proposal, and in
view of the foregoing considerations, the disinterested directors unanimously
approved the proposed amendment and submitted their recommendation to the Board.
On August 31, 2004, the Board of Directors approved the proposed amendment and
directed that proposed amendment be submitted for consideration by all of the
stockholders of the Corporation entitled to vote thereon at the Annual Meeting.
For these reasons the Board, including the disinterested members
thereof, deems it to be advisable and in the best interest of Guardian that
Guardian should amend its Series A Certificate of Designations to provide for
the automatic conversion of each of such shares of Series A Convertible
Preferred stock into 1,000 shares of common stock, $0.001 par value per share,
effective 5:00 p.m. Washington, D.C. time on November 30, 2004.
There can be no assurances, nor can the board of Guardian predict what
effect, if any, this proposed amendment will have on the market price of
Guardian's common stock.
ATTENDANCE OF REPRESENTATIVES OF OUR PRINCIPAL ACCOUNTANTS
A representative of our independent accountants, Aronson & Company, is
expected to be present at the Annual Meeting and will have the opportunity to
make a statement if he or she desires to do so. Moreover, such representative
will be available to respond to appropriate questions
46
VOTE REQUIRED FOR APPROVAL
All shares of Guardian's common stock, including the Series A
Convertible Preferred Stock (voting on an as-converted basis) voting as a single
class will be entitled to vote on Proposal 3. In addition, the shares of Series
A Convertible Preferred Stock will be entitled to vote on Proposal 3 as a
separate class. The affirmative vote of a majority of the (i) all the shares of
issued and outstanding common stock and votes of the Series A Convertible
Preferred Stock (on an as-converted basis), and (ii) all the shares of issued
and outstanding Series A Convertible Preferred Stock (voting on an unconverted
basis) voting as a separate class, is required for approval of the Amendment to
Guardian's Certificate of Designations, Preferences and Rights of Series A
Convertible Preferred Stock amending the terms of conversion of the Series A
Convertible Preferred Stock to provide for the automatic mandatory conversion of
each of such share of Series A Convertible Preferred Stock into 1,000 shares of
common stock effective November 30, 2004.
OTHER PROPOSED ACTION
The board of directors does not intend to bring any other matters
before the Annual Meeting, nor does the board of directors know of any matters
that other persons intend to bring before the Annual Meeting. If, however, other
matters not mentioned in this proxy statement properly come before the Annual
Meeting, the persons named in the accompanying form of proxy will vote thereon
in accordance with the recommendation of the board of directors.
You should be aware that Guardian's By-Laws provide that no proposals
or nominations of directors by stockholders shall be presented for vote at an
annual meeting of stockholders unless notice complying with the requirements in
the By-Laws is provided to the board of directors or Guardian's Secretary not
less than 60 days nor more than 90 days prior to the meeting; provided, however,
that in the event of less than 70 days' notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the stockholder
to be timely must be received not later than the close of business on the 10th
day following the day on which notice of the annual meeting is mailed or public
disclosure made, which ever first occurs.
STOCKHOLDER PROPOSALS AND SUBMISSIONS
Pursuant to Rule 14a-8 under the Exchange Act, stockholders may present
proper proposals for inclusion in Guardian's proxy statement and for
consideration at the next annual meeting of its stockholders by submitting their
proposals to Guardian in a timely manner. In order to be so included for the
2005 Annual Meeting, stockholder proposals must be received by Guardian a
reasonable time before we begin the printing and mailing of our proxy material
for the 2005 Annual Meeting, and must otherwise comply with the requirements of
Rule 14a-8. We will provide notification to stockholders of the date of our 2005
Annual Meeting in a Form 10-QSB or as otherwise permitted under Rule 14a-5(e).
In addition, Guardian's By-laws establish an advance notice procedure with
regard to certain matters, including stockholder proposals not included in
Guardian's proxy statement, to be brought before an annual meeting of
stockholders. In general, notice must be received by the Secretary of Guardian
not less than 60 days or more than 90 days prior to meeting and must contain
specified information concerning the matters to be presented at Guardian's 2005
Annual Meeting. However, in the event that less than 10 days' notice or prior
public disclosure of the date of the annual meeting is given or made to
stockholders, notice by the stockholder to be timely must be received no later
than the close of business on the 10th day following the day on which notice of
the date of the annual meeting was mailed or such public disclosure was made,
whichever is earlier.
47
All notices of proposals by stockholders, whether or not to be included
in Guardian's proxy materials, should be sent to the attention of the Secretary
of Guardian at 21351 Ridgetop Circle, Suite 300, Dulles, Virginia 20166.
INCORPORATION OF INFORMATION BY REFERENCE
Guardian incorporates herein by reference the following information
from its Form 10-KSB for the year ended December 31, 2003:
o Item 7 - Consolidated Financial Statements (Audited) as of
December 31, 2003, for Guardian Technologies International,
Inc. and Subsidiaries and RJL Marketing Services Inc.
o Item 6 - Management's Discussion and Analysis or Plan of
Operations.
Guardian incorporates herein by reference the following information
from its Form 10-QSB for the period ended June 30, 2004:
o Item 1 - Consolidated Financial Statements (Unaudited) as of
June 30, 2004, for Guardian Technologies International, Inc.
and Subsidiaries and RJL Marketing Services Inc.
o Item 2 - Management's Discussion and Analysis or Plan of
Operations.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE SIGN AND RETURN
THE ENCLOSED PROXY PROMPTLY USING THE ENVELOPE PROVIDED. YOUR VOTE IS IMPORTANT.
IF YOU ARE A STOCKHOLDER OF RECORD AND ATTEND THE MEETING AND WISH TO VOTE IN
PERSON, YOU MAY WITHDRAW YOUR PROXY AT ANY TIME PRIOR TO THE VOTE.
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
Michael W. Trudnak, Secretary
48
APPENDIX A
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
AUDIT COMMITTEE CHARTER
I. PURPOSE AND RESPONSIBILITY
The Audit Committee ("Committee") of Guardian Technologies
International, Inc., (the "Company"), was established to assist the Board of
Directors in carrying out its oversight responsibilities that relate to the
Company's accounting and financial reporting processes, audits of the Company's
financial statements, internal controls, and compliance with laws regulations
and ethics.
The Committee's duties are oversight in nature and the primary
responsibility for financial reporting, internal control, and compliance with
laws, regulation, and ethics standards rests with the Company's executive
management and the Company's external auditors are responsible for auditing the
Company's financial statements. The foregoing notwithstanding, the Committee, in
its capacity as the audit committee of the Board of Directors, has direct
responsibility for the appointment, compensation and oversight of the work of
any registered public accounting firm employed by the Company (including
resolution of disagreements between management and the auditor regarding
financial reporting) for the purpose of preparing or issuing an audit report or
related work. The Committee does not provide any expert or special assurances as
to the Company's financial statements or any professional certification as to
the external auditor's work.
The Committee has the power to conduct or authorize investigations into
any matters within the Committee's scope of responsibilities and to establish
procedures concerning the receipt, retention and treatment of complaints
regarding accounting, internal accounting controls or auditing matters and
confidential, anonymous employee submissions of concerns regarding questionable
accounting or auditing matters. The Committee is empowered to retain independent
counsel, accountants, or others to assist it in the conduct of any
investigation. The President, the Chief Financial Officer or the Secretary of
the Company shall provide, or arrange to provide, such other information, data
and services as the Committee may request. The Committee shall conduct such
interviews or discussions as it deems appropriate with personnel of the Company,
and/or others whose views would be considered helpful to the Committee. The
Committee shall also be authorized and designated to receive any report from
legal counsel to the Company pursuant to Rule 3(b) of the "Standards of
Professional Conduct for Attorneys Appearing and Practicing Before the
Commission in the Representation of an Issuer" (the "Standards") and to conduct
such investigations of such reports as it deems necessary and appropriate with
the advice of counsel or other advisors and to provide a report to the Board of
Directors and/or such legal counsel regarding an "appropriate response" (within
the meaning of Rule 2(b) of the Standards) to such report.
49
The Committee's prior approval is required for all auditing services and
non-audit services, including the fees and terms thereof, to be provided to the
Company by the independent auditor, either before the independent auditor is
engaged for the particular service or pursuant to pre-approval policies and
procedures established by the Committee, subject to the de minimis exception for
non-audit services described in Section 10A(i) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules promulgated thereunder.
Under the de minimis exception, in the event the aggregate amount of all
non-audit services constitutes no more than 5% of the total amount of revenues
paid by the Company to its external auditor during the fiscal year in which
non-audit services are provided, if the Company did not recognize that these
services were non-audit services at the time of the engagement and such
non-audit services are promptly brought to the attention of the Committee by the
Company, if the Committee (or one or more members of the Committee who are also
members of the Board to whom approval authority has been delegated by the
Committee) approves such non-audit services prior to the completion of the
audit, the requirement for Committee pre-approval may be waived.
The Committee believes its policies and procedures should remain
flexible in order to best react to changing conditions and that the following
duties of the Committee are set forth as a guide with the understanding that the
Committee may diverge from this guide as appropriate given the circumstances:
A. Financial Reporting
Committee procedures shall include:
1. Selection of Independent Public Accountants
The Committee shall have the ultimate authority and
responsibility, in its capacity as a committee of the Board of
Directors, for the appointment, compensations and terms of
engagement, retention, evaluation, and oversight of the
independent auditor. The independent auditors are ultimately
accountable to the Committee and the entire Board for such
accountant's review of the financial statements and controls
of the Company. On an annual basis, the Committee should
review and discuss with the independent auditors all
significant relationships the independent auditors have with
the Company to determine the independent auditors'
independence. The Committee shall review senior management's
recommendation on the annual selection of the external
auditors. The Committee shall submit its recommended
appointment (or reappointment) or termination of external
auditors to the Board of Directors for their approval.
The Committee's review shall include:
50
o Review and prior approval of all auditing services and
non-audit services. (In the event the Committee approves an
audit service within the scope of an auditor's engagement
that audit service shall be deemed to have been
pre-approved.)
o Assessments on the performance of the external auditors by
appropriate management.
o Inquiring if the external auditors face any significant
litigation or disciplinary actions by the Securities and
Exchange Commission (the "Commission") or others.
o Inquiring whether the chief executive officer or the audit
partner of the Company's external auditors was employed by a
registered independent public accounting firm and
participated in any capacity in the Company's audit during
the one-year period preceding the commencement of an audit
of the Company.
o Receiving from the accountants, on a periodic basis, a
formal written statement delineating all relationships
between the accountants and the Company consistent with
Independence Standards Board Statement 1 ("ISB No. 1");
o Obtaining written disclosure from the external auditors
describing all relationships between the external auditors
and the Company that bear on independence and objectivity.
o Discussing auditor independence with its external auditors
and recommending that the Board of Directors take
appropriate action regarding any independence issues.
o Discussing with the Company's Chief Executive Officer and
Chief Financial Officer certifications in the Company's
periodic reports concerning disclosures of significant
control deficiencies and any fraud by management.
o Auditor engagement letters and estimated fees.
o At least annually, the Committee shall obtain and review a
report by the independent auditor describing (a) any
material issues raised by the most recent internal quality
or peer review of the firm conducted pursuant to a
professional quality control program, or by any inquiry or
investigation by governmental or professional authorities
within the preceding five years regarding one or more
independent audits carried out by the firm, and (b) any
steps to deal with any such issues.
o Review and evaluate the lead partner of the independent
auditor team.
o Evaluate the qualifications, performance and independence of
the independent auditor, including considering whether the
auditor's quality controls are adequate and the provision of
permitted non audit services is compatible with maintaining
the auditor's independence, and taking into account the
opinions of management and internal auditors. The Committee
shall present to the Board its conclusions with regard to
the independent auditor.
o Ensure the rotation of the independent auditor's lead or
coordinating audit partner having primary responsibility for
the Company's audit, the concurring or reviewing partner and
other audit engagement partners as required by law.
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o Consideration of whether, in order to assure continuing
auditor independence, it is appropriate to adopt a policy of
rotating the independent auditing firm on a regular basis.
o Recommend to the Board policies for the Company's hiring of
employees and former employees of the independent auditor
who participated in the audit of the Company.
o Review of management's letter of representation and
consideration of any significant operational or reporting
issues that may affect the financial statements.
o Proposed non-audit services and consideration of the
possible effect that these services could have on the
independence of the external auditors.
o Facilitating and maintaining an open avenue of communication
with the Company's external auditors.
o Ensuring the Committee is informed in a timely manner by the
Company's independent auditor of (1) all critical accounting
policies and practices; (2) discussion with the Company's
management of all alternative treatments of financial
information within generally accepted accounting principles,
the ramifications of the use thereof and the independent
auditor's preferred treatment; and (3) other material
written communications between the independent auditors and
the Company's management to include any management letter or
schedule of past audit adjustments.
2. Meeting with the Company's general counsel, if any, and outside
counsel when appropriate, to discuss legal matters that may have a significant
impact on the Company's financial statements.
3. Regarding the Company's financial statements and periodic reports,
the Committee will:
o Review the Company's audited annual financial statements and
independent auditors' reports with respect to the
statements, including the nature of any changes in
accounting principles or their application.
o Review the Company's interim quarterly financial statements
and independent auditors' views with respect to the
statements, including the nature of any changes in
accounting principles or their application.
o Review significant accounting policies, policy decisions and
changes, along with significant accounting, reporting or
operational issues.
o Review the financial statements to be issued with management
and with the independent auditors to determine whether the
independent auditors are satisfied with the disclosure and
content of the financial statements to be presented to the
stockholders prior to the release of the each quarterly
financial report to stockholders.
52
o Review and discuss with management and the independent
auditors the annual audited financial statements of the
Company, including (A) an analysis of the auditor's judgment
as to the quality of the Company's accounting principles,
setting forth significant financial reporting issues and
judgments made in connection with the preparation of the
financial statements; (B) the Company's disclosures under
"Management's Discussion and Analysis of Financial Condition
and Results of Operations" (or "Management's Discussion and
Analysis or Plan of Operations," as the case may be)
including the development, selection and reporting of
accounting policies that may be regarded as critical; and
(C) major issues regarding the Company's accounting
principles and financial statement presentations, including
any significant changes in the Company's selection or
application of accounting principles and financial statement
presentation.
o Review filings with the Commission and other published
documents containing the Company's financial information.
o Review the audit committee report required by the rules of
the Commission to be included in the Company's annual proxy
statement.
o Review and discuss with management and independent auditors
any material financial or non-financial arrangements of the
Company which do not appear on the financial statements of
the Company.
o Review any related party transactions involving directors or
executive officers of the Company.
o Make a recommendation to the Board of Directors regarding
the inclusion of interim and annual financial statements in
the Company's Commission filings based on its review of such
financial statements with management and the independent
auditors.
o Ensure that management maintains the reliability and
integrity of accounting policies and financial reporting and
that management establishes and maintains processes to
assure adequate systems of internal control.
o Periodically review and discuss the adequacy and
effectiveness of the Company's internal controls over
financial reporting and disclosure controls and procedures
and management reports thereon.
o Review with management any required report on the Company's
internal control over financial reporting, including
management's assessment of the effectiveness of such
internal controls, any material weaknesses identified by
management, and any changes in such controls. Review with
the independent auditor its attestation report on
management's assessment of the Company's internal control
over financial reporting.
o Disclose in the Company's annual proxy or information
statement, the existence of the Committee and the Committee
charter and the extent to which the Committee has satisfied
its responsibilities during the prior year in compliance
with its charter.
o Disclose the Committee's approval of any non-audit services
in the Company's periodic reports filed with the Commission.
53
o Review the management letter issued by the external auditors
and management's response.
o Review fees paid for audit and consulting services,
respectively.
o Establish procedures for receiving and handling complaints
regarding accounting, internal accounting controls and
auditing matters, including procedures for confidential,
anonymous submission of concerns by employees regarding
accounting and auditing matters.
o Discuss with management the Company's policies with regard
to risk assessment and risk management, the Company's major
financial risk exposures and the steps management has taken
to monitor and control such exposure.
o Review disclosures made to the Committee by the Company's
Chief Executive Officer and Chief Financial Officer during
their certification process for the Form 10-K and Forms 10-Q
(or Forms 10-KSB and 10-QSB, as the case may be) about any
significant deficiencies in the design or operation of
internal controls and weaknesses therein and any fraud
involving management or other employees who have significant
role in the Company's internal controls.
4. Annually review and examine those matters which relate to a
financial review of the Company's investment policies.
5. Submit findings of importance, conclusions, recommendations, and
items that require follow-up or action to the Board of Directors.
6. Annually review and update the Audit Committee Charter and submit
the Charter to the full Board of Directors for approval.
7. Maintain minutes or the other records of meetings and activities of
the Committee.
8. Annually review the Committee's own performance.
B. Monitoring of Internal Controls and Disclosure Controls
The Committee is responsible for obtaining and understanding of the
Company's key financial reporting risk areas and internal control and disclosure
control and procedures structure. The Committee monitors the internal control
process by reviewing information provided in the internal reporting made by the
Company, discussions with the chief financial and accounting officers and such
other persons as the Committee deems appropriate, and discussions with and
reports issued by external auditors.
54
C. Compliance with Laws, Regulations, and Ethics
The Committee shall review reports and other information to gain
reasonable assurance that the Company is in compliance with pertinent laws and
regulations, is conducting its affairs ethically, and is maintaining effective
controls against conflict of interest and fraud. Committee procedures shall
include:
1. Review the Company's policies relating to compliance with laws,
regulations, ethics, and conflict of interest.
2. Review significant cases of conflict of interest, misconduct, or
fraud and the resolution of such cases.
3. Review the Company's policies and processes for compliance with U.S.
and foreign country export controls, laws and regulations.
4. Obtain from the independent auditor assurance that the provisions of
Section 10A(b) of the Exchange Act regarding detecting and reporting of illegal
acts have not been implicated
5. Review the Company's policies and processes for compliance with the
Foreign Corrupt Practices Act and the USA Patriot Act.
6. Review compliance reports received from regulators and consider
legal and regulatory matters that may have a material impact on the financial
statements.
7. Review policies and procedures covering officers' expense accounts
and perquisites, including their use of corporate assets.
8. Review the disclosure included in the Company's periodic reports
concerning whether at least one member of the Committee is a "financial expert"
(as defined in Part II below) and, if no member of the Committee is a "financial
expert", why no such expert has been appointed to the Committee.
9. Ensure that the Company has an effective information technology
disaster recovery plan.
10. Review and make recommendations to the Board concerning the
Company's financing plans and policies.
11. Conduct or authorize investigations into any matters within the
Committee's scope of responsibilities including, but not limited to, in response
to any report of a "material violation" by the Company, or any officer,
director, employee, or agent of the Company, pursuant to Rule 3(b) of the
55
"Standards of Professional Conduct for Attorneys Appearing and Practicing Before
the Commission in the Representation of an Issuer" by any counsel to the
Company.
D. Annual Report
The Committee shall annually prepare a report for inclusion in the
Company's proxy statement, to the extent required under the proxy rules relating
to the Company's annual shareholders' meeting. In that report, the Committee
will state whether it has: (a) reviewed and discussed the audited financial
statements with management; (b) discussed with the independent auditor the
matters required to be discussed by SAS No. 61, as that statement may be
modified or supplemented from time to time; (c) received from the independent
auditor the written disclosures and the letter required by Independence
Standards Board Standard I, as that standard may be modified or supplemented
from time to time, and has discussed with the independent auditor, the
independent auditor's independence; and (d) based on a review and discussion
referred to in clauses (a), (b) and (c) above, recommended to the Board that the
audited financial statements may be included in the Company's annual report on
Form 10-K (or Form 10-KSB, as the case may be) for the last fiscal year for
filing with the Commission.
II. OVERSIGHT OF EXTERNAL AUDIT FUNCTIONS
The Committee shall schedule meetings as necessary to receive and
discuss reports from staff, other committees, and consultants. Particular
emphasis will be given by the Committee to significant control deficiencies, and
actions taken by management to correct them. The Committee may request through
the Chief Financial Officer that the external auditors perform special studies,
investigations, or other services in matters of interest or concern to the
Committee.
The Committee's oversight of external audit coverage is covered under
section I.A. above.
III. COMMITTEE MEMBERSHIP
The Committee shall be composed of two or more directors, each of whom
shall be "independent." To be considered independent, a Committee member may not
(other than in his capacity as a member of the Committee, the Board or another
committee of the Board) accept, directly or indirectly, any consulting, advisory
or other compensatory fee from the Company or any subsidiary thereof or be an
affiliated person of the Company or any subsidiary thereof. Each member shall
comply with the requirements promulgated by the Commission and any stock
exchange on which shares of stock of the Company are traded, and shall be free
of any relationship that, in the opinion of the Board of Directors, would
interfere with his or her exercise of independent judgment. All members of the
Committee will have a general understanding of basic finance practices,
accounting practices and policies. The Committee members may enhance their
56
familiarity with finance and accounting by participating in educational programs
conducted by the Company or an outside consultant. The Chairman and other
members of the Committee shall be appointed by the Board of Directors.
Vacancies occurring in the Committee may be filled by appointment of the
Chairman of the Board upon the recommendations of any nominating committee of
the Board of Directors (or similar committee) if such a committee has then been
established, but no member of the Committee shall be removed except by vote of a
majority of Directors present at any regular or special meeting of the Board.
The Secretary of the Committee shall be appointed by the majority vote
of the Committee. The Secretary of the Committee shall prepare minutes of the
meetings, maintain custody of copies of data furnished to and used by the
Committee, and generally assist the Committee in connection with preparation of
agendas, notices of meetings and otherwise.
IV. CONDUCT OF BUSINESS
All meetings require the presence of a majority of the members of the
Committee to conduct business. Each Committee member shall have one vote. All
actions or determinations by the Committee must be by majority vote of the
members present. The Board of Directors shall have overall authority over all
Committee actions.
V. COMPENSATION
The compensation of members of the Committee may be determined from time
to time by resolution of the Board of Directors. Members of the Committee shall
be reimbursed for all reasonable expenses incurred in attending such meetings.
VI. TIME AND PLACE OF MEETINGS
Committee meetings shall be held quarterly or more frequently as
necessary at an agreed upon location. The Committee may ask members of
management or others to attend the meeting and to provide pertinent information
as necessary. As part of its job to foster open communication, the Committee
should meet at least annually with management and the independent auditors
separately to discuss any matters that the Committee or each of these groups
believe should be discussed privately. In addition, the Committee or at least
its Chairperson should meet with the independent accountants and management
quarterly to review the Company's financial statements consistent with the
Committee's duties and responsibilities set forth herein.
VII. FUNDING
The Company shall provide appropriate funding, as determined by the
Committee, for the payment of: (i) the compensation of any independent auditor
engaged for the purpose of preparing or issuing an audit report or performing
other audit, review or attest services for the Company; (ii) the compensation of
57
any advisers employed by the Committee pursuant to the provisions of this
charter; (iii) administrative expenses of the Committee necessary or appropriate
to carry out its duties and responsibilities.
VIII. PRESENTATION OF REPORTS TO THE BOARD OF DIRECTORS
The Committee shall make an annual presentation to the Board of
Directors within three (3) months after the receipt of the external auditor's
opinion on the Company's financial statement. The presentation shall provide an
overview of the Committee's activities, findings of importance, conclusions,
recommendations, and items that require follow-up or action by the Board.
Presentations may be made at more frequent intervals if deemed necessary by the
Committee or as requested by the Board of Directors.
58
APPENDIX B
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
COMPENSATION COMMITTEE CHARTER
I. PURPOSE AND RESPONSIBILITY
The primary functions of the Compensation Committee (the "Committee")
of Guardian Technologies International, Inc. (the "Company") are to review and
provide oversight of executive compensation as well as to administer the
Company's various equity compensation plans. The Committee shall also have those
duties delegated to it, if any, under the Company's employee benefit plans.
The Compensation Committee's compensation policies with respect to the
Company's executive officers are based on the principles that compensation
should, to a significant extent, be reflective of the financial performance of
the Company, align the interests of the Company's management with the interests
of its stockholders, and that a portion of executive officers' compensation
should provide long-term incentives. The Compensation Committee seeks to have
executive compensation set at levels that are sufficiently competitive so that
the Company may attract, retain, and motivate high quality executives to
contribute to the Company's success. In assessing overall compensation for
executive officers, the Compensation Committee considers the Company's
performance and industry position, general industry data, and the
recommendations of third-party consultants.
II. COMPOSITION
A. Appointment. The Committee shall consist of two (2) or more independent
directors, as determined by the Board in accordance with the applicable
regulations of the Securities and Exchange Commission ("SEC"), applicable
listing standards and any standards of Board independence established by the
Board from time to time. In the event a vacancy occurs on the Committee prior to
such meeting of the Board, the Board shall appoint a member to fill such vacancy
at such time. In appointing members to serve on the Committee, the Board shall
consider the independence of the members of the Committee and all of the facts,
circumstance, and such other qualifications such as the Board may determine, in
its reasonable judgment, to be relevant to serving on the Committee. Among the
qualifications the Board seeks in a Committee member are: broad management
experience, general familiarity with executive compensation programs, knowledge
of and/or experience with corporate performance measurement and incentive
approaches, and the ability to assert opinions different from those of
management. Unless the Board elects a Chair of the Committee, the Committee may,
in its discretion, designate a Chair by an affirmative vote of the majority of
the members of the Committee.
B. Term. Members of the Committee shall be elected annually by the full Board
and shall hold office until the earlier of (i) the election of their respective
successors, (ii) the end of their service as a director of the Company (whether
through resignation, removal, expiration of term, or death), or (iii) their
resignation from the Committee.
59
C. Removal. The Board may remove any member of the Committee at any such time as
the Board determines, in its reasonable judgment, that (i) such member no longer
meets the qualification standard set forth in Article II A of this Charter, or
(ii) it is in the best interests of the Company or its shareholders to remove
such member from the Committee.
D. Authority.
(i) The Committee shall have the authority to retain, and
determine the fees and other retention terms for, such legal, accounting and
other advisors to the Committee as it determines necessary to carry out its
functions, without deliberation or approval by the Board or management.
(ii) The Committee shall have the power and authority to
interpret this Charter and make any determinations as to whether any act taken
has been taken in compliance with the terms hereof.
(iii) At least annually, the Committee will evaluate how well
it has fulfilled its purpose during the previous year, and report its findings
to the full Board.
E. Funding. The Company shall provide for appropriate funding, as determined by
the Committee in its capacity as a committee of the Board, for payment of (a)
compensation to any advisors engaged by the Committee under Article II D above,
and (b) ordinary administrative expenses of the Committee that are necessary or
appropriate in carrying out its duties.
III. MEETINGS
A. The Committee shall meet at least annually and at such times as deemed
appropriate by the Chairman of the Committee or by a majority of the Committee.
The presence of a majority of the members of the Committee shall constitute a
quorum for the purposes of a meeting of the Committee. The act of a majority of
the directors present at any meeting of the Committee at which a quorum is
present shall be the act of the Committee. The Committee may also act by
unanimous written consent. The Committee shall conduct its meetings in
accordance with the Company's Bylaws.
B. The Committee shall meet regularly in executive session. The Committee shall
make regular reports to the full Board of all matters approved or reviewed by
the Committee. The Committee shall determine from time to time best practices
for the conduct of its meetings, such as development of agenda, review of
materials in advance of meetings and establishment of a Committee calendar for
recurring items.
IV. DUTIES AND RESPONSIBILITIES
The Committee shall have the duty and responsibility to:
A. Review and approve executive officers' annual performance goals for the
coming year.
B. Evaluate the performance of the Chief Executive Officer at least annually and
determine the Chief Executive Officer's total compensation and the individual
elements thereof, based upon such evaluation, and review it with the independent
directors of the Board.
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C. Determine the compensation level of the Chief Executive Officer and President
for the coming year. In determining the long-term incentive compensation
component, the Committee shall consider the Company's performance and relative
shareholder return, the value of similar incentive awards to Chief Executive
Officers and presidents at comparable companies, and the awards given to the
Chief Executive Officer in past years. The Chief Executive Officer shall not be
present during voting or deliberations.
D. Evaluate the performance of the Company's other executive officers and
determine their total compensation and the individual elements thereof based
upon such evaluation, and the compensation level of such executive officers for
the coming year.
E. Produce an annual report on executive compensation for inclusion in the
Company's proxy statement, in accordance with applicable SEC rules and
regulations.
F. Make all grants of restricted stock or other equity-based compensation to
executive officers, subject to any required approval by shareholders.
G. Administer the Company's Amended and Restated 2003 Stock Incentive Plan and
similar prior plan, and make any determinations and interpretations and take
such other actions as contemplated thereby for the administration of the plan,
insofar as applicable to employees who are subject to the reporting requirements
of Section 16 of the Securities Exchange Act of 1934, as amended, with respect
to equity securities of the Company, and such other eligible employees or
consultants as may be recommended to the Committee by the Chairman, Chief
Executive Officer or President; and is authorized to amend any existing award
granted to participants under the plan.
H. Review and recommend to the Board for approval any equity-based plans and
incentive compensation plans (and material amendments thereto) and monitor the
administration of such plans, subject to any required approval by shareholders,
and take actions required of it under any such plans.
I. Take actions required of it under the various employee benefit plans of the
Company.
J. Assess succession planning for the Company's President and Chief Executive
Officer.
K. Review and recommend to the Board the appropriate structure and amount of
compensation for the members of the Board.
V. REPORTING RESPONSIBILITIES
The minutes of the Committee reflecting, among other things, all
actions taken by the Committee shall be distributed to the Board at the next
Board meeting following the meeting of the Committee that is the subject of such
minutes.
In addition, matters within the responsibility of the Committee may be
discussed by the full Board from time to time during the course of the year.
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APPENDIX C
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
NOMINATING COMMITTEE CHARTER
I. PURPOSE AND RESPONSIBILITY
The primary functions of the Nominating Committee (the "Committee") of
Guardian Technologies International, Inc. (the "Company") are to (i) identify
individuals who are qualified to serve on the Company's Board of Directors (the
"Board") based on criteria approved by the Board, and (ii) recommend for
selection by the Board the director nominees for the next annual meeting of the
shareholders or at any such time that there is a vacancy on the Board.
II. COMPOSITION
E. Appointment. The Committee shall consist of two (2) or more independent
directors, as determined by the Board in accordance with the applicable
regulations of the Securities and Exchange Commission ("SEC"), applicable
listing standards and any standards of Board independence established by the
Board from time to time. In the event a vacancy occurs on the Committee prior to
such meeting of the Board, the Board shall appoint a member to fill such vacancy
at such time. In appointing members to serve on the Committee, the Board shall
consider the independence of the members of the Committee and all of the facts,
circumstances, and such other qualifications as the Board may determine, in its
reasonable judgment, to be relevant to serving on the Committee. Unless the
Board elects a Chair of the Committee, the Committee may, in its discretion,
designate a Chair by an affirmative vote of the majority of the members of the
Committee.
F. Term. Members of the Committee shall be elected annually by the full Board
and shall hold office until the earlier of (i) the election of their respective
successors, (ii) the end of their service as a director of the Company (whether
through resignation, removal, expiration of term, or death), or (iii) their
resignation from the Committee.
G. Removal. The Board may remove any member of the Committee at any such time as
the Board determines, in its reasonable judgment, that (i) such member no longer
meets the qualification standard set forth in Article II(A) of this Charter, or
(ii) it is in the best interests of the Company or its shareholders to remove
such member from the Committee.
H. Authority.
(i) The Committee shall have the authority to obtain advice
and seek assistance from outside advisors, including search firms, as it
determines necessary to carry out its duties. The Committee shall have the
authority to engage, retain, approve payment of compensation to and other
retention terms of, and terminate any director search firm retained to identify
and recommend possible candidates for Board membership. The Committee, and each
member of the Committee in his or her capacity as a member of the Committee,
shall be entitled to rely, in good faith, on information, opinions, reports,
statements, or other information prepared for or presented to them by (A)
officers and other employees of the Company whom such member believes to be
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reliable and competent in the matters presented, and (B) counsel or other
advisors as to matters which the member believes the person to be reliable and
competent in the matters presented.
(ii) The Committee shall have the power and authority to
interpret this Charter and make any determinations as to whether any act taken
has been taken in compliance with the terms hereof.
(iii) At least annually, the Committee will evaluate how well
it has fulfilled its purpose during the previous year, and report its findings
to the full Board.
E. Funding. The Company shall provide for appropriate funding, as
determined by the Committee in its capacity as a committee of the Board, for
payment of (a) compensation to any advisors engaged by the Committee under
Article II D above, and (b) ordinary administrative expenses of the Committee
that are necessary or appropriate in carrying out its duties.
III. MEETINGS
The Committee shall meet at least annually or more frequently, as may be
necessary or appropriate. The presence of a majority of the members of the
Committee shall constitute a quorum for the purposes of a meeting of the
Committee. The act of a majority of the directors present at any meeting of the
Committee at which a quorum is present shall be the act of the Committee. The
Committee may also act by unanimous written consent. The Committee shall conduct
its meetings in accordance with the Company's Bylaws.
IV. DUTIES AND RESPONSIBILITIES
The Committee shall have the duty and responsibility to:
A. Consider, recommend and recruit candidates to serve on the Board and to
recommend the director nominees selected by the Committee for approval by the
Board and the shareholders of the Company;
B. Recommend to the Board when new members should be added to the Board;
C. Recommend to the Board the director nominees for the next annual meeting;
D. When vacancies occur or otherwise at the direction of Board, the Committee
shall actively seek individuals whom the Committee determines meet the criteria
and standards for recommendation to the Board;
E. Consider recommendations of director nominees by shareholders and establish
procedures for shareholders to submit recommendations to the Committee in
accordance with applicable SEC rules and applicable listing standards;
F. Report, on a periodic basis, to the Board regarding compliance with this
Charter, the activities of the Committee and any issues with respect to the
duties and responsibilities of the Committee;
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G. Establish a process for interviewing and considering a director candidate for
nomination to the Board;
H. Recommend to the Board guidelines and criteria as to the desired
qualifications of potential Board members;
I. Provide comments and suggestions to the Board concerning Board committee
structure, committee operations, committee member qualifications, and committee
member appointment;
J. Review and update this Charter at least annually, or more frequently as may
be necessary or appropriate; and
K. Perform any other activities consistent with this Charter, the Company's
Bylaws and all applicable laws and applicable listing standards, as the
Committee deems necessary or appropriate or as may be referred to it from time
to time by the Board.
VI. PROCEDURES
A. No member of the Committee shall vote on his or her own nomination.
B. Each year the Committee shall deliver written nominations to the Secretary of
the Company at least sixty (60) days prior to the date of the Company's annual
meeting, except as otherwise provided herein.
C. Should a person nominated for election at an annual meeting become unwilling
or unable to stand for election to the Board prior to election, the Committee
may designate a substitute nominee upon delivery, not fewer than five (5) days
prior to the date of the meeting for the election of such nominee, of a written
notice to the Secretary of the Company. Such notice shall include a written
consent of any such substitute nominee to serve as a director of the Company.
D. With respect to any vacancy on the Board that may occur from time to time,
the Committee shall interview and review the qualifications of any candidate or
candidates to fill the vacancy and shall report the name of its nominee to the
Secretary of the Company prior to the Board vote to fill any such vacancy.
E. Upon request from the Board, with respect to any person it nominates the
Committee shall report to the Board: (i) the name, age, business address and
residence address of the nominee, (ii) the principal occupation or employment of
the nominee, (iii) the nominee's written consent to serve as a director, if
elected, and (iv) such other information regarding the nominee as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the SEC.
F. No nominee other than a person nominated by the Committee shall be voted upon
at any annual meeting of shareholders, except for nominations by shareholders
that are made in accordance with the provisions for shareholder nominations set
forth in the By-Laws of the Company.
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VI. DIRECTOR NOMINEE CRITERIA
The Board has determined the Committee consider at a minimum, the
following factors in recommending to the Board potential new Board members or
the continued service of existing members:
A. Independence- Whether an existing member or potential Board member is
independent, as determined by the Board in accordance with applicable law,
applicable listing standards and any standards of Board independence as may be
established by the Board from time to time.
B. Integrity - Whether the existing member or potential member of the Board
demonstrates high ethical standards, professionalism, and integrity in his/her
personal and professional dealings.
C. Commitment to Service on the Board- Whether the existing member or potential
member of the Board has a history of achievement that reflects high standards
for himself/herself and others and is he/she willing to commit himself/herself
to his/her duties as a member of the Board including being available to
participate in regular meetings and the ability to provide thoughtful
consideration of a broad range of issues.
D. Business Judgment- Whether the existing member or potential member of the
Board is a senior executive or has he/she had prior experience in managing and
making business decisions in the corporate sector.
E. Financial Literacy- Whether the existing member or potential member is
financially literate and does he/she know how to read a balance sheet, income
statement and cash flow statement, and understand the use of financial ratios
and other indices for evaluating Company performance. Also, the Committee should
consider whether the Board member or potential member is a "financial expert"
within applicable SEC rules, applicable listing standards, legislation, or audit
committee guidelines.
F. Public Company Experience- Whether the member or potential member of the
Board has past experience with public companies or the SEC, either through past
employment, directorships, or advisory or consulting roles.
G. Accounting and Finance- Among the most important missions of the Board is to
ensure that shareholder value is both enhanced through corporate performance and
protected through adequate internal financial controls. The Committee should
consider whether Board should have one or more directors with specific expertise
in financial accounting and corporate finance.
H. Industry Knowledge- The Company continually faces new opportunities and
challenges that are unique to its industry. The Board should try to have one or
more members with appropriate and relevant knowledge specific to the security
and technology industry.
I. Retirement- Whether any existing member of the Board has reached retirement
age.
J. Diversity- Whether the member or potential member assists in achieving a mix
of Board members that represents a diversity of background and experience,
including with respect to age, gender, international background, race, and
specialized experience.
K. Other- Other factors related to the ability and willingness of a potential
member of the Board to serve, or an existing member of the Board to continue
his/her service.
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APPENDIX D
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
-----------------------------------------------
PURSUANT TO SECTIONS 151(g) AND 242 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
-----------------------------------------------
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC., a corporation organized and
existing under the laws of the State of Delaware (the "Corporation"), hereby
certifies that:
WHEREAS, the Corporation executed and filed, on June 26, 2003, a
Certificate of Designations, Preferences and Rights of Series A Convertible
Preferred Stock (the "Series A Certificate of Designations") providing for the
designations, preferences and relative, participating, optional or other rights,
and the qualifications, limitations or restrictions of 6,000 shares of Series A
Convertible Preferred Stock, $0.20 par value per share, of the Corporation; and
WHEREAS, as of the date of this amendment, 5,527 shares of preferred
stock designated as Series A Convertible Preferred Stock have been issued
pursuant to the Series A Certificate of Designations; and
WHEREAS, on August __, 2004, the Board of Directors of the Corporation
duly adopted a resolution setting forth certain amendments to the Series A
Certificate of Designations authorizing a change in the terms of conversion of
Series A Convertible Preferred Stock; and
WHEREAS, Section 10 of the Series A Certificate of Designations
requires the affirmative vote of at least a majority of the Series A
stockholders then outstanding to alter or change the designations, preferences
and relative, participating, optional or other special rights of the Series A
Convertible Preferred Stock; and
WHEREAS, pursuant to the resolution of the Board of Directors of the
Corporation, a meeting of the stockholders of the Corporation was duly held upon
notice in accordance with Section 222 of the General Corporation Law; and
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WHEREAS, by the affirmative written vote of the stockholders of the
Corporation entitled to vote on the following amendment, such stockholders
authorized and approved the amendments contained in the Board of Directors'
resolution set forth hereinbelow; and
WHEREAS, the amendments to the Series A Certificate of Designations
contained in the Board of Directors' resolution set forth hereinbelow were duly
adopted in accordance with the provisions of Section 242 of the Delaware General
Corporation Law.
FURTHER RESOLVED, that the Certificate of Designations, Preferences and
Rights of Series A Convertible Preferred Stock, filed with the Secretary of
State of the State of Delaware on _____, 2004 (the "Series A Certificate of
Amendment"), is hereby amended by deleting in its entirety Section 7(a) and
inserting in lieu thereof the following:
(a) Automatic Mandatory Conversion. Each share of Preferred Stock
shall automatically convert into 1,000 shares of Common Stock
effective 5:00 p.m. Washington, D.C. time on November 30, 2004 (the
"Conversion Date").
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
hereunto affixed and this Series A Certificate of Amendment to be signed by its
President and Secretary as of the __ day of ______, 2004.
Attest:
- ------------------------------ ------------------------------
Michael W. Trudnak, Secretary Robert A. Dishaw, President
[SEAL]
67
PROXY
ANNUAL MEETING OF STOCKHOLDERS
OF
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
NOVEMBER __, 2004
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Michael W. Trudnak and Robert A.
Dishaw, and each or any of them proxies, with power of substitution, to vote all
shares of the undersigned at the Annual Meeting of stockholders to be held on
November __, 2004, at 10.00 a.m. at the _______________________ of
______________________________, or at any adjournment thereof, upon the matters
set forth in the Proxy Statement for such meeting, and in their discretion, on
such other business as may properly come before the meeting.
1. ELECT TWO (2) DIRECTORS FOR A THREE YEAR TERM, AND UNTIL THEIR
SUCCESSORS ARE DULY ELECTED AND QUALIFIED.
|_| FOR THE NOMINEES LISTED |_| WITHHOLD AUTHORITY
BELOW to vote for the nominee
listed below
(INSTRUCTION: To withhold authority to vote for a nominee strike a line
through the nominee's name below.)
Class 1
M. RILEY REPKO
CHARLES T. NASH
2. RATIFY THE APPOINTMENT OF ARONSON & COMPANY AS THE INDEPENDENT ACCOUNTANTS OF
GUARDIAN FOR 2004.
|_| FOR |_| AGAINST |_| ABSTAIN
(CONTINUED, AND TO BE DATED AND SIGNED ON OTHER SIDE)
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3. APPROVE AN AMENDMENT TO GUARDIAN'S CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS OF SERIES A CONVERTIBLE PREFERRED STOCK AMENDING
THE TERMS OF CONVERSION OF THE SERIES A CONVERTIBLE PREFERRED STOCK TO
PROVIDE FOR THE AUTOMATIC MANDATORY CONVERSION OF EACH OUTSTANDING
SHARE OF SERIES A CONVERTIBLE PREFERRED STOCK INTO 1,000 SHARES OF
COMMON STOCK EFFECTIVE NOVEMBER 30, 2004.
|_| FOR |_| AGAINST |_| ABSTAIN
TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL
MEETING OR ANY ADJOURMENT THEREOF.
Dated: _______________________ ______________________________
Signature
Dated: _______________________ ______________________________
Signature, if held jointly
NOTE: When shares are held by joint tenants, both should sign. Persons
signing as Executor, Administrator, Trustee, etc. should so indicate.
Please sign exactly as the name appears on the proxy.
IF NO CONTRARY SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1,
2, and 3.
PLEASE MARK, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
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