EXHIBIT 10.22
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ASSET PURCHASE AGREEMENT
BY AND AMONG
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
("PURCHASER")
AND
DIFFERENCE ENGINES CORPORATION
("SELLER")
XXXXXX XXXXXX
AND
XXXXXX X. XXXXXXXX
("STOCKHOLDERS")
OCTOBER 23, 2003
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into effective as of this 23rd day of October, 2003, by and among Guardian
Technologies International, Inc., a Delaware corporation ("Purchaser");
Difference Engines Corporation, a Maryland corporation ("Seller"); and Xxxxxx
Xxxxxx and Xxxxxx X. Xxxxxxxx (collectively, the "Stockholders").
WITNESSETH:
WHEREAS, among other things, Seller has developed certain image and
compression software applications for the medical imaging industry known as
DEVision (which, together with related source code, algorithms, documentation
and related Intellectual Property (as defined in Section 1.1(g)) shall be
hereinafter referred to as the "Purchased Assets"); and
WHEREAS, Seller desires to sell, assign, transfer and convey to the
Purchaser pursuant to the terms and subject to the conditions set forth in this
Agreement, all of the Purchased Assets free and clear of all liens, claims,
rights, encumbrances or security interests;
WHEREAS, Purchaser desires to integrate Seller's Intellectual Property
with its own technology in the development of products and services for the Life
Sciences marketplace;
WHEREAS, it is the desire of the Purchaser to purchase, obtain and
acquire from the Seller, pursuant to the terms and subject to the conditions set
forth in this Agreement, all of the Sellers' right, title and interest in and to
the Purchased Assets; and
WHEREAS, Seller desires to transfer and convey the Purchased Assets to
Purchaser, solely in exchange for voting shares of Purchaser in a transaction
intended to qualify as a reorganization within the meaning of Section
368(a)(i)(C) of the Internal Revenue Code of 1986, as amended (the "Code"). It
being understood that Seller will thereafter, as an integral part of the
transaction, distribute the shares received as the Purchase Price (as defined
below) to Seller's stockholders in complete liquidation of Seller and dissolve.
NOW THEREFORE, in consideration of the premises and mutual covenants,
conditions and agreements contained herein and for such other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, each intending to be legally bound hereby, agree as follows:
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ARTICLE I
PURCHASE OF PURCHASED ASSETS
1.1 PURCHASE AND SALE OF ASSETS. Upon the terms and subject to the
conditions of this Agreement, Seller hereby agrees that on the Closing Date (as
hereinafter defined in Section 2.1), Seller shall sell, assign, transfer and
convey to the Purchaser, and Purchaser hereby agrees to purchase, obtain and
acquire from Seller, all of Seller's right, title and interest in and to all of
the assets, properties and rights (contractual or otherwise) described in the
following subparagraphs of this Section 1.1 (previously defined as "Purchased
Assets"), free and clear of any and all liens, claims, rights, encumbrances or
security interests. The Purchased Assets shall comprise all of the following:
(a) All right, title and interest in and to the Seller's compression
software technology, including, but not limited to, Seller's Visual
Internet Applications or DEVision and all modifications, enhancements,
designs, concepts, techniques, methods, ideas, flow charts, coding
sheets, notes, source codes, algorithms, and all other information
relating thereto ("Software");
(b) All right, title and interest held or owned by Seller in and to the
use of the name "Difference Engines," "Difference Engines Corporation,"
or any variation thereof worldwide and all goodwill and other
intangibles relating thereto;
(c) All of Seller's right, title and interest in and to the copyrights,
copyright registrations, proprietary processes, trade secrets, license
right, specifications, technical manuals and data, drawings,
inventions, designs, patents, patent applications, trade names,
trademarks, service marks, domain names, URLs, product information and
data, know-how and development work-in-progress, software, marketing
plans and other Intellectual Property (as hereinafter defined) or
intangible property embodied in or pertaining to the Software, whether
pending, applied for or issued, whether filed in the United States or
in other countries and as listed on Schedule 1.1(c);
(d) All things authored, discovered, developed, made, perfected,
improved, designed, engineered, acquired, produced, conceived or first
reduced to practice by Seller or any of its employees or agents that
are exclusively used by Seller or any of its employees or agents
related to the Software or developed by Seller exclusively for use in
connection with the Software, in any stage of development, including
without limitation, modifications, enhancements, designs, concepts,
techniques, methods, ideas, flow charts, coding sheets, notes and all
other information relating to the Software;
(e) Any and all design and code documentation, algorithms,
methodologies, processes, trade secrets, copyrights, design
information, product information, technology, formulae, routines,
engineering specifications, technical manuals, and data, drawings,
inventions, know-how, techniques, engineering work papers and notes,
development work in process, and other proprietary information and
materials of any kind used in or derived from the Software
(collectively with subsections (a), (c), and (d), the "Intellectual
Property");
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(f) All books, records, files and papers, whether in hard copy or
electronic format, of Seller related to the Software, including without
limitation engineering information, ledger cards, books of account,
customer marketing and advertising information and materials, personnel
records, and lists, files, papers and records that are necessary or
incidental to the ownership, development, sale, distribution or
licensing of the Software ("Books and Records");
(g) The telephone numbers of the Seller, e-mail and website addresses
(including the Uniform Resource Locator xxx.xxxxxxxxxx-xxxxxxx.xxx);
(h) All franchises, licenses, permits, consents and other certificates
of any regulatory, administrative agency or body issued to or held by
Seller as
more particularly described on Schedule 1.1(h) (the "Permits");
(i) All supplier and subscriber lists, pricing and cost information and
business and marketing proposals relating to the ownership,
development, or licensing of the Software, and all computer software
programs relating to the development, production, sale or distribution
of the Software.
1.2 PURCHASE PRICE. In consideration of and in exchange for the
Seller's sale, assignment, transfer and conveyance of all of the Purchased
Assets, the Purchaser hereby agrees to pay or issue the following consideration
to Seller at Closing: 587,000 shares of the Purchaser's common stock, $.001 par
value per share ("Stock Payment"). The Stock Payment constitutes the "Purchase
Price."
ARTICLE II
CLOSING
2.1 DATE AND TIME OF CLOSING. Subject to satisfaction of the conditions
to Closing set forth in Section 2.3 of this Agreement, the closing of the
transactions contemplated by this Agreement (the "Closing") shall take place at
10:00 a.m. (Eastern Standard Time) on November __, 2003, at the offices of
Xxxxxxx, Xxxxxx, Vangellow & Xxxx, P.C., 0000 X Xxxxxx, X.X., Xxxxx 0000,
Xxxxxxxxxx, X.X. 00000, or at such other place and time thereafter as shall be
mutually agreeable to the parties hereto (the "Closing Date").
2.2 DELIVERY OF INSTRUMENTS. The following documents, instruments and
other materials shall be executed and delivered at or prior to the Closing on
the Closing Date:
(a) INSTRUMENTS OF TRANSFER. The Seller shall execute and
deliver to the Purchaser such bills of sale, assignments, endorsements,
and other instruments and documents (including but not limited to a
xxxx of sale substantially in the form attached hereto as Exhibit
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2.2(a)) reasonably satisfactory in form and substance to the Purchaser
and its counsel as they may reasonably deem to be necessary or
appropriate to vest in the Purchaser on the Closing Date good and
marketable title to the Purchased Assets free and clear of any and all
adverse claims, mortgages, pledges, liens, charges, security interests
or other rights, interests or encumbrances, and a receipt for the price
of other assets being acquired hereunder, title to which shall transfer
upon delivery of such assets.
(b) UCC TERMINATION AND RELATED MATTERS. Seller shall execute
and deliver such UCC Termination Statements and release statements
(including with regard to the VisualGold Note (as hereinafter
defined)), as appropriate and necessary to release in full all of the
Purchased Assets from the liens and other security interest of any
note, debt or other obligation of Seller to which the Purchased Assets
are bound.
(c) TERMINATION OF CONVERTIBLE NOTE. Seller has issued a
Convertible Promissory Note to Purchaser, dated July 1, 2003, in the
principal amount of $25,000.00 (the "Seller Note"). On or prior to the
Closing, Purchaser shall execute and deliver to Seller release
statements acknowledging cancellation of the debt evidenced by the
Seller Note and Purchaser shall deliver the Seller Note to Seller
marked "cancelled".
(d) INTELLECTUAL PROPERTY REPRESENTATIONS. Seller shall
deliver to Purchaser such electronic and paper copies and
representations of the Intellectual Property as may in the Purchaser's
judgment be necessary to convey the Intellectual Property to the
Purchaser.
(e) PURCHASE PRICE. Purchaser shall deliver to the Seller the
Purchase Price, as provided in Section 1.3.
(f) VISUALGOLD NOTE. On or prior to the Closing Date, the
Seller shall have repaid the promissory note, dated February 19, 2002
as subsequently amended (the "VisualGold Note"), in the amount of
$25,680.05 issued by Seller to Xxxxxx X. Xxxxx and subsequently
assigned to XxxxxxXxxx.xxx, Inc., in full and shall have obtained, to
the satisfaction of Purchaser and its counsel, a release of any and all
liens and security interests in the assets of Seller, termination of
all escrow arrangements related to any source code or algorithm in
connection with the Intellectual Property, and a termination of any and
all license agreements between XxxxxxXxxx.xxx, Inc. and Seller pursuant
to which Seller has licensed any of its Intellectual Property to Xxxxxx
X. Xxxxx and/or XxxxxxXxxx.xxx, Inc., and mutual releases related
thereto.
(g) FOUNDERS' RELEASES. At Closing, Xxxxxx Xxxxxx, Xxxxxx X.
Xxxxxxxx, and Xxxx X. Xxxx shall each deliver to Purchaser a release
relating to the intellectual property contributed to Seller on or about
February 15, 2002, and in such form as counsel for the Purchaser shall
reasonably require.
(h) VOTE OF STOCKHOLDERS. Prior to Closing, Seller shall have
obtained the approval of its stockholders of this Agreement and the
transactions contemplated hereby to the extent required under Maryland
law and shall provide a certificate of the secretary of Seller
confirming that such approval has been obtained in accordance with
applicable law.
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(i) EMPLOYMENT AGREEMENTS. At Closing, Xxxxxx Xxxxxx and
Xxxxxx X. Xxxxxxxx shall deliver to the Purchaser employment agreements
in such form as shall be satisfactory to the Purchaser.
(j) DELIVERY OF CERTIFICATE. The Seller and the Stockholders
shall have delivered to the Purchaser certificates, dated the Closing
Date, and signed by an executive officer of the Seller and by the
Stockholders, respectively, representing and affirming that the
representations and warranties made by each of them were and are true,
correct and complete in all respects when made and shall also be
materially true, correct and complete in all respects at and as of the
Closing Date, with the same force and effect as if made at and as of
the Closing Date. The Seller and the Stockholders shall also have
delivered a certificate signed by the Secretary of the Seller with
respect to the authority and incumbency of the officers of the Seller
in executing this Agreement and any documents required to be executed
in connection herewith on behalf of the Seller.
(k) RELATED AGREEMENTS AND CONSENTS. The Purchaser and the
Seller and the Stockholders shall execute and deliver any other
agreements, consents or other documents reasonably necessary to
effectuate consummation of the transactions contemplated herein
including but not limited to a certificate of the Seller that all of
the representations, warranties and covenants set forth in this
Agreement are true and correct
2.3 CONDITIONS TO CLOSING.
(a) CONDITIONS TO OBLIGATIONS OF PURCHASER. Purchaser shall
not be obligated to consummate the Closing and the transactions
contemplated hereby and may terminate this Agreement without any
liability unless (i) the Seller and the Stockholders shall have
performed and complied in all respects with all agreements and
covenants required by this Agreement to be performed by the Seller and
the Stockholders at or prior to the Closing Date, (ii) Seller shall
have delivered all items specified in Section 2.2 above, (iii) any and
all necessary consents, authorizations, orders or approvals described
in Subsection 3.1(g) below shall have been obtained, except as the same
shall have been waived by the Purchaser, (iv) on the Closing Date,
there shall be no effective injunction, writ or preliminary restraining
order or any order of any kind whatsoever with respect to the Seller or
the Stockholders issued by a court or governmental agency (or other
governmental or regulatory authority) of competent jurisdiction
restraining or prohibiting the consummation of the transactions
contemplated hereby or making consummation thereof unduly burdensome to
the Seller or the Stockholders, (v) on the Closing Date and immediately
prior to consummation of the transactions contemplated by this
Agreement, no proceeding or lawsuit shall have been commenced, be
pending or have been threatened by any governmental or regulatory
agency or authority or any other person with respect to the
transactions contemplated by this Agreement, and (vi) on the Closing
Date, no material adverse change in Purchased Assets, and no event
which would materially and adversely affect the Purchased Assets, shall
have occurred.
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(b) CONDITIONS TO OBLIGATIONS OF SELLER AND STOCKHOLDERS.
Seller and the Stockholders shall not be obligated to consummate the
Closing and the transactions contemplated hereby and may terminate this
Agreement without any liability unless (i) the Purchaser shall have
performed and complied in all respects with all agreements and
covenants required by this Agreement to be performed by Purchaser at or
prior to the Closing Date, (ii) on the Closing Date, there shall be no
effective injunction, writ or preliminary restraining order or any
order of any kind whatsoever with respect to the Purchaser issued by a
court or governmental agency (or other governmental or regulatory
authority) of competent jurisdiction restraining or prohibiting the
consummation of the transactions contemplated hereby or making
consummation thereof unduly burdensome to the Purchaser, and (iii) on
the Closing Date and immediately prior to consummation of the
transactions contemplated by this Agreement, no proceeding or lawsuit
shall have been commenced, be pending or have been threatened by any
governmental or regulatory agency or authority or any other person with
respect to the transactions contemplated by this Agreement.
2.4 PAYMENT OF TAXES AND OTHER CHARGES. The Seller shall be responsible
for any sales tax arising out of or in any way related to the transfer by the
Seller of the Purchased Assets pursuant hereto. The Seller shall be responsible
for any income taxes or gains taxes arising out of or in any way related to the
transfer by the Seller of the Purchased Assets pursuant hereto.
2.5 NOTICES OF SALE. The Seller shall execute and deliver, or shall
cause to be executed and delivered, on a timely basis to all appropriate United
States federal, state, local and foreign governments or governmental entities,
with a copy to the Purchaser, all notices, assignments or transfers of rights,
reports, and other authorizations or documentation as may be necessary to assure
the continued effectiveness, and transfer to the Purchaser, of all existing
permits, approvals, licenses, and authorizations in effect with respect to the
Purchased Assets in compliance with applicable law and regulations, to the
extent such are assignable or transferable.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER AND STOCKHOLDERS.
Seller and Stockholders, jointly and severally, represent and warrant to the
Purchaser as follows:
(a) AUTHORIZATION. The execution, delivery and performance of
this Agreement and consummation of the transactions contemplated hereby
have been duly authorized by Seller, and Seller has taken all necessary
corporate action and has all the necessary corporate power to enter
into this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered
by the officers of Seller and Stockholders on their behalf and,
assuming that this Agreement is the valid and binding obligation of the
Purchaser, is the valid and binding obligation of each of Seller and
the Stockholders, enforceable against Seller and Stockholders in
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accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect, or by legal or equitable
principles, relating to or limiting creditors' rights generally and
except that the remedy of specific performance and injunctive and other
forms of equitable relief are subject to certain equitable defenses and
to the discretion of the court before which any proceeding therefor may
be brought.
(b) ORGANIZATION. Seller is a corporation duly formed, validly
existing and in good standing under the laws of the State of Maryland.
Seller has the requisite power and authority to own and lease its
assets and to carry on its business as it is now being conducted and is
duly qualified to do business as a foreign entity in each jurisdiction
where it conducts business, except where the failure to be so qualified
would not have a material adverse effect on the business, operations,
earnings, prospects, assets or condition (financial or otherwise) of
Seller.
(c) TITLE. The Seller owns, or will own at the date of
Closing, good, marketable and insurable title to all of the Purchased
Assets. Upon consummation of the transactions contemplated by this
Agreement, Purchaser will acquire good marketable title to the
Purchased Assets free and clear of all adverse claims, liens,
mortgages, charges, security interests, encumbrances and other
restrictions or limitations of any kind whatsoever. The Seller has not
made any commitments or received any notice, oral or written, from any
public authority or other entity with respect to the taking or use of
any of the Purchased Assets, whether temporarily or permanently, for
any purpose whatsoever, nor is there any proceeding pending or
threatened to the best knowledge of the Stockholders or Seller which
could adversely affect the Purchased Assets.
(d) CONDITION OF PURCHASED ASSETS. All documents and
agreements pursuant to which the Seller has obtained the right to use
any Purchased Assets and all of the documents, instruments and other
materials delivered or executed pursuant to Section 2.2 of this
Agreement, are valid and enforceable in all respects against the
parties thereto in accordance with their respective terms, except as
such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect, or by legal or equitable principles, relating to or limiting
creditors' rights generally and except that the remedy of specific
performance and injunctive and other forms of equitable relief are
subject to certain equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought. All
licenses, permits and authorizations related to the location or
operation of the Purchased Assets are in good standing and are valid
and enforceable in all respects against the Seller in accordance with
their respective terms. There is not, under any of the foregoing
instruments, documents or agreements, any existing default, nor is
there any event which, with notice or lapse of time or both, would
constitute a default arising through the Seller or, to the best
knowledge of Seller and Stockholders, arising through any third party
which could: (i) have a material adverse effect on the Purchased
Assets; or (ii) materially adversely affect the Seller's title to the
Purchased Assets. Seller is not in violation of and Seller has complied
with all applicable zoning, building or other codes, statutes,
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treaties, regulations, ordinances, notices and orders of any
governmental authority with respect to the occupancy, use, maintenance,
condition, operation and improvement of the Purchased Assets, except
where the failure to comply would not have a material adverse effect on
the Purchased Assets. The Seller possesses all licenses, certificates,
permits and authorizations required to be obtained by the Seller with
respect to the Seller's operation and maintenance of the Purchased
Assets for all uses for which such Purchased Assets are operated or
used by the Seller as of the date hereof, except where the failure to
do so would not have a material adverse effect on the Purchased Assets.
All of the Purchased Assets (whether owned or leased by the Seller) are
in good operating condition and repair, subject to normal wear and use,
and each such item is usable in a manner consistent with current use by
the Seller and in compliance with Seller's specifications for such
assets.
(e) INTELLECTUAL PROPERTY. Schedule 1.1(e) hereto sets forth a
true, correct and complete list of the Seller's Intellectual Property,
including an identification of the holder of each item listed and the
jurisdiction in which each is registered or applications for
registration are pending. The Seller owns (or is an authorized user of)
all Intellectual Property set forth on Schedule 1.1(e), to the extent
described on Schedule 1.1(e), and all copyrights relating to the
Purchased Assets. Seller has taken all necessary action to maintain and
protect each item of Intellectual Property that it owns or uses and
that constitute part of the Purchased Assets, consistent with sound
business practice. To the best knowledge of Seller and Stockholders,
Seller has not interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any intellectual property rights of
third parties, and Seller has not received any charge, complaint,
claim, demand, or notice alleging any such interference, infringement,
misappropriation or violation except as disclosed on Schedule 1.1(e).
To the best knowledge of Seller and Stockholders, no third party is
currently interfering with, infringing upon, misappropriating, or
otherwise coming into conflict with any Intellectual Property rights of
Seller, except as set forth on Schedule 1.1(e). Schedule 1.1(e) sets
forth a true and correct status of (i) Seller's patent, service xxxx,
copyright, and trademark registrations, and to the best of Seller's and
Stockholders' knowledge, there is no pending challenge to any such
application, (ii) all licenses, sublicenses and other agreements as to
which Seller is a party and pursuant to which Seller or any other
person is authorized to use any Intellectual Property, and (iii) all
licenses under which Seller is or may be obligated to make royalty or
other payments. Copies of all licenses, sublicenses and other
agreements identified pursuant to clauses (ii) and (iii) above have
been delivered by Seller to Purchaser. Seller is not in violation in
any material respect of any license, sublicense or agreement described
in Schedule 1.1(e). As a result of the execution of this Agreement or
the performance of the Seller's obligations hereunder, neither the
Seller nor the Purchaser will be in violation of any license,
sublicense or agreement described in such schedule. All source code
included within the Intellectual Property constitutes a trade secret of
Seller and is not part of the public knowledge or literature, and
Seller has taken reasonable action to protect such source code as a
trade secret. In addition, Seller has taken reasonable steps (including
without limitation entering into confidentiality agreements with all
officers and employees of and consultants involved in the Seller's
business) to maintain the secrecy and confidentiality of and its
proprietary rights in, all Intellectual Property.
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(f) NON-CONTRAVENTION; CONSENTS. Neither the execution and
delivery of this Agreement by the Seller or the Stockholders, nor
consummation of the transactions contemplated hereby, does or will: (i)
violate or conflict with any provision of the Articles of Incorporation
or By-Laws of the Seller; (ii) violate or, with the passage of time,
result in the violation of any provision of, or result in the
acceleration of or entitle any party to accelerate any obligation
under, or result in the creation or imposition of any lien, charge,
pledge, security interest or other encumbrance upon any of the
Purchased Assets, pursuant to any provision of any mortgage, lien,
lease, agreement, permit, indenture, license, certificate, instrument,
law, order, arbitration award, judgment or decree to which the Seller
is a party or by which it or any of the Purchased Assets are bound;
(iii) violate or conflict with any other restriction of any kind
whatsoever to which the Seller is subject, or by which any of the
Purchased Assets may be bound; or (iv) constitute an event permitting
termination by a third party of any agreement to which the Seller is a
party or the Purchased Assets are subject. Except as set forth on
Schedule 3.1(f) hereto, no consent, authorization, order or approval
of, or filing or registration with, any governmental commission, board,
agency, bureau or other regulatory body is required by the Seller or
the Stockholders in connection with the execution, delivery and
performance of the terms of this Agreement and consummation of the
transactions contemplated hereby.
(g) LITIGATION. There is no action, suit, proceeding or
investigation pending against or related to any of the Seller or the
Stockholders, nor to the best knowledge of the Seller or the
Stockholders, threatened, which would restrict the Seller's ability to
perform its obligations hereunder or would have a material adverse
effect on the Purchased Assets. To the best knowledge of the Seller and
the Stockholders, there are no grounds for or facts, events or
circumstances which could form the basis of any such action that could
cause or result in any such action, suit, proceeding or investigation
or which is probable of assertion. Neither the Seller nor the
Stockholders is in default in respect of any judgment, order, writ,
injunction or decree of any court or any federal, state, local or other
governmental agency, authority, body, board, bureau, commission,
department or instrumentality which could have a material adverse
effect on the Purchased Assets.
(h) PERMITS. The Seller holds all Permits required for the
operation of the Purchased Assets, except where the failure to do so
would not have a material adverse effect on the Purchased Assets. All
Permits are in full force and effect and no suspension, termination or
revocation of any of the foregoing is threatened. None of such Permits
will be adversely affected by consummation of the transactions
contemplated by this Agreement. To the best knowledge of the Seller and
Stockholders, the Seller has complied with the rules and regulations of
all governmental or other regulatory agencies, authorities, bodies,
boards, bureaus, commissions, departments or instrumentalities which
regulate, supervise or are in any manner concerned with import and
export licenses, occupational safety, environmental protection and
employment practices. The Seller and Stockholders have no knowledge of
nor have they received any notice of violation of any of such rules or
regulations which would result in any liability of the Seller for
penalties or damages or which would subject the Seller to any
injunction or governmental writ, order or decree.
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(i) WARRANTIES. Except as required by federal or state law or
as otherwise disclosed on Schedule 3.1(i) hereto, the Seller has not
made, extended or otherwise represented that it would provide any
express warranty with respect to the Software or any services sold,
distributed or leased to its clients or customers.
(j) ACCURACY OF INFORMATION FURNISHED. No statement,
representation, warranty or covenant set forth in this Agreement, in
the exhibits or the schedules hereto, or in any certificate or other
instrument or document required to be delivered by or on behalf of the
Seller or the Stockholders pursuant hereto or in connection with the
consummation of the transactions contemplated hereby, contained,
contains or will contain any untrue statement of a material fact, or
omits, omitted or will omit to state any material fact which is
necessary to make the statements contained herein or therein, in light
of the circumstances under which they were made, not misleading.
(k) INVESTMENT INTENT. Except for the contemplated
distribution of the Stock Payment shares to its stockholders in
connection with its liquidation, Seller is acquiring the Stock Payment
shares solely for its own account, as principal, for investment
purposes and not with a view to, or for resale in connection with, any
distribution or underwriting of the Stock Payment shares.
(l) NO SECURITIES ACT REGISTRATION. Except as set forth in
Section 4.2 hereof, Seller understands that the shares of Purchaser's
stock issued as the Stock Payment have not been and will not be
registered under either the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities law, that Seller (or
stockholders of Seller to whom Seller may transfer the Stock Payment
shares) must hold the Stock Payment shares indefinitely unless the
Stock Payment shares are subsequently registered under those laws or
transferred in reliance on an opinion of counsel that registration
under those laws is not required, and that the certificates
representing the Stock Payment shares will bear a legend to the
foregoing effect. The parties agree that neither the foregoing
restrictions nor this Agreement prohibits Seller from transferring the
Stock Payment shares to a stockholder of Seller provided such
stockholder executes an investment representation letter in form
satisfactory to the Purchaser and its counsel and to assure the
availability (or continued availability) of an exemption under the
Securities Act, in connection with the issuance of such shares and
agrees to comply with the lock-up restrictions of subsection 4.1(f)
below.
(m) ABILITY TO EVALUATE AND BEAR RISK. Seller is fully able
(1) to evaluate the information provided by the Purchaser relevant to
the merits, risks, and other factors bearing on the suitability of the
Stock Payment shares as an investment, and (2) to bear the economic
risk of its proposed investment in the Stock Payment shares without
reselling the Stock Payment shares. The Seller has reviewed all
information relating to the Purchaser that has been filed with the
Securities and Exchange Commission ("SEC"). The Seller has had the
opportunity to discuss Purchaser's business, management and affairs
(financial and other) with the directors, officers and management of
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Purchaser and has had the opportunity to review Purchaser's operations
and facilities. The Seller has also had the opportunity to ask
questions of and receive answers from the Purchaser and its management
regarding the terms and conditions of its investment.
(n) RESTRICTIVE LEGEND. Purchaser shall cause each certificate
representing the Stock Payment shares held by Seller to be inscribed
with the following legend:
THE SHARES OF COMMON STOCK OF GUARDIAN TECHNOLOGIES INTERNATIONAL,
INC., REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS; NOR HAVE THEY
BEEN PASSED UPON BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
REGULATORY AUTHORITY. THE SHARES CANNOT BE SOLD, TRANSFERRED, ASSIGNED,
OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH APPLICABLE FEDERAL
AND STATE SECURITIES LAWS.
(o) SELLER CAN PROTECT ITS INTEREST. The Seller represents
that by reason of its, or of its management's, business or financial
experience, the Seller has the capacity to protect its own interests in
connection with the transactions contemplated hereby.
3.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER. The Purchaser
represents and warrants to the Seller and Stockholders as follows:
(a) AUTHORIZATION. The Purchaser has taken all necessary
corporate action and has all the necessary corporate power to enter
into this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered
by the officers of the Purchaser on its behalf, and assuming that this
Agreement is the valid and binding obligation of the Seller and the
Stockholders, is the valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, except
as such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect, or by legal or equitable principles, relating to
or limiting creditors' rights generally and except that the remedy of
specific performance and injunctive and other forms of equitable relief
are subject to certain equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.
(b) ORGANIZATION. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. The Purchaser has the corporate power and authority
to own and lease its properties and assets and to carry on its business
as it is now being conducted and is duly qualified to do business as a
foreign corporation in each jurisdiction where it owns or leases real
property or conducts business, except where the failure to be so
qualified would not have a material adverse effect on the business,
operations, earnings, assets or condition (financial or otherwise) of
the Purchaser.
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(c) NON-CONTRAVENTION; CONSENTS. Neither the execution and
delivery of this Agreement by the Purchaser, nor the consummation of
the transactions contemplated hereby, does or will: (i) violate or
conflict with any provision of the certificate of incorporation or
bylaws of the Purchaser; or (ii) violate or conflict with any other
restriction to which the Purchaser is subject or by which any of its
property or assets may be bound, the effect of any of which violation
or conflict would result in a material adverse impact on the Purchaser
or the Purchaser's business. No consent, authorization, order or
approval of, or filing or registration with, any governmental
commission, board or other regulatory body is required in connection
with the execution, delivery and performance of the terms of this
Agreement by the Purchaser and consummation by the Purchaser of any of
the transactions contemplated hereby.
(d) STOCK PAYMENT SHARES. The Stock Payment shares will, when
issued and delivered pursuant to this Agreement, be validly issued,
fully paid and nonassessable. The Seller understands that the Stock
Payment Shares will be issued in reliance upon an exemption from the
registration provision of the Securities Act of 1933 and applicable
state securities laws. The Purchaser's common stock is registered
pursuant to Section 12(g) of the Securities Exchange Act of 1934, as
amended, and is quoted on The Nasdaq Stock Market, Inc.'s OTC Bulletin
Board.
(e) LITIGATION. There is no action, suit, proceeding or
investigation pending against or related to the Purchaser, to the best
of the Purchaser's knowledge, nor has the Purchaser been threatened
with any such action, suit, proceeding or investigation, which would
restrict the Purchaser's ability to perform its obligations hereunder
or which would have a material adverse effect on the business, assets,
operations, earnings, or condition (financial or otherwise) of the
Purchaser. To the best knowledge of the Purchaser, there are no grounds
for or facts, events or circumstances which would form the basis of any
such action that would cause or result in any such action, suit,
proceeding or investigation or which is probable of assertion. The
Purchaser is not in default in respect of any judgment, order, writ,
injunction or decree of any court or any federal, state, local or other
governmental agency, authority, body, board, bureau, commission,
department or instrumentality which could have a material adverse
effect on the business, assets, operations, earnings, or condition
(financial or otherwise) of the Purchaser.
(f) ACCURACY OF INFORMATION FURNISHED; SUBSEQUENT EVENTS. No
statement by the Purchaser set forth herein or in the exhibits or the
schedules hereto, and no statement set forth in any certificate or
other instrument or document required to be delivered by or on behalf
of the Purchaser pursuant hereto or in connection with consummation of
the transactions contemplated hereby, contained, contains or will
contain any untrue statement of a material fact, or omitted, omits or
will omit to state any material fact which is necessary to make the
statements contained herein or therein, in light of the circumstances
under which they were made, not misleading.
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(g) COMPLIANCE WITH APPLICABLE LAW. The Purchaser has been and
is in compliance with all foreign, United States federal, state and
local laws, statutes, ordinances, rules and regulations as of the date
hereof, the failure to comply with which could materially adversely
affect the business, assets, operations, earnings, or condition
(financial or otherwise) of the Purchaser or which would subject any
officer or director of the Seller to civil or criminal penalties or
imprisonment. The Purchaser has complied with the rules and regulations
of all governmental agencies having authority over its business or its
operations, including without limitation, agencies concerned with
intra-state and interstate commerce, occupational safety, environmental
protection and employment practices, except where the failure to comply
would not have a material adverse effect on the business, operations,
earnings, prospects, assets or condition (financial or otherwise) of
the Purchaser. The Purchaser has no knowledge of and has not received
any notice of violation of any such rule or regulation which could
result in any liability of the Purchaser for penalties or damages or
which could subject the Purchaser to any injunction or government writ,
order or decree. To the best knowledge of the Purchaser, there are no
facts, events or conditions that could interfere with, prevent
continued compliance with or give rise to any liability under any
foreign, federal, state or local governmental laws, statutes,
ordinances or regulations applicable to the business, assets,
operations, earnings, or condition (financial or otherwise) of the
Purchaser, except where the failure to do so would not have a material
adverse effect on the business, operations, earnings, prospects, assets
or condition (financial or otherwise) of the Purchaser.
(h) UNLAWFUL PAYMENTS. To the best knowledge of the Purchaser,
neither the Purchaser nor any officer, director, employee, agent, owner
or representative of the Purchaser has made, directly or indirectly,
any bribe or kickback, illegal political contribution, payment from
corporate funds which was incorrectly recorded on the books and records
of the Purchaser, unlawful payment from corporate funds to governmental
or municipal officials in their individual capacities for the purpose
of affecting their action or the actions of the jurisdiction which they
represent to obtain favorable treatment in securing business or
licenses or to obtain special concessions of any kind whatsoever, or
illegal payment from corporate funds to obtain or retain any business.
(i) REPORTS; FINANCIAL STATEMENTS. Since June 26, 2003,
Purchaser has filed all forms, reports, statements and other documents
(the "SEC Reports") required to be filed with the United States
Securities and Exchange Commission (the "SEC"). The SEC Reports were or
will be prepared in all material respects in accordance with the
requirements of applicable law (including the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
the case may be, and the rules and regulations of the SEC thereunder
applicable to such SEC Reports). As of their respective dates, to the
best knowledge of the Purchaser, the SEC Reports did not contain any
untrue statement of material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. Each of the financial statements (including, in each case,
any related noted thereto) contained in the SEC Reports filed prior to,
on or after the date of this Agreement (i) have been or will be
prepared in accordance with, and compiled or will comply as to form
with, the published rules and regulations of the SEC and generally
accepted accounting principals applied on a consistent basis throughout
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the periods involved (except as otherwise noted therein), and (ii)
fairly present or will fairly present the financial position of
Purchaser as of the respective dated thereof and the results of its
operations and cash flows for the periods indicated, except that any
unaudited interim financial statements were or will be subject to
normal and recurring year-end adjustments
3.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties set forth in Sections 3.1 and 3.2 hereof shall survive until the
close of business one (1) year after the Closing Date.
ARTICLE IV
COVENANTS AND ADDITIONAL AGREEMENTS
4.1 COVENANTS AND AGREEMENTS OF THE SELLER AND STOCKHOLDERS.
(a) NOTIFICATION. Prior to the Closing, each of the Seller and
the Stockholders shall give prompt notice to the Purchaser of: (i) any
notice or other communication received by the Seller prior to the
Closing Date, relating to a default or an event which, with notice or
lapse of time or both would become a default under this Agreement or
become a material default under any other material contract, agreement,
license or instrument to which any of the Seller or the Stockholders is
a party, by which it or any of the Purchased Assets are bound or to
which it or any of the Purchased Assets are subject; (ii) any event
which, with notice or lapse of time or both, would cause any warranty,
representation, or covenant of any of the Seller or the Stockholders
under this Agreement to be inaccurate, untrue, incomplete, misleading
or violated in any respect; (iii) any notice or other communication
from any third party alleging that the consent of such third party was,
is or may be required in connection with the transactions contemplated
by this Agreement; and (iv) any material adverse change in the
Purchased Assets.
(b) ACCESS TO ADDITIONAL AGREEMENTS AND INFORMATION. Prior to
the Closing Date, the Seller shall make available to the Purchaser any
and all, licenses, permits, agreements, contracts, documents,
certificates and other instruments material to the Purchased Assets.
(c) NON-COMPETITION AND NON-SOLICITATION. During the period
commencing on the Closing Date and for two (2) years thereafter (the
"Non-Compete Period"):
(i) The Seller and Stockholders shall not, within any
jurisdiction in which the Purchaser or any affiliate,
subsidiary or division of the Purchaser is duly qualified to
do business, or in any area in which the it is selling or
providing its products or services or marketing its products
or services, or within a one hundred (100) mile radius of any
such area, directly or indirectly, engage in activities or
solicit any business in the field of which is competitive with
the Purchaser (unless the board of directors of the Purchaser
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shall have authorized such activity and the Purchaser shall
have consented thereto in writing), either as an individual on
his own account, as an investor (except for investments of
less than 5% of the securities of a corporation subject to the
reporting requirements of Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as amended), or as an
officer, director, partner, joint venturer, consultant,
employee, agent or salesman for any other person, entity,
corporation or otherwise.
(ii) The Seller and Stockholders will not (A) induce
any employee or independent contractor of the Purchaser to
leave the Purchaser's employ or service or hire any such
employee or independent contractor (unless the board of
directors of the Purchaser shall have authorized such
employment and the Purchaser shall have consented thereto in
writing), or (B) contact, service or solicit any clients,
customers or accounts of the Purchaser, either as an
individual on his own account, as an investor, or as an
officer, director, partner, joint venturer, consultant,
employee, agent or salesman for any other person, or entity,
corporation or otherwise.
(d) CONFIDENTIAL INFORMATION. The parties hereto recognize
that a major need of the Purchaser is to preserve its specialized
knowledge, trade secrets, customer lists and confidential information
concerning the industry. The strength and goodwill of the Purchaser is
derived from the specialized knowledge, trade secrets, and confidential
information generated from experience with the activities undertaken by
the Purchaser and its subsidiaries. The disclosure of this information
and knowledge to competitors would be beneficial to them and
detrimental to the Purchaser, as would the disclosure of information
about the products, methods, marketing practices, pricing practices,
costs, profit margins, design specifications, analytical techniques,
technical information, client contracts, inventory sources, customer
information, employee information, and other similar items of the
Purchaser and its subsidiaries. The Seller and Stockholders have or
will have access to, and have obtained or will obtain, specialized
knowledge, trade secrets and confidential information about the
Purchaser's operations and the operations of its subsidiaries,
affiliates, and/or divisions. The term "confidential" or "proprietary
information" shall not include information which is i) already known
from sources not subject to any confidential obligations; ii) is or
becomes generally available to the public other than as a result of a
disclosure by the Purchaser; or iii) required to be disclosed by law,
regulatory or judicial process. Therefore, the Seller and Stockholders
hereby agree as follows, recognizing that the Purchaser is relying on
these agreements in entering into this Agreement:
During the Non-Compete Period, the Seller and Stockholders
will keep secret and retain in strict confidence, and will not use,
disclose to others, or publish any inventions or any confidential
business information about the affairs of the Purchaser, including but
not limited to confidential information concerning the Purchaser's
products, methods, marketing practices, pricing practices, costs,
profit margins, design specifications, analytical techniques, technical
information, client contracts, inventory sources, customer information,
employee information, and other similar items of confidential
information;
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(e) REFERRALS. Commencing on the Closing Date and thereafter,
the Stockholders and the Seller agree that they shall refer all
customer inquiries relating to the Purchased Assets to the Purchaser as
soon as possible after receiving such inquiries.
(f) LOCK UP RESTRICTIONS.
(i) Notwithstanding any other provision of this
Agreement, the Seller will not, without the prior written
consent of Purchaser, for a period beginning on the Closing
Date and for a period of two (2) years thereafter (the
"Lock-Up Period"), offer, sell, contract to sell, transfer,
assign, contract to assign, gift, grant any option or warrant
to purchase or right to acquire, announce its intention to
sell, pledge, exchange, contract to exchange, or otherwise
dispose or contract to dispose of, any Stock Payment shares;
except that, during the Lock-Up Period, the Seller may make
transfers to any person who is a stockholder of Seller on the
date of the execution of this Agreement, provided that any
such person or organization agrees to be bound by the
foregoing restrictions on the disposition of such securities.
It is specifically agreed that, during the Lock Up Period, the
Stock Payment shares will be held in certificated form and not
in DTC or other "street name" form. Furthermore, the Seller
agrees that the Stock Payment shares shall bear a legend
making reference to the provisions of this Subsection (f),
which shall be placed on file with the Seller's transfer
agent.
(ii) The Seller further understands and agrees that
the Purchaser will place stop transfer instructions against
the Stock Payment shares (and any other shares of capital
stock of the Purchaser now or hereafter issued by the
Purchaser in a stock split, stock dividend or similar with
regard to such shares), in accordance with the restrictions
set forth in this Subsection (f).
4.2 COVENANTS AND AGREEMENTS OF PURCHASER.
(a) RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the Commission which may at
any time permit the sale of the Stock Payment shares to the public
without registration at all times the Purchaser agrees to:
(i) Make and keep public information available, as
those terms are understood and defined in Rule 144 as
promulgated under the Securities Act;
(ii) Use its best efforts to file with the Commission
in a timely manner all reports and other documents required of
the Purchaser under the Exchange Act; and
(iii) Furnish to each holder of Stock Payment shares
forthwith upon request (A) a written statement by Purchaser as
to its compliance with the reporting requirements of Rule 144
and of the Securities Act and Exchange Act, (B) a copy of the
most recent annual or quarterly report of the Purchaser and
(C) such other information, reports and documents so filed by
the Purchaser as such holder may reasonably request in
availing itself of any rule or regulation of the Commission
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allowing such holder to sell any Stock Payment shares without
registration. After the conclusion of the Lock-up Period, the
Purchaser agrees to use its best efforts to permit transfers
of the Stock Payment shares pursuant to Rule 144, which
efforts shall include timely notice to the Purchaser's
transfer agent to permit such transfers of Stock Payment
shares.
(b) PIGGYBACK RIGHTS. Following the expiration of the Lock-Up
Period, in the event Purchaser files a registration statement under the
Securities Act, with respect to shares of its common stock, on a form
appropriate for registering stockholders' common stock (other than a
registration on Form S-8 or S-4, or any form which does not include
substantially the same information as would be required to be included
in a registration statement covering the sale of the Stock Payment
shares), Purchaser shall give written notice to the holders of Stock
Payment shares (the "Holders") prior to filing, and the Holders shall
have the right to request to have included such Stock Payment shares as
shall be specified in the request. If Holders do not make a request for
registration within 20 days after receipt of notice from Purchaser,
Purchaser shall have no obligation to include any Stock Payment shares
owned by those Holders in the registration statement. Notwithstanding
the foregoing, if the managing underwriter of any underwritten offering
by the Purchaser expresses reasonable objection to the registration of
all of the Stock Payment shares, the number of Stock Payment shares to
be registered in such offering on behalf of the Holders shall be
reduced pro rata among all stockholders seeking registration in
connection with such offering.
(c) PAYMENT OF EXPENSES. In the event of a registration under
subsection (b) above, the Holders shall pay and bear the direct selling
fees, disbursements and expenses, including without limitation all
underwriters' discounts, commissions and expenses, but no other cost of
registration.
(d) TERMINATION OF PURCHASER'S OBLIGATIONS. Notwithstanding
any contrary provision of this Section 4, Purchaser shall not be
required to effect any registrations under the Securities Act or under
any state securities laws on behalf of the Holder or Holders if, in the
opinion of counsel for the Purchaser, the offering or transfer by such
Holder or Holders in the manner proposed (including, without
limitation, the number of shares proposed to be offered or transferred
and the method of offering or transfer) is exempt from the registration
requirements of the Securities Act, under Rule 144 or otherwise and the
securities laws of applicable states. The Purchaser shall have not
obligations pursuant to Section 4.2(b) with respect to any request or
requests after the fifth anniversary of this Agreement.
(e) REDEMPTION RIGHT. Upon the expiration of the Lock-Up
Period, in the event that the Stock Payment shares held by any Holder
are not (for any reason) eligible for resale under Rule 144 and such
Stock Payment shares have not been registered under the Subsections (b)
above, the Holder of such Stock Payment shares may, by notice to the
Company (a "Determination Notice"), demand a determination of the
Redemption Price (as defined below) for purposes of this subsection
(e). Within 30 days after the receipt of any Determination Notice from
the Holder, the Purchaser shall give to the Holder notice of the
Redemption Price, including a reasonably detailed description of the
18
method of calculation thereof, determined as of the day preceding such
notice of the Redemption Price. At any time within 30 days after
receipt of notice of the Redemption Price the Holder may demand
redemption of its Stock Payment shares, in whole or in part, at the
Redemption Price by notice to the Purchaser, payable on the third
business day after receipt of notice of such demand in immediately
available funds to the Holder, upon surrender of the Holders Stock
Payment shares, by wire transfer to any account specified by notice to
the Purchaser. For purposes of this subsection (e): (A) "Redemption
Price" shall, as at any date of determination, mean the average of the
daily Closing Prices of a share of Common Stock for the 20 consecutive
business days ending on the most recent business day prior to the Time
of Determination; (B) "Closing Price" shall mean the reported last
sales price or, if no such reported sale occurs on such day, the
average of the closing bid and asked prices on such day, in each case
on the principal national securities exchange on which Common Stock is
listed or admitted to trading; and (C) "Time of Determination" means
the time and date of the determination of the Holders to exercise their
respective rights set forth in this subsection (e).
4.3 GOVERNMENTAL FILINGS AND CONSENTS. The Seller, the Stockholders and
the Purchaser shall cooperate with one another in filing any necessary
applications, reports or other documents with any domestic or foreign, federal,
state or local agencies, authorities or bodies having jurisdiction with respect
to the transactions contemplated by this Agreement and in seeking any necessary
approval, consultation or prompt favorable action of, with or by any of such
agencies, authorities or bodies.
4.4 PUBLICITY. Any public announcement or press release relating to
this transaction must be approved by both Seller and Purchaser in writing before
being made or released. Purchaser shall have the right to issue a press release
without the Seller's written approval if in the opinion of Purchaser's counsel
such a release is necessary to comply with applicable securities laws.
ARTICLE V
INDEMNIFICATION AND CLAIMS
5.1 INDEMNIFICATION BY THE SELLER AND STOCKHOLDERS.
(a) The Seller and the Stockholders, jointly and severally,
hereby agree to indemnify and hold harmless the Purchaser (the
"Indemnified Party") against and in respect of all damages, claims,
losses and expenses (including, without limitation, reasonable
attorneys' fees and disbursements) reasonably incurred by the Purchaser
(all amounts for which the Seller and the Stockholders shall be liable
shall hereinafter be referred to as the "Damages") arising out of: (i)
any material misrepresentation or breach of any warranty made by the
Seller or Stockholders pursuant to the provisions of this Agreement or
in any statement, certificate or other document furnished by the Seller
and the Stockholders pursuant to this Agreement; and (ii) the
nonperformance or breach of any material covenant, agreement or
obligation of the Seller and the Stockholders contained in this
Agreement which has not been waived by the Purchaser.
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(b) Notwithstanding the indemnification provided pursuant to
Subsection 5.1(a) above, no amount shall be payable by the Seller or
the Stockholders in indemnification hereunder or under any other
provision of this Agreement unless the aggregate amount of such Damages
in respect of which the Seller or the Stockholders would be liable, but
for operation and application of the provisions of this Section,
exceeds Ten Thousand Dollars ($10,000) for any single incident or, on a
cumulative basis, Twenty Thousand Dollars ($20,000), and then only to
the extent of such excess.
(c) In any case where the Seller or the Stockholders have
indemnified the Indemnified Party for any Damages and the Indemnified
Party recovers from third parties all or any part of the amount so
indemnified by the Seller and the Stockholders, the Indemnified Party
shall promptly pay over to the Seller and the Stockholders, as the case
may be, the amount so recovered.
5.2 CLAIMS AGAINST THE INDEMNIFIED PARTY. With respect to claims or
demands by third parties, whenever the Indemnified Party shall have received
notice that such a claim or demand has been asserted or threatened which, if
valid, would be subject to indemnification under Section 5.1 hereof, the
Indemnified Party shall as soon as reasonably possible and in any event within
thirty (30) days of receipt of such notice, notify the Seller and the
Stockholders of such claim or demand and of all relevant facts within its
knowledge which relate thereto. The Seller and the Stockholders shall then have
the right at their own expense to undertake the defense of any such claims or
demands utilizing counsel selected by the Seller and the Stockholders and
approved by the Purchaser, which approval shall not be unreasonably withheld. In
the event that the Seller or the Stockholders should fail to give notice of the
intention to undertake the defense of any such claim or demand within sixty (60)
days after receiving notice that it has been asserted or threatened, the
Indemnified Party shall have the right to satisfy and discharge the same by
payment, compromise or otherwise and shall give written notice of any such
payment, compromise or settlement to the Seller and the Stockholders.
5.3 RIGHT OF OFFSET. In the event that the Seller or the Stockholders
may be required to pay monies in indemnification to the Indemnified Party
pursuant to any indemnification provision of this Agreement, the Indemnified
Party shall have the right to offset any amounts which are owed to it in
indemnification by the Seller and the Stockholders against any amounts which are
payable by the Indemnified Party to the Seller and the Stockholders, provided
however, that nothing set forth in this Section 5.3 shall relieve the
Indemnified Party of its obligations (subject to reduction for offsets as
provided herein) under this Agreement when due.
5.4 INDEMNIFICATION BY PURCHASER.
(a) The Purchaser hereby agrees to indemnify and hold harmless
the Seller and the Stockholders against and in respect of all damages,
claims, losses and expenses (including without limitation, attorneys'
fees and disbursements) reasonably incurred by the Seller or the
Stockholders with respect thereto (all such amounts may hereinafter be
referred to as "Seller Damages") arising out of: (i) any
20
misrepresentation or breach of any warranty made by the Purchaser
pursuant to the provisions of this Agreement or in any statement,
certificate or other document furnished by the Purchaser pursuant to
this Agreement; and (ii) the nonperformance or breach of any covenant,
agreement or obligation of the Purchaser which has not been waived by
the Seller or the Stockholders.
(b) Notwithstanding the indemnification provided pursuant to
Section 5.4(a) above, no amount shall be payable by the Purchaser in
indemnification hereunder or under any other provision of this
Agreement unless the aggregate amount of Seller Damages in respect of
which the Purchaser would be liable, but for operation and application
of the provisions of this Subsection, exceeds on a cumulative basis,
Fifty Thousand Dollars ($50,000), and then only to the extent of such
excess.
(c) In any case where the Purchaser has indemnified the Seller
or the Stockholders for any Seller Damages and the Seller or the
Stockholders recover from third parties all or any part of the amount
so indemnified by the Purchaser, the Seller or the Stockholders shall
promptly reimburse to the Purchaser the amount paid by the Purchaser up
to the amount so recovered.
5.5 CLAIMS AGAINST THE SELLER AND STOCKHOLDERS. With respect to claims
or demands by third parties, whenever the Seller or the Stockholders shall have
received notice that such a claim or demand has been asserted or threatened,
which, if valid, would be subject to indemnification under Section 5.4 hereof,
the Seller and the Stockholders shall as soon as reasonably possible and in any
event within thirty (30) days of receipt of such notice, notify the Purchaser of
such claim or demand and of all relevant facts within its knowledge which relate
thereto. The Purchaser shall have the right at its expense to undertake the
defense of any such claim or demand utilizing counsel selected by the Purchaser
and approved by the Seller and the Stockholders, which approval shall not be
unreasonably withheld. In the event that the Purchaser should fail to give
notice of its intention to undertake the defense of any such claim or demand
within sixty (60) days after receiving notice that it has been asserted or
threatened, the Seller and the Stockholders shall have the right to satisfy and
discharge the same by payment, compromise or otherwise and shall give written
notice of any such payment, compromise or settlement to the Purchaser.
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ARTICLE VI
MISCELLANEOUS
6.1 FEES AND EXPENSES. Except as otherwise provided in this Agreement,
Purchaser will bear both its own and the Seller's legal, accounting, and other
fees and expenses incident to the transactions contemplated herein. Each party
hereto represents that it or he has been represented by counsel in connection
with the preparation and negotiation of this Agreement and the transactions
contemplated hereby.
6.2 MODIFICATION, AMENDMENTS AND WAIVER. The parties hereto may amend,
modify or otherwise waive any provision of this Agreement by mutual consent,
provided that such consent and any amendment, modification or waiver is in
writing and is signed by each of the parties hereto.
6.3 ASSIGNMENT. Neither the Seller, the Stockholders nor the Purchaser
shall have the authority to assign its respective rights or obligations under
this Agreement without the prior written consent of the other parties hereto,
except that, following Closing, the Purchaser may assign or transfer the
Purchased Assets to a subsidiary of Purchaser, and Purchaser may assign all or
any portion of its respective rights hereunder as security, without the prior
written consent of any party, or to any lender, bank, financial institution or
other entity providing financing to the Purchaser in connection with
consummation of the transactions contemplated hereby and the Seller and the
Stockholders shall execute such documents as are necessary in order to
effectuate such assignments.
6.4 BURDEN AND BENEFIT. This Agreement shall be binding upon and, to
the extent permitted in this Agreement, shall inure to the benefit of the
parties and their respective successors and permitted assigns. In the event of a
default by the Seller or a Stockholder of any of its or their obligations
hereunder, the sole and exclusive recourse and remedy of the Purchaser shall be
against the Seller and the Stockholders; under no circumstances shall any,
officer, director, stockholder or affiliate of the Seller be liable in law or
equity for any obligations of the Seller or the Stockholders. In the event of a
default by the Purchaser of any of its obligations hereunder, the sole and
exclusive recourse and remedy of the Seller or the Stockholders shall be against
the Purchaser; under no circumstances shall any officer, director, stockholder
or affiliate of the Purchaser be liable in law or equity for any obligations of
the Purchaser hereunder.
6.5 BROKERS. The Seller and the Stockholders represent and warrant to
the Purchaser that there are no brokers or finders entitled to any brokerage or
finder's fee or other commission or fee based upon arrangements made by or on
behalf of the Seller and the Stockholders or any other person in connection with
this Agreement or any of the transactions contemplated hereby. The Purchaser
represents and warrants to the Seller and the Stockholders that no broker or
finder is entitled to any brokerage or finder's fee or other commission or fee
based upon arrangements made by or on behalf of the Purchaser in connection with
this Agreement or any of the transactions contemplated hereby.
22
6.6 ENTIRE AGREEMENT. This Agreement and the exhibits, lists and other
documents referred to herein contain the entire agreement among the parties
hereto with respect to the transactions contemplated hereby and supersede all
prior agreements with respect thereto, whether written or oral including but not
limited to the Memorandum of Agreement, dated September 10, 2003.
6.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard, however, to
such jurisdiction's principles of conflicts of laws.
6.8 NOTICES. Any notice, request, instruction or other document to be
given hereunder by any party hereto shall be in writing and delivered
personally, by facsimile transmission or telex, or sent by registered or
certified mail (return receipt requested), postage prepaid, addressed as
follows:
If to the Seller: Difference Engines Corporation
c/o Guardian Technologies
International, Inc.
00000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attn: Xx. Xxxxxx Xxxxxx
Facsimile: (000) 000-0000
with a copy to: Xxxxxxx X. XxXxxxxx
Xxxxx Xxxxx
00000 Xxxxxx Xxxxx Xxxx
Xxxxx 000
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
If to the Stockholders: Xxxxxx Xxxxxx
000 Xxxxxxxx Xxxxxx
Xxxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Xxxxxx X. Xxxxxxxx
00000 Xxxxxx Xxxx.
Xxx. 000
Xxxxxx Xxxxxx, XX 00000
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with a copy to: Xxxxxxx X. XxXxxxxx
Xxxxx Xxxxx
00000 Xxxxxx Xxxxx Xxxx
Xxxxx 000
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
If to the Purchaser: Guardian Technologies International, Inc.
00000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attn: Xx. Xxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
with a copy to: Xxxxxxx, Xxxxxx, Vangellow & Xxxx, P.C.
0000 X Xxxxxx, X.X., Xxxxx 0000
Xxxxxxxxxx, X.X. 00000
Attn: Xxxx R.E. Xxxx, Esquire
Facsimile: (000) 000-0000
or to such other persons or addresses as may be designated in writing by the
party to receive such notice. If mailed as aforesaid, the day of mailing or
transmission shall be the date any such notice shall be deemed to have been
delivered.
6.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which shall
constitute but one agreement.
6.10 RIGHTS CUMULATIVE. All rights, powers and privileges conferred
hereunder upon the parties, unless otherwise provided, shall be cumulative and
shall not be restricted to those given by law. Failure to exercise any power
given any party hereunder or to insist upon strict compliance by any other party
shall not constitute a waiver of any party's right to demand exact compliance
with any of the terms or provisions hereof.
6.11 SEVERABILITY OF PROVISIONS. The provisions of this Agreement shall
be considered severable in the event that any of such provisions are held by a
court of competent jurisdiction to be invalid, void or otherwise unenforceable.
Such invalid, void or otherwise unenforceable provisions shall be automatically
replaced by other provisions which are valid and enforceable and which are as
similar as possible in term and intent to those provisions deemed to be invalid,
void or otherwise unenforceable. Notwithstanding the foregoing, the remaining
provisions hereof shall remain enforceable to the fullest extent permitted by
law.
24
6.11 HEADINGS. The headings set forth in the articles and sections of
this Agreement and in the exhibits and the schedules to this Agreement are
inserted for convenience of reference only and shall not be deemed to constitute
a part hereof.
6.12 SURVIVAL. The provisions of Sections 3.3, 4.1, 4.2 and all of
Articles V and VI shall survive termination of this Agreement.
6.13 REMEDIES. It is acknowledged that this Sections 4.1(c) and (d) are
of a unique nature and of extraordinary value and of such a character that a
breach thereof by the Seller or any Stockholder may result in irreparable damage
and injury to the Purchaser for which the Purchaser may not have any adequate
remedy at law. Therefore, the non-breaching party shall be entitled to seek a
decree of specific performance against the breaching party, or such other relief
by way of restraining order, injunction or otherwise as may be appropriate to
ensure compliance with this Agreement. The remedies provided by this Section
6.13 are non-exclusive and the pursuit of such remedies shall not in any way
limit any other remedy available to the parties with respect to this Agreement,
including, without limitation, any remedy available at law or equity with
respect to any anticipatory or threatened breach of the provisions hereof.
[THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date and year first above written.
ATTEST: GUARDIAN TECHNOLOGIES
INTERNATIONAL, INC.
/S/ XXXXXX X. XXXXXX By: /S/ XXXXXXX X. XXXXXXX
--------------------------------------- ----------------------
Xxxxxxx X. Xxxxxxx, CEO
ATTEST: DIFFERENCE ENGINES CORPORATION
/S/ XXXXXXX XXXXXX By: /S/ XXXXXX XXXXXX
--------------------------------------- -----------------
Its: CHAIRMAN, CEO, & PRESIDENT
WITNESS: XXXXXX XXXXXX
/S/ XXXXXX X. XXXXXXXX /S/ XXXXXX XXXXXX
---------------------- -----------------
WITNESS: XXXXXX X. XXXXXXXX
/S/ XXXXXX XXXXXX /S/ XXXXXX X. XXXXXXXX
----------------- ----------------------
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