AGREEMENT AND PLAN OF REORGANIZATION
Dated as of
September 30, 2000
between and among
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
and
PALO VERDE GROUP, INC.
and
REDWOOD MICROCAP FUND, INC.
TABLE OF CONTENTS
SECTION 1: GENERAL DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . -1-
1.1 Best Knowledge. . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
1.2 Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
1.3 ERISA.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
1.4 Exchange Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
1.5 Fiscal Year.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
1.6 Governmental Authority. . . . . . . . . . . . . . . . . . . . . . . . -2-
1.7 Governmental Requirement. . . . . . . . . . . . . . . . . . . . . . . -2-
1.8 Legal Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . -2-
1.9 IRS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
1.10 Ownership Interest. . . . . . . . . . . . . . . . . . . . . . . . . . -2-
1.11 Person. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
1.12 Section.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
1.13 Securities Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
1.14 Taxes.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
SECTION 2: EXCHANGE OF STOCK. . . . . . . . . . . . . . . . . . . . . . . -3-
2.1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
2.2 Income Tax Consideration. . . . . . . . . . . . . . . . . . . . . . . -3-
2.3 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . -3-
SECTION 3: CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
3.1 General Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
3.2 Time and Place. . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
3.3 Covenants Regarding Closing.. . . . . . . . . . . . . . . . . . . . . -3-
3.4 Conditions to Obligation of Guardian. . . . . . . . . . . . . . . . . -4-
3.5 Conditions to Obligation of Palo Verde and Redwood. . . . . . . . . . -4-
3.6 Specific Terms to be Delivered at Closing . . . . . . . . . . . . . . -5-
3.7 Election of Directors and Executive Officers of Palo Verde. . . . . . -6-
SECTION 4: REPRESENTATIONS AND WARRANTIES BY PALO VERDE AND REDWOOD. . -7-
4.1 Organization and Standing . . . . . . . . . . . . . . . . . . . . . . -7-
4.2 Subsidiaries, etc.. . . . . . . . . . . . . . . . . . . . . . . . . . -7-
4.3 Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
4.4 Capitalization of the Corporation . . . . . . . . . . . . . . . . . . -7-
4.5 No Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
4.6 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
4.7 No Actions, Proceedings, etc. . . . . . . . . . . . . . . . . . . . . -8-
4.8 Post Balance Sheet Changes. . . . . . . . . . . . . . . . . . . . . . -8-
4.9 No Breaches.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
4.10 Corporate Acts and Proceedings. . . . . . . . . . . . . . . . . . . . -9-
4.11 Registered Rights and Proprietary Information . . . . . . . . . . . . -9-
4.12 No Liens or Encumbrances. . . . . . . . . . . . . . . . . . . . . . .-10-
SECTION 5: COVENANTS OF PALO VERDE. . . . . . . . . . . . . . . . . . . .-10-
5.1 Preservation of Business. . . . . . . . . . . . . . . . . . . . . . .-10-
5.2 Ordinary Course.. . . . . . . . . . . . . . . . . . . . . . . . . . .-10-
5.3 Negative Covenants. . . . . . . . . . . . . . . . . . . . . . . . . .-11-
5.4 Access to Books and Records, Premises, etc. . . . . . . . . . . . . .-11-
5.5 Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . .-11-
SECTION 6: REPRESENTATIONS AND WARRANTIES OF REDWOOD. . . . . . . . . . .-11-
6.1 Share Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . .-12-
6.2 Rights Ownership. . . . . . . . . . . . . . . . . . . . . . . . . . .-12-
6.3 Restriction on Future Transfer. . . . . . . . . . . . . . . . . . . .-12-
6.4 Unregistered Stock. . . . . . . . . . . . . . . . . . . . . . . . . .-12-
6.5 Stock Acquired for Investment; Limitations on Dispositions. . . . . .-12-
SECTION 7: REPRESENTATIONS AND WARRANTIES OF GUARDIAN . . . . . . . . . .-12-
7.1 Organization and Standing.. . . . . . . . . . . . . . . . . . . . . .-12-
7.2 Subsidiaries, etc.. . . . . . . . . . . . . . . . . . . . . . . . . .-13-
7.3 Qualification.. . . . . . . . . . . . . . . . . . . . . . . . . . . .-13-
7.4 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . .-13-
7.5 Capitalization of the Corporation.. . . . . . . . . . . . . . . . . .-13-
7.6 No Defaults.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .-14-
7.7 Taxes.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-14-
7.8 No Actions, Proceedings, etc. . . . . . . . . . . . . . . . . . . . .-14-
7.9 Post Balance Sheet Changes. . . . . . . . . . . . . . . . . . . . . .-14-
7.10 No Breaches.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .-15-
7.11 Corporate Acts and Proceedings. . . . . . . . . . . . . . . . . . . .-15-
7.12 Labor Matters.. . . . . . . . . . . . . . . . . . . . . . . . . . . .-15-
7.13 Compliance with Reporting Requirements. . . . . . . . . . . . . . . .-15-
SECTION 8: COVENANTS OF GUARDIAN. . . . . . . . . . . . . . . . . . . . .-15-
8.1 Preservation of Business. . . . . . . . . . . . . . . . . . . . . . .-15-
8.2 Ordinary Course.. . . . . . . . . . . . . . . . . . . . . . . . . . .-16-
8.3 Negative Covenants. . . . . . . . . . . . . . . . . . . . . . . . . .-16-
8.4 Access to Books and Records, Premises, etc. . . . . . . . . . . . . .-16-
8.5 Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . .-17-
SECTION 9: INDEMNIFICATION AND REMEDIES FOR BREACH. . . . . . . . . . . .-17-
9.1 Indemnification by Guardian.. . . . . . . . . . . . . . . . . . . . .-17-
9.2 Indemnification by Redwood. . . . . . . . . . . . . . . . . . . . . .-18-
9.3 Indemnification by Palo Verde.. . . . . . . . . . . . . . . . . . . .-18-
9.4 Additional Notice.. . . . . . . . . . . . . . . . . . . . . . . . . .-19-
9.5 Determination of Damages and Related Matters. . . . . . . . . . . . .-19-
9.6 Remedies for Breach.. . . . . . . . . . . . . . . . . . . . . . . . .-20-
SECTION 10: NONDISCLOSURE OF CONFIDENTIAL INFORMATION . . . . . . . . . .-20-
SECTION 11: EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . .-21-
SECTION 12: MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . .-21-
12.1 Attorney's Fees.. . . . . . . . . . . . . . . . . . . . . . . . . . .-21-
12.2 Survival and Incorporation of Representations.. . . . . . . . . . . .-21-
12.3 Incorporation by Reference. . . . . . . . . . . . . . . . . . . . . .-22-
12.4 Parties in Interest.. . . . . . . . . . . . . . . . . . . . . . . . .-22-
12.5 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . . .-22-
12.6 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-22-
12.7 Governing Law - Construction. . . . . . . . . . . . . . . . . . . . .-22-
12.8 Limitation of Actions.. . . . . . . . . . . . . . . . . . . . . . . .-22-
12.9 Notices.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-22-
12.10 Fax/Counterparts.. . . . . . . . . . . . . . . . . . . . . . . .-24-
12.11 Captions.. . . . . . . . . . . . . . . . . . . . . . . . . . . .-24-
12.12 Severability.. . . . . . . . . . . . . . . . . . . . . . . . . .-24-
12.13 Good Faith Cooperation and Additional Documents. . . . . . . . .-24-
12.14 Specific Performance.. . . . . . . . . . . . . . . . . . . . . .-24-
12.15 Assignment.. . . . . . . . . . . . . . . . . . . . . . . . . . .-24-
12.16 Authority to Sign. . . . . . . . . . . . . . . . . . . . . . . .-25-
12.17 Execution of Documents.. . . . . . . . . . . . . . . . . . . . .-25-
12.18 Time.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-25-
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT is made and entered into effective this 30th day of
September, 2000, by and between PALO VERDE GROUP, INC., a Colorado
corporation, ("Palo Verde"), GUARDIAN TECHNOLOGIES INTERNATIONAL, INC., a
Delaware corporation, ("Guardian") and REDWOOD MICROCAP FUND, INC., a Colorado
corporation, ("Redwood"). (Palo Verde and Guardian may hereafter sometimes
collectively be referred to as the "Companies".)
WITNESSETH
WHEREAS, Redwood is the actual and beneficial owner of shares,
constituting one hundred percent (100%) of the issued and outstanding shares
of common stock of Palo Verde; and
WHEREAS, Guardian desires to acquire all of the issued and outstanding
shares of common stock of Palo Verde owned by Redwood, as well as any and all
other equity rights, options, warrants and the like owned by Redwood subject
to the terms and conditions set forth in this Agreement; and
WHEREAS, Redwood desires to exchange all of its shares of common stock
and other rights in Palo Verde subject to the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, and other good and
valuable consideration, the receipt and adequacy whereof is hereby
acknowledged, the parties agree as follows:
SECTION 1: GENERAL DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings set forth below:
1.1 BEST KNOWLEDGE. "Best Knowledge" shall mean both what a Person knew
as well as what the Person should have known had the Person exercised
reasonable diligence. When used with respect to a Person other than a natural
person, the term "Best Knowledge" shall include matters that are known to the
current directors, officers, partners, trustees, administrators, executors,
managers, employees, consultants and agents of the Person, as well as past
directors, officers, partners, managers and employees of the Person.
1.2 CODE. "Code" means the Internal Revenue Code of 1986, as amended.
1.3 ERISA. "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
1.4 EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
1.5 FISCAL YEAR. "Fiscal Year" shall mean a twelve-month period
beginning January 1;
1.6 GOVERNMENTAL AUTHORITY. "Governmental Authority" shall mean any and
all foreign, federal, state or local governments, governmental institutions,
public authorities and governmental entities of any nature whatsoever, and any
subdivisions or instrumentalities thereof, including, but not limited to,
departments, boards, bureaus, commissions, agencies, courts, administrations
and panels, and any division or instrumentalities thereof, whether permanent
or ad hoc and whether now or hereafter constituted or existing.
1.7 GOVERNMENTAL REQUIREMENT. "Governmental Requirement" shall mean any
and all laws (including, but not limited to, applicable common law
principles), statutes, ordinances, codes, rules regulations, interpretations,
guidelines, directions, orders, judgments, writs, injunctions, decrees,
decisions or similar items or pronouncements, promulgated, issued, passed or
set forth by any Governmental Authority.
1.8 LEGAL REQUIREMENTS. "Legal Requirements" means applicable common
law and any statute, ordinance, code or other laws, rule, regulation, order,
technical or other standard, requirement, judgment, or procedure enacted,
adopted, promulgated, applied or followed by any governmental authority,
including, without limitation, any order, decree, award, verdict, findings of
fact, conclusions of law, decision or judgment, whether or not final or
appealable, of any court, arbitrator, arbitration board or administrative
agency.
1.9 IRS. "IRS" means the Internal Revenue Service.
1.10 OWNERSHIP INTEREST. "Ownership Interest" shall mean any form of
direct or indirect interest in the ownership, equity or profits of Palo Verde
or Guardian, whether certificated or non-certificated, issued or unissued,
contingent or otherwise, including, without limitation, the following:
Shares, or the right thereto, executory rights to receive Shares, options,
warrants, instruments or obligations convertible into Shares or profit
interests.
1.11 PERSON. "Person" shall mean any natural person, any Governmental
Authority and any entity the separate existence of which is recognized by any
Governmental Authority or Governmental Requirement, including, but not limited
to, corporations, partnerships, joint ventures, joint stock companies, trusts,
estates, companies and associations, whether organized for profit or
otherwise.
1.12 SECTION. Unless otherwise stated herein, the term "Section" when
used in this Agreement shall refer to the Sections of this Agreement.
1.13 SECURITIES ACT. "Securities Act" shall mean the Securities Act of
1933, as amended.
1.14 TAXES. "Tax" and "Taxes" shall mean any and all income, excise,
franchise or other taxes and all other charges or fees imposed or collected by
any Governmental Authority or pursuant to any Governmental Requirement, and
shall also include any and all penalties, interest, deficiencies, assessments
and other charges with respect thereto.
SECTION 2: EXCHANGE OF STOCK
2.1 Subject to the terms and conditions hereinafter set forth, on the
Closing Date, Redwood shall deliver to Guardian, and Guardian shall accept
from Redwood, 100% of the outstanding shares of Palo Verde common stock in
exchange for Guardian issuing to Redwood an aggregate of 361,800 shares of
Guardian $0.001 par value common stock ("Guardian Shares" or "Exchange
Shares") (hereinafter the "Exchange").
2.2 INCOME TAX CONSIDERATIONS. It is the intention of the parties
hereto that the exchange of stock contemplated by this Agreement will qualify
for treatment as a tax-free reorganization under Section368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended, and the parties hereby agree to
undertake all actions necessary both before and after the consummation of the
Exchange to effect such treatment.
2.3 REGISTRATION RIGHTS. Guardian shall use its best efforts to
cause to be filed with the Securities and Exchange Commission a Registration
Statement registering the distribution by Guardian of the Exchange Shares to
the Shareholders of Redwood, pro rata. All costs and expenses, including fees
and disbursements of legal counsel, incurred in connection with the
preparation and filing of the Registration Statement shall be borne by
Redwood.
SECTION 3: CLOSING
3.1 GENERAL PROCEDURE. At the Closing each party shall deliver such
documents, instruments and materials as may be reasonably required in order to
effectuate the intent and provisions of this Agreement, and all such
documents, instruments and materials shall be satisfactory in form and
substance to counsel for the other parties.
3.2 TIME AND PLACE. The Closing shall take place in the offices of
Guardian, as soon as practicable but in no event later than (i) five (5)
business days from the date of the satisfaction or waiver of all conditions
precedent set forth in Sections 3.4 and 3.5 or (ii) September 25, 2000, or
such time and place as shall be mutually acceptable to the parties, subject to
the following provisions:
3.3 COVENANTS REGARDING CLOSING. The Companies hereby covenant and
agree that they shall (i) use reasonable efforts to cause each of their
respective Exhibits to be prepared and exchanged with the other party, and its
legal counsel, within ten (10) business days following the execution of this
Agreement, except to the extent the express terms of this Agreement provide
for a different time period for such delivery to be accomplished, (ii) use
reasonable efforts to cause all of their respective representations and
warranties set forth in this Agreement, and Exhibits hereto, to be true on and
as of the Closing Date, (iii) use reasonable efforts to cause all of their
respective obligations that are to be fulfilled on or prior to the Closing
Date to be so fulfilled, (iv) use reasonable efforts to cause all conditions
to the Closing set forth in this Agreement to be satisfied on or prior to the
Closing Date, and (v) use reasonable efforts to deliver to each other at the
Closing the certificates, updated lists, notices, consents, authorizations,
approvals, agreements, transfer documents, receipts and amendments
contemplated hereby (with such additions or exceptions to such items as are
necessary to make the statements set forth in such items accurate and
acceptable, provided that if any such additions or exceptions cause any of the
conditions to the Companies' obligations hereunder as set forth hereinbelow
not to be fulfilled, such additions and exceptions shall in no way limit the
rights of the parties hereto to terminate this Agreement or refuse to
consummate the transactions contemplated hereby).
3.4 CONDITIONS TO OBLIGATION OF GUARDIAN. The obligation of Guardian to
complete the Exchange on the Closing date on the terms set forth in this
Agreement is, at the option of Guardian, subject to the satisfaction or waiver
by Guardian of each of the following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties made by Redwood and Palo Verde in this
Agreement shall be correct in all material respects on and as of the Closing
date with the same force and effect as though such representations and
warranties had been made on the Closing date.
(b) Compliance with Covenants. All covenants which Redwood and/or
Palo Verde are required to perform or comply with on or before the Closing
date shall have been fully complied with or performed in all material
respects.
(c) Corporate Approvals. The Board of Directors of Palo Verde and
its Shareholders, if necessary, shall have approved and ratified this
Agreement and shall have authorized the appropriate officers of Palo Verde to
execute same and fully perform its terms.
(d) Consents and Approvals. To the extent that any material lease,
mortgage, deed of trust, contract or agreement to which Palo Verde is a party
shall require the consent of any person to the exchange of Palo Verde's shares
of common stock or any other transaction provided for herein, such consent
shall have been obtained; provided, however, that Palo Verde shall not make,
as a condition for the obtaining of any such consent, any agreements or
undertakings not approved in writing by Guardian to the extent that such
condition otherwise has an effect on Guardian.
(e) Other Documents. The parties shall have delivered or caused to
be delivered all other documents, agreements, resolutions, certificates or
declarations as each respective party or its attorneys may have reasonably
requested.
3.5 CONDITIONS TO OBLIGATION OF PALO VERDE AND REDWOOD. The obligations
of Redwood and/or Palo Verde, respectively, to complete the Exchange on the
Closing date on the terms set forth in this Agreement is, at the option of
Palo Verde and Redwood, subject to the satisfaction or waiver by Redwood
and/or Palo Verde, respectively, of each of the following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties made by Guardian in this Agreement shall be
correct in all material respects on and as of the Closing date with the same
force and effect as though such representations and warranties had been made
on the Closing date.
(b) Compliance with Covenants. All covenants which Guardian is
required to perform or comply with on or before the Closing date shall have
been fully complied with or performed in all material respects.
(c) Corporate Approvals. The Board of Directors of Guardian and
its Shareholders, if necessary, shall have approved and ratified this
Agreement and shall have authorized the appropriate officers to execute same
and fully perform its terms.
(d) Consents and Approvals. To the extent that any material lease,
mortgage, deed of trust, contract or agreement to which Guardian is a party
shall require the consent of any person to the exchange of Guardian's shares
of common stock or any other transaction provided for herein, such consent
shall have been obtained; provided, however, that Guardian shall not make, as
a condition for the obtaining of any such consent, any agreements or
undertakings not approved in writing by Palo Verde to the extent that such
condition otherwise has an effect on Palo Verde or Guardian.
(e) Other Documents. The parties shall have delivered or caused to
be delivered all other documents, agreements, resolutions, certificates or
declarations as each respective party or its attorneys may have reasonably
requested.
3.6 SPECIFIC ITEMS TO BE DELIVERED AT THE CLOSING. The parties shall
deliver the following items to the appropriate party at the Closing of the
transactions contemplated by this Agreement.
(a) To be delivered by Palo Verde:
(i) Copy of corporate resolutions authorizing the execution of
this Agreement, and the consummation by Palo Verde of the
transactions contemplated by this Agreement.
(ii) A certificate of the President of Palo Verde stating that
the representations and warranties of Palo Verde set forth
in this Agreement are true and correct. Said certificate
shall further verify and affirm that all consents or
waivers, if any, which may be necessary to execute and
deliver this Agreement have been obtained and are in full
force and effect.
(iii) A certificate dated the Closing Date, signed by
the Chief Executive Officer and the Chief Financial
Officer of Palo Verde, in form and substance satisfactory
to the other party and its legal counsel, certifying that
all conditions precedent set forth in this Agreement to
the obligations of Palo Verde to close, have been
fulfilled, and that no event of default hereunder and no
event which, with the giving of notice or passage of time,
or both, would be an event of default, has occurred as of
such date.
(b) To be delivered by Redwood:
(i) Certificate or certificates representing 100% of the
issued and outstanding common shares of Palo Verde, which
stock certificates shall be endorsed in favor of Guardian.
(ii) Assignments, if any, with unconditional warranties of
title, duly executed by Redwood, assigning to Guardian any
and all equity rights, including, but not limited to,
options, warrants, puts and so forth, which Redwood may
own in Palo Verde at the time of Closing.
(iii) Certificate of Redwood in which it states that it owns
the shares and other rights of Palo Verde free and clear
of all liens, encumbrances, security interests and
limitations on transfer whatsoever.
(iv) Certificate of Redwood confirming the accuracy, as of the
Closing date, of the representations and warranties of
Redwood set forth in this Agreement.
(c) To be delivered by Guardian:
(i) Certificate or certificates representing Guardian shares
of Guardian Common Stock, which stock certificates shall
be issued in the name of Redwood; and
(ii) Copy of corporate resolution authorizing the execution of
this Agreement and the consummation by Guardian of the
transactions contemplated by this Agreement, including,
but not limited to, the issuance of Guardian Common Stock
in the amounts and manner set forth in Section 2.1 above;
and
(iii) A certificate dated the Closing Date, signed by the Chief
Executive Officer and the Chief Financial Officer of
Guardian, in form and substance satisfactory to the other
party and its legal counsel, certifying that all
conditions precedent set forth in this Agreement to the
obligations of Guardian to close, have been fulfilled, and
that no event of default hereunder and no event which,
with the giving of notice or passage of time, or both,
would be an event of default, has occurred as of such
date.
3.7 ELECTION OF DIRECTORS AND EXECUTIVE OFFICERS OF PALO VERDE.
(a) At Closing, the Board of Directors of Palo Verde shall be
reconstituted so as to be comprised of the following person:
J. Xxxxxx Xxxxxx
(b) At Closing, the Board of Directors shall nominate and elect the
following person to serve as executive officers of Palo Verde until the
regular annual meeting of Palo Verde's Board of Directors:
J. Xxxxxx Xxxxxx - President
SECTION 4: REPRESENTATIONS AND WARRANTIES BY PALO VERDE AND REDWOOD
As a material inducement to Guardian to enter into this Agreement and
with the understanding and expectations that Guardian will be relying thereon
in consummating the Exchange contemplated hereunder, Palo Verde (hereinafter
referred to as the "Corporation" or "Palo Verde " for the purposes of this
Section 4 only), and Redwood, hereby jointly and severally represent and
warrant as follows:
4.1 ORGANIZATION AND STANDING. Palo Verde is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Colorado and has all requisite corporate power and authority to own its
assets and properties and to carry on its business as it is now being
conducted.
4.2 SUBSIDIARIES, ETC. The Corporation does not have any direct or
indirect ownership interest in any corporation, partnership, joint venture,
association or other business enterprise.
4.3 QUALIFICATION. The Corporation is not qualified to engage in
business as a foreign corporation in any state and there is no other
jurisdiction wherein the character of the properties presently owned by the
Corporation or the nature of the activities presently conducted by the
Corporation makes necessary the qualification, licensing or domestication of
the Corporation as a foreign corporation.
4.4 CAPITALIZATION OF THE CORPORATION. The authorized capital stock of
the Corporation consists entirely of 50,000,000 shares common stock having
$.001 par value per share and 1,000,000 shares of preferred stock, $.001 par
value. As of the date of this Agreement, and as of the Closing, ____________
shares of common stock and no shares of preferred stock are issued and
outstanding. All outstanding shares of the Corporation's capital stock have
been validly issued and are fully paid and nonassessable. There are no other
equity securities of the Corporation authorized, issued or outstanding, and
there are no authorized, issued or outstanding subscriptions, options,
warrants, contracts, calls, commitments or other purchase rights of any nature
or character relating to any of the Corporation's capital stock, equity
securities, debt or other securities convertible into stock or equity
securities of the Corporation.
4.5 NO DEFAULTS. Each of the leases, contracts, agreements and
insurance policies to which Palo Verde is a party is in full force and effect
as of the date hereof with no material defaults existing thereunder.
4.6 TAXES. The Corporation has filed (or has obtained extensions for
filing) all income, excise, sales, corporate franchise, property, payroll and
other tax returns or reports required to be filed by it, as of the date hereof
by the United States of America, any state or other political subdivision
thereof or any foreign country and has paid all Taxes or assessments relating
to the time periods covered by such returns or reports. To the Best Knowledge
of the Corporation and the Shareholders, except as set forth in Exhibit 4.6,
the amounts set up as provisions for Taxes in the Latest Financial Statements
are sufficient for the payment of all unpaid federal, foreign, state or local
Taxes of the Corporation accrued for or applicable to all periods ended on or
prior to the date of this Agreement, or which may subsequently be determined
to be owing by the Corporation with respect to all periods ending on or prior
to the Closing date, subject to normal year-end adjustments, which will not be
material. There are no present disputes as to Taxes of any nature payable by
the Corporation.
4.7 NO ACTIONS, PROCEEDINGS, ETC. There is no action or proceeding
(whether or not purportedly on behalf of the Corporation) pending or
threatened by or against the Corporation, nor does there exist any basis
therefor, which might result in any material adverse change in the condition,
financial or otherwise, of the Corporation's business or assets. No order,
writ or injunction or decree has been issued by, or requested of any court or
governmental agency which does nor may result in any material adverse change
in the Corporation's assets or properties or in the financial condition or the
business of the Corporation. The Corporation is not liable for damages to any
employee or former employee as a result of any violation of any state, federal
or foreign laws directly or indirectly relating to such employee or former
employee.
4.8 POST BALANCE SHEET CHANGES. Since the date of the latest financial
statements through the date of this Agreement, the Corporation has not (a)
issued, bought, redeemed or entered into any agreements, commitments or
obligations to sell, buy or redeem any shares of its capital stock; (b)
incurred any obligation or liability (absolute or contingent), other than
current liabilities incurred, and obligations under contracts entered into, in
the ordinary course of business; (c) discharged or satisfied any lien or
encumbrance or paid any obligation or liability (absolute or contingent),
other than current liabilities incurred in the ordinary course of business;
(d) mortgaged, pledged or subjected to lien charges, or other encumbrance any
of its assets, other than the lien of current or real property taxes not yet
due and payable; (e) waived any rights of substantial value, whether or not in
the ordinary course of business; (f) suffered any damage, destruction or loss,
whether or not covered by insurance, materially and adversely affecting its
assets or its business; (g) made or suffered any amendment or termination of
any material contract or any agreement which adversely affects its business;
(h) received notice or had knowledge of any labor trouble other than routine
grievance matters, none of which is material; (i) increased the salaries or
other compensation of any of its directors, officers or employees or made any
increase in other benefits to which employees may be entitled; (j) sold,
transferred or otherwise disposed of any of its assets, other than in the
ordinary course of business; (k) declared or made any distribution or payments
to any of its Shareholders, officers or employees, other than wages and
salaries made to employees in the ordinary course of business; (l) revalued
any of its assets; or (m) entered into any transactions not in the ordinary
course of business.
4.9 NO BREACHES. The Corporation is not in violation of, and the
consummation of the transactions contemplated hereby do not and will not
result in any material breach of, any of the terms or conditions of any
mortgage, bond, indenture, agreement, contract, license or other instrument or
obligation to which the Corporation is a party or by which its assets are
bound; nor will the consummation of the transactions contemplated hereby cause
Palo Verde or Redwood to violate any statute, regulation, judgment, writ,
injunction or decree of any court, threatened or entered in a proceeding or
action in which the Corporation is, was or may be bound or to which any of the
Corporations assets are subject.
4.10 CORPORATE ACTS AND PROCEEDINGS. This Agreement has been duly
authorized by all necessary corporate action on behalf of Palo Verde, has been
duly executed and delivered by authorized officers of Palo Verde, and is a
valid and binding Agreement on the part of Palo Verde that is enforceable
against Palo Verde in accordance with its terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, moratorium, reorganization
or other similar laws affecting the enforcement of creditors' rights generally
and to judicial limitations on the enforcement of the remedy of specific
performance and other equitable remedies.
4.11 REGISTERED RIGHTS AND PROPRIETARY INFORMATION.
(a) Exhibit 4.11 hereto contains a true and complete list of all
patents, letters patent and patent applications, service marks, trademark and
service xxxx registrations and applications, copyright, copyright
registrations and applications, grants of licenses and rights to Palo Verde
with respect to the foregoing, both domestic and foreign, claimed by Palo
Verde or used or proposed to be used by Palo Verde in the conduct of its
business (collectively herein, "Registered Rights"). Exhibit 4.11 hereto also
contains a true and complete list of all computer files comprising software
owned by Palo Verde (hereafter collectively the "Proprietary Information").
Palo Verde is not obligated or under any liability whatever to make any
payments by way of royalties, fees or otherwise to any owner or licensor of,
or other claimant to, any Registered Right or Proprietary Information with
respect to the use thereof in the conduct of the business of Palo Verde or
otherwise.
(b) Palo Verde owns and has the unrestricted right to use the
Registered Rights and Proprietary Information required for or incident to the
design, development, manufacture, operation, sale and use of all products and
services sold or rendered or proposed to be sold or rendered by Palo Verde or
relating to the conduct or proposed conduct of the business of Palo Verde,
free and clear of any right, title, interest, equity or claim of others. Palo
Verde has taken all necessary steps (including without limitation entering
into appropriate confidentiality, assignment of rights and non-competition
agreements with all officers, directors, employees and consultants of Palo
Verde and others with access to or knowledge of the Proprietary Information)
to safeguard and maintain the secrecy and confidentiality of, and its
proprietary rights in, the Proprietary Information and all related
documentation and intellectual property rights therein necessary for the
conduct or proposed conduct of the business of Palo Verde.
(c) Palo Verde has not sold, transferred, assigned, licensed or
subjected to any right, lien, encumbrance or claim of others, any Proprietary
Information, including without limitation any Registered Right, or any
interest therein, related to or required for the design, development,
manufacture, operation, sale or use of any product or service currently under
development or manufactured, or proposed to be developed, sold or
manufactured, by Palo Verde. Exhibit 4.11 contains a true and complete list
and description of all licenses of Proprietary Information granted to Palo
Verde by others or to others by Palo Verde. Except as described in
Exhibit 4.11 hereto, there are no claims or demands of any person pertaining
to, or any proceedings that are pending or threatened, which challenge the
rights of Palo Verde in respect of any Proprietary Information used in the
conduct of the business of Palo Verde.
(d) Palo Verde owns and on the Closing Date shall own exclusively
all right, title and interest in the Registered Rights and Proprietary
Information, free and clear of all liens, encumbrances, restrictions, claims
and equities of any kind whatsoever, has and shall have the exclusive right to
use, sell, license or dispose of, and has and shall have the exclusive right
to bring action for the infringement of the Registered Rights and the
Proprietary Information. The marketing, promotion, distribution or sale by
Palo Verde of any products or interests subject to the Registered Rights or
making use of Proprietary Information shall not constitute an infringement of
any patent, copyright, trademark, service xxxx or misappropriation or
violation of any other party's proprietary rights or a violation of any
license or agreement by Palo Verde. To the knowledge of Palo Verde after due
inquiry no facts or circumstances exist that could result in the invalidation
of any of the Registered Rights.
4.12 NO LIENS OR ENCUMBRANCES. The Corporation has good and marketable
title to all of the property and assets, tangible and intangible, employed in
the operations of its business, free of any material mortgages, security
interests, pledges, easements or encumbrances of any kind whatsoever except
for such property and assets as may be leased by the Corporation.
SECTION 5: COVENANTS OF PALO VERDE
5.1 PRESERVATION OF BUSINESS. Until Closing, Palo Verde shall use its
best efforts to :
(a) preserve intact the present business organization of Palo
Verde;
(b) maintain its property and assets in its present state of
repair, order and condition, reasonable wear and tear excepted;
(c) preserve and protect the goodwill and advantageous
relationships of Palo Verde with its customers and all other
persons having business dealings with Palo Verde;
(d) preserve and maintain in force all licenses, permits,
registrations, franchises, patents, trademarks, tradenames,
trade secrets, service marks, copyrights, bonds and other
similar rights of Palo Verde; and
(e) comply with all laws applicable to the conduct of its business
5.2 ORDINARY COURSE. Palo Verde shall conduct its business only in the
usual, regular and ordinary course, in substantially the same manner as
previously, and shall not make any substantial change to its methods of
management or operation in respect of such business or property. Without
limiting the foregoing, Palo Verde shall not, with respect to Palo Verde:
(a) sell, mortgage, pledge or encumber or agree to sell, mortgage,
pledge or encumber, any of its property or assets, other than
in the ordinary course of business;
(b) incur any obligation (contingent or otherwise) or purchase,
acquire, transfer, or convey, any material assets or property
or enter into any contract or commitment, except in the
ordinary course of business;
(c) discuss, solicit negotiate, enter into an agreement concerning
any merger, consolidation or sale of all or substantially all
of its assets except as contemplated by this Agreement.
5.3 NEGATIVE COVENANTS. Except as disclosed in Exhibits to this
Agreement, from the date hereof until the Closing date, unless and until
Guardian otherwise consents in writing, Palo Verde will not (a) change or
alter the physical contents or character of the inventories of its business,
so as to materially affect the nature of Palo Verde's business or materially
and adversely change the total dollar valuation of such inventories from that
reflected on the financial statements referred to in Section 4.4 other than in
the ordinary course of business; (b) incur any obligations or liabilities
(absolute or contingent) other than current liabilities incurred and
obligations under contracts entered into in the ordinary course of business;
(c) mortgage, pledge or voluntarily subject to lien, charge or other
encumbrance any assets, tangible or intangible, other than the lien of current
property taxes not due and payable; (d) sell, assign or transfer any of its
assets or cancel any debts or claims, other than in the ordinary course of
business; (e) waive any right of any substantial value; (f) declare or make
any payment or distribution to Redwood or issue, purchase or redeem any shares
of its capital stock or other equity securities or issue or sell any rights to
acquire the same; (g) grant any increase in the salary or other compensation
of any of its directors, officers, or employees or make any increase in any
benefits to which such employees might be entitled; (h) institute any bonus,
benefit, profit sharing, stock option, pension, retirement plan or similar
arrangement, or make any changes in any such plans or arrangements presently
existing; or (i) enter into any transactions or series of transactions other
than in the ordinary course of business.
5.4 ACCESS TO BOOKS AND RECORDS, PREMISES, ETC. From the date of this
Agreement through the Closing date, Palo Verde will grant Guardian and its
authorized representatives access to its books and records, premises,
products, employees and customers and other parties with whom it has
contractual relations during reasonable business hours and in a manner not to
disrupt or interfere with Palo Verde's business relationships for purposes of
enabling Guardian to fully investigate the business of Palo Verde. Palo Verde
will also deliver copies of its monthly statements of operations and financial
condition for the period subsequent to the latest financial statements to Palo
Verde as soon as such statements are available.
5.5 COMPENSATION. Palo Verde shall not enter into or agree to enter
into any employment contract or agreement for consulting, professional, or
other services which will adversely and materially affect the operation of
Palo Verde prior to the Closing Date.
SECTION 6: REPRESENTATIONS AND WARRANTIES OF REDWOOD
Redwood represents and warrants to Guardian that, as of the date of this
Agreement, and as of the date of Closing, the following are true and accurate:
6.1 SHARE OWNERSHIP. Redwood owns100% shares of the issued and
outstanding shares of the common stock of Palo Verde, a Colorado corporation,
which shares are fully paid, nonassessable and will be transferred and
assigned to Guardian free and clear of any claims, liens, and encumbrances or
other restrictions which would in any way impair their right to effectively
sell or transfer such shares.
6.2 RIGHTS OWNERSHIP. Redwood is the beneficial owner of the equity
rights, including, but not limited to, options, warrants, puts and the like,
in Palo Verde, as are set forth on Exhibit 6.2 hereto. The rights set forth
on Exhibit 6.2 are owned by Redwood and will be assigned to Guardian free and
clear of any claims, liens, and encumbrances or other restrictions which would
in any way impair the entitlements represented thereby.
6.3 RESTRICTION ON FUTURE TRANSFER. There are no restrictions on the
transferability of the shares of Palo Verde common stock being transferred to
Guardian imposed by or pursuant to the company's Articles of Incorporation,
Bylaws or by any other agreements to which Redwood or Palo Verde are a party,
except for restrictions imposed by or on account of federal and state
securities laws.
6.4 UNREGISTERED STOCK. Redwood represents that it understands that the
Guardian Common Stock has not been registered for sale under federal or state
securities laws and that said securities are being issued to Redwood pursuant
to a claimed exemption from the registration requirements of such laws.
Redwood understands that in order to maintain such exemption it must be
acquiring the stock with no view to making a public distribution of said
securities, and the representations and warranties contained in this Section 6
are given with the intention that Guardian may rely thereon for purposes of
claiming such exemption; and that it understands that it must bear the
economic risk of their investment in the Guardian Common Stock for a
substantial period of time, because the Guardian Common Stock has not been
registered under the federal or state securities laws, and, cannot be sold
unless subsequently registered under such laws or unless an exemption from
such registration is available.
6.5 STOCK ACQUIRED FOR INVESTMENT; LIMITATIONS ON DISPOSITIONS. Redwood
represents that it is acquiring the Guardian Common Stock for its own account
and for investment and not with a view to, or for sale in connection with, any
distribution thereof in violation of the Securities Act of 1933, as amended.
Redwood agrees that the stock will not be offered for sale, sold or otherwise
transferred for value and that no transfer thereof will be made by it unless
(a) a registration statement with respect thereto has become effective under
the Securities Act of 1933, as amended, or (b) there is presented to Guardian
an opinion of counsel for Redwood reasonably satisfactory to Guardian that
such registration is not required, or (c) there is presented to Guardian a
letter from the Securities and Exchange Commission (said Commission having
been informed of all relevant circumstances) to the effect that in the event
the stock is transferred by Redwood without such registration, the Commission
or the staff will not recommend any action. Redwood further agrees that the
stock will not be offered for sale, sold or otherwise transferred unless, in
the opinion of legal counsel for Guardian, such sale or disposition does not,
and will not, violate any provisions of any other federal or state securities
law or regulation. Redwood consents that any transfer agent of Guardian may
be instructed not to transfer any of the stock unless it receives satisfactory
evidence of compliance with the foregoing provisions and that there may be
endorsed upon any certificates (or instruments issued in substitution
therefor), Guardian's regular legend regarding the sale of restricted
securities.
SECTION 7: REPRESENTATIONS AND WARRANTIES OF GUARDIAN
7.1 ORGANIZATION AND STANDING. Guardian is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware and has all requisite corporate power and authority to own its
assets and properties and to carry on its business as it is now being
conducted.
7.2 SUBSIDIARIES, ETC. The Corporation does not have any direct or
indirect ownership interest in any corporation, partnership, joint venture,
association or other business enterprise, except:
Guardian Steel, Inc.
Guardian Security & Safety Products, Inc.
7.3 QUALIFICATION. The Corporation is not qualified to engage in
business as a foreign corporation in any state other than Arizona and Virginia
and there is no other jurisdiction wherein the character of the properties
presently owned by the Corporation or the nature of the activities presently
conducted by the Corporation makes necessary the qualification, licensing or
domestication of the Corporation as a foreign corporation.
7.4 FINANCIAL STATEMENTS. The following statements will be attached to
this Agreement within ten (10) days of the date hereof Exhibit 7.4:
(a) Audited financial statements of the Corporation accompanied by
a report of its independent certified public accountants containing audited
balance sheets of Guardian as December 31, 1999, together with statements of
operations for Guardian from inception to and including December 31, 1999;
(b) Unaudited financial statements of the corporation containing
balance sheets and statements of operations for Guardian covering the period
from the end of the period covered by the most recent audited financial
statements of the corporation through June 30, 2000.
To the Best Knowledge of Guardian, such financial statements,
together with and subject to the disclosures and notes thereto, (i) are in
accordance with the books and records of the Corporation; (ii) present fairly
and accurately the financial condition of the Corporation; as of the dates of
the balance sheets; (iii) present fairly and accurately the results of
operations for the periods covered by such statements; (iv) have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis; (v) include all adjustments (consisting of only normal
recurring accruals) which are necessary for a fair presentation of the
financial condition of the Corporation, and of the results of operations of
the Corporation for the periods covered by such statements; and (vi) fully
comply with all requirements of Regulation SB and all applicable securities
laws.
As of the date hereof, and as of Closing, the Corporation does not
have any liabilities or payables (absolute or contingent, known or unknown)
except for liabilities or payables set forth on Guardian's financial
statements or otherwise disclosed in writing to Guardian, or except for
liabilities and payables incurred in the ordinary course of business.
7.5 CAPITALIZATION OF THE CORPORATION. The authorized capital stock of
the Corporation consists entirely of 15,000,000 shares common stock having a
par value of $.001 per share, and 1,000,000 shares of preferred stock having a
par value of $.20 per share. As of the date of this Agreement, 3,611,662
shares of common stock are issued and outstanding. There are no other equity
securities of the Corporation authorized, issued or outstanding, and there are
no authorized, issued or outstanding subscriptions, options, warrants,
contracts, calls, commitments or other purchase rights of any nature or
character relating to any of the Corporation's capital stock, equity
securities, debt or other securities convertible into stock or equity
securities of the Corporation.
7.6 NO DEFAULTS. Each of the leases, contracts, agreements and
insurance policies to which Guardian is a party is in full force and effect as
of the date hereof with no material defaults existing thereunder.
7.7 TAXES. The Corporation has filed (or has obtained extensions for
filing) all income, excise, sales, corporate franchise, property, payroll and
other tax returns or reports required to be filed by it, as of the date hereof
by the United States of America, any state or other political subdivision
thereof or any foreign country and has paid all Taxes or assessments relating
to the time periods covered by such returns or reports. The amounts set up as
provisions for Taxes in the Latest Financial Statements are sufficient for the
payment of all unpaid federal, foreign, state or local Taxes of the
Corporation accrued for or applicable to all periods ended on or prior to the
date of this Agreement, or which may subsequently be determined to be owing by
the Corporation with respect to all periods ending on or prior to the Closing
date, subject to normal year-end adjustments, which will not be material.
There are no present disputes as to Taxes of any nature payable by the
Corporation.
7.8 NO ACTIONS, PROCEEDINGS, ETC. There is no action or proceeding
(whether or not purportedly on behalf of the Corporation) pending or
threatened by or against the Corporation, nor does there exist any basis
therefor, which might result in any material adverse change in the condition,
financial or otherwise, of the Corporation's business or assets. No order,
writ or injunction or decree has been issued by, or requested of any court or
governmental agency which does nor may result in any material adverse change
in the Corporation's assets or properties or in the financial condition or the
business of the Corporation. The Corporation is not liable for damages to any
employee or former employee as a result of any violation of any state, federal
or foreign laws directly or indirectly relating to such employee or former
employee.
7.9 POST BALANCE SHEET CHANGES. Since the date of the latest financial
statements through the date of this Agreement, the Corporation has not without
the prior written consent of Palo Verde and Redwood, (a) issued, bought,
redeemed or entered into any agreements, commitments or obligations to sell,
buy or redeem any shares of its capital stock; (b) incurred any obligation or
liability (absolute or contingent), other than current liabilities incurred,
and obligations under contracts entered into, in the ordinary course of
business; (c) discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent), other than current
liabilities incurred in the ordinary course of business; (d) mortgaged,
pledged or subjected to lien charges, or other encumbrance any of its assets,
other than the lien of current or real property taxes not yet due and payable;
(e) waived any rights of substantial value, whether or not in the ordinary
course of business; (f) suffered any damage, destruction or loss, whether or
not covered by insurance, materially and adversely affecting its assets or its
business; (g) made or suffered any amendment or termination of any material
contract or any agreement which adversely affects its business; (h) received
notice or had knowledge of any labor trouble other than routine grievance
matters, none of which is material; (i) increased the salaries or other
compensation of any of its directors, officers or employees or made any
increase in other benefits to which employees may be entitled; (j) sold,
transferred or otherwise disposed of any of its assets, other than in the
ordinary course of business; (k) declared or made any distribution or payments
to any of its Shareholders, officers or employees, other than wages and
salaries made to employees in the ordinary course of business; (l) revalued
any of its assets; or (m) entered into any transactions not in the ordinary
course of business.
7.10 NO BREACHES. The Corporation is not in violation of, and the
consummation of the transactions contemplated hereby do not and will not
result in any material breach of, any of the terms or conditions of any
mortgage, bond, indenture, agreement, contract, license or other instrument or
obligation to which the Corporation is a party or by which its assets are
bound; nor will the consummation of the transactions contemplated hereby cause
Guardian to violate any statute, regulation, judgment, writ, injunction or
decree of any court, threatened or entered in a proceeding or action in which
the Corporation is, was or may be bound or to which any of the Corporations
assets are subject.
7.11 CORPORATE ACTS AND PROCEEDINGS. This Agreement has been duly
authorized by all necessary corporate action on behalf of Guardian, has been
duly executed and delivered by authorized officers of Guardian, and is a valid
and binding Agreement on the part of Guardian that is enforceable against
Guardian in accordance with its terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency, moratorium, reorganization or other
similar laws affecting the enforcement of creditors' rights generally and to
judicial limitations on the enforcement of the remedy of specific performance
and other equitable remedies. All corporate action necessary to issue and
deliver to Redwood the common shares (as described in Section 2.1) has been
taken by Guardian.
7.12 LABOR MATTERS. There are no strikes, slowdowns, stoppages,
organizational efforts, discrimination charges or other labor disputes pending
or, to the knowledge of Guardian or any of its agent or employees, threatened
against Guardian.
7.13 COMPLIANCE WITH REPORTING REQUIREMENTS. Guardian represents,
warrants and agrees that, as of the date of Closing, Guardian has filed all
forms, reports and documents with the Securities and Exchange Commission (the
"Commission") required to be filed by it pursuant to the Securities Act and
the Exchange Act, including, without limitation, all reporting requirements of
Section13(a) of the Exchange Act. The reports filed with the Commission, to
Guardian's Best Knowledge, did not contain, as of their respective dates, any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
SECTION 8: COVENANTS OF GUARDIAN
8.1 PRESERVATION OF BUSINESS. Until Closing, Guardian shall use its
best efforts to :
(a) preserve intact the present business organization of Guardian;
(b) maintain its property and assets in its present state of
repair, order and condition, reasonable wear and tear excepted;
(c) preserve and protect the goodwill and advantageous
relationships of Guardian with its customers and all other
persons having business dealings with Guardian;
(d) preserve and maintain in force all licenses, permits,
registrations, franchises, patents, trademarks, tradenames,
trade secrets, service marks, copyrights, bonds and other
similar rights of Guardian; and
(e) comply with all laws applicable to the conduct of its business
8.2 ORDINARY COURSE. Guardian shall not, without the prior written
consent of Palo Verde or Redwood:
(a) sell, mortgage, pledge or encumber or agree to sell, mortgage,
pledge or encumber, any of its property or assets;
(b) incur any obligation (contingent or otherwise) or purchase,
acquire, transfer, or convey, any material assets or property
or enter into any contract or commitment;
(c) discuss, solicit negotiate, enter into an agreement concerning
any merger, consolidation or sale of all or substantially all
of its assets except as contemplated by this Agreement.
8.3 NEGATIVE COVENANTS. From the date hereof until the Closing date,
unless and until Palo Verde otherwise consents in writing, Guardian will not
(a) change or alter the physical contents or character of the inventories of
its business, so as to materially affect the nature of the Corporation's
business or materially and adversely change the total dollar valuation of such
inventories from that reflected on the financial statements referred to in
Section 4.4 other than in the ordinary course of business; (b) incur any
obligations or liabilities (absolute or contingent) other than current
liabilities incurred and obligations under contracts entered into in the
ordinary course of business; (c) mortgage, pledge or voluntarily subject to
lien, charge or other encumbrance any assets, tangible or intangible, other
than the lien of current property taxes not due and payable; (d) sell, assign
or transfer any of its assets or cancel any debts or claims, other than in the
ordinary course of business; (e) waive any right of any substantial value; (f)
declare or make any payment or distribution to Shareholders or issue, purchase
or redeem any shares of its capital stock or other equity securities or issue
or sell any rights to acquire the same; (g) grant any increase in the salary
or other compensation of any of its directors, officers, or employees or make
any increase in any benefits to which such employees might be entitled; (h)
institute any bonus, benefit, profit sharing, stock option, pension,
retirement plan or similar arrangement, or make any changes in any such plans
or arrangements presently existing; or (i) enter into any transactions or
series of transactions other than in the ordinary course of business.
8.4 ACCESS TO BOOKS AND RECORDS, PREMISES, ETC. From the date of this
Agreement through the Closing date, Guardian will grant Guardian and its
authorized representatives access to its books and records, premises,
products, employees and customers and other parties with whom it has
contractual relations during reasonable business hours for purposes of
enabling Guardian to fully investigate the business of Guardian. Guardian
will also deliver copies of its monthly statements of operations and financial
condition for the period subsequent to the latest financial statements to Palo
Verde as soon as such statements are available.
8.5 COMPENSATION. Guardian shall not enter into or agree to enter into
any employment contract or agreement for consulting, professional, or other
services which will adversely and materially affect the operation of Guardian
prior to the Closing Date.
SECTION 9: INDEMNIFICATION AND REMEDIES FOR BREACH
9.1 INDEMNIFICATION BY GUARDIAN.
(a) Guardian shall defend, indemnify and hold Redwood and Palo
Verde harmless against and in respect of any damage, loss, liability, cost or
expense, including expert witness fees and reasonable attorneys' fees, whether
or not recoverable under applicable state law, resulting or arising from or
incurred in connection with:
(i) any misrepresentation, breach of warranty, or
nonfulfillment or nonperformance of any agreement on the
part of Guardian under this Agreement, or any
misrepresentation or omission from any exhibit, schedule,
list, certificate or other instrument furnished or to be
furnished by it under this Agreement, or any noncompliance
on the part of Guardian with applicable law.
(ii) any and all liabilities of Guardian of any nature
whatsoever, whether accrued, absolute, contingent or
otherwise and whether known or unknown, except to the
extent that any such liability arises from Redwood's
failure to perform or discharge, when due, Redwood's and
Palo Verde's future obligations; and
(iii) any actions, suits, proceedings, damages, assessments,
judgments, costs or expenses incident to any of the
foregoing.
(b) Promptly after the receipt by Redwood or Palo Verde of notice
of any claim asserted by a third party that may give rise to
Guardian's liability to Redwood and/or Palo Verde under this
Section, Redwood and Palo Verde shall give to Guardian written
notice of such claim, and Guardian shall be entitled to
participate at its own expense in the defense of any such
claim. Redwood and Palo Verde shall not pay, acknowledge,
compromise or settle any such claim without the written consent
of Guardian, unless such payment, acknowledgement, compromise
or settlement results in a full and complete release and
discharge of Guardian from any liability.
9.2 INDEMNIFICATION BY REDWOOD.
(a) Redwood shall defend, indemnify and hold Guardian harmless
against and in respect of any damage, loss, liability, cost or expense,
including expert witness fees and reasonable attorneys' fees, whether or not
recoverable under applicable state law, resulting or arising from or incurred
in connection with:
(i) any misrepresentation, breach of warranty, or
nonfulfillment or nonperformance of any agreement on the
part of Redwood under this Agreement, or any
misrepresentation or omission from any exhibit, schedule,
list, certificate or other instrument furnished or to be
furnished by him under this Agreement.
(ii) any and all liabilities of Redwood of any nature
whatsoever, whether accrued, absolute, contingent or
otherwise and whether known or unknown, except to the
extent that any such liability arises from Guardian's
failure to perform or discharge, when due, Guardian's
future obligations;
(iii) any actions, suits, proceedings, damages, assessments,
judgments, costs or expenses incident to any of the
foregoing.
(b) Promptly after the receipt by Guardian of notice of any claim
asserted by a third party that may give rise to Redwood's liability to
Guardian under this Section, Guardian shall give to Redwood written notice of
such claim and Redwood shall be entitled to participate at its own expense in
the defense of any such claim. Guardian shall not pay, acknowledge,
compromise or settle any such claim without the written consent of Redwood,
unless such payment, acknowledgement, compromise or settlement results in a
full and complete release and discharge of Redwood from any liability.
9.3 INDEMNIFICATION BY PALO VERDE.
(a) Palo Verde shall defend, indemnify and hold Guardian harmless
against and in respect of any damage, loss, liability, cost or expense,
including expert witness fees and reasonable attorneys' fees, whether or not
recoverable under applicable state law, resulting or arising from or incurred
in connection with:
(i) any misrepresentation, breach of warranty, or
nonfulfillment or nonperformance of any agreement on the
part of Palo Verde under this Agreement, or any
misrepresentation or omission from any exhibit, schedule,
list, certificate or other instrument furnished or to be
furnished by it under this Agreement.
(ii) any and all liabilities of Palo Verde of any nature
whatsoever, whether accrued, absolute, contingent or
otherwise and whether known or unknown, except to the
extent that any such liability arises from Guardian's
failure to perform or discharge, when due, Guardian's
future obligations;
(iii) any actions, suits, proceedings, damages, assessments,
judgments, costs or expenses incident to any of the
foregoing.
(b) Promptly after the receipt by Guardian of notice of any claim
asserted by a third party that may give rise to Palo Verde's liability to
Guardian under this Section, Guardian shall give to Palo Verde written notice
of such claim and Palo Verde shall be entitled to participate at its own
expense in the defense of any such claim. Guardian shall not pay, acknowledge,
compromise or settle any such claim without the written consent of Palo Verde,
unless such payment, acknowledgement, compromise or settlement results in a
full and complete release and discharge of Palo Verde from any liability.
9.4 ADDITIONAL NOTICE. Notwithstanding the provisions of Sections 9.1,
9.2 or 9.3 above, promptly after the receipt by any party hereto of notice of
any claim asserted by a third party that may give rise to the liability of any
party for which the right to indemnification may be claimed under this
Section, such party shall give to each other party written notice of such
claim as soon as practicable. The provisions of this Section 9.4 in addition
to and not in lieu of the covenants of the parties contained in Sections 9.1,
9.2 or 9.3 above.
9.5 DETERMINATION OF DAMAGES AND RELATED MATTERS.
(a) Upon the occurrence of any event which would give rise to a
claim by Guardian against, or to a right of defense and indemnity against
Redwood pursuant to this Section 9, or in the event that any suit, action,
investigation, claim or proceeding is begun, made or instituted as a result of
which Redwood may become obligated to Guardian hereunder, Guardian shall give
notice to Redwood of the occurrence of such event and shall identify
Guardian's choice of counsel to represent such investigation, claim or
proceedings, provided that the failure of Guardian to give notice shall not
affect the indemnification obligations of Redwood hereunder. Guardian (i)
shall have the exclusive right to so defend, contest or protect against such
matter utilizing the counsel of Guardian's choice (who shall be reasonably
acceptable to a representative of Redwood), and (ii) without further notice
may set off or apply against all amounts due Redwood hereunder, or their
affiliates, under any instrument or pursuant to any obligation other than an
obligation to pay Redwood compensation for services rendered on behalf of
Guardian, the full amount for which indemnification hereunder is provided.
Redwood shall have the right, but not the obligation, to participate, at its
own expense, in the defense thereof by counsel of their choice.
(b) As Guardian incurs expenses for which indemnification hereunder
is provided and after any final judgment or award shall have been rendered by
a court, arbitration board or administrative agency of competent jurisdiction,
and the expiration of the time in which to appeal therefrom, or a settlement
shall have been consummated, Guardian shall forward to Redwood notice of any
sums due and owing by them pursuant to this Agreement with respect to such
matter and they shall be required to pay all of the sums so due and owing to
Guardian by certified or bank cashier's check within ten (10) days of such
notice.
(c) Upon the occurrence of any event which would give rise to a
claim by Palo Verde and/or Redwood against, or to a right of defense and
indemnity against Guardian pursuant to this Section 9, or in the event that
any suit, action, investigation, claim or proceeding is begun, made or
instituted as a result of which Guardian may become obligated to Palo Verde
and/or Redwood hereunder, Palo Verde and/or Redwood shall give notice to
Guardian of the occurrence of such event and shall identify their choice of
counsel to represent such investigation, claim or proceedings, provided that
the failure of either or both of them to give notice shall not affect the
indemnification obligations of Guardian hereunder. Palo Verde and/or Redwood
(i) shall have the exclusive right to so defend, contest or protect against
such matter utilizing the counsel of their choice (who shall be reasonably
acceptable to a representative of Guardian), and (ii) without further notice
may set off or apply against all amounts due Guardian hereunder, or their
affiliates, under any instrument or pursuant to any obligation, the full
amount for which indemnification hereunder is provided. Guardian shall have
the right, but not the obligation, to participate, at its own expense, in the
defense thereof by counsel of its choice.
(d) As Palo Verde and/or Redwood incur expenses for which
indemnification hereunder is provided and after any final judgment or award
shall have been rendered by a court, arbitration board or administrative
agency of competent jurisdiction, and the expiration of the time in which to
appeal therefrom, or a settlement shall have been consummated, Palo Verde
and/or Redwood shall forward to Guardian notice of any sums due and owing by
it pursuant to this Agreement with respect to such matter and shall be
required to pay all of the sums so due and owing to Palo Verde and/or Redwood
by certified or bank cashier's check within ten (10) days of such notice.
9.6 REMEDIES FOR BREACH. In the event of any breach of any of the
provisions of this Agreement, including but not limited to any breach of any
covenant, warranty or representation made by any party hereto, the breaching
or defaulting party shall be liable pursuant to the provisions of 9.1, 9.2 or
9.3 above. In the event of any material breach by any party of any provision
under this Agreement, either party may file suit. Nothing contained in this
Agreement shall be deemed to preclude a party to xxx for or seek specific
performance of the provisions of this Agreement in the appropriate
circumstance.
SECTION 10: NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Each of the parties hereto recognizes and acknowledges that it has and
will have access to certain nonpublic information of the others which shall be
deemed the confidential information of the other Companies that is included in
the Assets (including, but not limited to, business plans, costs, trade
secrets, licenses, research projects, profits, markets, sales, customer lists,
strategies, plans for future development, financial information and any other
information of a similar nature) that after the consummation of the
transactions contemplated hereby will be valuable, special and unique property
of the Companies. Information shall not be deemed Confidential Information
and afforded the protections of this Section 10 if, on the Closing Date, such
information has been (i) developed by the receiving party independently of the
disclosing party, (ii) rightfully obtained without restriction by the
receiving party from a third party, provided that the third party had full
legal authority to possess and disclose such information, (iii) publicly
available other than through the fault or negligence of the receiving party,
(iv) released without restriction by the disclosing party to anyone, including
the United States government, or (v) properly and lawfully known to the
receiving party at the time of its disclosure, as evidenced by written
documentation conclusively established to have been in the possession of the
receiving party on the date of such disclosure. Each of the parties hereto
agrees that it shall not disclose, and that it shall use its best efforts to
prevent disclosure by any other Person of, any such confidential information
to any Person for any purpose or reason whatsoever, except to authorized
representatives of the Companies. Notwithstanding, a party may use and
disclose any such confidential information to the extent that a party may
become compelled by Legal Requirements to disclose any such information;
provided, however, that such party shall use all reasonable efforts and shall
have afforded the other Companies the opportunity to obtain an appropriate
protective order or other satisfactory assurance of confidential treatment for
any such information compelled to be disclosed. In the event of termination
of this Agreement, each party shall use all reasonable efforts to cause to be
delivered to the other parties, and to retain no copies of, any documents,
work papers and other materials obtained by such party or on such party's
behalf during the conduct of the matters provided for in this Agreement,
whether so obtained before or after the execution hereof. Each of the
Companies recognizes and agrees that violation of any of the agreements
contained in this Section 10 will cause irreparable damage or injury to the
Companies, the exact amount of which may be impossible to ascertain, and that,
for such reason, among others, the Companies shall be entitled to an
injunction, without the necessity of posting bond therefor, restraining any
further violation of such agreements. Such rights to any injunction shall be
in addition to, and not in limitation of, any other rights and remedies the
Companies may have against each other.
SECTION 11: EXPENSES
Each of the parties will pay all costs and expenses of its performance
and compliance with this Agreement. Notwithstanding the foregoing, if the
Agreement is not consummated by reason of a default of one of the Companies,
then the expenses of each of the Companies in connection with the transaction
contemplated herein shall be paid by such defaulting Company.
SECTION 12: MISCELLANEOUS
12.1 ATTORNEY'S FEES. In any action at law or in equity or in any
arbitration proceeding, for declaratory relief or to enforce any of the
provisions or rights or obligations under this Agreement, the unsuccessful
party to such proceeding, shall pay the successful party or parties all
statutorily recoverable costs, expenses and reasonable attorneys' fees
incurred by the successful party or parties including without limitation
costs, expenses, and fees on any appeals and the enforcement of any award,
judgment or settlement obtained, such costs, expenses and attorneys' fees
shall be included as part of the judgment. The successful party shall be that
party who obtained substantially the relief or remedy sought, whether by
judgment, compromise, settlement or otherwise.
12.2 SURVIVAL AND INCORPORATION OF REPRESENTATIONS. The representations,
warranties, covenants and agreements made herein or in any certificates or
documents executed in connection herewith shall survive the execution and
delivery thereof, and all statements contained in any certificate or other
document delivered by any party hereunder or in connection herewith shall be
deemed to constitute representations and warranties made by that party to this
Agreement.
12.3 INCORPORATION BY REFERENCE. All appendices to this Agreement and
all documents delivered pursuant to or referred to in this Agreement are
herein incorporated by reference and made a part hereof.
12.4 PARTIES IN INTEREST. Nothing in this Agreement, whether express or
implied, is intended to, or shall, confer any rights or remedies under, or by
reason of, this Agreement, on any person other than the parties hereto and
their respective and proper successors and assigns. Nor shall anything in
this Agreement act to relieve or discharge the obligation or liability of any
third persons to any party to this Agreement.
12.5 AMENDMENTS AND WAIVERS. This Agreement may not be amended, nor may
compliance with any term, covenant, agreement, condition or provision set
forth herein be waived (either generally or in a particular instance and
either retroactively or prospectively) unless such amendment or waiver is
agreed to in writing by all parties hereto.
12.6 WAIVER. No waiver of any breach of any one of the agreements,
terms, conditions, or covenants of this Agreement by the parties shall be
deemed to imply or constitute a waiver of any other agreement, term,
condition, or covenant of this Agreement. The failure of any party to insist
on strict performance of any agreement, term, condition, or covenant, herein
set forth, shall not constitute or be construed as a waiver of the rights of
either or the other thereafter to enforce any other default of such agreement,
term, condition, or covenant; neither shall such failure to insist upon strict
performance be deemed sufficient grounds to enable either party hereto to
forego or subvert or otherwise disregard any other agreement, term, condition,
or covenants of this Agreement.
12.7 GOVERNING LAW - CONSTRUCTION. This Agreement, and the rights and
obligations of the respective parties, shall be governed by and construed in
accordance with the laws of the State of Delaware, excluding conflict of law
provisions which would act to apply the laws of another state.
Notwithstanding the preceding sentence, it is acknowledged that each party
hereto is being represented by, or has waived the right to be represented by,
independent counsel. Accordingly, the parties expressly agree that no
provision of this Agreement shall be construed against any party on the ground
that the party or its counsel drafted the provision. Nor may any provision of
this Agreement be construed against any party on the grounds that party caused
the provision to be present.
12.8 LIMITATION OF ACTIONS. No action may be brought by any party to
this Agreement to enforce any covenant made by any party hereto or to seek
damages or equitable relief arising from any claimed breach or nonperformance
of a covenant, representation, warranty or other performance provided for
herein unless such action is commenced within one (1) year of the date of
Closing. The parties hereto agree to be bound by the aforesaid limitation of
actions notwithstanding the provisions of any applicable statutory limitation
of actions to the contrary.
12.9 NOTICES. Any notice, communication, offer, acceptance, request,
consent, reply, or advice (herein severally and collectively, for convenience,
called "Notice"), in this Agreement provided or permitted to be given, served,
made, or accepted by any party or person to any other party or parties, person
or persons, hereunder must be in writing, addressed to the party to be
notified at the address set forth below, or such other address as to which one
party notifies the other in writing pursuant to the terms of this Section, and
must be served by (1) telefax or other similar electronic method, or
(2) depositing the same in the United States mail, certified, return receipt
requested and postage paid to the party or parties, person or persons to be
notified or entitled to receive same, or (3) delivering the same in person to
such party.
Notice shall be deemed to have been given immediately when sent by
telefax or other electronic method and seventy-two hours after being deposited
in the United States mail, or when personally delivered in the manner
hereinabove described. Notice provided in any manner not specified above
shall be effective only if and when received by the party or parties, person
or persons to be, or provided to be notified.
All notices, requests, demands and other communications required or
permitted under this Agreement shall be addressed as set forth below:
If Guardian, to: Guardian Technologies International, Inc.
00 Xxxxxxx Xxxxxx, Xxxxx 00
Xxxxxxxx, Xxxxxxx 00000
Attention: J. Xxxxxx Xxxxxx
With copy to: Xxxxxxxx X. Xxxxxx, Esq.
Xxxxxx & Xxxxxxx, LLC
0000 Xxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
If Palo Verde, to: Palo Verde Group, Inc.
00 Xxxxxxx Xxxxxx, Xxxxx 00
Xxxxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Power
If Redwood, to: Redwood MicroCap Fund, Inc.
00 Xxxxxxx Xxxxxx, Xxxxx 00
Xxxxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Power
Any party receiving a facsimile transmission shall be entitled to rely upon a
facsimile transmission to the same extent as if it were an original. Any
party may alter the address to which communications or copies are to be sent
by giving notice of such change of address in conformity with the provisions
of this Section for the giving of notice.
12.10 FAX/COUNTERPARTS. This Agreement may be executed by telex,
telecopy or other facsimile transmission, and such facsimile transmission
shall be valid and binding to the same extent as if it were an original.
Further, this Agreement may be signed in one or more counterparts, all of
which when taken together shall constitute the same documents. For all
evidentiary purposes, any one complete counter set of this Agreement shall be
considered an original.
12.11 CAPTIONS. The caption and heading of various sections and
paragraphs of this Agreement are for convenience only and are not to be
construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
12.12 SEVERABILITY. Wherever there is any conflict between any
provision of this Agreement and any statute, law, regulation or judicial
precedent, the latter shall prevail, but in such event the provisions of this
Agreement thus affected shall be curtailed and limited only to the extent
necessary to bring it within the requirement of the law. In the event that
any part, section, paragraph or clause of this Agreement shall be held by a
court of proper jurisdiction to be invalid or unenforceable, the entire
Agreement shall not fail on account thereof, but the balance of the Agreement
shall continue in full force and effect unless such construction would clearly
be contrary to the intention of the parties or would result in unconscionable
injustice.
12.13 GOOD FAITH COOPERATION AND ADDITIONAL DOCUMENTS. The parties
shall use their best good faith efforts to fulfill all of the conditions set
forth in this Agreement over which it has control or influence. Each party
covenants and agrees to cooperate in good faith and to enter into and deliver
such other documents and papers as the other party reasonably shall require in
order to consummate the transactions contemplated hereby, provided in each
instance, any such document is in form and substance approved by the parties
and their respective legal counsel.
12.14 SPECIFIC PERFORMANCE. The obligations of the parties under
Section 10 are unique. If either party should default in its obligations
under said section(s), the parties each acknowledge that it would be extremely
difficult and impracticable to measure the resulting damages; accordingly, the
non-defaulting party, in addition to any other available rights and remedies,
may xxx in equity for injunction (mandatory or prohibitive) or specific
performance (all without the need to post a bond or undertaking of any
nature), and the parties each expressly waive the defense that a remedy at law
in damages is adequate.
12.15 ASSIGNMENT. Neither party may directly or indirectly assign or
delegate, by operation of law or otherwise, all or any portion of
its/their/his rights, obligations or liabilities under this Agreement without
the prior written consent of all other parties, which consent may be withheld
in their respective sole and absolute discretion.
For purposes of this Section, the term "Agreement" shall include
this Agreement and the Exhibits and other documents attached hereto or
described in this Section 12. This Agreement, and other documents delivered
pursuant to this Agreement, contain all of the terms and conditions agreed
upon by the parties relating to the subject matter of this Agreement and
supersede all prior and contemporaneous agreements, letters of intent,
representations, warranties, disclosures, negotiations, correspondence,
undertakings and communications of the parties, oral or written, respecting
that subject matter.
12.16 AUTHORITY TO SIGN. Each of the persons signing below on behalf
of any party hereby represents and warrants that s/he or it is signing with
full and complete authority to bind the party on whose behalf of whom s/he or
it is signing, to each and every term of this Agreement.
12.17 EXECUTION OF DOCUMENTS. The parties hereto agree to execute
and deliver any and all other documents necessary and convenient to effectuate
the exchange of stock herein provided for, and Redwood and Palo Verde as an
inducing condition, represent that they have the authority to enter into this
Agreement and to make the foregoing commitments for themselves.
12.18 TIME. Time is of the essence of this Agreement and each of its
provisions.
IN WITNESS WHEREOF, the parties have signed the Agreement the date and year
first above written.
PALO VERDE GROUP, INC.,
a Colorado corporation,
ATTEST:
______________________ By:_________________________
Secretary
GUARDIAN TECHNOLOGIES INTER-
NATIONAL, INC.,
a Delaware corporation,
ATTEST: By:_______________________
______________________
Secretary
REDWOOD MICROCAP FUND, INC.,
a Colorado corporation
ATTEST:
__________________________ By:________________________
Secretary
EXHIBIT 4.11
