<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1933
For the fiscal year ended December 31, 1999 Commission file number 028238
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
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(Name of Small Business Issuer in its Charter)
Delaware 54-1521616
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(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
22570 Markey Court, Dulles, Virginia 20166
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(address of principal executive offices) (ZIP CODE)
Issuer's telephone number: 703-444-7931
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Securities registered under Section 12(b) of the Exchange Act: NONE
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.001 par value
-----------------------------
(Title of Class)
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(s) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form, and no disclosure will be contained
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
Issuer's revenues for its most recent fiscal year were $1,100,076.
The aggregate market value of the voting stock held by non-affiliates as of
April 10, 2000 was approximately $7,302,215 based on the average bid and asked
price of such stock.
The number of shares outstanding of issuer's Common Stock, $.001 par value, as
of April 10, 2000 was 3,311,662.
Transitional Small Business Disclosure Format (Check one). Yes [ ] No [X]
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DOCUMENTS INCORPORATED BY REFERENCE
The Registrant hereby incorporates herein by reference the following
documents:
Item 13. Exhibits
1. Incorporated by reference in the Company's Registration Statement on Form
SB-2 dated March 22, 1996 (Reg. No. 333-2712-NY).
2. Incorporated by reference in the Company's 1996 Form 10-KSB dated April
15, 1997.
3. Incorporated by reference in the Company's 1997 Form 10-KSB dated March
31, 1998.
4. Incorporated by reference in the Company's Current Report on Form 8-
K/A-3 filed with the Commission on August 16, 1999.
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PART I
DESCRIPTION OF BUSINESS
Item 1. General
Guardian Technologies International, Inc. (referred to hereinafter as the
Company) was originally incorporated in 1989 in the Commonwealth of Virginia,
and commenced full production of its products in December, 1990. In 1996, the
Company was reincorporated in the State of Delaware. The Company manufactures
its products under its own label at its facility in Dulles, Virginia. The
Company currently employs 15 people.
OPERATIONS
The Company manufactures and distributes ballistic protective equipment,
including equipment commonly referred to as body armor.
The Company's product lines include four basic types of ballistic protective
vests, K-9 ballistic protective vests and assorted other ballistic protective
devices, such as aircraft ballistic protective equipment and ballistic
protective shields, blankets and seat cover liners.
The Company's four main product lines of ballistic protective vests are
manufactured in six styles, each providing varying degrees of protection and
certified under guidelines established by the National Institute of Justice
(the "NIJ"). All of the Company's body armor products are certified under the
NIJ's Standard 0101.03 for Police Armor.
PRODUCTS
The Company's life-saving products are manufactured primarily with Honeywell's
High Performance Materials which are Spectra(-Registered Mark-) 1000 woven
fabric, and non-woven composite ballistic materials Spectra Shield(-Registered
Mark-), Spectra Flex(-TM-), Gold Shield(-TM-) and Gold Flex(-TM-).
Based on studies and testing performed at H.P. White Laboratory, Inc., an
independent testing laboratory, tests prepared by Honeywell and the Company's
own test experience, the Company believes that protective vests and equipment
manufactured with Honeywell's High Performance Materials provide, pound for
pound, greater ballistic protection and reduced blunt trauma to the wearer, at
higher projectile protection and reduced blunt trauma to the wearer, at higher
projectile velocities and with longer durability than similar equipment made
with other forms of ballistic resistant materials.
The Company has been assigned rights to U.S. patents numbered 5,327,811;
5,448,938; and 5,377,577 for, respectively, a Lightweight Ballistic Protective
Device, a Removable Ballistic Resistant Armor Seat Cover and Floor Mat, and a
Ballistic Shield.
MANUFACTURING
The Company manufactures substantially all of its products. The Company
manufactures its products under its own label at its facility in Dulles,
Virginia.
RESEARCH AND DEVELOPMENT
The Company concluded research and development during 1996 on a new line of
ballistic protective vests marketed as the Thin Blue Line (TBL). The TBL
vests, made with Honeywell's High Performance Materials, Gold Flex(-TM-) and
Gold Shield(-TM-), are light, flexible and cost less to produce than the
Company's other ballistic protective vests. Also in 1996, the Company
introduced a newly designed ballistic-protective vest for police dogs.
The Company did not initiate any new R&D efforts during 1999 or 1998.
RAW MATERIALS, SOURCES AND AVAILABILITY
The Company is dependent upon a single supplier for the majority of its raw
materials. These materials are available only from Honeywell, which holds the
parent for the unidirectional fiber/resin process incorporating Spectra(-TM-)
ultra high molecular weight polyethylene fibers or aramid fibers. Honeywell
also controls the proprietary thermoplastic process used to manufacture its
Shield and Flex materials.
CUSTOMERS
Government contract work and sales to U.S. government agencies represented 23%
of total sales in 1999 and 19% in 1998. Sales to municipal law enforcement
agencies represented 20% of total sales in 1999 and 26% in 1998. In 1999 and
1998, approximately 2% of Guardian's total sales were made to foreign police
and military organizations.
MARKETING AND DISTRIBUTION
The Company's products are marketed directly by the Company and through
selected dealers of police equipment to local, state, and federal agencies,
private security companies, and private individuals with legitimate security
needs. Marketing methods include personal sales presentations, advertising in
magazines and periodicals aimed at the law enforcement profession, direct mail
campaigns, participation selected trade shows and conferences, teaming
arrangements which bring together technical expertise, sales and marketing
efforts and production capabilities of other companies and responding to
agency and department solicitations for bids and proposals.
In June 1997, the Company executed a four-year contract with the General
Services Administration (GSA) - the federal government's principal procurement
channel - enabling the Company to sell all its products directly through GSA.
The Company has developed an Internet presence with its own home page
(www.guardiantech.com) and E-Mail address ([email protected]) which have
become channels for marketing products in the United States and around the
world.
The Company also subscribes to two marketing services: BidNet and FACNet.
BidNet tracks bids and solicitations for proposals from local and state
jurisdictions throughout the United States. FACNet provides information on
federal procurements and is a required on-line service for GSA contract
suppliers seeking to sell to the U.S. Department of Defense (DOD). In order to
respond to DOD solicitation opportunities, the Company seeks out manufacturers
of compatible products and/or materials with which the Company can match its
technical expertise, sales and marketing efforts and production capabilities.
BACKLOG
At December 31, 1999, the Company's estimated backlog of sales was $96,000. A
year earlier, at December 31, 1998, the Company's estimated backlog of sales
was $75,000. Backlog at the end of any given month is generally shipped
during the following month. Backlog at December 31, 1999 and 1998 represents
typical average backlog of between $75,000 and $100,000.
COMPETITION
The ballistic protective equipment business is highly competitive. In the
domestic law enforcement, federal government and military markets, the Company
has at least five major competitors. The Company believes that the principal
elements of competition in the sale of ballistic protective vests are 1)
materials used in construction, 2) style and design of the vest, and 3) price.
In the law enforcement and military markets, the Company frequently bids for
orders in response to invitations for bidding which set forth product
performance specifications. Although the Company's products are priced
slightly higher than the competition's products, the Company believes its
higher prices are justified by better craftsmanship, higher ballistic
capability of materials, more body area coverage, and a longer warranty. In
international markets, the Company's competition consists of several American
competitors and a few international companies.
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Item 2. Description of Property
On March 31, 1999, the Company sold its land and building for $2,825,000. The
building was constructed in 1997 for a total cost of $2,762,119 comprised of
$237,339 for land and $2,524,780 in building costs. As a result of the sale
the Company no longer received rental income from sublease agreements or
incurred depreciation expense and other operating expenses associated with
owning and managing a commercial building.
Following the sale the Company signed a five-year lease to occupy 15,000
square feet of space for approximately $14,000 per month.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
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PART II
Item 5. Market for Common Equity and Related Stockholder Matters
The common stock of the Company is traded on the NASDAQ Stock Market under the
symbol GRDN. The prices listed below are the high and low sales for common
shares during 1999 and 1998.
<TABLE>
<CAPTION>
Price
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Quarter Ended Low High
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<S> <C> <C>
03/31/98 $ 1.6250 $2.8750
06/30/98 $ 2.1875 $3.3125
09/30/98 $ 2.0000 $3.7500
12/31/98 $ 1.2500 $3.8125
03/31/99 $ 1.0400 $1.8750
06/30/99 $ 1.1875 $2.1200
09/30/99 $ 1.1800 $1.5000
12/31/99 $ 1.0600 $2.1200
</TABLE>
The Company maintained common stock purchase warrants which traded on the
NASDAQ Stock Market under the symbol GRDNW. On October 27, 1998 the Company
received a letter from NASDAQ indicating that the warrants were subject to
delisting because the warrants had failed to maintain a minimum of two active
market makers. Based on limited interest in the warrants from outside
investors management decided not to attempt to rectify the market maker
situation. NASDAQ subsequently delisted the warrants.
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Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations
GENERAL
The following discussion of the financial condition and results of operations
of the Company should be read in conjunction with the consolidated financial
statements and related notes thereto.
OVERVIEW
During 1999, the Company sold its land and building for $2,825,000. In
conjunction with the sale, the purchaser assumed the Company's mortgage note
payable of $1,857,000. After the assumption of the mortgage, the Company had
minimal long-term debt, thereby reducing future interest costs. Proceeds from
the sale of the land and building were used to purchase 50% of the outstanding
shares of common stock of Structural Holdings, Inc., a Delaware holding
company (Structural). Structural has no operations and was formed
specifically to purchase 100% of the outstanding shares of common stock of H&M
Steel, Inc., an Oklahoma corporation (H&M). H&M is engaged in the business of
structural steel fabrication. The Company, through its investment in
Structural has embarked on an aggressive acquisition campaign in the area of
structural steel fabrication. The Company believes this fragmented industry
represents an opportunity to complete a consolidation strategy. Since the
acquisition of H&M, Structural has executed letters of intent for three
additional fabricators. Following satisfactory completion of due diligence
Structural will enter into definitive purchase agreements with these
companies. Funding from Guardian for closing on these acquisitions by
Structural will come from external equity capital and debt financing.
The Company is currently pursuing three distinct activities associated with
its body armor manufacturing operation:
a) Management is currently looking to outsource the manufacture of its
ballistic product line to reduce labor and overhead (mostly rent)
costs incurred in the production process at its Dulles, Virginia
facility.
b) Management is working with several composite material vendors in an
effort to develop a lightweight ballistic material package that will
provide an overall reduction in the material cost component of each
vest. By doing this in conjunction with outsourcing manufacturing
the Company expects to increase its gross margin and lower its
prices, making the Company more competitive in the market.
c) Management is currently searching for experienced body armor sales
personnel that will be able to capitalize on the new, light weight,
lower priced product line being developed in order to increase sales
volume.
The armor business restructuring strategy began in the first quarter of 2000
with full implementation expected by the end of the second quarter. The
successful implementation of the aforementioned activities is intended to
produce positive cashflow in the body armor business by year-end.
In addition, the Company is presently researching private companies in the
security and safety product industry with profitable operations as potential
acquisition candidates that would compliment the body armor business. It is
anticipated that funds received from the Company's private placement and the
exercise of common stock options (see liquidity and capital resources),
coupled with the use of the Company's common stock, will be used to acquire a
company in the security and safety products business.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Net sales for 1999 were $1,100,076 compared to $1,656,649 in 1998, a decrease
of $556,573 or 33.6%. Sales in 1999 lagged behind 1998 due to limited
government funding of local law enforcement programs. Although the
"Bulletproof Vest Partnership Act of 1998" was enacted, the funding for this
program was slow. In addition, the funding that was received did not
materialize in quantities expected by industry. The "Bulletproof Vest
Partnership Act of 1998" provides matching funds to law enforcement agencies
for purposes of procuring body armor for law enforcement personnel. In
essence, the matching funds would cover roughly half of the cost of procuring
body armor. Due to the slow nature and quantity of funding available under
this program, many procurement departments delayed the purchase of body armor.
Revenues in 1999 were also negatively impacted by a smaller than anticipated
order from a distributor that supply's armor products to an allied government.
A similar order in 1998 from this same distributor was nearly double the size
of the 1999 order.
The company's gross profit in 1999 was $163,424 or 14.8% compared to gross
profit of $278,672 or 16.8. As the gross margin percentage remained
relatively stable, the reduction in gross margin dollars of $115,248 was the
result of reduced sales volume.
Total operating expenses of $1,117,644 during 1999 were comprised of selling
expenses of $83,955 and general and administrative expenses of $1,033,689.
Total operating expenses of $697,856 during 1998 were comprised of selling
expenses of $129,070 and general and administrative expenses of $568,786.
Selling expenses decreased $45,115 primarily from reduced sales consultant
costs. Management believes the increase in general and administrative
expenses of $464,903 were necessary to properly position the Company for long-
term growth and was attributable primarily to the following:
a) Salary, travel and related costs of the Company's President and CEO
of $118,500. These costs were partially offset by $45,000 in fees
the Company is to receive under a management contract with
Structural. Upon Structural completing another acquisition, the
Company's fees under the management contract will increase
significantly.
b) Audit fees of $30,000 incurred by the Company in connection with the
acquisition of H&M by Structural.
c) Rent expense associated with the Company's manufacturing operation
located in Dulles, Virginia of $50,000 for the period April 1, 1999
to December 31, 1999. Prior to this time, the Company owned the
building that housed the Company's manufacturing operation and
therefore did not incur rent expense.
d) Increased investor relations fees of $65,000 related to actual cash
payments and options granted to an outside firm to assist the
Company in the dissemination of information to the investing public.
e) Consulting fees paid to an officer and director of $169,000 ($64,000
in the value of stock grants and the balance in cash) and $50,000
paid to a related party entity for financial advisory services.
Other income (expense) was $95,668 in 1999 compared to ($28,071) in 1998.
Other income recorded in 1999 was comprised of the gain on sale of the
Company's land and building of $107,974 recorded in March 1999 and rental
income of $49,233 received prior to the building sale. Partially offsetting
1999 other income were miscellaneous expenses of $62,533. Other expense in
1998 was comprised of interest expense of $100,717 related to loans associated
with the Company's building prior to its sale and costs incurred related to a
failed acquisition of $111,423. These expenses were partially offset by
rental income of $184,069.
The Company posted a net loss in 1999 of ($825,076) or ($.62) per share
compared to a net loss of ($447,255) or ($.40) per share for 1998. Lower
sales volume coupled with increased general and administrative expenses
(discussed in detail above) produced a loss from armor operations of
($954,220) for the period. Partially offsetting this loss was income of
$33,476 from the Company's equity method investment for the period related to
the Company recognizing its pro-rata share of earnings in Structural, the
parent of H&M.
As previously stated, H&M is engaged in the business of structural steel
fabrication. Structural purchased H&M in 1999 for approximately $5,000,000.
The purchase resulting in the recognition of approximately $3,025,000 of
goodwill which is being amortized over 15 years. The purchase was financed by
Structural with approximately $1,700,000 in cash (of which $850,000 was paid
by the Company), a $650,000 note payable to the seller and a 3-year $2,650,000
term loan from a financial institution. Additionally, H&M obtained a 3-year
$2,350,000 revolving line of credit from the same financial institution.
Since H&M is involved in the fabrication of products used in the construction
industry, H&M often enters into long-term contracts with its customers and
recognizes revenue on a percentage of completion basis, which requires
significant estimates. During the fourth quarter of 1999, the Company
recognized a loss of approximately $267,000 on its equity in net earnings of
Structural. This loss was primarily the result of H&M revising its
calculation for profit on long-term contracts prior to the Company's fourth
quarter.
Also at December 31, 1999, H&M was not in compliance with certain financial
covenants of its financial institution. H&M is currently attempting to obtain
waivers of these loan covenant violations. Management believes these waivers
will be obtained.
The table below presents summarized financial information for Structural:
<TABLE>
<CAPTION>
Summarized Financial Information for Structural Holdings
--------------------------------------------------------
(Amounts in 000's)
For the Year Ended
December 31, 1999
-----------------
<S> <C>
Current assets $ 5,464,000
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Total assets $ 10,241,000
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Current liabilities $ 7,810,000
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Total liabilities $ 8,450,000
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Total stockholders' equity $ 1,790,000
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Sales revenue $ 7,005,000
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Gross margin $ 1,675,000
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Net income $ 90,000
=============
</TABLE>
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Net sales for 1998 were $1,656,649 compared to $1,154,970 in 1997, an increase
of $501,679 or 43.4%. The increase in sales is attributable primarily to the
completion of a new order to supply armor products to an allied government
during 1998. The Company anticipates continued sales during 1999 associated
with this order.
The Company's gross profit in 1998 was $278,672 or 17% compared to a gross
loss of ($82,135) in 1997. The Company's improved margin resulted from
increased sales coupled with reductions in production costs and increased
manufacturing efficiency.
Total operating expenses were $697,856 for 1998 compared to $799,822 for 1997.
Selling expenses were 129,070 in 1998 compared to $258,067 in 1997, a decrease
of $128,997 or 50.0%. The decrease was attributable primarily to a decrease in
sales consultant costs of $51,524 and a decrease in advertising and promotion
of $34,730. General and administrative costs were $568,786 in 1998 compared to
$521,755 in 1997, an increase of $47,301 or 9.0%. The increase was
attributable primarily to a bad debt cost of $32,224 in 1998.
Other income (expense) was ($28,071) in 1998 compared to $847 in 1997. The
decrease was attributable primarily to two factors. Rental income increased by
$82,919 from $101,150 in 1997 to $184,069 in 1998 as the Company was able to
lease out the remaining unoccupied space in its Dulles, Virginia facility.
Offsetting the increase in rental income during 1998 was acquisition costs of
$111,423 (mostly legal and audit fees) related to a failed acquisition.
Without these additional non-operating costs, the Company's net loss would
have been ($355,832) or 61% lower than the loss incurred in 1997.
The net loss in 1998 was ($447,255) or ($.40) per share compared to ($861,110)
or ($.77) per share in 1997.
LIQUIDITY AND CAPITAL RESOURCES
During the twelve months ended December 31, 1999, the Company used net cash in
operating activities of $391,893 compared with $331,182 last year. Cash used
in operating activities was provided by $585,937 in available cash existing at
the beginning of the year.
In March 1999 the Company sold its land and building generating net cash of
$684,793 after the repayment of a 1st mortgage on the facility in the amount
of $1,834,581.
In June 1999 the Company sold 133,334 shares of common stock generating
proceeds of $100,000.
The net proceeds from the sale of the building and the private placement
proceeds referred to above were used to fund the Company's 50% investment in
Structural of $850,000, plus acquisition related expenses totaling $98,900.
The Company does not anticipate any significant capital expenditures for
property and equipment in the coming year.
The Company's only long-term indebtedness at December 31, 1999 relates to a
three-year premium financing arrangement for Director's and Officer's
insurance in the amount of $36,489.
The Company had notes receivable of $235,000 at December 31, 1999. In March
2000 the Company collected $50,000 of the outstanding balance of notes
receivable. Management believes the remaining balance of notes receivable
will be collected by June 30, 2000 which will provide an additional $185,000
of cashflow to the Company for working capital purposes.
From January 2000 through March 2000, options for 424,000 shares of common
stock were exercised generating net proceeds to the Company of $530,000.
These funds will be used for general working capital purposes.
Subsequent to December 31, 1999, the Company sold 150,000 units (comprised of
2 common shares and warrants for the purchase of 4 shares of common stock) for
$1.50 each receiving net proceeds of $225,000. The warrants have the
following terms:
<TABLE>
<CAPTION>
WARRANT PRICE PERIOD*
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<S> <C> <C> <C>
Class A $.7500 30 days
Class B $.8750 60 days
Class C $1.000 90 days
Class D $1.125 120 days
Class E $1.250 150 days
Class F $1.375 180 days
</TABLE>
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* The exercise period begins upon the effective date of a registration
statement registering the underlying shares of common stock issuable upon
the exercise of these warrants. Warrants must be exercised in
alphabetical order by warrant class. If any warrant is not exercised
during the term of the warrant by an individual warrant holder, all
remaining classes of warrants will automatically expire.
Should all warrants be exercised the Company will receive additional proceeds
from this offering of $3,825,000. These funds will be used for acquisitions
and general working capital purposes.
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FORWARD-LOOKING STATEMENTS
The Company believes that this report contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended, that are
subject to certain risks and uncertainties. Forward-looking statements
represent the Company's expectations or beliefs concerning future events,
including the following: any statements regarding future sales and gross
profit percentages, any statements regarding the continuation of historical
trends, any statements regarding the sufficiency of the Company's cash
balance. and cash generated from operating and financing activities for the
Company's future liquidity and capital resource needs, any statements
regarding the effect of regulatory changes, the success of development and
enhancement of the Company's products, the adequacy of the Company's
facilities, potential acquisitions, and any statements regarding the future of
the industry and the various parts of the markets in which the Company
conducts its business. The Company cautions that any forward-looking
statements made by the Company in this report or in other announcement made by
the Company are further qualified by important factors that could cause actual
results to differ materially from those in the forward-looking statements.
THE YEAR 2000 ISSUE
We have not encountered any Year 2000 problems, however there is still a risk
of the following consequences:
* operational inconveniences and inefficiencies for us, our service and
content providers and our visitors that may divert our time and attention
and financial and human resources from our ordinary business activities;
and
* lesser system failures that may require significant efforts by us, our
service and content providers or our visitors to prevent or alleviate
material business disruptions.
We view the risk of material disruption to our service to be immaterial and
accordingly have not formulated a detailed contingency plan.
ACCOUNTING PRONOUNCEMENTS
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities",
was issued in June 1998. This statement establishes accounting and reporting
standards for derivative instruments and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in
the statement of financial position and measure those instruments at fair
value. This statement is effective for the Company's financial statements for
the year ended December 31, 2000 and the adoption of this standard is not
expected to have a material effect on the Company's financial statements.
Item 7. Financial Statements
The following financial statements are filed as part of this report beginning
on page F-1:
1. Independent Auditor's Report
2. Balance Sheet as of December 31, 1999
3. Statements of Operations for the years ended December 31, 1999 and 1998
4. Statement of Stockholders' Equity for the years ended December 31, 1999
and 1998
5. Statements of Cash Flows for the years ended December 31, 1999 and 1998
6. Notes to Financial Statements
Item 8. Changes and Disagreements with Accountants on Accounting and
Financial Disclosures
None.
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PART III
Item 9. Directors and Executive Officers
The executive officers and directors of the Company are listed in the table
below and brief summaries of their business experience and certain other
information with respect to them are set forth thereafter.
<TABLE>
<CAPTION>
NAME AGE P0SITION
- ---- --- --------
<S> <C> <C>
Oliver L. North 56 Chairman of the Board, and Secretary
J. Andrew Moorer 38 President and CEO
Herbert M. Jacobi 60 Director
Kevin L. Houtz 37 Director
David W. Stevens 64 Director
</TABLE>
The Company's Articles of Incorporation authorize three (3) classes of
Directors which classes serve for varying terms. The Articles also grant to
the sitting Directors the authority to fill any vacancies on the Board and/or
to appoint members to the Board to fill any vacancies resulting from an
increase in the authorized number of Directors.
Oliver L. North is currently the Chairman of the Board and Secretary of the
Company. Since the Company's inception until February 1999, Mr. North was
also the President and Chief Executive Officer. In February 1999, Mr. North
resigned as President and C. E. O. due to increased responsibilities
associated with his broadcasting interests. Mr. North graduated from the
United States Naval Academy in June 1968 and served in the United States
Marine Corps for twenty-two years. His service included a tour of duty in
Vietnam where he earned a Silver Star for heroism, a Bronze Star with a "V"
for valor, and two Purple Hearts for wounds in action. From 1981 through 1986,
he served as a member of President Ronald Reagan's National Security Council
staff and became Deputy Director of Political-Military Affairs. In this
capacity, he helped plan the liberation of Grenada, the capture of terrorists
who hijacked the cruise ship Achille Lauro, and the U.S. raid on Mohmar
Quaddafi's terrorist training camps in Libya. He retired from the Marine Corps
in 1988.
J. Andrew Moorer has been the President and Chief Executive Officer of the
Company since February 1999. Mr. Moorer was named Chief Operating Officer of
the Company in l998. Mr. Moorer began his career as a Certified Public
Accountant in the Audit and Emerging Business Services Group of the
international accounting firm of PriceWaterhouseCoopers. Since leaving public
accounting in l987, Mr. Moorer has held various positions in finance with
increasing levels of responsibility, including the position of Chief Financial
Officer for several firms. Mr. Moorer received his formal education at Loyola
College of Maryland.
Herbert M. Jacobi has been an attorney in private practice in New York, New
York since 1967.
Kevin L. Houtz is the founder of Elements of Design, a full service graphic
design firm located in Baltimore, Maryland. The firm, specializing in the
development of corporate identity and collateral and packaging design, has
served a variety of regional and national clients since its inception in 1989.
Mr. Houtz graduated from the University of Maryland in 1984 receiving a
Bachelor of Arts degree in Visual Arts/Design.
David W. Stevens has been the CEO of several public and private companies for
the past twenty-four years. His assignments have focused on restructuring and
turnaround situations in the manufacturing, defense electronics and
engineering services industries. Mr. Stevens is also a consultant to the
International Finance Corporation of the World Bank Group in organizational
development. At present, Mr. Stevens is Chief Operational Officer of
Hargrove, Inc., a company specializing in exhibits and special events.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16 (a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers, directors and persons who own more than ten
percent of the Common Stock (collectively, "Reporting Persons") to file
initial reports of ownership and changes of ownership of the Common Stock with
the SEC and the NASDAQ Stock Market. Reporting Persons are required to furnish
the Company with copies of all forms that they file under Section 16(a).
Based upon information provided to the Company from Reporting Persons, Mr.
Moorer failed to file four reports covering five transactions in a timely
fashion, Mr. North failed to file two reports covering four transactions in a
timely fashion, Mr. Houtz failed to file seven reports covering 24
transactions in a timely fashion, and Mr. Stevens failed to file three reports
covering four transactions in a timely fashion. Other than the foregoing, the
Company is not aware of any failure on the part of any Reporting Persons to
timely file reports required pursuant to Section 16(a).
Item 10. Executive Compensation
The following table sets forth the executive compensation paid to each
executive officer of the Company during the years ended December 31.
<PAGE>
<TABLE>
TABLE 1
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term Compensation
----------------------------------
Annual Compensation(1) Awards Payouts
-------------------------- ------------- --------
Other All
Annual Restricted Restricted Other
Name and Compen- Stock LTIP Compen-
Principal Year Salary Bonus sation Award(s) Options/ Payouts sation
Position Ended ($) ($) ($)(2) ($) SARs ($) ($)
- --------------- ------- -------- ----- --------- ---------- -------- ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Oliver L. North, 1999 $ -0- -0- $55,000 100,000 -0- -0- (1)
Chairman and 1998 $ -0- -0- -0- -0- 110,000 -0- (1)
Secretary
J. Andrew Moorer, 1999 $82,500 $12,175 -0- -0- 100,000 -0- (1)
President and 1998 -0- -0- -0- -0- 120,000 -0- (1)
Chief Executive
Officer
- ------------------------------
</TABLE>
<PAGE>
<PAGE>
<TABLE>
TABLE 3
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
----------------------------------------------------
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End (#) at FY-End ($) (1)
Shares Acquired Value Realized Exercisable Exercisable/
Name on Exercise (#) ($) (Unexercisable) Unexercisable
- ---------------- --------------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Oliver L. North, 110,000 -0-
Chairman and
Secretary
J. Andrew Moorer, 140,000 $30,000
President and
Chief Executive
Officer
- ------------------------------
</TABLE>
<PAGE>
<PAGE>
(1) The above table reflects salary expenses as recorded on the Company's
financial statements in accordance with generally accepted accounting
principles. As such, the amounts may differ from the base salary rates
discussed below.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information, as of April 10, 2000 with
respect to the beneficial ownership of shares of Common Stock by (i) each
stockholder known by the Company to be the beneficial owner of more than five
percent (5%) of the outstanding shares of Common Stock; (ii) each director of
the Company; (iii) each executive officer named in the Summary Compensation
Table appearing in Item 10 "Executive Compensation", and (iv) all executive
officers and directors as a group. Except as indicated in the footnotes to the
table, persons named in the table have sole voting and investment power with
respect to all shares of Common Stock which they respectively own
beneficially.
<TABLE>
<CAPTION>
Name. and Address Number of Shares Percent
of Beneficial Owner Beneficially Owned (1) of Class (2)
- ------------------- ---------------------- ------------
<S> <C> <C>
Oliver L. North 229,980 6.9%
Rt. 1, Box 560
B1uemont, VA 20135
J. Andrew Moorer 420,000 (3) 12.0%
11 Sundial Circle, Suite 17
Carefree, AZ 85377
Herbert M. Jacobi 20,000 *
3 West 38th Street
New York, NY 10018
Kevin L. Houtz 154,000 4.7%
3000 Chestnut Ave.
Suite 343D
Baltimore, MD 21222
David W. Stevens 20,000 *
312 Greenwood Point Rd.
Grasonville, MD 21638
All Officers and Directors
as a Group (5 persons) (4) 743,900 24.0%
</TABLE>
- ----------------
* Less than 1%
(1) A person is deemed to be the beneficial owner of securities if, among
other things, he or she directly or indirectly has or shares voting power
or investment power with respect to such securities. A person is also
considered to beneficially own securities which he or she does not
actually own but has the right to acquire presently or within the next
sixty (60) days, through the exercise of any option or warrant.
(2) In calculating percentage ownership, all shares of Common Stock that the
named shareholder has the right to acquire within 60 days upon the
exercise of any option or warrant are deemed to be outstanding for the
purpose of calculating the percentage of Common Stock owned by such
stockholder, but are not deemed outstanding for the purpose of computing
the percentage of Common Stock owned by any other stockholder. Shares
and percentages beneficially owned are based upon 1, 655,831 shares
outstanding on April 10, 2000.
(3) Includes 200,000 shares exercisable upon the exercise of options.
(4) Includes Messrs. Moorer, North, Jacobi, Houtz and Stevens.
Item 12. Certain Relationships and Related Transactions
In February 1999, J. Andrew Moorer and Oliver L. North entered into an
agreement whereby Moorer was granted an option to acquire, from North,
100,0000 shares of common stock of the Company at an exercise price of $1.75
per share for a period of six (6) months and 57,990 shares of common stock at
an exercise price of $5.00 for a period of one (1) year. During 1999 Moorer
exercised the option to purchase 100,000 shares of common stock from North for
$175,000. As of the date of this filing, the remaining 57,990 shares under
option expired unexercised.
During 1999, the Company paid $55,000 in cash and issued 75,006 shares of
common stock valued at $51,087 to Mr. North for consulting services.
The Company issued to TAIM Special Equities III 133,334 shares of common
stock for $100,000. TAIM owns the other 50% of Structural.
During 1999 the Company loaned $85,000 to TAIM. The interest rate is 9%,
with interest due monthly with principal due June 30, 2000. The note is
collateralized by 10% of TAIM's common stock ownership of Structural and
consulting fee payments of $12,500 per month made to TAIM by Structural.
During 1999 the Company issued to Redwood MicroCap Fund, Inc. 66,666
shares of common stock valued at $50,000 for serviced provided in connection
with the acquisition of Structural. Mr. Moorer is an officer of Redwood.
During 1999 the Company paid $50,000 to Redwood for financial advisory
services.
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
- ------- -----------
3.1 Certificate of Incorporation of the Company *
3.2 Bylaws of the Company.*
4.1 Form of Common Stock Certificate.*
4.2 Form of Warrant.*
10.1 Employment Agreement between the Company and Oliver L. North.**
10.2 Employment Agreement between the Company and Joseph F. Fernandez.**
10.3 Revolving Line of Credit Agreement dated December 7, 1995 among the
Company, Creditanstalt Corporate Finance, Inc. and Oliver L. North,
as Guarantor.**
10.4 Promissory Note dated December 7, 1995 from the Company to
Creditanstalt Corporate Finance, Inc.**
10.5 Guaranty dated December 7, 1995 from Oliver L. North to
Creditanstalt Corporate Finance, Inc.**
10.6 Amendment dated November 26, 1996 relating to Revolving Loan of
Credit Agreement among the Company, Creditanstalt Corporate Finance,
Inc. and Oliver L. North, as Guarantor.**
10.7 Margin Agreement dated June 24, 1996 between the Company and
Pershing, Division of Donaldson, Lufkin & Jenrette Securities
Corporation.**
10.8 Promissory Note dated February 7, 1997 from the Company to Dashco,
Inc.**
10.9 Deed of Trust between the Company and Marc A. Busman and Rosalyn R.
Busman, Trustees.**
10.10 Deed of Lease dated January 23, 1997 between the Company, as
Landlord, and Freedom Alliance, as Tenant.**
10.11 Letter re: Line of Credit facility between the Company and Adler
Financial Group.**
10.12 Letter re: Loan commitment between the Company and The Baltimore
Life Insurance Company/Life of Maryland, Inc.***
10.13 Stock Purchase Agreement dated August 12, 1999 between the Company
and Taim Investment Company regarding Structural Holdings, Inc.****
10.14 Employment Agreement between the Company and J. Andrew Moorer dated
February 1, 1999.*****
10.15 Option dated February 19, 1999 by and between J. Andrew Moorer and
Oliver North.*****
10.16 Promissory Note dated May 1, 1999 from Taim Special Equities III to
the Company.*****
10.17 Consulting Agreement between the Company and Structural Holdings,
Inc. dated April 1, 1999.*****
10.18 Consulting Agreement between the Company and Oliver L. North dated
February 19, 1999.*****
10.19 Consulting Agreement between the Company and Redwood MicroCap Fund,
Inc. dated December 31, 1998.*****
11.0 Statement re: Computation of Per Share Earnings.
27.0 Financial Data Schedule
* Filed as an Exhibit to the Company's Registration Statement on Form
SB-2 dated March 22, 1996 (Reg. No. 333-2712-NY) and incorporated
herein by reference.
** Filed as an Exhibit to the Company's 1996 Form 10-KSB dated April
15, 1997 and incorporated herein by reference.
*** Filed as an Exhibit to the Company's 1997 Form 10-KSB dated March
31, 1998 and incorporated herein by reference.
**** Filed as an Exhibit to the Company's Current Report on Form 8-
K/A-3 filed with the Commission on August 16, 1999
***** Filed herewith
(b) Reports on Form 8-K
The Registrant filed no Current Reports on Form 8-K during the fourth
quarter ended December 31, 1999.
<PAGE>
<PAGE>
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
------------------------------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
PAGE
----
INDEPENDENT AUDITORS' REPORT F-2
BALANCE SHEET - December 31, 1999 F-3
STATEMENTS OF OPERATIONS - For the Years Ended
December 31, 1999 and 1998 F-4
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY -
For the Years Ended December 31, 1999 and 1998 F-5
STATEMENTS OF CASH FLOWS - For the Years Ended
December 31, 1999 and 1998 F-6
NOTES TO FINANCIAL STATEMENTS F-7
<PAGE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Shareholders
Guardian Technologies International, Inc.
Dulles, Virginia
We have audited the accompanying balance sheet of Guardian Technologies
International, Inc. as of December 31, 1999 and the related statements of
operations, changes in shareholders' equity, and cash flows for the years
ended December 31, 1999 and 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Guardian Technologies
International, Inc. as of December 31, 1999, and the results of its operations
and its cash flows for the years ended December 31, 1999 and 1998, in
conformity with generally accepted accounting principles.
Hein + Associates LLP
Denver, Colorado
March 16, 2000
<PAGE>
<PAGE>
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S> <C>
ASSETS
------
Current Assets:
Cash and cash equivalents $ 191,690
Accounts receivable, no allowance considered necessary 185,279
Inventories
158,745
Notes receivable:
Related party 85,000
Other 150,000
Prepaid expenses and other 97,745
-----------
Total current assets 868,459
Equity Investment 1,027,376
Property and Equipment, net 52,064
Deposits and Other 12,210
-----------
Total Assets $1,960,109
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Notes payable and current portion of long-term debt $33,133
Accounts payable
218,243
Accrued director fees 97,655
Accrued payroll and related benefits expenses 12,999
-----------
Total current liabilities 362,030
Long-Term Debt, net of current portion 36,489
Commitments and Contingencies (Notes 2 and 7)
Shareholders' Equity:
Preferred stock, $.20 par value, 1,000,000
shares authorized; no shares issued and outstanding -
Common stock, $.001 par value; 15,000,000 shares
authorized, 2,762,668 shares issued and outstanding 2,763
Additional paid-in capital 4,660,908
Accumulated deficit (3,102,081)
------------
Total shareholders' equity 1,561,590
------------
Total Liabilities and Shareholders' Equity $1,960,109
============
</TABLE>
See accompanying notes to these financial statements
<PAGE>
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the
Years Ended
December 31,
-------------------------
1999 1998
----------- -----------
<S> <C> <C>
Net Sales $ 1,100,076 $ 1,656,649
Cost of goods sold 936,652 1,377,977
----------- -----------
Gross Profit 163,424278,672
Operating Expenses:
Selling expenses 83,955 129,070
General and administrative 1,033,689 568,786
----------- -----------
Total operating expenses 1,117,644 697,856
----------- -----------
Operating Loss (954,220) (419,184)
Other Income (Expense):
Interest income (expense) 994 (100,717)
Rental income 49,233 184,069
Gain on sale of assets 107,974 -
Miscellaneous income (expense) (62,533) -
Costs related to failed acquisition - (111,423)
----------- -----------
Total other income (expense) 95,668 (28,071)
----------- -----------
Loss Before Earnings From Equity Investment (858,552) (447,255)
Equity in net earnings of investment 33,476 -
----------- -----------
Net Loss $ (825,076) $ (447,255)
=========== ===========
Net Loss per Common Share, Basic and Dilutive $ (.62) $ (.40)
=========== ===========
Average Common Shares Outstanding, Basic
and Dilutive 1,338,513 1,120,310
=========== ===========
</TABLE>
See accompanying notes to these financial statements
<PAGE>
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Common Stock Additional Accumu-
-------------------- Paid-in lated
Shares Amount Capital Deficit Total
--------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balances, January
1, 1998 2,228,402 $ 2,228 $4,106,310 $(1,829,750)$2,278,788
Exercise of
options 200,000 200 249,800 - 250,000
Issuance of
common stock 59,260 60 49,940 - 50,000
Net loss - - - (447,255) (447,255)
--------- --------- --------- ---------- ----------
Balances, December
31, 1998 2,487,662 2,488 4,406,050 (2,277,005) 2,131,533
Issuance of
common stock:
Cash 133,334 133 99,867 - 100,000
Services 141,672 142 154,991 - 155,133
Net loss - - - (825,076) (825,076)
--------- --------- --------- ---------- ----------
Balances, December
31, 1999 2,762,668 $ 2,763 $4,660,908 $(3,102,081)$1,561,590
========= ========= ========= ========== ==========
</TABLE>
See accompanying notes to these financial statements
<PAGE>
<PAGE>
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------------
1999 1998
------------ -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (825,076) $ (447,255)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization of property
and equipment 40,720 92,949
Common stock and options for services 155,133 -
Write down of assets to net realizable
value - 68,224
Gain on sale of property and equipment 107,974 -
Equity in net earnings of investment (33,476) -
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable (32,748) 42,382
Inventories 22,040 235,550
Prepaid expenses and other 50,889 (66,697)
Increase (decrease) in:
Accounts payable 122,171 (155,725)
Accrued expenses 792 (19,629)
Customer deposits (312) (80,981)
------------ -------------
Net cash used in operating activities (391,893) (331,182)
------------ -------------
Cash Flows from Investing Activities:
Purchase of property and equipment (3,248) (7,729)
Sale of property and equipment 2,519,374 -
Issuance of notes receivable (505,000) (500,000)
Payments on notes receivable 670,000 100,000
Investment in Structural Holdings, Inc. (948,900)
------------ -------------
Net cash provided by (used in)
investing activities 1,732,226 (407,729)
Cash Flows from Financing Activities:
Proceeds from issuance of notes payable - 1,926,161
Payment on notes payable (1,834,581) (1,010,774)
Exercise of options - 250,000
Issuance of common stock 100,000 50,000
------------ -------------
Net cash provided by (used in)
financing activities (1,734,581) 1,215,387
------------ -------------
Increase (Decrease) in Cash and Cash
Equivalents (394,248) 476,476
Cash and Cash Equivalents, beginning of
period 585,938 109,461
------------ -------------
Cash and Cash Equivalents, end of period $ 191,690 $ 585,937
============ =============
Supplemental Schedule of Cash Flow
Information:
Cash paid for interest $ 39,685 $ 146,842
============ =============
</TABLE>
See accompanying notes to these financial statements
<PAGE>
<PAGE>
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
1. Nature of Business and Significant Accounting Policies:
Nature of Operations - Guardian Technologies International, Inc. (the
"Company") is incorporated in the State of Delaware. The Company
manufactures and distributes soft armor products, primarily superior
quality ballistic protective vests, for law enforcement officers, armed
forces personnel, and other legitimate individuals or groups requiring
protective equipment. During 1999, the Company acquired a 50% interest
in Structural Holdings, Inc. (Structural). Structural is a holding
company and its only investment at December 31, 1999 is 100% of the
common stock of H&M Steel (H&M). H&M is engaged in the business of
structural steel fabrication.
Investments - The Company's 50% ownership interest in Structural is
accounted for under the equity method of accounting and is recorded at
cost as adjusted for its proportionate share of earnings and
distributions.
Revenue Recognition - Manufacturing revenue is recognized upon shipment
of product.
Use of Estimates - The preparation of the Company's financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in these financial statements and accompanying notes. Actual
results could differ from those estimates. H&M enters into long-term
contracts with its customers and recognizes revenue on a percentage of
completion basis, which requires significant estimates.
Financial Instruments - The estimated fair value of cash and cash
equivalents, accounts receivable, notes receivable, accounts payable and
accrued expenses approximate their carrying amounts in the financial
statements due to the short-term nature of these instruments.
Based on the borrowing rates currently available to the Company for loans
with similar terms and average maturities, the fair value of long-term
debt approximates its carrying value.
Concentrations of Credit Risk - Financial instruments which potentially
subject the Company to concentrations of credit risk consist of trade
accounts receivable and cash. The Company grants credit terms in the
normal course of business to its customers, who are primarily dealers or
municipal, state and Federal law enforcement agencies, and who are
located throughout the United States. As part of its ongoing procedures,
the Company monitors the credit worthiness of its customers.
The Company maintains cash in commercial banks in accounts which are
insured by the Federal Deposit Insurance Corporation (FDIC) up to
$100,000 per customer and in uninsured accounts. The cash amount
presented on the balance sheet reflects the actual amounts on deposit
with banks reduced for outstanding checks and increased for deposits in
transit. At December 31, 1999, the Company had cash in banks in excess
of FDIC insured limits of approximately $87,200.
Cash Equivalents - For purposes of the statement of cash flows, the
Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
Accounts Receivable - It is the practice of management to write-off
receivables in the year amounts are determined to be uncollectible. No
allowance for doubtful accounts is reflected in these financial
statements since management believes all accounts at December 31, 1999 to
be fully collectible.
Inventories - Inventories consist of purchased materials and components,
work-in-process, and finished goods. Inventories are stated at the lower
of cost or market, with cost being determined on a first-in, first-out
basis. Inventories consisted of the following at December 31, 1999:
<TABLE>
<CAPTION>
<S> <C>
Raw materials and components $ 135,437
Finished goods 23,308
-------------
$ 158,745
=============
</TABLE>
Property and Equipment - Property and equipment are recorded at cost and
depreciated over their estimated useful lives. The Company uses the
straight-line and accelerated methods of depreciation, respectively, for
financial statement and income tax reporting purposes.
A summary of the estimated useful lives follows:
<TABLE>
<CAPTION>
<S> <C>
Office furniture and equipment 5 - 7 years
Manufacturing equipment 7 - 8 years
</TABLE>
Expenditures for maintenance and repairs which do not materially extend
the useful lives of property and equipment are charged to earnings. When
property or equipment is sold or otherwise disposed of, the cost and
related accumulated depreciation are removed from the respective accounts
with the resulting gain or loss reflected in earnings.
Impairment of Long-Lived Assets - The Company performs an assessment for
impairment whenever events or changes in circumstances indicate that the
carrying amount of a long-lived asset may not be recoverable. If the net
carrying value exceeds estimated undiscounted future net cash flows, then
impairment is recognized to reduce the carrying value to the estimated
fair value.
Rental Income - The Company leased a portion of the building which it
owned until March 31, 1999. Rental income and payments are recorded and
received on a monthly basis. Rental income was $49,233 and $184,069 in
1999 and 1998, respectively.
Income Taxes - The Company utilizes the liability method for accounting
for income taxes. The liability method accounts for deferred income
taxes by applying enacted statutory rates in effect at the balance sheet
date to differences between financial statement amounts and tax bases of
assets and liabilities. The resulting deferred income tax liabilities
are adjusted to reflect changes in tax laws and rates. Temporary
differences consist of the difference in financial statement and income
tax bases for property and equipment. Deferred income taxes related to
an asset or liability are classified as current or noncurrent based on
the classification of the related asset or liability.
Net Loss Per Common Share - The Company has adopted SFAS No. 128 which
establishes standards for computing and presenting earnings per share
(EPS) for entities with publicly held common stock. The standard
requires presentation of two categories of EPS - basic EPS and diluted
EPS. Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted-average number of common
shares outstanding for the year. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in
the issuance of common stock that then shared in the earnings of the
Company. All potential dilutive securities are antidilutive as a result
of the Company's net loss for the years ended December 31, 1999 and 1998.
Accordingly, basic and diluted EPS are the same for each year.
Comprehensive Loss - SFAS No. 130 establishes standards for reporting and
display of comprehensive loss, its components and accumulated balances.
Comprehensive loss is defined to include all changes in equity except
those resulting from investments by owners and distributions to owners.
Comprehensive loss was the same as net loss in 1999 and 1998.
Recently Issued Accounting Pronouncement - SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, was issued in June 1998.
This statement establishes accounting and reporting standards for
derivative instruments and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair
value. This statement is effective for the Company's financial
statements for the year ended December 31, 2000 and the adoption of this
standard is not expected to have a material effect on the Company's
financial statements.
2. Liquidity:
The Company has incurred losses since inception, including $825,076 in
1999 and $447,225 in 1998, respectively. If losses continue and/or the
Company is unable to raise adequate capital to fund future operations,
the Company may be required to curtail operations, liquidate assets or
enter into capital or financing arrangements on terms which may have an
adverse effect on future operations. In an effort to improve operations
and cash flow, the Company is currently pursuing the following
activities:
* Outsourcing of the manufacture of its ballistic product line to
reduce labor and overhead costs (mostly rent) incurred in the
production process at its Dulles, Virginia facility. The Company is
also working with several vendors to provide a lightweight ballistic
material in order to reduce material costs in its product lines.
The Company anticipates that these actions will not only increase
gross margin percentages, but will allow the Company to lower the
price on its product lines. Management is also seeking experienced
body armor sales personnel that will be able to capitalize on this
lower priced product line, thereby increasing sales volume.
* Seeking profitable and privately held strategic acquisition
candidates that are in the security and safety product industry.
The Company intends to acquire the candidates through a combination
of cash (raised through equity financings) and common stock of the
Company.
* Subsequent to December 31, 1999, the Company raised additional
equity financing of $225,000 and $530,000 through proceeds from a
private placement and option exercises, respectively. The Company
anticipates the exercise of warrants included in the private
placement in fiscal 2000. Assuming all warrants are exercised, the
Company would receive proceeds of $3,825,000. However, there can
be no assurances that any of these warrants will be exercised (see
Note 13).
For these reasons, management believes that no adjustments or
reclassifications of recorded assets and liabilities is necessary at this
time.
3. Investment in Structural Holdings:
In 1999, the Company purchased a 50% interest in Structural for $850,000
cash and incurred $98,900 of costs directly associated with this
investment. The investment is accounted for under the equity method of
accounting.
<TABLE>
<CAPTION>
Summarized Financial Information for Structural Holdings
--------------------------------------------------------
(Amounts in 000's)
For the Year Ended
December 31, 1999
-----------------
<S> <C>
Current assets $ 5,464,000
=============
Total assets $ 10,241,000
=============
Current liabilities $ 7,810,000
=============
Total liabilities $ 8,450,000
=============
Total stockholders' equity $ 1,790,000
=============
Sales revenue $ 7,005,000
=============
Gross margin $ 1,675,000
=============
Net income $ 90,000
=============
</TABLE>
Structural purchased an entity (H&M) in 1999 for approximately
$5,000,000. The purchase of H&M was accounted for under the purchase
method of accounting, and as a result, approximately $3,025,000 of
goodwill was recorded which is being amortized over 15 years. The
purchase was financed by Structural with approximately $1,700,000 in cash
(of which $850,000 was paid by the Company), a $650,000 note payable to
the seller and $2,650,000 of 3-year term loans to a financial institution
to H&M. Additionally, H&M obtained a $2,350,000 3-year revolving line-
of-credit from the same financial institution. H&M was not in compliance
with certain financial covenants of the financial institution as of
December 31, 1999 and as such, the notes have been classified as current.
However, H&M is currently attempting to obtain waivers of these loan
covenant violations. The loan agreements have restrictions on payment of
dividends, salaries and fees to the principals/shareholders of
Structural. Consulting fees of $225,000, primarily related to obtaining
the loan from the financial institution, were paid to an entity that has
a common equity interest holder with a shareholder of Structural. The
equity interest holder is also the chief executive officer of Structural.
This fee has been recorded as deferred financing fees and is being
amortized over the 3-year life of the loans.
The Company receives fees of $5,000 per month from Structural. Included
in the Company's investment in Structural is a $45,000 receivable due
from Structural for accrued fees. The net investment in Structural of
approximately $982,000, after deducting the fee receivable, differs from
the Company's 50% interest in the net equity of Structural totaling
$895,000. This difference, totaling $87,000, is the result of the
Company capitalizing direct costs it incurred for the purchase of its 50%
interest in Structural and a timing difference from when Structural
effectively acquired H&M and when the Company acquired its interest in
Structural for purposes of allocating net income. This difference is
being amortized over 15 years.
4. Note Receivable:
In conjunction with a failed acquisition of an entity in 1998, the
Company loaned $500,000 to this entity. The interest rate is 8%. A 637-
acre parcel of land and a building have been pledged as collateral on the
note. At December 31, 1999, the note balance had been reduced to
$100,000. The remaining balance is due June 30, 2000.
The Company loaned $50,000 to an unrelated entity. The interest rate is
12% and the principal plus interest is payable in full on March 31, 2000.
An interest in the underlying mortgage was assigned to the Company by the
entity's lender as collateral on the note. Subsequent to December 31,
1999, this note was repaid in full.
A related party note receivable of $85,000 is from an entity that is a
stockholder in the Company and the other 50% stockholder in Structural.
The interest rate is 9 %, with interest due monthly with the principal
due June 30, 2000. This note is collateralized by 10% of the entity's
common stock ownership of Structural and consulting fee payments of
$25,000 per month made to the entity by Structural.
5. Property and Equipment:
Property and equipment consists of the following at December 31, 1999:
<TABLE>
<CAPTION>
<S> <C>
Manufacturing equipment $ 74,494
Furniture and fixtures 74,555
Computer equipment 44,800
------------
193,849
Accumulated depreciation (141,785)
------------
$ 52,064
============
</TABLE>
Depreciation expense for the years ended December 31, 1999 and 1998 was
$40,720 and $92,949, respectively.
On March 31, 1999, the Company sold its land and building for $2,825,000,
which was greater than its net cost of approximately $2,640,000. In
conjunction with the sale, the purchaser assumed the Company's note
payable which is collateralized by the building, which balance was
approximately $1,857,000 on the date of the sale. The total proceeds to
the Company was approximately $883,000. The Company also signed a 5-year
lease totaling approximately $13,000 per month on the building after it
was sold. In conjunction with the sale, the Company will no longer
recognize rental income nor will it recognize depreciation expense
related to the building or general operating costs attributable to being
the owner of a building.
6. Notes Payable:
Included in notes payable are two insurance premium finance agreements
totaling $36,489. The agreements mature in May 2000 and April 2001 and
call for monthly payments of principal and interest of $2,585 and $2,492
with interest at 10.5% and 8.375%, respectively.
The following is a schedule of future principal payments as of
December 31, 1999:
<TABLE>
<CAPTION>
Year Ending December 31,
------------------------
<S> <C>
2000 $33,133
2001 27,775
2002 8,714
------------
69,622
Less current portion (33,133)
------------
$ 36,489
============
</TABLE>
7. Lease Commitments:
Office Lease - The Company leases office space, under a five-year
operating lease. Total rental expense was $131,500 for the year ended
December 31, 1999. The total minimum rental commitments at December 31,
1999 are as follows:
<TABLE>
<CAPTION>
<S> <C>
2000 $175,300
2001 175,300
2002 175,300
2003 175,300
2004 43,800
-------------
$ 745,000
=============
</TABLE>
8. Shareholders' Equity:
Stock Split - Subsequent to December 31, 1999, the Company's Board of
Directors approved a 2 for 1 reverse stock split. Accordingly, all
common stock reflected in the accompanying financial statements and notes
reflect this split.
Preferred Stock - The Company has the authority to issue 1,000,000 shares
of preferred stock. The Board of Directors has the authority to issue
such preferred shares in series and determine the rights and preferences
of the shares as may be determined by the Board of Directors. There were
no outstanding shares of preferred stock in 1999 or 1998.
Issuances of Common Stock - During 1999, the Company issued 66,666 shares
of common stock valued at $50,000 to an entity which has a common officer
with the Company for services provided in connection with the acquisition
of Structural (see Note 3). In addition to $55,000 in cash for
consulting services to a shareholder/director, the Company issued 75,006
shares of common stock to an entity owned by this shareholder/director
for consulting services valued at $51,087. During 1999, the Company
issued 133,334 shares of common stock for $100,000 to an entity that owns
50% of Structural.
Warrants - In conjunction with the initial public offering in 1996, the
Company issued 1,628,712 warrants. These warrants have an exercise price
of $7.50 per share and expire in the year 2001. None of these warrants
have been exercised.
Stock Option Plans - In 1997, the shareholders approved a stock option
plan authorizing options for 300,000 shares of the Company's common
stock. Under the terms of the plan, the exercise price of non-qualified
options will be the lesser of the book value per share of the common
stock as of the end of the Company's fiscal year immediately preceding
the date of such grant or 50% of the fair market value per share of the
common stock on the date of such grant. For incentive stock options, the
exercise price shall not be less than fair market value per share at the
date of such grant. Options shall expire on the date specified by the
Board but not more than 10 years from the date of grant for non-qualified
and incentive stock options and options granted to employees expire
90 days after termination. Following is a summary of activity under the
stock option plan for the years ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
-------------------- ----------------------
Weighted Weighted
Average Average
Number Exercise Number Exercise
of Shares Price of Shares Price
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Outstanding, beginning of
year 466,666 $1.165 66,666 $.660
Granted 194,000 .970 600,000 1.250
Exercised - - (200,000) 1.250
Expirations (66,666) .660 - -
---------- ---------- ---------- -----------
Outstanding, end of year 594,000 $1.160 466,666 $1,165
========== ========== ========== ===========
Vested Options 508,284 $1.235 466,666 $1.165
========== ========== ========== ===========
</TABLE>
Of the 194,000 options issued in 1999, 100,000 options were issued to
officers and directors of the Company and 94,000 were issued to employees
and unrelated parties for services. All options granted during 1998 were
to employees and directors.
If not previously exercised or forfeited, vested options outstanding at
December 31, 1999 will expire in the year ending December 31, 2000 at a
weighted average exercise price of $1.165 per share. The remaining
85,716 options will vest ratably each quarter over seven years and will
expire in February 2006 at a weighted average exercise price of $.705 per
share. At December 31, 1998, the weighted average remaining contractual
life of options outstanding was approximately 14 months.
Presented below is a comparison of the weighted average exercise price and
fair values of the Company's common stock on the measurement date for all
stock options granted to employees during 1999:
<TABLE>
<CAPTION>
Number of Exercise Fair
Shares Price Value
---------- -------- ------
<S> <C> <C> <C>
Market price equal to exercise price 100,000 $ .705 $ .705
Exercise price greater than market price 24,000 1.250 1.188
Exercise price greater than market price 70,000 1.250 1.235
-------- ------- --------
194,000 $1.070 $ 1.040
======== ======= ========
</TABLE>
Pro Forma Stock-Based Compensation Disclosures - The Company applies APB
Opinion 25 and related interpretations in accounting for its stock options
and warrants which are granted to employees. Accordingly, no compensation
cost has been recognized for grants of options and warrants to employees
since the exercise prices were not less than the market value of the
Company's common stock on the grant dates. Had compensation cost been
determined based on the fair value at the grant dates for awards under
those plans consistent with the method of SFAS No. 123, the Company's net
loss and EPS would have been increased to the pro forma amounts indicated
below.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------
1999 1998
---------- ---------
<S> <C> <C>
Net loss applicable to common shareholders:
As reported $(460,897) $(447,255)
Pro forma $(596,542) $(579,363)
Net loss per common shareholders:
As reported - basic and diluted $ (.33) $ (.40)
Pro forma - basic and diluted $ (.43) $ (.52)
</TABLE>
The fair value of each option granted in 1998 was estimated on the date of
grant, using the Black-Scholes option-pricing model with the following
weighted average assumptions:
<TABLE>
<CAPTION>
<S> <C> <C>
Expected volatility 125.3% 165.2%
Risk-free interest rate 5.3% 5.5%
Expected dividends - -
Expected terms (in years) 3.7 2.0
</TABLE>
9. Income Taxes:
There was no provision for income taxes for the years ended December 31,
1999 or 1998 due to net operating losses, and deferred tax assets being
offset by a valuation allowance.
The net deferred tax asset for the years ended December 31, are comprised
of the following items:
<TABLE>
<CAPTION>
1999 1998
---------- ---------
<S> <C> <C>
Deferred tax assets:
Options $ 20,000 $ -
Net operating loss carryforward 1,112,000 843,000
Other 37,000 37,000
---------- -----------
Gross deferred tax assets 1,169,000 880,000
Deferred tax liability:
Equity investment (12,000) -
Property and equipment (2,000) (65,000)
----------- ---------
Net deferred tax asset 1,155,000 815,000
Less deferred tax asset valuation
allowance (1,155,000) (815,000)
----------- ----------
Net deferred tax asset $ - $ -
=========== ==========
</TABLE>
Total income tax expense for 1999 and 1998 differed from the amounts
computed by applying the U.S. Federal statutory tax rates to pre-tax income
as follows:
<TABLE>
<CAPTION>
1999 1998
---------- ---------
<S> <C> <C>
Statutory rate (34)% (34)%
State income taxes, net of Federal
income tax benefit (4)% (4)%
Increase (reduction) in valuation
allowance related to of net
operating loss carryforwards
and change in temporary
differences 38% 38%
--------- ---------
- -
========= =========
</TABLE>
In 1999, the valuation allowance increased $344,000. At December 31, 1999,
the Company has net operating loss carryforwards of approximately
$2,980,000 available under provisions of the Internal Revenue Code to be
applied against future taxable income. These carryforwards are subject to
annual limitations on utilization and expire from December 31, 2010 through
December 31, 2018.
10. Major Customers:
The Company sells its products primarily to authorized dealers for resale
to municipal, county and state law enforcement agencies throughout the
United States. Approximately 2% of sales in 1999 and 1998 were to foreign
governments and agencies.
Percentage of sales to major domestic customers at December 31, are as
follows:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Government Customer:
U.S. Government Agency and
subcontract 23% 19%
Municipal law enforcement agency 20% 26%
Non-Governmental Customer 20% 49%
</TABLE>
11. Major Supplier Concentration:
The ballistic resistant products of the Company are primarily manufactured
with the raw materials Spectra 1000 woven fabric and Spectra Shield. These
two products are manufactured and distributed by one company only. As of
December 31, 1999 and 1998, Guardian Technologies International, Inc., owed
$72,700 and $80,600, respectively, to this company.
12. Fourth Quarter Adjustment:
During the fourth quarter of 1999, the Company recognized a loss of
approximately $267,000 on its equity in net earnings of Structural. This
loss was primarily the result of Structural revising its calculation for
profit on long-term contracts prior to the Company's fourth quarter.
13. Subsequent Events:
Subsequent to December 31, 1999, the Company granted 100,000 shares of
common stock valued at $98,000 to the directors of the Company for services
performed in fiscal 1999. The amount was recorded as an accrued liability
as of December 31, 1999 and will be recorded as an increase to common stock
and additional paid-in capital during the first quarter of fiscal 2000.
From January 1, 2000 through March 16, 2000, options for 424,000 shares of
common stock were exercised resulting in total proceeds of $530,000.
Subsequent to December 31, 1999, the Company sold 150,000 units for $1.50
each, totaling $225,000. Each unit is comprised of 2 shares of common
stock and four Class A, Class B, Class C, Class D, Class E, and Class F
warrants. The warrants have the following terms:
<TABLE>
<CAPTION>
Exercise Exercise
Warrant Price Period*
------- --------- ---------
<S> <C> <C>
Class A $.750 30 days
Class B $.875 60 days
Class C $1.000 90 days
Class D $1.125 120 days
Class E $1.250 150 days
Class F $1.375 180 days
</TABLE>
- --------------
* The exercise period begins the effective date of a registration statement
registering the underlying shares of common stock issuable upon exercise
of these warrants. Warrants must be exercised in alphabetical order by
warrant class. If any warrant is not exercised during the term of the
warrant by an individual warrant holder, all remaining classes of
warrants will be automatically expire.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
Date: April 14, 2000 By: /s/ J. Andrew Moorer
-----------------------------------
J. Andrew Moorer, Director, President
and Chief Executive Officer
In accordance with the Exchange Act of 1934, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
By: /s/ Oliver L. North Date: April 14, 2000
--------------------------------
Oliver L. North
Chairman of the Board and Secretary
By: /s/ J. Andrew Moorer Date: April 14, 2000
--------------------------------
J. Andrew Moorer
Director, President and
Chief Executive Officer
By: /s/ Herbert M. Jacobi Date: April 14, 2000
--------------------------------
Herbert M. Jacobi
Director
By: /s/ Kevin L. Houtz Date: April 14, 2000
--------------------------------
Kevin L. Houtz
Director
By: /s/ David W. Stevens Date: April 14, 2000
--------------------------------
David W. Stevens
Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOUND ON PAGES F1 THROUGH F7 OF THE COMPANY'S
FORM 10KSB FOR THE YEAR ENDED DECEMBER 31, 1999, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 191,690
<SECURITIES> 0
<RECEIVABLES> 185,279
<ALLOWANCES> 0
<INVENTORY> 158,745
<CURRENT-ASSETS> 1,960,109
<PP&E> 193,849
<DEPRECIATION> 141,785
<TOTAL-ASSETS> 1,960,109
<CURRENT-LIABILITIES> 362,030
<BONDS> 0
0
0
<COMMON> 2,763
<OTHER-SE> 4,660,908
<TOTAL-LIABILITY-AND-EQUITY> 1,960,109
<SALES> 1,100,076
<TOTAL-REVENUES> 1,100,076
<CGS> 936,652
<TOTAL-COSTS> 1,117,644
<OTHER-EXPENSES> 62,533
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 994
<INCOME-PRETAX> (825,076)
<INCOME-TAX> 0
<INCOME-CONTINUING> (825,076)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (825,076)
<EPS-BASIC> (0.62)
<EPS-DILUTED> (0.62)
</TABLE>
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the ____ day of ______________, 1999, at
Dulles, Virginia, between GUARDIAN TECHNOLOGIES INTERNATIONAL, INC., a
Delaware corporation ("Corporation" or "Company" or "Employer"), and J. ANDREW
MOORER ("Employee").
In consideration of the mutual covenants, agreements and provisions
contained in this Agreement, the parties agree as follows:
EMPLOYMENT
1.0 EMPLOYMENT. Employer employs Employee, and Employee accepts
employment as Employer's President and Chief Executive Officer, upon the terms
and conditions set forth herein.
2.0 TERM. This Agreement shall commence effective as of February 1,
1999, and shall continue in effect through December 31, 2001 (the "Employment
Period"); provided, however, that upon each anniversary date hereof, the
Employment Period shall automatically be extended for one additional year;
provided further, that in the event the Company elects to terminate this
Agreement without cause pursuant to Section 11.4 hereof, the Employment Period
shall be extended such that the remaining term of the Employment Period shall
be twenty-four (24) months from the date of such notice; and provided further,
if a change of control (as defined herein) of the Company shall have occurred
during the original or extended Employment Period, this Agreement shall
continue in effect for a period of twenty-four (24) months beyond the month in
which such change of control occurred.
3.0 CHANGE OF CONTROL. The term "Change in Control of the Company"
shall mean a change in control of a nature that would be required to be
reported in response to Item 5(f) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934 as in effect on the date
of this Agreement or, if Item 5(f) is no longer in effect, any regulations
issued by the Securities and Exchange Commission pursuant to the Securities
and Exchange Act of 1934 which serve similar proposes; provided that, without
limitation, such change in control shall be deemed to have occurred if and
when: (a) any "person" (as such term is sued in Sections 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934) is or becomes a beneficial owner,
directly or indirectly, of securities of the Company representing 25% or more
of the combined voting power of the Company's then outstanding securities, or
(b) a majority of the individuals who were members of the Board of Directors
of the Company immediately prior to the action of the shareholders of the
Company involving the election of directors or an action of the Board of
Directors without action by the Company's shareholders shall not constitute a
majority of the Board of Directors following such action.
4.0 COMPENSATION. For all services to be rendered by the Employee
pursuant to his duties set forth in Section 9.0 below, the Employee shall be
paid as compensation.
4.1. Base Salary. A base or fixed salary, payable pro rata not less
often than bi-weekly, in the following amounts for the periods stated:
<TABLE>
<CAPTION>
Period Annual Base Salary
------ ------------------
<S> <C>
Commencement to December 31, 1999 $90,000/year
January 1, 2000 to December 31, 2000 $105,000/year
January 1, 2001 to December 31, 2001 $120,000/year
</TABLE>
After December 31, 2001, such base or fixed salary shall increase, from time
to time, in accordance with the Company's regular administrative practices for
other salary increases applicable to executive employees of the Company but in
no event less than 10% per year during the term hereof. This base or fixed
salary shall be reviewed from time to time during the term of this Agreement
by the corporation's Board of Directors or Compensation and Benefits Committee
of the Board, and may be redetermined upon said review subject to the approval
of said Board of Directors or Committee and Employee.
4.2. Incentive Stock Options. The Company shall use its best
efforts to maintain an Equity Incentive Plan pursuant to which the Company
shall be authorized to issue Incentive Stock Options qualified under Section
422 of the Internal Revenue Code of 1986, as amended (the "Plan"). Employee
shall be eligible to participate in the Plan as an executive officer and key
employee of the Company and shall be granted and entitled to receive Incentive
Stock Options in accordance with a Formula Plan to be adopted by the Board of
Directors for executive officers of the Company, but in no event shall
Employee receive fewer than 50,000 incentive stock options per year during the
term hereof. All Incentive Stock Options granted and issued to Employee shall
be exercisable for a period of seven (7) years to purchase shares of the
Company's Common Stock at an exercise price equal to 100% of the fair market
value of the Company's Common Stock as more fully defined in the Plan, on the
date of grant. For each year during the term, the Company shall effect the
option grant effective as of the first day of each year, and the Options
granted for such year shall vest and become exercisable ratably at the end of
each calendar quarter during such year. Should Employee's employment with the
Company terminate prior to all of such Options vesting, a proportionate number
of such Options shall be deemed vested and exercisable up to the date of such
termination.
4.3. Incentive Compensation. In addition to other items of
compensation provided for herein, Employee shall be entitled to receive an
annual incentive award or bonus described in Appendix I hereto. Such
incentive compensation shall be payable, if at all, within 120 days following
the end of the Company's fiscal year.
4.4. Employee Benefit Plans. The Employee, his dependents and
beneficiaries, shall be entitled to participate in any pension, profit
sharing, medical reimbursement, insurance or other employee payment or benefit
plan of the Employer as may be in effect from time to time, subject to the
participation standards and other terms thereof, to the same extent as other
officers under the benefit practices of the Company. Without in any way
limiting the generality of the foregoing, it is agreed that, at a minimum,
Employee shall be entitled to inclusion, with his dependents and
beneficiaries, in the Company's health insurance, life insurance and
disability insurance programs, the expense of which shall be paid solely by
the Company; or, at the option of Employee, Employee may obtain for himself
and his dependents and beneficiaries independent health, life and disability
insurance policies, the cost of which shall reimbursed to the Employee by the
Company.
4.5. Cumulative Compensation. The compensation provided for in
Paragraphs 4.1 through 4.4 above, together with the perquisites set forth in
Section 6.0 below, are in addition to the benefits provided for upon
termination pursuant to Section 11.0 below.
4.6. Indemnification. Subject to applicable law, the Corporation
shall indemnify and hold Employee harmless from any and all loss, judgment or
claims that the Employee may suffer in the proper discharge of Employee's
duties hereunder, including, but not limited to, attorneys' fees and court
costs, to the full extent permitted by applicable law.
5.0 EXPENSES. During the term hereof, the Corporation will reimburse
the Employee for any reasonable out-of-pocket expenses incurred by the
Employee in performance of service for the Corporation under this Agreement
(e.g., transportation, lodging and food expenses incurred while traveling on
Corporation business) and any other expenses incurred by the Employee in
furtherance of the Corporation's business; provided, however, that the
Employee renders to the Corporation a complete and accurate accounting of all
such expenses.
6.0 PERQUISITES. During the period of employment, Employee shall be
entitled to perquisites, including, without limitation, an appropriate office,
secretarial and clerical staff, and fringe benefits accorded executives of
equal rank including, without limitation, payment for reimbursement of medical
expenses which are otherwise uninsured or unreimbursed, in each case at least
equal to those attached to his office on the date of this Agreement.
7.0 MINIMUM COMPENSATION. Nothing in this Agreement shall preclude the
Company from amending or terminating any employee benefit plan or practice or
the provision of certain perquisites; provided, however, that it is the intent
of the parties that the Employee shall continue to be entitled, during the
period of employment, to compensation, benefits and perquisites as set forth
above at least equal to those attached to his position on the date of this
Agreement. Nothing in this Agreement shall operate or be construed to reduce,
or authorize a reduction, without the Employee's written consent, in the level
of such compensation, benefits and perquisites.
8.0 VACATIONS. The Employee shall be entitled to a vacation with full
compensation equal to four (4) weeks each year; provided, however, that the
Employee's vacation will be scheduled at such time as will least interfere
with the business of the Employer. Attendance at a business or seminar is not
to be deemed a vacation; provided, however, that attendance at such meeting or
seminar shall be planned so as to least interfere with the business of the
Employer.
9.0 EMPLOYMENT. The Company hereby agrees to continue the Employee in
its employ, and the Employee hereby agrees to remain in the employ of the
Company, for the Employment Period as specified in Section 2.0, to exercise
such authority and perform such duties as are commensurate with the authority
being exercised and duties being performed by the Employee immediately prior
to the effective date of this Agreement, which services shall be performed at
the location where the Employee was employed immediately prior to the
Effective Date of this Agreement or at such other location as the Company may
reasonably require; provided that the Employee shall not be required to accept
a location which is unreasonable in the light of the Employee's personal
circumstances. The Employee agrees that during the Employment Period he shall
devote his substantially equivalent full business time to his executive duties
as described herein and perform such duties faithfully and efficiently.
10.0 PERFORMANCE. It is contemplated that during the period of
employment the Employee shall serve as an executive officer of the Company
with the office and title of President, reporting directly to and only to the
Board of Directors. At all times during the period of employment, the
Employee shall hold a position of responsibility and importance and a position
of scope, with the functions, duties and responsibilities attached thereto, at
least equal to in responsibility and importance and in scope to and
commensurate with his position described in general terms in this
Section 10.0.
11.0 TERMINATION.
11.1. During the period of employment, Employee may terminate
this Agreement without cause or for cause. For the purposes of this
Section 11.1, the term "cause" shall include the occurrence of any of the
following:
11.1.1. The breach or violation by the Company of any of the
terms of this Agreement;
11.1.2. Any significant change in position, duties and
responsibilities of the Employee to which the Employee does not consent;
11.1.3. Any move of the Company resulting in or any other
requirement that the Employee, without his consent, change his principal
residence;
11.1.4. In the event of a change in control as defined in
Section 3.0 hereof, any change in the circumstances of employment which the
Employee determines, in good faith, results in his being unable to carry out
the duties and responsibilities attached to the position and contemplated by
the definition of that position set forth in this Agreement.
11.2. In the event of an occurrence described in
subsections 11.1.1, 11.1.2 or 11.1.3 above, the Employee shall serve written
notice of such event upon the Company, setting forth in detail the
circumstances which the Employee has determined constitutes "cause" within any
of those definitions. In the event the Company should remedy or otherwise
cure the facts constituting the cause relied upon by the Employee within
thirty (30) days after such written notice, such fact or circumstance shall
not be deemed to constitute "cause" for which employment can be terminated
within the meaning of Section 11.1 above.
11.3. During the period of employment, the Corporation may
terminate this Agreement for cause and upon 30 days written notice and
opportunity to cure being given to Employee. For the purpose of this
Section 11.3, the term "cause" shall include the occurrence of any of the
following:
11.3.1. Employee breaches or violates any of the terms of
this Agreement;
11.3.2. Employee is convicted of any felony or is shown to
have engaged in any act of dishonesty or fraud upon the Corporation, any of
its affiliated companies, or any of its customers or clients;
11.3.3. Employee fails to devote his substantive full time,
attention and efforts to the business and affairs of the Corporation or its
affiliated companies;
11.3.4. Employee has been grossly negligent in the
performance of his employment duties or responsibilities.
11.4. During the period of employment, the Corporation may
terminate this Agreement without cause upon thirty (30) days' prior written
notice.
11.5. This Agreement shall also terminate upon the insolvency,
bankruptcy, dissolution, or liquidation of the Corporation or cessation of
business by the Corporation for at least thirty (30) consecutive days.
12.0 TERMINATION PAYMENTS. In the event of a Termination and subject to
the provisions of Sections 11.1.1, 11.1.2, 11.1.3 or 11.4 of this Agreement,
the Company shall pay to the Executive and provide him with the following:
12.1. During the remainder of the Employment Period, the Company
shall continue to pay the Executive his salary on a monthly basis at the same
rate as payable immediately prior to the date of Termination.
12.2. During the remainder of the Employment Period, the
Executive shall continue to be entitled to all benefits and service credit for
benefits under medical, insurance, split-dollar life insurance and other
employee benefit plans, programs and arrangements of the Company described or
referred to in Section 4.4 as if he were still employed during such period
under this Agreement.
12.3. If, despite the provisions of Paragraph 12.2 above,
benefits or the right to accrue further benefits under any stock option or
other incentive compensation arrangement described in Section 4.3 shall not be
provided under any such arrangement to the Executive or his dependents,
beneficiaries or estate because he is no longer an employee of the Company,
the Company shall, to the extent necessary, pay or provide for payment of such
benefits to the Executive or his dependents, beneficiaries or estate.
13.0 DISABILITY.
13.1. If the Employee is unable to perform the Employee's
services by reason of illness, physical or mental disability or other
incapacity, the Employee's regular compensation shall be continued until such
time as Employee begins receiving disability insurance benefits as a result of
such condition. Upon Employee receiving payments on account of the fringe
benefit program covering disability provided or paid for by the Corporation,
then the Employee's base salary, as defined above, will be reduced to the
extent of such entitlement and receipt.
13.2. If, because of illness, physical or mental disability or
other incapacity, Employee shall fail, for a period of 12 months during the
term hereof, to render the services provided for by this Agreement, or if
Employee contracts an illness or injury which will permanently prevent
performance by him of the services and duties provided for by this Agreement,
then the Employer, at its option, may terminate this Agreement by notice to
the Employee effective 30 days after the giving of such notice, after which no
additional compensation shall be due.
14.0 DEATH. In the event of the death of Employee during the term of
this Agreement, his employment hereunder shall terminate on the date of his
death. In the accounting between the Employer and the Employee's personal
representative, Employee's estate shall be due compensation under this
Agreement only through the end of the month in which his death occurred.
15.0 COMPETITION.
15.1. Employee covenants to and with the Employer, its
successors and assigns, that during the term of this Agreement and for a
period of twelve (12) months from the date of the termination of this
Agreement for any reason, he will not directly or indirectly, either as
principal, agent, manager, employee, owner, partner (dominant or otherwise),
stockholder, director or other officer of a corporation, creditor, consultant
or otherwise, solicit, attempt to obtain or assist any other person or entity
engage or become interested financially or other wise, in any business,
agency, trade or occupation the same as or similar to the business of the
Corporation or its affiliates; nor shall Employee, during the term of this
Agreement and for a period of twelve (12) months from the date of the
termination of this Agreement, consult or enter into any agreement or
arrangement with any other person, firm, corporation or entity to conduct any
research or development, nor shall Employee directly or indirectly conduct
such research or development on his own behalf, related to the discovery of
processes, inventions, improvements, developments or commercialization of any
device, apparatus or product the same as or competitive with a product
developed, produced or reduced to practice by the Corporation, unless Employee
shall have first obtained the Corporation's expressed written consent thereto.
Because of the nature of the business, the parties agree that it is reasonable
for the covenant to apply to the entire geographic area of the world. If the
geographic area is determined by a court to be overly broad in scope, it shall
be modified only to the extent necessary to bring it within the requirements
of the law and interpreted to give the Corporation the broadest protection
allowed by law.
15.2. In the event of a breach or threatened breach by Employee
of any provisions of this Section 15.0, the Corporation shall be entitled to
an injunction restraining it from the commission of such breach. Nothing
herein contained shall be construed as prohibiting the Corporation from
pursuing any other remedies available to it for such breach or threatened
breach, including the recovery of money damages. The covenants contained in
this Section 15.0 shall be construed as independent of any other provisions in
this Agreement; and the existence of any claim or cause of action of Employee
against the Corporation, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by the Corporation of said
covenants.
15.3. The covenants contained in this Section 15.0 shall
terminate and, upon termination, shall be unenforceable and of no further
legal force and effect, in the event the Corporation, or any successor to the
Corporation, becomes insolvent, is liquidated or ceases for any reason to
conduct business operations for a continuous period of at least
thirty (30) days.
15.4. The Corporation shall have the right to assign the
aforesaid covenants; and Employee agrees to remain bound by the terms of the
covenants to any and all subsequent purchasers and assignees of the assets and
business of the Corporation.
16.0 REGISTRATION RIGHTS.
16.1. No later than 90 days following the Event of Termination,
the Company shall prepare and file, at its sole cost and expense, a
Registration Statement registering for sale under the Securities Act of 1933,
as amended (the "Registration Statement" and "Securities Act," respectively),
all shares of the Company's Common Stock owned by Employee on the date of
termination and all shares of Common Stock of the Company issuable upon
exercise of any options, warrants or other convertible securities
beneficially-owned by Employee on the date of termination. In connection with
such registration, the Company shall (i) cause such registration to be
declared effective b6y the Securities and Exchange Commission within 120 days
of the date of termination, (ii) maintain the effectiveness of such
registration for a minimum period of 180 days and (iii) shall qualify the sale
of all securities owned by the Employee or purchasable upon exercise of
outstanding derivatives owned by Employee in such states an under such Blue
Sky regulations as Employee may reasonably request.
16.2. In the event the Company should default in any of its
obligations contained in this Section 16.0, and such default remains uncured
after thirty (30) days' written notice of such default from Employee, Employee
shall have the right and option to "put" to the Company and compel the Company
to purchase within thirty (30) days of demand all shares of Company Common
Stock owned by Employee and all options, warrants and other securities
convertible into or exercisable to purchase additional shares of Common Stock
owned by Employee on the date of termination. In the event Employee exercises
this put option, the Company shall pay to Employee the fair market value of
such securities on the date of termination. For the purposes of this
Agreement, the fair market value of derivative securities shall be deemed to
be the difference between the fair market value of the underlying shares of
Common Stock and the exercise price or conversion value of such derivative.
17.0 NON-INTERFERENCE WITH EMPLOYEES.
17.1. Employee covenants with the Corporation that employees of
or consultants to the Corporation and employees of and consultants to firms,
corporations or entities affiliated with the Corporation have, of necessity,
been exposed to and have acquired certain knowledge, understandings, and know-
how concerning the Corporation's business operations which is confidential
information and proprietary to the Corporation.
17.2. In order to protect the Corporation's confidential
information and to promote and insure the continuity of the Corporation's
contractual relations with its employees and consultants, Employee covenants
and agrees that for so long as Employee holds any position or affiliation with
the Corporation, including service to the Corporation as an officer, director,
employee, consultant, agent or contractor, and for a period of twelve (12)
months from the date Employee ceases to hold any such position or status with
the Corporation or otherwise becomes disaffiliated with the Corporation, he
will not directly or indirectly, or permit or encourage others to directly or
indirectly (i) interfere in any manner whatsoever with the Corporation's
contractual or other relations with any or all of its employees or
consultants, or (ii) induce or attempt to induce any employee or consultant to
the Corporation to cease performing services for or on behalf of the
Corporation, or (iii) solicit, offer to retain, or retain, or in any other
manner engage or employ the services of, any person or entity who or which is
retained or engaged by the Corporation, or any firm, corporation or entity
affiliated with the Corporation, as an employee, consultant or agent.
17.3. In the event any court of competent jurisdiction
determines or holds that all or any portion of the covenants contained in this
Section 17.0 are unlawful, invalid, or unenforceable for any reasons, then the
parties hereto agree to modify the provisions of this Section 17.0 if and only
to the extent necessary to render the covenants herein contained enforceable
and otherwise in conformance with all legal requirements.
18.0 CLIENTS AND CUSTOMERS.
18.1. Employee covenants with the Corporation that the clients
and customers of the Corporation, both actual and contemplated, constitute
actual and prospective business relationships which are proprietary to the
Corporation and comprise, in part, the Corporation's confidential information
and trade secrets.
18.2. In order to protect the Corporation's proprietary rights
and to promote and ensure the continuity of the Corporation's contractual
relations with its customers and clients, Employee covenants and agrees that,
notwithstanding the provisions of Section 15.1 hereof, and for so long as
Employee holds any position or affiliation with the Corporation, including
service to the Corporation as an officer, director, employee, consultant,
agent or contractor, and for a period of twelve (12) months from the date
Employee ceases to hold any such position or status with the Corporation or
otherwise becomes disaffiliated with the Corporation, he will not directly or
indirectly, or permit or encourage others to directly or indirectly
(i) interfere in any manner whatsoever with the Corporation's contractual or
prospective relations with any clients or customers, or (ii) induce or attempt
to induce any client or customer of the Corporation to cease doing business
with the Corporation, or (iii) solicit, offer to retain, or retain, or in any
other manner engage or enter into any business or other arrangement with any
of the Corporation's customers or clients to provide any services or products
to any of such customers or clients, except and unless such arrangement for
the provision of products or services is not in any way competitive with the
products or services actually provided by the Corporation to its clients or
customers.
18.3. In the event any court of competent jurisdiction
determines or holds that all or any portions of the covenants contained in
this Section 18.0 are unlawful, invalid or unenforceable for any reason, then
the parties hereto agree to modify the provisions of this Section 18.0 if and
only to the extent necessary to render the covenants herein contained
enforceable and otherwise in conformance with all legal requirements.
19.0 COVENANT TO RETAIN CONFIDENCES.
19.1. Employee understands that all information learned, known,
made, devised or developed concerning any of the Company's products and
activities, including, without limitation, any inventions, discoveries,
improvements, processes, formulas, computer programs (including their
structure, sequence, organization, coherence, look and feel), apparatus,
equipment, customer and client lists, marketing plans, mailing lists, art,
graphics, display, research, and the like used by the Corporation in
connection with its business constitutes the confidential information,
proprietary information and trade secrets of the Corporation. Employee
covenants and agrees that he will not (except as required in the course of his
position with the Corporation), during the term hereof or thereafter,
communicate or divulge to, or use for the benefit of himself or any other
person, firm, association, or corporation, without the consent of the
Corporation, any confidential information or trade secrets possessed, owned,
or used by the Corporation or its affiliates that may be communicated to,
acquired by, or learned of by the Employee in the course of or as a result of
his services with the Corporation. For the purposes of this Section 19.1,
confidential information of the Corporation shall not include (i) any
information developed by the Employee independently of services performed by
the Employee for the Corporation pursuant to this Agreement; (ii) any
information rightfully obtained by the Employee from a third party without
restriction; (iii) any information publicly available other than through the
fault or negligence of the Employee; (iv) any information disclosed by the
corporation to third parties without restriction; or (v) information already
known by the Employee prior to its disclosure by the Corporation.
19.2. Employee will not use in the course of Employee's
employment with the Corporation, or disclose or otherwise make available to
the Corporation, any information, documents or other items which Employee may
have received from any other person or entity (including any prior employer),
and which Employee is prohibited from so using, disclosing or making
available.
19.3. All records, files, memoranda, reports, price lists,
customer lists, drawings, plans, sketches, documents, prototypes, testing
data, equipment, electronically stored information on disk, tape or any other
medium or existing in computer memory transmitted by any means, including, but
not limited to, telephone or electronic data transmission and the like,
relating to the business of the Corporation or its affiliates, which Employee
shall use or prepare or come into contact with, shall remain the sole property
of the Corporation.
20.0 WORK PRODUCT.
20.1. All trade secrets, know-how, confidential information,
copyrightable material, inventions, discoveries, and improvements, including
computer programs (their structure, sequence, organization, coherence, look
and feel), whether patentable or unpatentable, copyrightable or
uncopyrightable, made, devised, discovered or reduced to practice by the
Employee, whether by himself or jointly with others, from the time of becoming
an employee of the Corporation until the termination of that status, shall be
deemed work for hire and shall be promptly disclosed in writing to the
Corporation and are to redound to the benefit of the Corporation and become
and remain its sole and exclusive property.
20.2. By executing this Agreement, Employee hereby transfers and
assigns to the Corporation, or persons, firms or corporations designated by
the Corporation, any or all of Employee's rights, title and interest in and to
any and all developments, inventions, computer programs, discoveries,
improvements, processes, devices, copyrights, patents and patent applications
therefore, and to execute at any and all times any and all instruments and do
any and all acts necessary or which the Corporation may deem desirable in
connection with conveying, transferring and assigning Employee's entire right,
title and interest in and to any inventions, discoveries, improvements,
computer programs, processes, devices, copyrights, patent applications
therefore or patents thereon in any way related to the technology or trade
secrets developed, discovered or reduced to practice by Employee during the
term of this Agreement, it being the express understanding and agreement of
the parties that any and all future developments, inventions and discoveries
of Employee during the term hereof shall be the property of the Corporation,
or its assigns.
21.0 PATENTS AND COPYRIGHTS.
21.1. Employer shall cause to be filed United States and foreign
patent and/or copyright applications on each invention deemed to be patentable
or copyrightable and embodied in any technology developed and reduced to
practice during the term hereof which inure to the Corporation by virtue of
the provisions of Section 20.0 hereof.
21.2. The Corporation shall forfeit patent rights or copyrights
to any patentable or copyrightable technology developed by Employee during the
term hereof in any jurisdiction in which it fails to file patent or copyright
applications after a timely request by Employee. Employer shall provide to
Employee a copy of each application filed, and within six (6) months
thereafter Employee shall designated what, if any, foreign countries he
desires applications to be filed. Patent or copyright prosecution and
maintenance shall be done by an attorney to be selected by the Corporation and
approved by Employee, which approval shall not be unreasonably withheld. All
reasonable expense of filing, prosecution and maintenance of domestic and
foreign patents or copyrights and patent or copyright applications shall be
borne by Employer.
21.3. Employer and Employee agree to forebear from, and not
permit others to make or permit any public disclosure of any of the patentable
matter prior to the application for a United States patent. All foreign
patent applications shall be made no later than one (1) year following the
date of the U.S. patent application.
21.4. All patents shall be applied for in the name of Employee,
as inventor, and shall be assigned to the Corporation or its assigns. All
copyrights shall be registered in the name of the Corporation. The Employee
shall, upon demand, execute and deliver to the Corporation or its assigns such
documents or assignments as may be deemed necessary or advisable by counsel
for the Corporation or its assigns for filing in the appropriate patent
offices to evidence the assignment of the patent rights hereby granted.
22.0 REPRESENTATIONS OF EMPLOYEE. The Employee represents that, to the
best of his knowledge and belief, neither his affiliation with the
Corporation, nor his holding any position as officer, director, Employee, or
consultant with the Corporation, nor his ownership of common stock in the
Corporation, nor his performing any other services for the Corporation
violates any presently existing, valid and enforceable contract, agreement,
commitment or other legal relationship between Employee and any other person
or entity.
23.0 ARBITRATION. All disputes, claims, controversies and differences
arising out of or relating to this Agreement, or the termination, breach or
validity thereof, shall be submitted, referred to and resolved by compulsory,
mandatory and binding arbitration in Phoenix, Arizona in accordance with the
Arbitration Rules of the American Arbitration Association relating to
commercial disputes. The determination of such arbitration proceedings shall
be binding upon the parties and their respective successors and assigns and
may be enforced by the prevailing party as a Final Judgment in any Court of
competent jurisdiction. In any such arbitration proceeding, the prevailing
party shall be entitled to an award for its arbitration costs, including
attorney's fees.
24.0 ATTORNEYS' FEES. In the event there is any litigation or
arbitration between the parties concerning this Agreement, the successful
party shall be awarded reasonable attorneys' fees and litigation or
arbitration costs, including the attorneys' fees and costs incurred in the
collection of any judgment.
25.0 NOTICES. All notices required or permitted hereunder shall be
sufficient if delivered personally or mailed to the parties at the address set
forth below or at such other address as either party may designate in writing
from time to time. Any notice by mailing shall be effective 48 hours after it
has been deposited in the United States certified mail, return receipt
requested, duly addressed and with postage prepaid.
26.0 PARTIAL INVALIDITY. If any provisions of this Agreement are in
violation of any statute or rule of law of any state or district in which it
may be sought to be enforced, then such provisions shall be deemed null and
void only to the extent that they may be in violation thereof, but without
invalidating the remaining provisions.
27.0 BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the respective parties hereto, their heirs, personal
representatives, successors and assigns; provided, however, that Employee may
not assign his employment hereunder, and any assignment by Employee in
violation of this Agreement shall vest no rights in the purported assignee.
28.0 WAIVER. No waiver of any breach of any one of the agreements,
terms, conditions or covenants of this Agreement by the Employer or the
Employee shall be deemed to imply or constitute a waiver of any other
agreement, term, condition or covenant of this Agreement. The failure of
either 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.
29.0 GOVERNING LAW. This Agreement and the rights and duties of the
parties shall be construed and enforced in accordance with the laws of the
State of Delaware.
30.0 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
of the parties hereto with respect to the subject matter hereof. There are no
representations, warranties, conditions or obligations except as herein
specifically provided. Any amendment or modification hereof must be in
writing.
IN WITNESS WHEREOF, the parties to this Agreement have duly executed it
on the day and year first above written.
EMPLOYER:
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
ATTEST:
By:
Secretary -------------------------------------
EMPLOYEE:
------------------------------------------
J. ANDREW MOORER
<PAGE>
OPTION
THIS OPTION is made and entered into this 19th day of February, 1999, by
and between J. Andrew Moorer ("Optionee"), and Oliver North or his assigns
("Optionor").
WITNESSETH:
WHEREAS, Optionor is the beneficial owner of 159,440 shares (the
"Shares") of Common Stock, $.001 par value ("Common Stock") of Guardian
Technologies International, Inc., a Delaware corporation (the "Company"); and
WHEREAS, Optionor desires to sell and Optionee desires to purchase the
Common Stock subject to the terms and conditions hereinbelow set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinbelow set forth, the parties agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions set forth in
this Option Agreement, Optionor hereby grants to Optionee the right and option
to purchase from Optionor the Common Stock for the option price set forth in
Paragraph 2 hereof.
2. OPTION PRICE AND TERM. The Option granted in Paragraph 1 above
shall be exercisable as follows:
(a) As to 100,000 shares of Common Stock, Optionee hereby
irrevocably and unconditionally agrees to exercise the option to purchase all
100,000 shares of Common Stock at an exercise price of $1.75 per share within
one hundred twenty (120) days of the date hereof.
(b) As to 59,440 shares of Common Stock, Optionee may exercise the
option to purchase the 59,440 shares of Common Stock at an exercise price of
$5.00 per share at any time and from time to time for a period of one (1) year
from the date hereof; provided, however, that Optionee shall not be obligated
to purchase such shares unless Optionor exercises the put option provided for
in Paragraph 5 hereof subject to the terms and conditions set forth therein.
3. TIME OF EXERCISE OF OPTION. This option may be exercised at any
time and from time to time commencing on the date of this Option (the
"Exercise Date"), and terminating on the dates set forth in Paragraph 2(a) and
(b) above. Following each termination date, the option herein granted with
respect to those Shares shall thereafter be unexercisable and of no further
legal force and effect. Upon termination of this Option, the shares of Common
Stock shall be released from any restriction or obligation under this
Agreement.
4. METHOD OF EXERCISE. The Option shall be exercised by written notice
by Optionee to Optionor at Optionor's principal place of business accompanied
by delivering to Optionor an executed Notice of Exercise of Option in the form
attached hereto as Exhibit A, and Optionee's check in payment of the option
price for the number of shares of Common Stock for which the Option is
exercised. Upon payment of the option price, Optionor shall tender to the
Company certificates representing the number of shares of Common Stock
purchased by Optionee pursuant to its exercise of the Option, such
certificates duly endorsed in blank or accompanied by duly-executed
Irrevocable Stock Powers; whereupon Optionor shall cause the Company to issue
in the name of Optionee certificates representing all of the shares of Common
Stock purchased by Optionee pursuant to exercise of such Options.
5. PUT OPTION. In the event the Market Price, as hereinafter defined,
of the shares of Common Stock of the Company is $5.00 per share or more for at
least fifteen (15) consecutive trading days (the "Minimum Price Condition"),
Optionor shall have the right and option to put to Optionee and require
Optionee to purchase from Optionor the 59,444 shares of Common Stock described
in Paragraph 2(b) above, at the put option price of $5.00 per share. Such put
option may be exercised, if at all, by Optionor serving written notice upon
Optionee within ten (10) days following the satisfaction of the Minimum Price
Condition; whereupon Optionee shall have a period of thirty (30) days from the
date of such written notice to tender to Optionor the aggregate put option
exercise price of $297,200 against delivery by Optionor to Optionee of
certificates representing the shares of Common Stock covered by the put
option. For purposes of this put option, "Market Price" shall mean the
average bid and ask prices of the Company's Common Stock on the over-the-
counter market as quoted on the Nasdaq Small Cap Market or any other quotation
service or exchange upon which such securities are traded. The put option
described herein shall terminate and be of no further force or effect one (1)
year from the date hereof. In the event Optionor exercises the put option
described herein and Optionee defaults or otherwise fails to purchase the
shares of Common Stock in accordance with the terms and conditions described
herein, then and in such event all outstanding and unexercised options granted
to Optionee pursuant to Paragraph 2 hereof shall be deemed null, void,
unenforceable and of no further legal force or effect.
6. ADJUSTMENTS. In the event the Common Stock shall be changed into
the same or different number of shares of any class or classes of stock,
whether by capital reorganization, reclassification or otherwise, or in the
event the Company shall at any time issue Common Stock or convertible
securities by way of dividend or other distribution on any stock of the
Company or subdivide or combine the outstanding shares of Common Stock, or in
the event of any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the Company as the result of any
consolidation or merger of the Company with or into another corporation, or in
case of any sale or conveyance to another corporation of the property of the
Company as an entirety or substantially as an entirety, then Optionee shall be
entitled to receive, upon valid exercise of the Option herein granted, such
numbers of shares of Common Stock or other securities into which the Common
Stock was changed or converted.
7. RESTRICTION ON TRANSFER. Until the Option granted to Optionee
hereunder has been exercised or expires in accordance with its terms,
Optionor, for himself, his successors and assigns, herewith covenants and
agrees that the Securities may not be sold, transferred, hypothecated,
encumbered, pledged, or otherwise disposed of by Optionor without the express
written consent of Optionee. Optionor agrees that the certificates
representing the Common Stock may contain the following restrictive legend in
conspicuous type:
The securities represented by this certificate are subject
to an Option. Any sale, transfer, encumbrance, pledge, or
hypothecation of these securities in contravention of the
rights granted to the Optionee are void and unenforceable.
8. PROXY. For so long as any of the Options granted herein are
outstanding and exercisable, Optionor hereby irrevocably constitutes,
designates and appoints Optionee to act as Optionor's true and lawful
attorney-in-fact and proxy to vote all of the Shares of the Common Stock
subject to the options herein at any meeting of the Shareholders. The
irrevocable grant of proxy herein is acknowledged to be coupled with an
interest in accordance with applicable law.
9. REPRESENTATIONS OF OPTIONOR. Optionor represents and warrants to
Optionee as follows:
(a) That the shares of Common Stock are validly issued, fully paid
and nonassessable and have been issued pursuant to all requisite action and
authority of the Board of Directors of the Company in accordance with all
legal requirements.
(b) That the shares of Common Stock are fully assignable by
Optionor to Optionee without restriction, except for restrictions on
transferability imposed by or on account of federal or state securities laws.
The shares of Common Stock are not subject to any agreement, covenant or
restriction imposed by or on account of any contract, agreement or by-laws of
the Company or to which Optionor or the Company may be bound.
(c) That the shares of Common Stock are free of all claim, lien,
security interest or encumbrance of any third party and, upon the exercise by
Optionee of the Option herein granted, will be assigned to Optionee free and
clear of any claims, liens or interests of third parties.
10. NOTICES. Whenever notice is called for by this Agreement, notice
shall be in writing, and shall be effective when deposited in the United
States mails, first class postage prepaid, addressed to the other party at the
address first set forth above. Either party may change his address by notice
to the other party as provided herein.
11. FAX/COUNTERPART. 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.
12. MISCELLANEOUS. This Agreement contains a complete expression of its
terms and shall not be subject to modification by any prior or contemporaneous
evidence. Optionee may not assign any of its rights pursuant to this
Agreement without the written consent of Optionor. This Agreement shall not
be modified except in a writing signed by both parties.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
OPTIONEE:
By:
------------------------------
Oliver North
OPTIONOR:
By:
------------------------------
J. Andrew Moorer
<PAGE>
<PAGE>
EXHIBIT A
GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.
PURCHASE FORM
Dated: ____________, _____
The undersigned hereby irrevocably elects to exercise the
attached Option to the extent of purchasing ________ shares of Common Stock
and hereby makes payment of $_____________ in payment of the Exercise Price
therefor.
-------------------------------
[Signature]
INSTRUCTIONS FOR REGISTRATION OF STOCK
-------------------------------
Name (please typewrite or print in
block letters)
-------------------------------
Address
-------------------------------
City, State, Zip
-------------------------------
Signature
------------------------------
ASSIGNMENT FORM
FOR VALUE RECEIVED, _____________________________ hereby sells, assigns and
transfers unto ______________________________ (Name, please typewrite or print
in block letters) at ______________________________________ (address) the right
to purchase Common Stock represented by this Option to the extent of
_______________ shares as to which such right is exercisable and does hereby
irrevocably constitute and appoint ________________________________, attorney,
to transfer the same on the books of the Company with full power of substitution
in the premises.
-------------------------------
[Signature]
Dated: ________________, ______
<PAGE>
PROMISSORY NOTE
$85,000.00 May 1, 1999
FOR VALUE RECEIVED, and intending to be legally bound, Taim Special Equities
III, an Oklahoma Limited Liability Company ("Debtor") hereby promises to pay
to the order of Guardian Technologies International, Inc. ("Holder"), the
principal amount of Eighty-Five Thousand Dollars ($85,000.00) subject to the
following terms and conditions:
1.) The principal amount of this Note shall bear interest at the rate of
nine percent (9.00%) per annum, simple interest, payable monthly, until the
principal amount hereof, together with all accrued and unpaid interest, has
been paid in full.
2.) Subject to the terms and conditions herein set forth, the total
outstanding principal amount hereof, together with all accrued and unpaid
interest shall be due and payable no later than December 31, 2000 (the
"Maturity Date"). Hereinafter, the total outstanding principal balance hereof,
together with any and all accrued and unpaid interest shall be referred to as
the "Loan Amount."
3.) Debtor may at any time prepay the entire unpaid principal of this
Note or any part thereof without additional interest or penalty. Any
prepayment in part shall be applied first to accrued but unpaid interest
hereunder, and second to installments of principal in the reverse order of
maturity.
4.) Payments of both principal and interest on this Note shall be made to
Holder in immediately available funds in lawful money of the United States.
5.) This Note is fully negotiable and may be assigned by the Holder.
Neither this Note nor the obligations of Debtor hereunder may be assigned or
delegated by Debtor without the prior written consent of Holder.
6.) If any payment shall not be paid in full when due, and shall continue
unpaid for a period of five (5) days thereafter, the entire unpaid amount of
principal, accrued interest and all other sums due and owing to Holder shall,
at the option of Holder become immediately due and payable without notice or
demand.
7.) The occurrence of any of the following events ("Events of Default")
with respect to Debtor, shall constitute a default hereunder: (a) if any of
principal or interest shall not be paid in full when due, and shall continue
unpaid for a period of five (5) days thereafter; (b) if a default shall occur
under any security agreement; or (c) if a default shall occur under any
covenant contained in any instrument relating to the rights of the Holder.
8.) Upon the occurrence of a default hereunder, then the entire principal
balance of this Note plus accrued interest and all other obligations of Debtor
to Holder, direct or indirect, absolute or contingent, now existing or
hereafter arising, shall, at the option of Holder, become immediately due and
payable without notice or demand, and Holder shall have all rights and
remedies provided under all applicable laws and shall be deemed to have
exercised the same immediately upon the occurrence of any such event without
notice or further action, irrespective of when any record of the same may
thereafter be noted by Holder. In addition, Holder has the right to seek
repayment of the Loan Amount in the form of consulting payments currently
being paid to the Debtor by H&M Steel, Inc. (H&M) or 500 shares of common
stock of Structural Holdings, Inc. (Structural) owned by Debtor, the value of
which is $85,000. H&M is a wholly-owned subsidiary of Structural. Structural
is owned equally by Debtor and Holder.
9.) Failure by Holder to declare a default hereunder shall not constitute
a waiver of any subsequent default. Debtor further promises to pay a
reasonable attorney's fee, court costs, and any other expenses, losses,
charges, damages incurred or advances made by Holder in protection of its
rights or caused by Debtor's default under the terms of this Note.
10.) If Holder retains an attorney for collection of this Note, or if any
suit or proceeding is brought for the recovery of all or any part of or for
protection of the indebtedness, or any collateral, or to enforce Holder's
rights under any security agreement or other collateral agreement, then Debtor
agrees to pay on demand all reasonable costs and expenses of the suit or
proceeding, or any appeal thereof, incurred by Holder, including, without
limitation, reasonable attorney's fees.
11.) The terms of this Note shall not be varied, altered or modified
except by a writing signed by Holder and Debtor.
12.) Debtor hereby waives presentment for payment or acceptance, demand
and protest, and notice of protest, dishonor and non-payment of this Note.
13.) Debtor acknowledges that this is not a consumer loan, but rather the
obligation set forth herein arises from a commercial transaction wherein full
consideration for said indebtedness and the confession of judgement herein
contained has been given and received.
14.) No delay on the part of Holder in exercising any power or right
under this Note shall operate as a waiver of the power or right, nor shall any
single or partial exercise of that power or right, preclude further exercise
of that power or right. The rights and remedies specified in this Note are
cumulative and not exclusive of any rights and remedies that the Holder may
otherwise possess.
15.) The provisions of this Note shall be severable, so that if any
provision hereof is declared invalid under the laws of any state where it is
in effect, or of the United States, all other provisions of this Note shall
continue in full force and effect.
16.) This Note shall be binding upon Debtor and its successors and
assigns, and shall inure to the benefit of and be enforceable by Holder, its
heirs, successors and assigns.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
undersigned has caused this Note to be executed on the date first above
written.
_______________________________________ __________________
TAIM Special Equities III DATE:
BY:
<PAGE>
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is entered into as of April
1, 1999 by and between Guardian Technologies International, Inc., a Delaware
corporation ("Guardian") and Structural Holdings, Inc., a Delaware corporation
("Structural").
In consideration of the mutual promises set forth herein, the sufficiency
of which is hereby acknowledged by each of the parties hereto, the parties
hereby agree as follows:
1. CONSULTING SERVICES. Guardian hereby agrees to provide and perform
for the benefit of Structural certain consulting services ("Services"), as
more fully set forth on Exhibit A attached hereto and incorporated herein by
this reference, or as may be requested by Structural from time to time and
described in a supplement to Exhibit A approved by each of the parties hereto
(a "Supplement"), and Structural hereby hires and engages Guardian to provide
the Services.
2. CONSIDERATION FOR SERVICES. As consideration for the Services,
Structural shall pay Guardian, beginning April 1, 1999 an amount equal to five
thousand dollars ($5,000) per month payable in advance on the first day of
each month. Should Stuctural Holdings and/or its affiliates acquire
additional companies, the monthy fee paid to Guardian will be increased by
mutual agreement of the parties executing this agreement.
3. COMPLETION OF TASKS; TERM OF AGREEMENT. The term of this Agreement
shall be effective as of April 1, 1999, and shall continue until December 31,
2003.
4. INDEPENDENT CONTRACTOR STATUS. The relationship of Consultant to
the Company is that of an independent contractor, and nothing herein shall be
construed or deemed as creating any other relationship. As an independent
contractor, Consultant shall have the sole responsibility for paying taxes,
workers compensation, employee benefits (if any), and all similar obligations,
and shall be charged with performing the Services and completing the Tasks in
the way that Consultant deems the most feasible or desirable in order to
accomplish the Tasks in the most efficient manner possible.
5. NOTICES, ETC. All notices, demands, and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(including facsimile or similar transmission) and mailed (by certified mail,
return receipt requested), sent, or delivered (including by way of overnight
courier service), (i) if to Structural, to 100 North Broadway, Suite 3000,
Oklahoma City, OK 73102, and in the case of facsimile transmission, to
telecopy no. (405) 272-0501, in each case to the attention of David Payne; and
(ii) if to Guardian, to 11 Sundial Circle, P.O. Box 3618, Carefree, AZ 85377,
Attn: J. Andrew Moorer, and in the case of facsimile transmission, to telecopy
no. (480) 488-2384; or, as to each party, to such other person and/or at such
other address or number as shall be designated by such party in a written
notice to the other party. All such notices, demands, and communications
shall be effective when sent; provided, however, that if sent by facsimile
transmission, notices, demands, and other communications shall be confirmed by
same day certified mail, return receipt requested.
6. AMENDMENTS, ETC. No modification, amendment, or waiver of any
provision of this Agreement shall be effective unless the same shall be in
writing and signed by each of the parties hereto. Any waiver of any provision
of this Agreement shall be effective only in the specific instance and for the
specific purpose for which given.
7. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding and agreement between the parties and supersedes all previous
understandings, agreements, communications, and representations, whether
written or oral, concerning the treatment of information and other matters to
which this Agreement relates.
8. NO WAIVER; REMEDIES. No failure on the part of any party to this
Agreement to exercise, and no delay in exercising, any right, power, or
privilege hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right.
9. SEVERABILITY. Any provision of this Agreement which is prohibited,
unenforceable, or not authorized in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition,
unenforceability, or non-authorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability, or legality of
such provision in any other jurisdiction.
10. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the state of Delaware.
12. CAPTIONS. The captions contained in this Agreement are for
convenience only and shall not affect the construction or interpretation of
any provisions of this Agreement.
13. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which when
taken together shall constitute one and the same instrument. One or more
counterparts of this Agreement may be delivered via telecopier with the
intention that they shall have the same effect as an original executed
counterpart hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
Guardian Technologies International, Inc., Structural Holdings, Inc.,
a Delaware corporation a Delaware corporation
By:__________________________________ By:___________________________
Its:_________________________________ Its:_______________________
<PAGE>
<PAGE>
EXHIBIT A
SERVICES
1. Corporate Finance
2. Capital Formation
3. Merger & Acquisition
<PAGE>
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is entered into as of
February 19, 1999 by and between Oliver L. North, an individual (North) and
Guardian Technologies International, Inc., a Delaware corporation
("Guardian").
In consideration of the mutual promises set forth herein, the sufficiency of
which is hereby acknowledged by each of the parties hereto, the parties hereby
agree as follows:
1. CONSULTING SERVICES. North hereby agrees to provide and perform for
the benefit of Guardian certain consulting services ("Services"), as more
fully set forth on Exhibit A attached hereto and incorporated herein by this
reference, or as may be requested by Guardian from time to time and described
in a supplement to Exhibit A approved by each of the parties hereto (a
"Supplement"), and Guardian hereby hires and engages North to provide the
Services.
2. CONSIDERATION FOR SERVICES. As consideration for the Services,
Guardian shall pay North an amount equal to five thousand dollars ($5,000) per
month payable in advance on the first day of each month. In addition,
Guardian shall issue North 4,167 shares of common stock per month (total of
50,000 shares). Guardian will be under no obligation to pay or reimburse
North for any additional services or for any costs or expenses incurred in
connection with the Services, except upon Guardian's prior written approval
thereof.
3. COMPLETION OF TASKS; TERM OF AGREEMENT. The term of this Agreement
shall be effective as of February 19, 1999, and shall continue until February
19, 2000.
4. INDEPENDENT CONTRACTOR STATUS. The relationship of Consultant to
the Company is that of an independent contractor, and nothing herein shall be
construed or deemed as creating any other relationship. As an independent
contractor, Consultant shall have the sole responsibility for paying taxes,
workers compensation, employee benefits (if any), and all similar obligations,
and shall be charged with performing the Services and completing the Tasks in
the way that Consultant deems the most feasible or desirable in order to
accomplish the Tasks in the most efficient manner possible.
5. NOTICES, ETC. All notices, demands, and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(including facsimile or similar transmission) and mailed (by certified mail,
return receipt requested), sent, or delivered (including by way of overnight
courier service), (i) if to Guardian, to 11 Sundial Circle, P.O. Box 3618,
Carefree, AZ 85377, and in the case of facsimile transmission, to telecopy no.
(480) 488-2384, in each case to the attention of J. Andrew Moorer; and if to
North, to 867 River Road, Bluemont, VA 20135, and in the case of facsimile
transmission, to telecopy no. (703) 444-7937, in each case to the attention of
Oliver L. North, or, as to each party, to such other person and/or at such
other address or number as shall be designated by such party in a written
notice to the other party. All such notices, demands, and communications
shall be effective when sent; provided, however, that if sent by facsimile
transmission, notices, demands, and other communications shall be confirmed by
same day certified mail, return receipt requested.
6. AMENDMENTS, ETC. No modification, amendment, or waiver of any
provision of this Agreement shall be effective unless the same shall be in
writing and signed by each of the parties hereto. Any waiver of any provision
of this Agreement shall be effective only in the specific instance and for the
specific purpose for which given.
7. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding and agreement between the parties and supersedes all previous
understandings, agreements, communications, and representations, whether
written or oral, concerning the treatment of information and other matters to
which this Agreement relates.
8. NO WAIVER; REMEDIES. No failure on the part of any party to this
Agreement to exercise, and no delay in exercising, any right, power, or
privilege hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right.
9. SEVERABILITY. Any provision of this Agreement which is prohibited,
unenforceable, or not authorized in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition,
unenforceability, or non-authorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability, or legality of
such provision in any other jurisdiction.
10. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the state of Delaware.
12. CAPTIONS. The captions contained in this Agreement are for
convenience only and shall not affect the construction or interpretation of
any provisions of this Agreement.
13. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which when
taken together shall constitute one and the same instrument. One or more
counterparts of this Agreement may be delivered via telecopier with the
intention that they shall have the same effect as an original executed
counterpart hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
Oliver L. North Guardian Technologies International, Inc.,
an individual a Delaware corporation
By:_________________________ By:__________________________________
Its:________________________ Its:_________________________________
<PAGE>
<PAGE>
EXHIBIT A
SERVICES
1. Corporate Strategy
2. Sales & Marketing
3. Armor Manufacturing
<PAGE>
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is entered into as of
December 31, 1998 by and between Redwood Microcap Fund Inc., a Colorado
corporation ("Redwood") and Guardian Technologies International, Inc., a
Delaware corporation ("Guardian").
In consideration of the mutual promises set forth herein, the sufficiency of
which is hereby acknowledged by each of the parties hereto, the parties hereby
agree as follows:
1. CONSULTING SERVICES. Redwood hereby agrees to provide and perform
for the benefit of Guardian certain consulting services ("Services"), as more
fully set forth on Exhibit A attached hereto and incorporated herein by this
reference, or as may be requested by Guardian from time to time and described
in a supplement to Exhibit A approved by each of the parties hereto (a
"Supplement"), and Guardian hereby hires and engages Redwood to provide the
Services.
2. CONSIDERATION FOR SERVICES. As consideration for the Services,
Guardian shall pay Redwood, an amount equal to fifty thousand dollars
($50,000). Guardian will be under no obligation to pay or reimburse Redwood
for any additional services or for any costs or expenses incurred in
connection with the Services, except upon Guardian's prior written approval
thereof.
3. COMPLETION OF TASKS; TERM OF AGREEMENT. The term of this Agreement
shall be effective as of January 1, 1999, and shall continue until December
31, 1999.
4. INDEPENDENT CONTRACTOR STATUS. The relationship of Consultant to
the Company is that of an independent contractor, and nothing herein shall be
construed or deemed as creating any other relationship. As an independent
contractor, Consultant shall have the sole responsibility for paying taxes,
workers compensation, employee benefits (if any), and all similar obligations,
and shall be charged with performing the Services and completing the Tasks in
the way that Consultant deems the most feasible or desirable in order to
accomplish the Tasks in the most efficient manner possible.
5. NOTICES, ETC. All notices, demands, and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(including facsimile or similar transmission) and mailed (by certified mail,
return receipt requested), sent, or delivered (including by way of overnight
courier service), (i) if to Guardian, to 11 Sundial Circle, P.O. Box 3618,
Carefree, AZ 85377, and in the case of facsimile transmission, to telecopy no.
(480) 488-2384, in each case to the attention of J. Andrew Moorer; and if to
Redwood, to 11 Sundial Circle, P.O. Box 3463, Carefree, AZ 85377, and in the
case of facsimile transmission, to telecopy no. (480) 488-2384, in each case
to the attention of John C. Power; or, as to each party, to such other person
and/or at such other address or number as shall be designated by such party in
a written notice to the other party. All such notices, demands, and
communications shall be effective when sent; provided, however, that if sent
by facsimile transmission, notices, demands, and other communications shall be
confirmed by same day certified mail, return receipt requested.
6. AMENDMENTS, ETC. No modification, amendment, or waiver of any
provision of this Agreement shall be effective unless the same shall be in
writing and signed by each of the parties hereto. Any waiver of any provision
of this Agreement shall be effective only in the specific instance and for the
specific purpose for which given.
7. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding and agreement between the parties and supersedes all previous
understandings, agreements, communications, and representations, whether
written or oral, concerning the treatment of information and other matters to
which this Agreement relates.
8. NO WAIVER; REMEDIES. No failure on the part of any party to this
Agreement to exercise, and no delay in exercising, any right, power, or
privilege hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right.
9. SEVERABILITY. Any provision of this Agreement which is prohibited,
unenforceable, or not authorized in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition,
unenforceability, or non-authorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability, or legality of
such provision in any other jurisdiction.
10. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the state of Delaware.
12. CAPTIONS. The captions contained in this Agreement are for
convenience only and shall not affect the construction or interpretation of
any provisions of this Agreement.
13. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which when
taken together shall constitute one and the same instrument. One or more
counterparts of this Agreement may be delivered via telecopier with the
intention that they shall have the same effect as an original executed
counterpart hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
Redwood Microcap Fund, Inc. Guardian Technologies International, Inc.,
a Colorado corporation a Delaware corporation
By:________________________ By:_______________________________________
Its:_______________________ Its:______________________________________
<PAGE>
<PAGE>
EXHIBIT A
SERVICES
1. Corporate Finance
2. Capital Formation
3. Merger & Acquisition
