INVENTORY TRANSFER
AGREEMENT,
GENERAL RELEASE AND COVENANT NOT
TO SUE
This Agreement (this “
Agreement ”) is made as of the 13th day of
September, 2006, by and among GVI Security Solutions, Inc., a
Delaware corporation (“ GVI ”), E&S
International Enterprises, Inc., a California corporation (“
E&S ”), SSC, Inc., a Delaware corporation
(“ SSC ”), and David Happe, an
individual (“ Happe ” and together with
E&S and SSC, the “ ESI Parties
”).
WITNESSETH
WHEREAS, GVI, SSC and E&S are parties to
that certain Alliance Agreement, dated as of May 5, 2005 (the
“ Alliance Agreement ”), pursuant to
which, among other things, GVI formed an alliance with SSC under
which SSC was to be responsible for the retail sale and
distribution of consumer security products licensed by the GVI,
distributed by or on behalf of GVI, or manufactured on behalf of
the GVI;
WHEREAS, pursuant to the Alliance Agreement, GVI
entered into Subscription Agreements with each of ESI and Happe
(collectively, the “ Subscription Agreements
” ), pursuant to which, among other things, ESI and
Happe were entitled to be issued up to an aggregate of 3,000,000
shares of the common stock of GVI (“ Common
Stock ”) upon the occurrence of certain
events;
WHEREAS, prior to the date hereof, ESI and Happe
have been issued an aggregate of 750,000 shares of Common Stock
pursuant to the terms of the Subscription Agreements;
WHEREAS, GVI on the one hand, and the ESI
Parties on the other hand, dispute the amounts due to SSC under the
Alliance Agreement (including without limitation, disputes
pertaining to the responsibility for freight costs pertaining to
goods purchased by SSC, and adjustments to the markup on purchases
that GVI had been receiving from SSC), and the respective
obligations of each of the parties thereunder;
WHEREAS, the parties desire to terminate the
Alliance Agreement and resolve any controversy between them upon
the terms set forth in this Agreement; and
WHEREAS, capitalized terms used but not defined
herein shall have the meanings set forth in the Alliance
Agreement.
NOW, THEREFORE, in consideration of the
foregoing, of the mutual promises, releases, representations,
covenants and obligations hereinafter set forth and for other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. Inventory Transfer .
(i) GVI hereby agrees to transfer all of its right,
title and interest in and to the inventory identified on Schedule 1
hereto (the “ Inventory ”) to SSC as
provided below. GVI shall make the
Inventory available to SSC for inspection (the “
Inspection ”) by a representative of SSC
during normal business hours at its warehouse located at 2801 Trade
Center Drive, Carrolton Texas (the “ GVI
Warehouse ”) until the close of business on
September 13, 2006. Upon its completion of the Inspection, SSC
shall promptly, and in no event later than the close of business on
September 14, 2006, notify GVI in writing of any material
inconsistency between Schedule I hereto and the Inventory located
at the GVI Warehouse (any such inconsistency shall consist solely
of missing or visibly damaged items, a “Deficiency”),
which shall be the sole purpose of the Inspection. In the event
that SSC provides GVI with any such written notice of Deficiency,
SSC shall have no obligation to cause the Inventory to be shipped
at GVI’s expense to the SSC Warehouse (as defined below)
until such Deficiency has been cured by GVI. In the event SSC has
not caused the Inspection to be conducted by the close of business
on September 13, 2006, SSC shall be deemed to have waived its
rights of inspection hereunder, and GVI shall thereafter, at
GVI’s own expense, be entitled to ship the Inventory to a
“Top Gun” warehouse designated by SSC located in the
State of California (the “ SSC Warehouse
”). In the event that SSC conducts the Inspection and does
not provide GVI with any notice of Deficiency as set forth in this
Section 1(i), SSC shall cause the Inventory to be shipped to the
SSC Warehouse at GVI’s expense by a carrier selected by SSC,
which shall be reasonably acceptable to GVI, no later than the
close of business on September 15, 2006; in the event that SSC
fails to cause the Inventory to be removed from the GVI Warehouse
by such time, GVI shall thereafter, at GVI’s own expense, be
entitled to ship the Inventory to the SSC Warehouse. SSC shall take
title to the Inventory (and risk of loss shall pass to SSC) only
upon the removal of the Inventory from the GVI Warehouse for
delivery to the SSC Warehouse by SSC’s carrier or GVI’s
carrier, as applicable.
(ii) SUBJECT TO THE PRECEDING PARAGRAPH, THE ESI
PARTIES REPRESENT THAT THEY HAVE HAD THE OPPORTUNITY TO INSPECT AND
ARE FULLY FAMILIAR WITH THE INVENTORY AND HEREBY COVENANT AND AGREE
THAT THEY ACCEPT THE CONDITION OF THE INVENTORY “AS
IS” AND “WHERE IS” .
EXCEPT AS SET FORTH IN THIS AGREEMENT, GVI HAS NOT MADE, AND IS NOT
WILLING TO MAKE, ANY REPRESENTATIONS OR WARRANTIES AS TO THE
PHYSICAL CONDITION OR WORKING ORDER OF THE INVENTORY OR THE INCOME
POTENTIALLY TO BE DERIVED FROM THE SALE OF THE INVENTORY.
GVI EXPRESSLY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE
WITH RESPECT TO THE INVENTORY. NEITHER GVI NOR ANY OF ITS
SUBSIDIARIES ARE, NOR WILL ANY OF THEM BE, LIABLE OR BOUND IN ANY
MANNER BY EXPRESS OR IMPLIED WARRANTIES, GUARANTEES, STATEMENTS,
PROMISES, REPRESENTATIONS OR INFORMATION PERTAINING TO THE
INVENTORY, MADE OR FURNISHED BY ANY AGENT, EMPLOYEE OR OTHER PERSON
REPRESENTING OR PURPORTING TO REPRESENT GVI, UNLESS SUCH ARE
EXPRESSLY AND SPECIFICALLY SET FORTH HEREIN.
2. Termination of Alliance Agreement
. Each of the parties hereto hereby
agrees that the Alliance Agreement and the respective obligations
of the parties thereto thereunder are hereby terminated, and that
following the execution of this Agreement, the Alliance Agreement
shall be of no further force or effect. Without limiting the
generality of the preceding sentence, the parties agree and
acknowledge that following the execution of this Agreement neither
GVI nor any of its subsidiaries shall have any obligation to accept
returns of any Products (including GVI Products) distributed or
sold by the ESI Parties under the Alliance Agreement or otherwise.
The parties further acknowledge and agree that neither ESI nor
Happe shall be entitled to be issued any additional shares of
Common Stock under the Subscription Agreements, which shall
otherwise remain in effect to the extent provided therein, and that
the Warrant to purchase GVI common stock issued to ESI under the
Alliance Agreement shall continue to be enforceable in accordance
with its terms.
3. Releases and Covenants Not to Sue by the
Parties .
(a) Release and Covenant Not to Sue by the ESI
Parties . As of the
Release Effective Time (defined below), each of the ESI Parties on
their behalf and on behalf of any and all entities controlled by
them, voluntarily releases and forever discharges GVI and each of
its subsidiaries and their respective affiliates, directors,
officers, employees, shareholders, agents and representatives, and
each of their successors and assigns (the “ GVI
Releasees ”) from, and covenants not to sue or
proceed against (or to encourage or induce any other person or
entity to sue or proceed against) any of the GVI Releasees on the
basis of, any and all claims, contentions, rights, debts,
liabilities, demands, accounts, reckonings, obligations, duties,
promises, costs, expenses (including, but not limited to,
attorneys’ fees), liens, damages, losses, actions, and causes
of action, of any kind whatsoever (hereinafter referred to as
“ Claims ”) whether due or owing in the
past, asserted or not, present or future and whether based upon
contract, tort, s
