1
EXHIBIT 10.33
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is entered into this 24 day of
August, 1998, by and among JOE'S DIRECT, INC., an Oregon corporation ("Buyer");
and ATHLETICA, INC., an Oregon corporation ("Athletica"), GRAVITY GAMES, INC.,
an Oregon corporation ("Gravity Games") and TS HOLDING, INC., an Oregon
corporation ("TS") (Athletica, Gravity Games and TS are sometimes referred to
individually as "Seller" and collectively as "Sellers") and Xxxxxxx X. Xxxxx and
Xxxxxxx Xxxxx (collectively, "Shareholders").
RECITALS:
A. Sellers are engaged in the business of operating a multi-title
catalog company focusing in outdoor related leisure activities. Athletica, TS
and Gravity Games collectively publish six separate catalogs related to outdoor
leisure activities (such business as conducted by Sellers or any Seller, as the
context requires, is hereinafter referred to as the "Business").
B. Subject only to the limitations and exclusions contained in
this Agreement, and on the terms and conditions hereinafter set forth, Sellers
wish to sell and Buyer wishes to purchase the assets of Sellers that relate to
the Business.
C. Shareholders are the majority stockholders of Sellers, except
for Gravity Games.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing Recitals and
the agreements set forth herein, the parties agree as follows:
ARTICLE 1. - SALE OF ASSETS
1.1 ASSETS. At the Closing (as hereinafter defined), Sellers
shall sell, convey, transfer, assign and deliver to Buyer, and Buyer shall
purchase and acquire from Sellers, upon and subject to the terms and conditions
of this Agreement, all right, title and interest of Sellers in and to the
following, which, taken together and in the aggregate, are hereinafter referred
to as the "Assets":
(a) All of Sellers' fixed assets (the "Fixed Assets"),
including without limitation, machinery, equipment, tools,
tooling, software, computer hardware, storage media, electronic
devices, designs, drawings, schematics, blueprints,
1
2
patterns, furniture, fixtures, leasehold improvements, vehicles,
accessories, and other personal property listed on Schedule
1.1(a) hereto, together with any replacements of or additions to
these items made in the ordinary course of business before the
Closing Date (as hereinafter defined).
(b) All of Sellers' accounts receivable on the Closing
Date (the "Accounts Receivable"), including without limitation,
all of the Accounts Receivable listed on Schedule 1.1(b) hereto
which remain uncollected on the Closing Date.
(c) All of Sellers' inventories of goods held by Sellers
on the Closing Date (i) as raw materials, (ii) as work in
process, (iii) for use or consumption in the production of
finished goods, and (iv) as finished goods (the "Inventory"),
including without limitation, the inventories listed on Schedule
1.1(c) hereto.
(d) All of Sellers' prepaid expenses such as security
deposits, utilities, rent and the like (the "Prepaid Expenses"),
including without limitation, the prepaid expenses listed on
Schedule 1.1(d) hereto.
(e) All of Sellers' cash, investment in stocks, bonds and
other marketable securities, except for those held by one of the
Sellers in another Selling entity.
(f) All of Sellers' sales literature, files, records and
customer lists.
(g) All of Sellers' technology and intellectual property
(the "Intellectual Property")listed on Schedule 1.1(g);
information relating to processes and know how used or held for
use in the Business; the names and assumed business names of the
Sellers and all registrations of, goodwill associated with and
rights to manufacture, sell, market and dispose of products
relating to the foregoing.
(h) Those real estate leases, equipment leases, purchase
contracts, sales contracts, pending catalog orders and other
agreements of any nature whatsoever to which any Seller is a
party or under which any Seller has or shall have any rights or
by which any Seller or any of the Assets are bound (the
"Contracts"), which are listed on Schedule 1.1(h) hereto or to
which any Seller becomes a party in the ordinary course of
business subsequent to the date hereof and prior to the Closing
Date and which Buyer elects to assume at the Closing (the
"Assumed Contracts").
(i) All of Sellers' licenses, permits, regulatory
approvals, franchises and authorizations (the "Permits") listed
on Schedule 1.1(i) hereto.
2
3
(j) All of Sellers' insurance policies ("Insurance
Policies") listed on Schedule 1.1(j) hereto.
(k) All other properties, rights and assets of Sellers
relating to the Business, whether tangible or intangible,
absolute, contingent or otherwise, in addition to those listed in
(a) through (j) above, except the Excluded Assets specified in
Section 1.2.
1.2 EXCLUDED ASSETS. The assets of Sellers listed in Schedule 1.2
(collectively, the "Excluded Assets") shall be excluded from the sale and
purchase under this Agreement.
ARTICLE 2. - ASSUMPTION OF LIABILITIES
2.1 ASSUMPTION OF LIABILITIES. At the Closing, Sellers shall
transfer and assign to Buyer, and Buyer shall assume and agree to pay, perform
and discharge all liabilities and obligations of Sellers which are specifically
set forth on Schedule 2.1, except any such liabilities and obligations
extinguished prior to the Closing Date (collectively, the "Assumed
Liabilities").
2.2 EXCLUDED LIABILITIES. Except for the Assumed Liabilities
Buyer does not assume or agree to assume or pay any obligation, liability,
indebtedness or commitment of any Seller known or unknown, absolute or
contingent, due or to become due and Seller shall pay, indemnify and hold Buyer
harmless for all such liabilities.
ARTICLE 3. - PURCHASE PRICE
3.1 PURCHASE PRICE. The purchase price (the "Purchase Price") for
the Assets is $5,500,000 subject to adjustments as provided in Article 4 below.
3.2 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid
as follows:
(a) $450,000 in cash at closing, of which $60,000 shall be
paid to Xxxxx in consideration of his non-competition agreement
and $40,000 shall be paid to Xxxxx in consideration of his
non-competition agreement, and the balance shall be paid to the
Sellers in accordance with the allocation set forth in Schedule
3.2(f).
(b) $550,000 in cash on or before the earlier of December
1, 1998, shall be paid to the Sellers in accordance with the
allocation set forth in Schedule 3.2(f).
(c) A credit against the portion of the Purchase Price
paid in shares of G. I. Joe's, Inc. common stock in the amount of
the Assumed Liabilities as finally determined by the audit
provided in Section 4.1 below.
3
4
(d) The balance of the Purchase Price as finally
determined in accordance with Article 4, less the credit set
forth in Section 3.2(c) shall be paid in shares of G. I. Joe's,
Inc. common stock which shall be issued to Sellers in accordance
with the allocation set forth in Schedule 3.2(f) and delivered to
Sellers in accordance with the schedule of payments set forth on
Schedule 3.2(d); provided however, that such shares of stock
shall be subject to the Registration Rights Agreement from the
Closing Date. The shares of G. I. Joe's, Inc., common stock shall
be valued at $11.00 per share, or the actual initial public
offering ("IPO") price for G. I. Joe's, Inc. common stock if the
IPO price is less than $8.80 per share. All of the shares of G.
I. Joe's, Inc. common stock due to Sellers under this Agreement,
subject to adjustment under Article 4, shall be issued to Sellers
and held in escrow to be distributed to Sellers in accordance
with the terms of this Agreement.
(e) The cash and stock paid by Buyer to Sellers hereunder
shall be allocated between the Sellers in accordance with a
schedule to be provided by Sellers on or before the Closing Date
and attached to this Agreement as Schedule 3.2(f).
3.3 ALLOCATION OF PURCHASE PRICE. Buyer and Seller shall allocate
the Purchase Price among the Assets, and such allocation shall be attached as a
schedule to an Addendum to this Asset Purchase Agreement at Closing. Sellers and
Buyer will comply fully with the requirements of Section 1060 of the U.S.
Internal Revenue Code of 1986, as amended, and the regulations thereunder
relating to the allocation rules for certain applicable asset acquisitions, and
will use the allocation agreed to by the parties as the basis for completing
Treasury Form 8594.
3.4 SECURITY INTEREST. Buyer grants to Sellers a security
interest in all of the Assets to secure payment of the balance of the cash
portion of the Purchase Price due on December 1, 1998. Buyer shall execute and
deliver to Sellers at Closing, UCC financing statements, the form of which shall
be reasonably satisfactory to Sellers, which may be filed by Sellers in order to
perfect their security interest hereunder.
ARTICLE 4 - ADJUSTMENT TO PURCHASE PRICE
4. ADJUSTMENT TO PURCHASE PRICE. The Purchase Price shall be adjusted as
follows:
4.1 CURRENT AND FIXED ASSET VERIFICATION. Within 45 days after
closing Xxxxxx Xxxxxxxx, LLP shall prepare an inventory count and verify the
existence of the current and fixed assets, as of July 31, 1998 (the "Asset
Verification"). The inventory of the Sellers shall be valued at cost, and any
damaged, obsolete and unsaleable items of inventory shall be excluded. The fixed
assets shall be valued at cost, net of depreciation and amortization allowances.
4
5
4.2 INCREASED NET WORTH. If the Asset Verification shows a value
for current assets (cash, inventory, catalogs and prepaid expenses) and fixed
assets in excess of $600,000, the Purchase Price shall be increased in the
amount of the excess and added to the balance payable under Section 3.2(e).
4.3 DECREASED NET WORTH. If the Asset Verification shows a value
for current assets and fixed assets less than $600,000, the Purchase Price shall
be decreased in the amount of the deficit and deducted from payment under
Section 3.2(e).
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF SELLERS
Except as otherwise described in Schedule 5 attached, Sellers and
Shareholders represent and warrant to Buyer as follows:
5.1 ORGANIZATION AND GOOD STANDING. Each Seller is a corporation
duly incorporated and organized and validly existing under the laws of the state
of Oregon. Each Seller is duly licensed or qualified as a foreign corporation,
in each other jurisdiction, if any, in which the nature of the business
transacted by it or the character of the properties owned or leased by it make
such licensing or qualification necessary. Each Seller has full power and
authority to own, lease and operate its properties, to carry on its business in
the manner and the places where such properties are now owned, leased or
operated and such business is now conducted and to execute, deliver and fully
perform its obligations under this Agreement and under each other agreement,
instrument, certificate and document to be executed and delivered pursuant
hereto by such Seller.
5.2 AUTHORIZATION; APPROVALS. The execution, delivery and
performance of this Agreement and each other agreement, instrument, certificate
and document to be executed and delivered pursuant hereto by Sellers have been
duly authorized by all requisite action, will not violate any provision of law
and will not violate any order of any court or other agency, the articles of
incorporation or bylaws of any corporate Seller, or any provision of any
indenture, agreement or other instrument to which any Seller is, or any Seller's
properties or assets are, bound or affected, or conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any such indenture, agreement or other instrument or result in
5
6
the creation of any lien, charge or encumbrance of any nature whatsoever upon
any of the Assets. No registration or filing with, or consent or approval of, or
other action by, any federal, state or other governmental agency or
instrumentality is or will be necessary for the valid execution, delivery and
performance by Sellers of this Agreement and each other agreement, instrument,
certificate and document to be executed pursuant hereto by Sellers.
5.3 VALIDITY. This Agreement and each other agreement and
instrument executed and delivered herewith by Sellers has been duly executed and
delivered by each Seller and constitutes the legal, valid and binding obligation
of each Seller, enforceable in accordance with its terms, except as
enforceability may be limited or effected by applicable bankruptcy, insolvency,
reorganization or other laws of general application relating to or affecting the
rights or creditors and except as enforceability may be limited by rules of law
governing specific performance, injunctive relief or other equitable remedies.
When the Xxxx of Sale and Assignment Agreement (as defined in Section
8.2(h)(iii) has been executed and delivered by Sellers in accordance with this
Agreement, each will constitute the legal, valid and binding obligation of
Sellers, enforceable in accordance with its terms, subject to the exceptions as
to enforceability as set forth above.
5.4 TITLE TO THE ASSETS. The Assets constitute all of the
material properties, assets and business of Sellers, of every kind and
description, tangible and intangible, real, personal, or mixed, wherever
located, except the Excluded Assets. Except for software licenses, Sellers have
good and marketable title to all of the Assets and have the ability and the
right to convey, and shall on the Closing Date convey to Buyer, good and
marketable title to all of the Assets free and clear of any mortgages, pledges,
liens, encumbrances, charges, or title retention, conditional sale or other
security arrangements or agreements of any nature whatsoever. To the best of
Sellers' and Shareholders' knowledge, all of the Assets are in usable condition
in the ordinary course of the Business conducted by Sellers (and to be conducted
by Buyer), conform with all applicable ordinances, regulations, zoning,
environmental and other laws and do not conflict with any property or property
rights of others. No person or entity, other than Sellers and the equipment
lessors listed on Schedule 1.1(h), owns any equipment or other Assets or
property used or held for use in the conduct of the Business or necessary to the
operation of the Business.
5.5 FINANCIAL STATEMENTS. Sellers have furnished Buyer with
internally prepared balance sheets of Sellers as of July 31, 1998, (the
"Financials"). The Financials fairly present the financial position of Sellers
as of those dates and the results of operations, and have been prepared in
accordance with generally accepted accounting principles consistently applied,
except as noted therein. Sellers have also furnished Buyer with an unaudited
balance sheet of Sellers as of June 15, 1998, and the related operating
statements for the period then ended (the "Interim Statements").
5.6 SUBSEQUENT EVENTS. There has not been with respect to any
Seller, since July 31, 1998:
6
7
(a) Any material adverse change in the financial condition
of any Seller from that shown on the Interim Statements;
(b) Any damage or loss, whether covered by insurance or
not, materially and adversely affecting the Business, property,
assets or prospects of any Seller;
(c) Any mortgage, pledge or lien placed on any of the
Assets which will not be released at closing;
(d) Any sale, assignment or transfer of any of the Assets,
other than sales in the ordinary course of business;
(e) Any other event or condition materially and adversely
affecting the results of operations of the Business or financial
condition or prospects of any Seller.
5.7 NO UNDISCLOSED LIABILITIES. No Seller has any material
obligations or liabilities of any kind, fixed, accrued, absolute, contingent or
otherwise and whether due or to become due (including without limitation,
liabilities as guarantor or otherwise) which have not been disclosed to Buyer
and would adversely affect in any material respect the Assets or any Seller's
ability to transfer any of the Assets to Buyer on the terms and conditions set
forth herein. Sellers and Shareholders do not know of any material obligation
which adversely affects the Assets which has not been specifically disclosed in
this Agreement or in an exhibit or schedule delivered to Buyer under this
Agreement.
5.8 INVENTORIES. All items in the Inventory are the property of
Sellers and no item in the Inventory has been pledged as collateral or is held
by any Seller on consignment by others. All items in the Inventory are valued at
cost. All items in the Inventory are fit and suitable for the purposes for which
they were purchased or manufactured and to the best of Sellers knowledge are
usable and/or salable in the ordinary course of business.
5.9 INTELLECTUAL PROPERTY. Section 1.1(g) and Schedule 1.1(g)
hereto contain a complete and accurate list of the Intellectual Property owned
by each Seller. No licenses, sublicenses, covenants or agreements have been
granted or entered into by any Seller in respect of any such Intellectual
Property. Each Seller owns the entire right, title and interest in and to any
and all such Intellectual Property, except for rights held under software
licenses to Sellers as identified on Schedule 1.1(g). Each Seller owns its
Intellectual Property free and clear of all liens and encumbrances of any kind
or nature, and none of the Intellectual Property is currently being challenged
in any way, has lapsed or expired, or is involved in any pending or to Sellers
knowledge threatened interference proceeding. To the best of Sellers' and
Shareholders' knowledge, no Seller has made use of any Intellectual Property in
which any present or past employee of any Seller has or has claimed an interest,
and Sellers and Selling Shareholders do not know of any facts that could
7
8
reasonably be expected to give rise to such a claim. Except for the Intellectual
Property listed on Schedule 1.1(g), there are no patents, trademarks, service
marks, trade names, brand names, copyrights, licenses or other intellectual
property rights that are required for the conduct of the Business as currently
conducted. To the best of Sellers' and Shareholders' knowledge, the operations
of the Business, the use of Sellers' Fixed Assets, the manufacture, use and sale
of Sellers' products, and the use of the Intellectual Property in advertising or
other literature do not infringe the rights of others; and no Seller has been
advised of any claim of infringement of any patent, trademark, service xxxx,
trade name, brand name, copyright, license or other intellectual property right
of any other person or entity. There is no basis known to any Seller for
asserting any claim that any of the Intellectual Property is invalid or
unenforceable or has been wrongfully or fraudulently obtained.
5.10 CONTRACTS. Schedule 1.1(h) hereto contains a complete and
accurate list of the material Contracts to which any Seller is a party, under
which any Seller has or shall have any rights or by which any Seller or any of
the Assets are bound. None of the Contracts has been canceled or otherwise
terminated, and each of the Contracts is in full force and effect and
constitutes a binding obligation of all parties thereto. Except as set forth in
Schedule 1.1(h), there are no material existing defaults or events of default,
real or claimed, or events which with notice or lapse of time or both would
constitute a material default under any Contract. Except as set forth on
Schedule 1.1(h), each of the Contracts is assignable to Buyer without the
consent of any party other than a Seller and is enforceable in accordance with
its terms. No customer has prepaid any Seller for any duties or obligations of
the customer under any Contract, and no Seller has invoiced any customer for any
amount, except for goods to be delivered by a Seller on or before the Closing
Date. There exists no actual or to the best of Sellers knowledge, threatened
termination, cancellation or material limitation of or material modification to
or change in any of the Contracts or business relationships of any Seller with
any supplier. Except as disclosed on Schedule 1.1(h), there is no Contract in
effect between any Seller and (a) any person who is a current or former officer,
director or shareholder of any Seller, or (b) any individual who is related by
blood or marriage to any such current or former officer, director or
shareholder, or (c) any partnership, corporation or other entity that is
controlled by or under common control with any one or more of the foregoing.
Except as contemplated by this Agreement, each Seller's possession under each of
the real estate leases listed in the list of Contracts on Schedule 1.1(h) has
not been disturbed, nor has any claim been asserted against any Seller adverse
to its rights in these leasehold interests. With respect to each of these
leases, except as set forth on Schedule 1.1(h), each Seller identified on
Schedule 1.1(h) as the tenant of a particular lease (a) is the sole tenant
holding the entire leasehold interest free and clear of all liens, encumbrances
and obligations, (b) has good right and authority to assign that lease to Buyer
as of the Closing Date as herein provided, and (c) is not in default, and has
paid all rentals and other charges due or owing under, these leases. Schedule
1.1(h) contains a complete and accurate description of all the product warranty
policies and obligations of Sellers.
8
9
5.11 PERMITS. Schedule 1.1(i) contains a complete and accurate
list of the Permits held by each Seller. Each Seller has all Permits from
federal, state, local and foreign governmental and regulatory authorities that
are necessary to conduct the Business of such Seller and are consistent with
such Seller's current operations. Each Seller holds the Permits free of any
claims or restrictions and has fulfilled and performed all of its obligations
with respect to the Permits and no event has occurred which allows, nor after
notice or lapse of time or both would allow, revocation or termination or would
result in any other impairment of the rights of the holder of any Permit. Except
as indicated on Schedule 1.1(i), all of the Permits are freely assignable and
transferable to Buyer without the consent of any third party, and such
assignment will not allow, nor after notice or lapse of time or both would
allow, revocation or termination thereof or would result in any impairment of
the rights of Buyer as the holder of any Permit.
5.12 INSURANCE. Sellers maintain Insurance Policies of the kind,
in the amounts and with the insurers set forth in Schedule 1.1(j). Each such
Insurance Policy is outstanding and in full force and effect. The beneficiary of
each such Insurance Policy is indicated on Schedule 1.1(j) and no such Policy,
or the future proceeds thereof, has been assigned to any other person or entity.
All premiums and other payments due from each Seller under or on account of any
such Insurance Policy have been paid. There is no act or failure to act which
has or might cause any such Insurance Policy to be canceled or terminated.
5.13 COMPLIANCE WITH LAW. Each Seller has complied and is in
compliance in all material respects with all applicable federal, state, local
and foreign laws, statutes, licensing requirements, rules and regulations, and
judicial or administrative decisions pertaining to the Business. There is no
order issued, investigation or proceeding pending, or to the best knowledge of
Sellers and Shareholders, threatened, or notice served with respect to any
violation issued by any federal, state, local or foreign court or governmental
agency or instrumentality to which any Seller, the Assets or the operations of
the Business of any Seller is subject.
5.14 LITIGATION. Except as set forth on Schedule 5.14, no Seller
has been informed in writing of any claim (product liability or otherwise),
arbitration or litigation (at law or in equity) affecting any Seller, or any
Assets, and there is no proceeding or investigation before any commission or
other administrative or regulatory authority pending or filed or to the best
knowledge of Sellers and Shareholders threatened against or affecting any Seller
or the Assets; and no Seller has any knowledge of any state of facts which any
Seller in good faith reasonably believes will or may give rise to any such
claim, arbitration, litigation, proceeding or investigation. No Seller is
subject to any judgment, order or decree entered in any lawsuit or proceeding
which may have an adverse effect on Buyer's use of the Assets.
5.15 TAXES. Each Seller has accurately prepared and duly filed
all federal, state, local and foreign tax returns and reports required to be
filed by it and duly paid all taxes and other governmental charges imposed upon
it for its properties, assets, income, franchises, licenses and sales. All
monies required to be withheld by each Seller from its employees for income
taxes,
9
10
social security and unemployment taxes have been collected or withheld and
either paid to the respective governmental agencies, or with respect to taxes
not yet due, set aside in accounts for such purpose or accrued, reserved against
and entered upon the books of such Seller.
5.16 ENVIRONMENTAL MATTERS. In relation to any leased real
property for which the lease will be assigned to Buyer and except as set forth
on Schedule 5.16, each Seller who is a lessee under such lease represents:
(a) Such Seller has not received any written claim,
written complaint, written notice or written request for
information from any government authority alleging violation of
or asserting any exceedance or a noncompliance with any federal,
state, and local laws, rules and regulations relating to
environmental protection and pollution control ("Environmental
Laws") by such Seller.
(b) During the term of the Seller's lease of the real
property, Seller has not discharged, spilled, leaked, dumped or
buried any Hazardous Substances, as defined in Comprehensive
Environmental Response, Compensation, and Liability Act of 1980,
as amended ("CERCLA"), or disposed of Hazardous Wastes, as
defined in the Resource Conservation and Recovery Act ("RCRA"),
or any other pollutant or contaminant on such real property that
is likely to form the basis of any written claim by any
government authority seeking to impose liability for remedial
action under CERCLA or RCRA.
5.17 BROKERS, FINDERS. Except for Dynasty Capital ("Broker"), no
agent, broker, investment banker, person or firm acting on behalf of Sellers or
under the authority of any of them, is or will be entitled to any broker's or
finder's fee or any other commission or similar fee directly or indirectly in
connection with the transactions contemplated hereby. Seller shall pay all fees
and expenses due Broker in connection with this transaction and indemnify and
hold Buyer harmless therefrom.
5.18 NO UNTRUE STATEMENTS OR OMISSIONS; COMPLETE DISCLOSURE. No
representation or warranty made by any Seller in this Agreement, and no
schedule, exhibit, statement, certificate, agreement, instrument or other
writing furnished to Buyer by or on behalf of Sellers pursuant to this
Agreement, or in connection with the transactions contemplated hereby, contains
or will contain any untrue statement of a material fact or omits or will omit a
material fact necessary to make the statements herein and therein not
misleading. Sellers have affirmatively disclosed to Buyer all facts known to
Sellers which are material to the assets, operations, financial condition and
prospects of the Business as conducted by Sellers prior to the date hereof and
as proposed to be conducted by Sellers through the Closing Date.
10
11
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers that:
6.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
incorporated and organized and validly existing under the laws of the State of
Oregon, and Buyer has full corporate power and authority to execute, deliver and
fully perform its obligations under this Agreement and under each other
agreement, instrument, certificate and document to be executed and delivered
pursuant hereto by Buyer.
6.2 AUTHORIZATION; APPROVALS. The execution, delivery and
performance of this Agreement and each other agreement, instrument, certificate
and document to be executed and delivered pursuant hereto by Buyer have been
duly authorized by all requisite corporate action, will not violate any
provision of law, and will not violate any order of any court or other agency,
the articles of incorporation or bylaws of Buyer or any provision of any
indenture, agreement or other instrument to which Buyer is, or Buyer's
properties or assets are, bound or affected, or conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any such indenture, agreement or other instrument. No registration or
filing with, or consent or approval of, or other action by, any federal, state
or other governmental agency or instrumentality is or will be necessary for the
valid execution, delivery and performance by Buyer of this Agreement and each
other agreement, instrument, certificate and document to be executed pursuant
hereto by Buyer.
6.3 VALIDITY. This Agreement and each other agreement and
instrument executed and delivered herewith by Buyer has been duly executed and
delivered by Buyer and constitutes the legal, valid and binding obligation of
Buyer, enforceable in accordance with its terms.
6.4 COMPLIANCE WITH LAW. Buyer has complied and is in compliance
in all material respects with all applicable federal, state, local and foreign
laws, statutes, licensing requirements, rules and regulations, and judicial or
administrative decisions pertaining to its business. There is no order issued,
investigation or proceeding pending, or to the best knowledge of Buyer,
threatened, or notice served with respect to any violation issued by any
federal, state, local or foreign court or governmental agency or instrumentality
to which Buyer is subject.
6.5 LITIGATION. Except as set forth on Schedule 6.5, Buyer has
not been informed in writing of any claim (product liability or otherwise),
arbitration or litigation (at law or in equity) affecting Buyer or its assets,
and there is no proceeding or investigation before any commission or other
administrative or regulatory authority pending or filed or to the best knowledge
of Buyer threatened against or affecting Buyer or its assets; and Buyer has no
knowledge of any state of facts which Buyer in good faith reasonably believes
will or may give rise to any such claim, arbitration, litigation, proceeding or
investigation. Buyer is not subject to any
11
12
judgment, order or decree entered in any lawsuit or proceeding which may have an
adverse effect on Buyer's ability to perform its duties and obligations under
this Agreement.
6.6 TAXES. Buyer has accurately prepared and duly filed all
federal, state, local and foreign tax returns and reports required to be filed
by it and duly paid all taxes and other governmental charges imposed upon it for
its properties, assets, income, franchises, licenses and sales. All monies
required to be withheld by Buyer from its employees for income taxes, social
security and unemployment taxes have been collected or withheld and either paid
to the respective governmental agencies, or with respect to taxes not yet due,
set aside in accounts for such purpose or accrued, reserved against and entered
upon the books of such Buyer.
6.7 BROKERS, FINDERS. No agent, broker, investment banker, person
or firm acting on behalf of Buyer or under the authority of Buyer is or will be
entitled to any broker's or finder's fee or any other commission or similar fee
directly or indirectly in connection with the transactions contemplated hereby.
6.8 NO UNTRUE STATEMENTS OR OMISSIONS; COMPLETE DISCLOSURE. No
representation or warranty made by Buyer in this Agreement, and no schedule,
exhibit, statement, certificate, agreement, instrument or other writing
furnished to Sellers by or on behalf of Buyer pursuant to this Agreement, or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact or omits or will omit a material fact
necessary to make the statements herein and therein not misleading. Buyer has
affirmatively disclosed to Sellers all facts known to Buyer which are material
to the assets, operations, financial condition and prospects of the business
conducted by Buyer prior to the date hereof and as proposed to be conducted by
Buyer through the Closing Date.
ARTICLE 7 - OTHER AGREEMENTS
7.1 ACCESS. From the date hereof through the Closing Date,
Sellers will give Buyer's officers, key employees, counsel, accountants,
appraisers, and other representatives access to and the right to inspect, during
normal business hours: (a) the Assets, (b) any premises leased or otherwise
occupied by the Sellers in the conduct of the Business, and (c) the books,
records, tax returns, financial statements, leases, agreements, files and other
documents pertaining to the Sellers and the Business. In addition, from the date
hereof through the Closing Date, Sellers will make available to Buyer's
officers, key employees, counsel, accountants, appraisers and other
representatives such of the officers, directors, partners and key employees of
each of the Sellers as Buyer requests for the purpose of discussing matters
germane to Buyer's "due diligence" inquiry of the Sellers' Business. Buyer
agrees it will conclude its due diligence review within 20 days after the date
of this Agreement.
Except as permitted hereinafter, Buyer agrees to treat as
confidential and to advise its representatives to treat as confidential all due
diligence documents and information of the Sellers
12
13
provided to Buyer, and Buyer hereby agrees and acknowledges that this covenant
of confidentiality will survive the execution hereof and will remain in full
force and effect. Buyer will be permitted to disclose to third parties all
information Buyer deems advisable to comply with applicable federal and state
securities laws. In the event this transaction is not consummated, Buyer agrees
that it will not use, transfer or disclose any of the information provided by
the Sellers and Shareholders in due diligence and will immediately return to
Sellers and Shareholders all originals and all copies of the documents and other
information obtained by Buyer from Sellers and Shareholders.
Buyer's satisfactory due diligence review and inspection shall
not be a condition to closing this sale transaction, and Buyer's sole remedy for
any problem discovered in due diligence shall be to reduce the Purchase Price to
be paid to Sellers hereunder in an amount which has a reasonable relationship to
the extent of the problem discovered in due diligence and which was not known to
Buyer prior to conducting its due diligence review.
7.2 ANNOUNCEMENTS. Sellers and Buyer will consult with each other
prior to any public announcement relating to the transactions contemplated
hereby, and will mutually approve the timing, content and dissemination of any
public announcement.
7.3 CONSENTS. Sellers will use their best efforts to obtain, at
their sole cost and expense, prior to the Closing Date, the consents or
approvals ("Consents") required by law or pursuant to contract, lease, permit,
policy or otherwise to consummate the sale of the Assets to Buyer, including
without limitation (i) the transfer and assignment of the Assumed Contracts to
Buyer, (ii) the transfer and assignment of the Permits to Buyer, and (iii) the
transfer and assignment of the Insurance Policies to Buyer. All such Consents
will be in form reasonably satisfactory to Buyer and will be obtained without
any cost or expense to Buyer and, without any adverse modification in the terms
of such Assumed Contracts, Permits, Insurance Policies or other instruments of
Sellers, to the extent permitted by law.
7.4 CONDUCT OF BUSINESS. From the date hereof through the Closing
Date, Sellers will:
(a) conduct the Business in a reasonable and prudent
manner in substantially the same manner that the Business is now
conducted;
(b) engage in no transaction out of the ordinary course of
business consistent with past practices;
(c) not use, encumber or sell any of the Assets other than
in the ordinary course of business consistent with past
practices;
(d) not enter into any agreement or transaction extending
beyond the Closing Date out of the ordinary course of business
consistent with past practices;
13
14
(e) not purchase any Inventory which in the aggregate
exceeds thirty thousand dollars ($30,000.00) between the
execution of this Agreement and the Closing Date without Buyer's
prior written consent which shall not be unreasonably withheld;
(f) use their best reasonable efforts to preserve Sellers'
existing business organizations and all of Sellers' relations
with Sellers' customers, suppliers and lessors;
(g) not amend or modify any of the Contracts, or do any
act or omit to do any act, or knowingly permit any act or
omission to act, that would give rise to a default under any of
the Contracts;
(h) maintain all of the Permits in effect as of the date
hereof;
(i) maintain all of their Insurance Policies in effect as
of the date hereof;
(j) maintain the books and records of each Seller in the
usual, regular and ordinary manner, on a basis consistent with
past practices;
(k) conduct the Business in compliance with all applicable
material laws and regulations;
(l) not make any distribution to shareholders;
(m) not hire any new employees without Buyer's prior
written consent; and
(n) not pay any bonuses or make any salary or wage
increases, except those due and payable in the ordinary course of
business consistent with past practices.
(o) sellers will promptly notify Buyer in writing; (i) of
any material adverse change in the financial condition of
Sellers; (ii) any material impairment or loss of or damage to any
of the Assets; (iii) the institution of or the threat of
institution of legal proceedings against any Seller; or (iv) any
material change in the customer base of Sellers which would
affect the future earnings potential of the Business as conducted
by Sellers prior to the date hereof and as proposed to be
conducted by Sellers though the Closing Date.
7.5 TAXES. Sellers will pay, when due all taxes payable to the
federal, state, municipal and/or other governmental authorities with respect to
the Assets or the Business prior to the Closing Date and any taxes due as a
result of the sale of the Assets or the Business (whether or
14
15
not assessed or due on the Closing Date). Sellers will use reasonable efforts to
provide to Buyer, as soon as practicable resale use certificates, exempt use
certificates or any other exemption certifications required to enable Buyer to
benefit from any sales and use or other local tax exemption applicable to an
isolated sale, bulk sale, casual sale or any related exemption from sales and
use or other local taxes.
7.6 RISK OF LOSS. The risk of loss, damage or destruction to the
Assets from fire or other casualty or cause, shall be borne by Sellers at all
times up to the time on the Closing Date that title to the Assets is actually
transferred to Buyer; and, subject to the provisions of this Section 7.6, it
shall be the responsibility of Sellers to repair or cause to be repaired and to
restore the Assets to their condition prior to any such loss, damage or
destruction. The proceeds of any claim for any such loss payable under any
Insurance Policy with respect thereto shall be used to repair, replace or
restore any such Asset to its former condition.
7.7 PAYABLES. Each Seller will satisfy on a timely basis all of
its accounts payable outstanding at the close of business on the Closing Date,
except those accounts payable included in the Assumed Liabilities.
7.8 FURTHER ASSURANCES. Sellers, on the one hand, and Buyer, on
the other hand, each will, at any time and from time to time after the Closing
Date, upon the request of the other, do, execute, acknowledge and deliver, or
will cause to be done, executed, acknowledged and delivered, all such further
acts, deeds, assignments, transfers, conveyances, powers of attorney, receipts,
acknowledgments, acceptances and assurances as may be reasonably required to
satisfy and perform the obligations of that party hereunder.
7.9 EMPLOYEES. Except for employment agreements with Xxxxxxx
Xxxxx and Xxxxxxx Xxxxx, Buyer shall be under no obligation to employ all or any
of Sellers' employees, provided that Buyer may, if Buyer so elects, employ any
of Sellers' employees from and after the Closing Date without liability or
obligation to any Seller. Each Seller shall terminate the employment of all
employees of such Seller as of the Closing Date. Each Seller shall be solely
responsible to its employees for any claims for wages, fringe benefits, other
compensation, withholding, employment taxes (except those assumed under Section
1.4), vacation pay, termination pay, other severance pay or any claims or
liabilities arising from the employment of such employees or the termination of
employment by such Seller of such employees, and each Seller shall be
responsible for all claims and liabilities arising out of any and all retirement
plans and other employee benefit programs in connection with the employment
relationship between such Seller and its employees. Each Seller will use its
best efforts to assist Buyer in engaging the services of all employees of such
Seller which Buyer wishes to hire from and after the Closing Date.
7.10 CONTRACTS. Buyer will deliver to Sellers on or prior to the
Closing a list of the Assumed Contracts which Buyer will assume at the Closing.
15
16
7.11 PRORATIONS. At the Closing, rents and other charges imposed
under leases assumed by Buyer, premiums on Insurance Policies assumed by Buyer,
and charges for electricity, water, gas, telephone, refuse collection, sewer
service and other similar utilities and services furnished to the Business will
be prorated between Sellers, on the one hand, and Buyer, on the other hand, on
the basis of the applicable accounting periods therefor.
7.12 NAME CHANGE; CEASE BUSINESS OPERATIONS. Immediately after
the Closing Date, Sellers shall change their corporate names. Sellers shall not
conduct any business after the Closing Date and shall maintain their corporate
existences solely for the purposes of holding the stock of G. I. Joe's, Inc.,
liquidating such stock and distributing such payments to their shareholders.
ARTICLE 8. - CLOSING AND CLOSING CONDITIONS
8.1 CLOSING. The closing (the "Closing") of the purchase and sale
of the Assets shall take place at the offices of Brownstein, Rask, Arenz,
Sweeney, Xxxx & Grim LLP, 0000 XX Xxxx Xx., Xxxxxxxx, Xxxxxx 00000 at 10 a.m.,
on September 1, 1998, or on such other date and time as may be mutually agreed
upon by Buyer, Sellers. The date of the Closing is referred to herein as the
"Closing Date."
8.2 CONDITIONS TO OBLIGATIONS OF BUYER. All of the obligations of
Buyer under this Agreement are subject to the fulfillment prior to or at the
Closing of each of the following conditions, any one or more of which may be
waived in writing by Buyer in its sole discretion:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Sellers contained herein and in
each other agreement, instrument, certificate and document
delivered pursuant to the provisions hereof or in connection
herewith shall be true and correct on and as of the Closing Date
as of made on and as of such date.
(b) COMPLIANCE WITH AGREEMENT. Sellers shall have
performed and complied with all conditions and agreements
required by this Agreement to be performed or complied with by
them prior to or at the Closing.
(c) NO MATERIAL ADVERSE CHANGE. There shall not have been
any material adverse change in the Assets or in the Business or
financial condition of any Seller since the date hereof.
16
17
(d) CONSENTS. Sellers shall have obtained all Consents
contemplated by Section 7.3 hereof in form and substance
reasonably satisfactory to Buyer in its sole discretion.
(e) APPROVALS. Buyer shall have obtained from its current
lending institutions all necessary approvals of the transactions
contemplated hereby.
(f) LEASES. Sellers, Buyer and Landlords shall have
executed and delivered a Lease Assignment in the from of Schedule
8.2(f) hereto (the "Lease Assignment").
(g) NONCOMPETITION AGREEMENT. Xxxxx and Xxxxx shall have
executed and delivered a Noncompetition Agreement in the form of
Schedule 8.2(g) hereto (the "Noncompetition Agreement").
(h) CLOSING DELIVERIES. Sellers shall have delivered to
Buyer:
(i) A certificate executed by an executive officer
of each Seller dated as of the Closing Date, certifying in such
detail as Buyer may request to the fulfillment of the conditions
specified in Sections 8.2(a) through 8.2(c) hereof;
(ii) A certificate of the Secretary or an Assistant
Secretary of each Seller, dated as of the Closing Date,
certifying in such detail as Buyer may request (A) that attached
thereto is a true and complete copy of such Seller's articles of
incorporation as in effect on the Closing Date, (B) that attached
thereto is a true and complete copy of such Seller's bylaws as in
effect on the Closing Date, and (C) that attached thereto is a
true and complete copy of resolutions adopted by the Board of
Directors and shareholders of such Seller authorizing the
execution, delivery and performance of this Agreement, and each
other agreement, instrument, certificate and document furnished
pursuant hereto and that all such resolutions are still in full
force and effect and are all of the resolutions adopted in
connection with the transactions contemplated by this Agreement;
(iii) A Xxxx of Sale and Assignment Agreement in the form
attached hereto as Schedule 8.2(h)(iii) (the "Xxxx of Sale and
Assignment Agreement"), duly executed by Sellers;
(vi) Exclusive possession of the Assets;
(vii) The original executed copies of the Assumed
Contracts, Permits and Insurance Policies; and
17
18
(viii) Any other agreements and documents that Buyer may
request at or prior to the Closing.
8.3 CONDITIONS TO OBLIGATIONS OF SELLERS. All of the obligations
of Sellers under this Agreement are subject to the fulfillment prior to or at
the Closing of each of the following conditions, any one or more of which may be
waived in writing by Sellers in their sole discretion:
(a) PURCHASE PRICE. Buyer shall have paid the cash portion
of the Purchase Price to be paid at Closing and issued the shares
of stock to be issued at Closing as provided in Section 3 above.
(b) ASSUMPTION OF LIABILITIES AGREEMENT. Buyer shall have
delivered to Sellers an Assumption of Liabilities Agreement in
the form attached hereto as Schedule 8.3(b) (the "Assumption of
Liabilities Agreement"), duly executed by Buyer.
(c) REGISTRATION RIGHTS AGREEMENT. Buyer shall have
delivered to Seller the duly executed Registration Rights
Agreement attached as Schedule 8.3(c).
(d) EMPLOYMENT AGREEMENT. Buyer shall have delivered to
Shareholders, Employment Agreements in accordance with Schedules
8.3(d)(i) and 8.3(d)(ii).
ARTICLE 9. - SURVIVAL OF REPRESENTATIONS,
WARRANTIES AND AGREEMENTS; INDEMNIFICATION
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Notwithstanding any investigation conducted at any time with regard to this
Agreement by or on behalf of any of the parties, all representations,
warranties, and agreements of each of the parties contained in this Agreement or
in any exhibit, schedule, agreement, instrument, certificate, list or other
document delivered pursuant hereto or in connection with the transactions
contemplated hereby shall survive the Closing Date for the periods of time set
forth in Sections 9.4(b) and 9.6(b).
9.2 INDEMNIFICATION. For purposes of Sections 9.3 and 9.5, with
respect to any party, "Damages" shall mean any and all losses, liabilities,
damages, demands, claims, suits, actions, judgments or causes of actions,
assessments, costs and expenses, including without limitation, interest,
penalties, attorneys' fees (in arbitration or at trial and on appeal), and all
expenses incurred in investigating, preparing for, defending against or settling
any litigation. In the event the claim for indemnification results from a suit
by a third party, the party seeking indemnification shall give the party from
whom indemnification is sought written notice of any commencement of any legal
action by such third party within thirty (30) days of receipt of written notice
by it of such legal action; provided, however, the failure to so notify such
party shall
18
19
discharge such party from its liabilities and obligations hereunder only if and
to the extent that such party is prejudiced thereby. The party from whom
indemnification is sought may elect to control the defense of such action at its
expense and with counsel of its own choosing. To the extent a party so elects to
control the defense of an action, the other party shall cooperate with such
controlling party with respect thereto and shall not settle or compromise the
action without the agreement of such controlling party.
9.3 BUYER INDEMNIFICATION OF SELLERS. Buyer hereby agrees to
indemnify and hold harmless Sellers and Shareholders and their affiliates,
successors and assigns ("Seller Parties") from and against any and all Damages
asserted against, resulting to, imposed upon, or incurred or suffered by Sellers
or their affiliates, successors and assigns, directly or indirectly, as a result
of or arising from the following: (a) any and all inaccurate representations or
warranties made by Buyer in this Agreement or in any exhibit, schedule,
agreement, instrument, certificate, list or other document delivered pursuant
hereto or in connection with the transactions contemplated hereby; (b) Buyer's
failure to perform any of the Assumed Liabilities; or (c) Buyer's failure to
perform any of the assumed contracts.
9.4 LIMITATION OF BUYER INDEMNITY LIABILITY. Buyer's obligations
with respect to indemnity pursuant to Section 9.3 shall be limited as follows:
(a) Buyer's indemnity obligations shall be for the Seller
Parties' aggregate claims in excess of $25,000.
(b) Claims for indemnification must be submitted to Buyer
within three years from the Closing Date, except for breaches of
covenants which may require performance more than three years
after the Closing Date.
(c) Buyer's maximum liability for indemnity claims shall
not exceed the Purchase Price.
(d) The limitations of Buyer's indemnification liabilities
set forth in this paragraph shall not apply to claims for fraud,
intentional misrepresentation or for the failure to pay or
discharge any Assumed Liability or assumed contract or the breach
or inaccuracy of the representations contained in Sections 6.1,
6.2 or 6.3.
9.5 SELLERS AND SHAREHOLDERS INDEMNIFICATION OF BUYER. Sellers
and Shareholders hereby agree to indemnify and hold harmless Buyer and its
affiliates, successors and assigns ("Buyer Parties") from and against any and
all Damages asserted against, resulting to, imposed upon, or incurred or
suffered by Buyer or its affiliates, successors and assigns, directly or
indirectly, as a result of or arising from the following: (a) any obligation, or
liability, indebtedness or commitment of any Seller which is not expressly
assumed by Buyer hereunder; (b) any and all inaccurate representations or
warranties made by Sellers in this Agreement or in any exhibit,
19
20
schedule, agreement, instrument, certificate, list, or other document delivered
pursuant hereto or in connection with the transactions contemplated hereby; or
(c) any and all breaches of covenants or agreements made by Sellers in this
Agreement or in any exhibit, schedule, agreement, instrument, certificate, list,
or other document delivered pursuant hereto or in connection with the
transactions contemplated hereby.
9.6 LIMITATION OF SELLERS AND SELLING SHAREHOLDERS INDEMNITY.
Sellers' and Shareholders' obligations with respect to indemnity pursuant to
Section 9.5 shall be limited as follows:
(a) Sellers' and Shareholders' indemnity obligations shall
be for the Buyer Parties' aggregate claims in excess of $25,000.
(b) Claims for indemnification must be submitted to
Sellers and Shareholders within three years from the Closing
Date, except for breaches of covenants which may require
performance more than three years after the Closing Date.
(c) Sellers' and Shareholders' maximum liability for
indemnity claims shall not exceed the Purchase Price.
(d) The limitations of Sellers' and Selling Shareholders'
indemnification liabilities set forth in this paragraph shall not
apply to claims for fraud, intentional misrepresentation or the
breach or inaccuracy of the representations contained in Sections
5.1, 5.2 or 5.3.
20
21
9.7 EXCLUSIVE REMEDY. The rights and remedies set forth in this
Section 9 shall be the exclusive rights and remedies granted to any party
hereunder for a breach of this Agreement by any party, except in cases involving
fraud or intentional misrepresentation and except for equitable remedies such as
specific performance or injunctive relief.
9.8 LIABILITY OF SELLERS AND SHAREHOLDERS. The liability of the
Sellers pursuant to Section 9.5 shall be limited to the Buyer Parties' claims
for Damages which relate to the particular Seller's Assets which have been sold
hereunder. The Sellers' liability pursuant to Section 9.5 shall not be joint or
several. The liability of the Shareholders pursuant to Section 9.5 shall be
joint and several as between themselves and as to the liability of any Seller.
ARTICLE 10. - MISCELLANEOUS
10.1 NOTICE. Any notice or other communication required or
permitted to be given pursuant to this Agreement shall be in writing and shall
be deemed given only if delivered by hand or sent by overnight courier or by
certified mail, return receipt requested, postage prepaid, and addressed as
follows:
If to Sellers to:
Xxxxxxx Xxxxx
00000 XX Xxxxx Xxxxx Xxxx
Xxxxxxxxxxxx, XX 00000
With a copy to :
Xxxx X. Xxxx
Farleigh, Wada & Xxxx, P.C.
000 X.X. Xxxxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxx 00000
If to Buyer to:
JOE'S DIRECT, Inc
0000 Xxxxxxxx Xxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxx
21
22
With a copy to:
Xxxxx XxXxxxxx
0000 XX Xxxx Xxxxxxxx
Xxxxxxxx, Xxxxxx 00000
or at such other address as Sellers, on the one hand, and Buyer, on the other
hand, shall have last designated by notice to the other. Any notice given in the
manner specified above shall be deemed to have been delivered on the date of
receipt of such delivery at the address set forth above (or at such other
address designated pursuant hereto).
10.2 COMPLETE AND INTEGRATED AGREEMENT. This Agreement, the
Schedules and Exhibits (including the executed Agreements forms of which are
attached hereto as exhibits) hereto, and each other agreement and instrument
executed and delivered at the Closing constitute the entire agreement among the
parties with respect to the transactions contemplated hereby and supersede and
are in full substitution for any and all prior agreements and understandings
among the parties relating to such transactions.
10.3 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
10.4 AMENDMENTS; WAIVERS. No modification, amendment,
termination, extension, renewal or waiver of any provision of this Agreement
shall be binding upon a party unless made in writing and signed by such party.
10.5 GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Oregon without regard to
the conflict of law provisions thereof.
10.6 ATTORNEYS' FEES. In the event of any action at law or suit
in equity in relation to this Agreement, the prevailing party, in addition to
all other sums which the other party may be called upon to pay, shall be
entitled to recover such additional sum for the prevailing party's attorneys'
fees incurred therein as the trial court or any appellate court adjudges
reasonable in that suit or action.
10.7 KNOWLEDGE. The words "knowledge" and "known" in this
Agreement refer to and include actual and constructive knowledge of a party. A
party will be deemed to have constructive knowledge of a particular matter if
such party could reasonably be expected to have actual knowledge of the matter
after taking into consideration such party's actual knowledge and business
experience and position to make a reasonable inquiry with respect to the matter.
22
23
IN WITNESS WHEREOF, Sellers, Shareholders and Buyer have executed
and delivered this Agreement as of the date first above written.
SELLERS: BUYER:
ATHLETICA, INC.
By: /s/ Xxxxxxx X. Xxxxx By: /s/ Xxxx Xxxxxxx
--------------------------------- -----------------------------------
XXXXXXX X. XXXXX XXXX XXXXXXX
Title: President Title: President
GRAVITY GAMES, INC.
By: /s/ Xxxxxxx X. Xxxxx
---------------------------------
XXXXXXX X. XXXXX
Title: President
TS HOLDINGS, INC.
By: /s/ Xxxxxxx X. Xxxxx
---------------------------------
XXXXXXX X. XXXXX
Title: President
SHAREHOLDERS:
/s/ Xxxxxxx X. Xxxxx
------------------------------------
XXXXXXX X. XXXXX
/s/ Xxxxxxx Xxxxx
------------------------------------
XXXXXXX XXXXX
23
24
SCHEDULE 1.1(a)
FIXED ASSET SCHEDULE
AS OF 7/31/98
See Attached.
A detailed listing of Fixed Assets will be provided to Buyer prior to Closing.
25
SCHEDULE 1.1(b)
ACCOUNTS RECEIVABLE SCHEDULE
AS OF 7/31/98
None
26
SCHEDULE 1.1(c)
INVENTORY SCHEDULE
AS OF 7/31/98
Athletica $ 18,732.42
Gravity Games $ 17,541.56
Tidewater $ 0.00
TOTAL $ 36,273.98
A detailed listing of inventory will be provided to Buyer prior to Closing.
27
SCHEDULE 1.1(d)
PREPAID EXPENSES SCHEDULE
AS OF 7/31/98
Athletica $17,064.25
Gravity Games $0.00
Tidewater $0.00
28
SCHEDULE 1.1(g)
INTELLECTUAL PROPERTY
CORPORATE NAMES:
Athletica, Inc.
Gravity Games, Inc.
TS Holding, Inc.
ASSUMED BUSINESS NAME:
Athletica Endurance
DOMAIN NAMES:
xxxxxxxxxx.xxx
xxxxxxxxx.xxx
xxxxxx.xxx
xxxxxxxxx.xxx
xxxxxxxxxx.xxx
SOFTWARE
ALL RIGHTS TO THE PEARL CODE, THE SOURCE CODE USED IN SHOPPING
CART ("CODE"), SUBJECT TO A LIMITED NON-TRANSFERRABLE LICENSE TO
XXXXXXXXX XXXXXXXX, INC.
29
SCHEDULE 1.1(h)
CONTRACTS/LEASE SCHEDULE
AS OF 7/31/98
Xxxxxxxxx Xxxx Business Park Lease-$1,620.00/Month through January 31,
1999 Pitney Xxxxx-Postage machine-$133.05/Quarter through ___________
G&W Leasing-$412.76/Month for 30 months OGI-Phone T-1- $1,100/Month for
36 months
Gravity Games, Inc.'s obligations under Agreement not to Compete and
Confidentiality Agreement with Xxxxxx Xxxxxx, dated April 28, 1998, for
payment of $125,000; payments of $1,267.83 monthly (including interest
at 9.0% per annum) commencing June 1, 1998 for 15 years.
Approximately 40, non-exclusive Dealer/vendor contracts.
Short Term Advertising contracts; Sellers
30
SCHEDULE 1.1(i)
PERMITS SCHEDULE
AS OF 7/31/98
None listed.
31
SCHEDULE 1.1(j)
INSURANCE SCHEDULE
AS OF 7/31/98
Timberline Direct General Liability - Policy # American Economy 02BO708101-1,
3/23/98 to 3/23/99
32
SCHEDULE 1.2
EXCLUDED ASSETS
None
33
SCHEDULE 2.1
ASSUMED LIABILITIES
AS OF 7/31/98
See Attached.
34
SCHEDULE 3.2(d)
STOCK PAYMENT SCHEDULE AND PERFORMANCE STANDARDS
The portion of the Purchase Price payable in common stock of G. I. Joe's, Inc.
shall be paid to Sellers in accordance with the following schedule:
1. 25% of the total common stock of G. I. Joe's, Inc. due to Sellers shall be
delivered on January 1, 1999, or the first business day thereafter. The delivery
of these shares of common stock shall not be subject to meeting any performance
standards.
2. 25% of the total common stock of G. I. Joe's, Inc. due to Sellers shall be
delivered on February 1, 1999. The delivery of these shares of common stock
shall not be subject to meeting any performance standards.
3. 25% of the total common stock of G. I. Joe's, Inc. due to Sellers shall be
delivered on the earlier of February 1, 2000, or February 1 of any subsequent
year, in which the First Performance Standard has been met by Buyer for the
prior fiscal year ending on January 31st. The "First Performance Standard" shall
mean that Buyer shall have earnings before interest, depreciation and
amortization, income taxes and bonus payments to Xxxxx and Xxxxx of not less
than 10%of the Buyer's gross sales and the Buyer's gross sales are not less than
$5,500,000. It is the intent of the parties that if the First Performance
Standard is not met in the fiscal year ending January 31, 2000, then such
Standard may be met in the next or subsequent years and the payment set forth
hereunder shall be paid at such time.
4. 25% of the total common stock of G. I. Joe's, Inc. due to Sellers shall be
delivered on the earlier of February 1, 2001, or February 1 of any subsequent
year, in which the Second Performance Standard has been met by Buyer for the
prior fiscal year ending on January 31st. The "Second Performance Standard"
shall mean that Buyer shall have earnings before interest, depreciation and
amortization, income taxes and bonus payments to Xxxxx and Xxxxx of not less
than 12%of the Buyer's gross sales and the Buyer's gross sales are not less than
$8,000,000. It is the intent of the parties that if the Second Performance
Standard is not met in the fiscal year ending January 31, 2001, then such
Standard may be met in the next or subsequent years and the payment set forth
hereunder shall be paid at such time.
35
SCHEDULE 3.2(f)
CONSIDERATION ALLOCATION SCHEDULE
ITEM ATHLETICS GRAVITY TIDEWATER TOTAL
GAMES
Covenant Not to Compete
Paid to Shareholder
9-1-98 $ $ $ $ 100,000.00
9-1-98 Cash $ 300,000.00 $ 20,000.00 $ 30,000.00 $ 350,000.00
12-1-98 Cash $ 400,000.00 $ 20,000.00 $ 130,000.00 $ 550,000.00
1-1-99 Stock $ 400,000.00 $ 40,000.00 $ 341,728.75 $ 781,726.75
2-1-99 Stock $ 400,000.00 $ 40,000.00 $ 341,728.75 $ 781,726.75
Stock #3 $ 400,000.00 $ 40,000.00 $ 341,728.75 $ 781,726.75
Stock #4 $ 400,000.00 $ 40,000.00 $ 341,728.75 $ 781,726.75
------------ ------------ ------------- -------------
$2,300,000.00 $ 200,000.00 $1,526,907.00 $4,126,907.00
============= ============= ============= =============
36
SCHEDULE 5
EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES OF SELLERS
5.1 None of Seller's are licensed or qualified as a foreign corporation
in any state other than the states of their organization.
5.4 The Inventory of Sellers is subject to the security interest
described in 5.8, below.
5.5 Sellers make no representation or warranty as to the financial
condition or operations of any business, the assets or stock of which was
acquired by any Seller within the six month period preceding the Closing Date,
for any period prior to acquisition by such Seller. The balance sheet dated July
31, 1998 provided by Sellers supercedes and replaces any other financial
information provided by any Seller or Shareholder, and no Seller or Shareholder
makes any representation or warranty with regard to any financial information
other than as set forth in the balance sheet dated July 31, 1998.
5.8 The inventory of all of the Sellers secures the $57,000 obligation
to Dynasty Capital disclosed in the balance sheet dated July 31, 1998.
5.9 No trade name or trademark (if any) of any Seller is registered with
the US Patent and Trademark Office.
5.10 The leases to which any Seller is a party are as follows:
Xxxxxxxxx Xxxx Business Park-$1,620/Month until January 31, 1999
Pitney Xxxxx+Postage Machine-133.05/Quarter
G&W Leasing-412.76/Month--30 months from_______.
OGI-Phone T-1--$1,100/Month-36 months from ______.
5.11 Sellers are not aware of any permits necessary or material to the
operation of their Business.
5.12 Sellers intend to cancel their insurance when deemed appropriate
after the Closing Date.
37
SCHEDULE 5.14
LITIGATION SCHEDULE
None.
38
SCHEDULE 5.16
ENVIRONMENTAL
None.
39
Schedule 6.5
Buyer Litigation
None.
40
SCHEDULE 8.2(f)
FORM OF LEASE ASSIGNMENT
See Attached.
41
SCHEDULE 8.2(g)
NONCOMPETITION AGREEMENT
THIS AGREEMENT is entered into this 1st day of September, 1998, between
("Employee") and G. I. JOE'S, INC., an Oregon corporation ("Corporation").
RECITALS:
A. Employee is an officer and shareholder of ATHLETICA, INC., an Oregon
corporation ("Athletica"), GRAVITY GAMES, INC., an Oregon corporation ("Gravity
Games"), and TS HOLDING, INC., an Oregon corporation ("TS") sometimes
hereinafter referred to collectively as "Sellers").
X. Xxxxxxx and JOE'S DIRECT, INC., ("Buyer") have entered into that
certain Asset Purchase Agreement dated as of August 24, 1998 (the "Asset
Purchase Agreement"), pursuant to which Corporation has agreed to purchase
substantially all of the assets of Sellers.
C. Buyer has assigned to assignee all rights under the Asset Purchase
Agreement and Corporation has agreed to assume all Buyer's obligations under the
Asset Purchase Agreement.
D. Corporation and Employee have agreed to enter into an employment
agreement (the "Employment Agreement"), pursuant to which Corporation will hire
Employee as an employee on the closing of the transactions under the Asset
Purchase Agreement.
E. Employee expects to derive direct and material benefits from the
transactions contemplated by the Asset Purchase Agreement and the Employment
Agreement. Employee recognizes and acknowledges that the covenants contained in
this Agreement are essential to protect the business interests of Corporation
and are in integral part of, and arise out of, the transactions contemplated by
the Asset Purchase Agreement and the Employment Agreement and that Corporation
would not enter such Agreements but for such covenants. Employee is executing
and delivering this Agreement as a material inducement to Corporation to enter
into and consummate the transactions under the Asset Purchase Agreement and the
Employment Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the consummation of the transactions
contemplated by the Asset Purchase Agreement, the consideration paid to Sellers
by Corporation, the employment under the Employment Agreement, the above
Recitals and the mutual agreements hereinafter set forth, the parties hereby
agree as follows:
1. DEFINITIONS. For purposes of this Agreement:
a. "Area" means worldwide.
PAGE 41 - NONCOMPETITION AGREEMENT
42
b. "Competing Business" means any Entity engaging at any location
or locations within the Area in the business of catalog sales of goods and
merchandise of the type sold by Corporation or the Corporation's parent company,
G. I. Joe's, Inc., (limited however, to goods and merchandise sold through
catalogs) during the term of Employee's employment with Corporation.
c. "Entity" means any individual, corporation, partnership, firm,
joint venture, joint enterprise, association, joint-stock company, trust,
unincorporated organization, governmental or regulatory body or other similar
entity.
d. "Employee Group" means (i) Employee, (ii) all Entities that
are now or hereinafter, directly or indirectly through one or more
intermediaries, controlled by, in control of, or under common control with
Employee (collectively, the "Employee Affiliates"), and (iii) the officers,
directors, executives, agents and representatives (in whatsoever capacity) of
Employee or any of the Employee Affiliates. For purposes of this Agreement, each
of the foregoing is a "member of the Employee Group."
e. "Timberline Group" means ATHLETICA ENDURANCE, INC., an Oregon
corporation ("Athletica"), GRAVITY GAMES, INC., an Oregon corporation ("Gravity
Games"), and TIDEWATER SPECIALTIES, INC., an Oregon corporation ("Tidewater")
and Employee, (ii) all successors, assigns and purchasers of the foregoing,
(iii) any and all Entities that are now or hereafter, directly or indirectly
through one or more intermediaries, controlled by, in control of, or under
common control with any of the foregoing, and (iv) the officers, directors,
executives, agents and representatives (in whatsoever capacity) of any of the
foregoing. For purposes of this Agreement, each of the foregoing is a "member of
the Timberline Group."
f. "Proprietary Information" means all items of confidential
information or trade secrets regarding the business conducted by the Timberline
Group prior to the date hereof, which Proprietary Information is transferred to
Corporation under the Asset Purchase Agreement. Without limiting the generality
of the foregoing, Proprietary Information includes the following:
i. Customer lists, price lists, and other confidential
information relating to the marketing and distribution of the
Timberline Group's products;
ii. Information relating to processes, technology,
manufacturing equipment and know-how used or held for use in the
Timberline Group's business;
iii. Programs, plans and projections relating to present
or future development, expansion, promotion, marketing and
distribution of any products or services in the electronic
components business conducted by the Timberline Group prior to
the date hereof; and
iv. All notes, memoranda, correspondence, processes,
systems, and documents, and all computer programs, databases and
software relating to any of the foregoing.
PAGE 2 - NONCOMPETITION AGREEMENT
43
"Proprietary Information" does not include:
i. Information which is now or later becomes generally
available to the public through no fault of any member of the
Employee Group, as long as the disclosure of such information,
if any, by a member of the Employee Group takes place after the
information has become generally available to the public; and
ii. Information which is publicly disclosed as required
by law or judicial process, after proper notice to Corporation.
2. COVENANTS.
2.1 NONCOMPETITION. Employee will not, directly or indirectly,
engage in any Competing Business on Employee's own behalf, or provide product
design, development, engineering, manufacturing, marketing, managerial,
supervisory or consulting services or assistance to, or lend money to or
purchase any debt instrument of, or own any equity interest in, any Competing
Business. Employee will not make any statement or do any act which causes any
existing or potential customer of Corporation (including without limitation, all
customers of the Timberline Group that are transferred to Corporation under the
Asset Purchase Agreement) to curtail or terminate its purchase of products
offered by Corporation, or which will in any way divert, diminish or prejudice
the business or goodwill of Corporation.
2.2 NONSOLICITATION. Employee will not solicit, divert or hire
away (or attempt to solicit, divert or hire away) to or for Employee or any
Entity, any employee of Corporation (including without limitation, all employees
of the Timberline Group that become employees of Corporation after the closing
of the transactions under the Asset Purchase Agreement) whether or not such
employee is a full-time or temporary employee, whether or not such employment is
pursuant to a written agreement and whether or not such employment is for a
determined period or is at will.
2.3 NONDISCLOSURE OF PROPRIETARY INFORMATION. Employee will not,
without the prior written consent of Corporation, cause, suffer or permit any
member of the Employee Group to disclose, divulge, communicate or otherwise make
known, directly or indirectly, to any person outside of Corporation, any
Proprietary Information.
2.4 NONUSE OF PROPRIETARY INFORMATION. Employee will not, without
the prior written consent of Corporation, cause, suffer or permit any member of
the Employee Group to make any use of the Proprietary Information for the
benefit of Employee or any Entity.
2.5 APPLICATION. Each of the covenants of Employee in this
Section 2 shall be applicable to actions and statements of Employee, whether
made or taken directly or indirectly, in an individual capacity or as an
officer, director, partner, executive, employee, manager, consultant,
independent contractor, agent, representative or otherwise of any Entity, alone
or in conjunction with any Entity, or in any other manner whatsoever.
PAGE 3 - NONCOMPETITION AGREEMENT
44
2.6 TERM. Each of the covenants of Employee in this Section 2
shall commence on the date hereof and shall expire two (2) years from the date
Employee ceases to be employed by Corporation.
3. CROSS DEFAULT AND OFFSET.
3.1 CROSS DEFAULT. In the event any representation or warranty of
Employee or any member of the Employee Group contained in, or made pursuant to,
this Agreement or the Asset Purchase Agreement (collectively, the "Agreements"),
is inaccurate, or in the event Employee or any member of the Employee Group
breaches, or fails to perform, any covenant or agreement contained in, or made
pursuant to, any of the Agreements, such inaccuracy, breach or failure to
perform shall constitute a breach by Employee of both Agreements.
3.2 RIGHT OF OFFSET. Employee acknowledges and agrees that in the
event any representation or warranty of Employee or any member of the Employee
Group contained in, or made pursuant to, the Agreements is inaccurate, or in the
event Employee or any member of the Employee Group breaches, or fails to
perform, any covenant or agreement contained in, or made pursuant to, either of
the Agreements, Corporation shall be and hereby is authorized to offset and
deduct from any amounts owed to Sellers under the Asset Purchase Agreement, that
amount of cash which would then be required to put Corporation in the position
it would have been in had such representation or warranty been true, correct and
complete, or had such covenant been performed, complied with or fulfilled. The
right of offset granted to Corporation under this Section 3.2 shall be without
prejudice to, and in addition to, any and all other remedies or relief available
to Corporation at law or in equity.
4. MISCELLANEOUS.
4.1 REMEDIES. Employee acknowledges that Corporation will suffer
immediate and irreparable injury in the event of a breach by Employee of any
covenant contained in this Agreement. Accordingly, in the event of a breach or
threatened breach by Employee of any provision of this Agreement, Corporation
shall be entitled to an injunction restraining Employee from committing such
breach or threatened breach. Such remedy shall be in addition to any other
remedies to which Corporation may be entitled at law or in equity.
4.2 SEVERABILITY. Employee agrees that the covenants contained in
Section 2 of this Agreement were agreed to by Corporation as a part of the
transactions contemplated by the Asset Purchase Agreement; that Employee has
received good, adequate and valuable consideration for each of such covenants;
that each of the such covenants is reasonable and necessary to protect and
preserve the business interests of Corporation; that each of such covenants is
separate, distinct and severable not only from the other of such covenants but
also from the other and remaining provisions of this Agreement; that the
unenforceability of any such covenants shall not affect the validity or
enforceability of any other such covenants or any other provision or provisions
of this Agreement; and that if, in any judicial proceeding, a court refuses to
enforce any provision (or part thereof) included herein, such unenforceable
provision (or part) shall be deemed modified or eliminated from the provisions
hereof for the purpose of such proceeding to the extent necessary to permit the
enforcement of the remainder of this Agreement.
PAGE 4 - NONCOMPETITION AGREEMENT
45
4.3 ATTORNEYS' FEES. In the event suit or action is brought to
enforce the provisions of this Agreement, the prevailing party shall be entitled
to reasonable attorneys' fees, both trial and appellate, in addition to its
costs and disbursements allowed by law.
4.4 ASSIGNMENT. This Agreement and the rights and obligations of
Corporation hereunder may be assigned by Corporation with notice to Employee and
shall inure to the benefit of, shall be binding upon (including without
limitation, Section 5 of the Employment Agreement), and shall be enforceable by
any such assignee. This Agreement and the rights and obligations of Employee
hereunder may not be assigned by Employee.
4.5 ENTIRE AGREEMENT. This Agreement embodies the entire
agreement of the parties hereto relating to the agreements set forth herein. All
prior understandings and agreements (including without limitation, Section 5 of
the Employment Agreement) relating to the agreements set forth herein are hereby
expressly terminated. No amendment or modification of this Agreement shall be
valid or binding upon either party unless made in writing and signed by the
parties hereto.
4.6 GOVERNING LAW. This Agreement shall be construed by reference
to the laws of the State of Oregon governing contracts made and to be performed
in such State.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Noncompetition Agreement as of the date first above written.
JOE'S DIRECT, INC.,
AN OREGON CORPORATION
---------------------------- ----------------------------
, EMPLOYEE XXXX XXXXXXX, PRESIDENT
PAGE 5 - NONCOMPETITION AGREEMENT
46
SCHEDULE 8.2(h)(iii)
XXXX OF SALE AND ASSIGNMENT AGREEMENT
FOR VALUE RECEIVED, ATHLETICA , INC., an Oregon corporation
("Athletica"), GRAVITY GAMES, INC., an Oregon corporation ("Gravity Games") and
TS HOLDING, INC., an Oregon corporation ("TS") (collectively, "Sellers"),
pursuant to the Asset Purchase Agreement (the "Asset Purchase Agreement") dated
as of August 24, 1998, by and among Sellers and JOE'S DIRECT,INC., an Oregon
corporation ("Buyer"), hereby sell, convey, transfer, assign and deliver to
Buyer and its successors and assigns, all of Sellers' right, title and interest
in and to the Assets (as defined in Section 1.1 of the Asset Purchase
Agreement).
The sale, conveyance, transfer, assignment and delivery by
Sellers to Buyer pursuant to this Xxxx of Sale and Assignment Agreement are
subject to all covenants, representations, warranties, conditions and other
terms set forth in the Asset Purchase Agreement.
IN WITNESS WHEREOF, Sellers have executed and delivered this Xxxx
of Sale and Assignment Agreement as of this 1st day of September, 1998.
SELLERS:
ATHLETICA, INC.
By:
-----------------------------------
XXXXXXX X. XXXXX
Title: President
GRAVITY GAMES, INC.
By:
-----------------------------------
XXXXXXX X. XXXXX
Title: President
TS HOLDING, INC.
By:
-----------------------------------
XXXXXXX X. XXXXX
Title: President
47
SCHEDULE 8.3(b)
ASSUMPTION OF LIABILITIES AGREEMENT
FOR VALUE RECEIVED, JOE'S DIRECT, INC. an Oregon corporation
("Buyer"), pursuant to the Asset Purchase Agreement (the "Asset Purchase
Agreement") dated as of August 24, 1998, by and among ATHLETICA , INC., an
Oregon corporation ("Athletica"), GRAVITY GAMES, INC., an Oregon corporation
("Gravity Games") and TS HOLDING, INC., an Oregon corporation ("TS")
(collectively, "Sellers") and Buyer, hereby accepts the assignment of, and
assumes and agrees to pay, perform and discharge the Assumed Liabilities (as
defined in Section 2.1 and listed in Schedule 2.1 of the Asset Purchase
Agreement) and to hold Sellers and Shareholders harmless therefrom.
The acceptance, assumption and agreement of Buyer pursuant to
this Assumption of Liabilities Agreement are subject to all covenants,
representations, warranties, conditions and other terms set forth in the Asset
Purchase Agreement.
IN WITNESS WHEREOF, Buyer has executed and delivered this Assumption of
Liabilities Agreement as of this ___________ day of ____________________, 1998.
"BUYER":
JOE'S DIRECT, INC.,
AN OREGON CORPORATION
BY:
-----------------------------------------
TITLE:
--------------------------------------
48
SCHEDULE 8.3(c)
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and entered
into as of the 1st day of September, 1998, by and between G.I. Joe's, Inc., an
Oregon corporation (the "Company"), and the person, or entities, executing this
Agreement in the space provided on the signature page hereto (collectively, the
"Holder").
WHEREAS, Holder has agreed to accept registerable shares of the
Company's common capital stock (the "Stock") as partial payment of the Purchase
Price in the Asset Purchase Agreement dated August 24, 1998,(the "APA") between
Joe's Direct, Inc., as Buyer, a wholly owned subsidiary of Company, and
Athletica, Inc., Gravity Games, Inc., and TS Holdings, Inc.; and
WHEREAS, as additional consideration the Company desires to grant to
Holder registration rights with respect to the Stock;
NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties hereto agree as follows:
1. Definition of Certain Terms. The following terms shall have the
following meanings in this Agreement:
1.1 "Act" shall mean the Securities Act of 1933, as amended.
1.2 "Commission" shall mean the Securities and Exchange Commission.
1.3 "Holder" means any person or entity owning or having the right to
acquire Registrable Securities pursuant to the APA.
1.4 "Register," "registered," and "registration" shall mean a
registration effected by preparing and filing a registration statement in
compliance with the Act and the declaration or ordering of effectiveness of such
registration statement.
1.5 "Registrable Securities" shall mean (i) the Stock issuable in
accordance with the terms of the APA and (ii) any Common Stock of the Company
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, the Stock, excluding in all cases,
however, any Stock sold by a person in a transaction in which such person's
rights under Section 8 are not assigned.
1.6 "Registration Expenses" shall mean all expenses incurred by the
Company in complying with this Agreement, including without limitation all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, and blue sky fees and expenses.
49
1.7 "Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities of a Holder and all
fees and disbursements of counsel for such Holder.
2. Company Registrations.
2.1 If at any time the Company determines to register any of its capital
stock for sale to the general public solely for cash on a form that would also
permit sale of the Registrable Securities, either for its own account or the
account of a security holder or holders exercising demand registration rights,
the Company will each such time (i) promptly give to each Holder written notice
thereof and (ii) use its best efforts to include in such registrations and in
any related underwriting all Registrable Securities specified in a written
request by any Holder (which request shall state the intended method of
distribution of the Registrable Securities), received by the Company within 15
days after receipt of such written notice from the Company by any Holder, except
as set forth in Section 2.2 below.
2.2 If the registration of which the Company gives notice under this
Section 2 is for a registered public offering involving an underwriting, the
Company will so advise the Holders as a part of the written notice given such
Holders pursuant to Section 2.1. In such event the right of any Holder to
registration pursuant to this Agreement will be conditioned on such Holder's
participation in such underwriting and the inclusion of such Holder's shares in
the underwriting to the extent provided herein. All Holders proposing to
distribute shares through such underwriting will (together with the Company and
the other Holders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company. Notwithstanding any
other provision of this Section 2, if the underwriter of the offering determines
that marketing factors require a limitation on the number of shares to be sold
for the account of security holders, the Company may exclude all Registrable
Securities from, or limit the number of Registrable Securities to be included
in, the registration and underwriting. In making the decision to exclude or
limit the number of Registerable Securities Company shall use reasonable efforts
to allocate shares in the following order of priority: (1) shares being offered
by the Company; (2) shares to be issued in connection with obligations of the
Company incurred prior to the date of this Agreement, including, without
limitation, the plan of merger; and (3) pro rata among the Holder and other
holders whose shares are being registered therein according to the number of
shares requested to be registered by the Holder and other such holders.
If less than all Registrable Securities for which registration is sought
are to be included in the registration and underwriting, the number of
Registrable Securities included will be reduced pro rata among the Holders
requesting registration based on the number of Registrable Securities of such
Holders for which registration is sought.
3. Limits on Registrations. Notwithstanding any other provision of this
Agreement, the Company shall not be obligated to register any Registrable
Securities if it furnishes the Holder thereof a written opinion of counsel to
the Company that such Holder will be able to sell all the Registrable Securities
to any party that such Holder in good faith wishes to sell in a three-month
period pursuant to Rule 144 (or a comparable successor rule adopted by the
Commission).
PAGE 2--REGISTRATION RIGHTS AGREEMENT
50
4 Indemnification.
4.1 The Company will indemnify each Holder distributing shares pursuant
to an underwriting provided for in Section 2, any officers, directors, or
partners of the Holder, if the Holder is an entity, and any person controlling a
Holder, to the extent shares of such Holder have been registered, qualified, or
for which compliance has been effected pursuant to this Section 5, and each
underwriter, if any, and each person who controls any under-writer, against all
claims, losses, damages, and liabilities or actions in respect thereof arising
out of or based on any untrue statement or alleged untrue statement of a
material fact contained in any prospectus, offering circular, or other document,
including any related registration statement, notification, or the like,
incident to any such registration, qualification or compliance, or based on any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse such Holder, each of its officers, directors, or partners, as the
case may be, and each person controlling such Holder, each such underwriter, and
each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred by each such person so indemnified in connection
with investigating or defending any such claim, loss, damage, liability, or
action; provided, however, that the Company will not be liable in any such case
to the extent any such claim, loss, damage, liability or expense arises out of
or is based on any untrue statement or omission based on written information
furnished to the Company by such Holder or underwriter specifically for use in
the prospectus or offering circular.
4.2 Each Holder whose Registerable Securities are included in the
securities for which any such registration, qualification or compliance is being
effected will indemnify to the extent permitted by law the Company, each of its
directors and officers, each legal counsel and independent accountant of the
Company, each underwriter, if any, of the Company's securities covered by such a
registration statement, each person who controls the Company or such underwriter
within the meaning of the Act, and each other shareholder whose shares are
included in such registration, and each of such other shareholder's officers and
directors and each person controlling such other shareholder, against all
claims, losses, damages, and liabilities or actions in respect thereof arising
out of or based on any untrue statement of a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse the Company, such shareholder, and such directors, officers, persons,
underwriters, or control persons for any legal or any other expenses reasonably
incurred by such persons in connection with investigating or defending any such
claim, loss, damage, liability, or action, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular, or other document in reliance on and in
conformity with written information furnished to the Company by the Holder
furnishing the same specifically for use therein; provided, however, that the
obligations of any indemnifying Holder hereunder will be limited to an amount
equal to the proceeds to such Holder from the sale of such Holder's shares in
such registration.
4.3 Each party entitled to indemnification under this Section 4 (the
"Indemnified Party") will give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and will
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that
PAGE 3--REGISTRATION RIGHTS AGREEMENT
51
counsel for the Indemnifying Party, who will conduct the defense of such claim
or litigation, is approved by the Indemnified Party (whose approval will not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense; provided, that the Indemnified Party shall have
the right to retain one separate counsel, with reasonable fees and expenses to
be paid by the Indemnifying Party, if representation of the Indemnified Party by
the Indemnifying Party's counsel would be inappropriate due to actual or
potential conflicts of interest. No Indemnifying Party, in the defense of any
such claim or litigation, will, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation.
5. Expenses.
5.1 All Registration Expenses incurred in connection with a registration
pursuant to Section 2 will be borne by the Company.
5.2 All Selling Expenses will be borne by the Holder or Holders of the
securities so registered apportioned on a pro rata basis.
5.3 Notwithstanding any other provision of this Section 5, the
provisions of this Section 5 shall be deemed amended to incorporate and comply
with the provisions of any applicable state securities laws, regulations, and
administrative policies, and the rules of the National Association of Securities
Dealers, Inc. and stock exchanges upon which the Registrable Securities are or
will be eligible for listing.
6. Procedures. Whenever required under Section 2 to use its best efforts
to effect the registration of any of the Registrable Securities, the Company
will, as expeditiously as reasonably possible:
(a) prepare and file with the Commission a registration statement with
respect to such Registrable Securities and use its best efforts to cause
such registration statement to become and remain effective;
(b) prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection
therewith as may be necessary to comply with the provisions of the Act
with respect to the disposition of all securities covered by such
registration statement;
(c) furnish to each Holder with respect to whom Registrable Securities
are included in such registration statement such numbers of copies of a
prospectus, including a preliminary prospectus, and such other documents
as the Holder reasonably may require to facilitate the disposition of
such Registrable Securities; and
(d) use its reasonable efforts to register and qualify the securities
covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as reasonably are appropriate for
the distribution of the securities covered by such registration
statement; provided, however, that the Company will not be required in
connection therewith or as a condition thereto to qualify to do business
or to file a general consent to service of process in any such state or
jurisdiction unless the
PAGE 4--REGISTRATION RIGHTS AGREEMENT
52
Company is already subject to service in such jurisdiction; and, provide
further, that in connection with any proposed registration, the Company
will in no event be obligated to cause any such registration to remain
effective for more than 90 days.
7. Information from Holders. Each Holder whose shares are included in
any registration under Section 2 of this Agreement will furnish in writing to
the Company such information regarding such Holder and the distribution proposed
by such Holder as the Company may request in writing and as may be required in
connection with registration, qualification or compliance referred to in Section
2.
8. Assignment. Subject to compliance with the restrictions on transfer
of the Registerable Securities, the Registered Owner's registration rights under
this Agreement may be assigned by the Registered Owner to a transferee or
assignee of the Registerable Securities if the Company is given written notice
of the transfer, stating the name and address of the transferee or assignee and
identifying the securities with respect to which such registration rights are
being assigned; provide , however, that such assignment will be effective only
if immediately following such assignment the transferee or assignee holds at
least 50 percent of the Registrable Securities.
9. Stand-Off Agreement. No Holder who participates in the registration,
if so requested by the Company and an underwriter of securities of the Company,
will sell or otherwise transfer or dispose of any other securities of the
Company held by such Holder other than pursuant to the registration statement
during the 180-day period following and including the effective date of a
registration statement; provided, however, such Holder's agreement in this
Section 9 will only apply if all officers and directors of the Company enter
into similar agreements in writing in a form satisfactory to the Company and
such underwriter covering shares of Common Stock owned by such officers and
directors. The Company may impose stop transfer instructions with respect to the
securities subject to the restriction in this Section 9 until the end of the
180-day period.
10. Miscellaneous.
(a) Remedies. In the event of a breach by the Company of its obligations
under this Agreement, the Holder, in addition to being entitled to
exercise all fights granted by law, including recovery of damages, will
be entitled to specific performance of its rights under this Agreement.
(b) Agreements and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or
supplemented, unless such amendment, modification or supplement is in
writing and signed by the parties hereto.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery,
registered first-class mail, telex, or telecopies initially to the
address set forth below, and thereafter at such other address, notice of
which is given in accordance with the provisions of this of this Section
10(c):
PAGE 5--REGISTRATION RIGHTS AGREEMENT
53
If to Holder to:
------------
Attention:
With a copy to :
Xxxx X. Xxxx
Farleigh, Wada & Xxxx, PC
000 X.X. Xxxxxxxx Xxxxxx, Xxx. 000
Xxxxxxxx, XX 00000
If to Company to:
G.I. Joe's, Inc.
0000 Xxxxxxxx Xxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxx
With a copy to:
Xxxxx XxXxxxxx
0000 XX Xxxx Xxxxxxxx
Xxxxxxxx, Xxxxxx 00000
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; two business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; and when receipt is acknowledged, if
telecopied.
(d) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express
assignment. subsequent holders of the Registrable Shares subject to the
terms hereof.
(e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for convenience of
references only and shall not limit or otherwise affect the meaning
hereof.
PAGE 6--REGISTRATION RIGHTS AGREEMENT
54
(g) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Oregon without reference to its
conflicts of law provisions.
(h) Severability In the event that any one or more of the provisions
contained herein, or the application hereof in any circumstance is held
invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provisions contained herein shall not be
affected or impaired thereby.
(i) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and
exclusive statement of this agreement and understanding of the parties
hereto in respect of the subject matter contained herein. There are not
restrictions, promises warranties or undertakings, other than those set
forth or referred to herein, concerning the registration rights granted
by the Company pursuant to this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first written above.
COMPANY:
G.I. Joe's, Inc.
----------------------------------
By: Xxxxxx Xxxxxxx
Title: President
HOLDER:
By:
---------------------------------
Title:
------------------------------
PAGE 7--REGISTRATION RIGHTS AGREEMENT
55
SCHEDULE 8.3(d)(i)
EMPLOYMENT AGREEMENT OF XXXXXXX XXXXX
1. Parties. The parties to this Agreement are G. I. JOE'S, INC.
("Company") and XXXXXXX XXXXX ("Employee").
2. Employment. Company employs Employee and Employee accept
employment on the terms and conditions set forth in this Agreement.
3. Term. The term of this Agreement shall begin September 1,
1998, and shall continue until January 31, 2004, unless sooner terminated as
provided herein.
4. Compensation. For all services rendered by Employee, Company
shall pay Employee:
(a) A base salary of $100,000.00 per year payable in
accordance with normal payroll schedules. Salary payment shall be subject to
withholding and all applicable taxes.
(b) An annual bonus equal to .6% of the Company's annual
sales, provided:
(i) The Company earns a net profit (as a % of
sales) before income taxes and bonus payments to Employee
and Xxxxxxx Xxxxx ("Net Profit") as follows:
(a) 10% for fye 1/31/2000;
(b) 12% fye 1/31/2001; and
(c) 15% fye 1/31/2002 and thereafter.
(ii) Company's minimum sales are as follows:
a. $ 5,500,000 fye 1/31/2000
b. $ 8,000,000 fye 1/31/2001
c. $12,000,000 fye 1/31/2002
d. $20,000,000 fye 1/31/2003
e. $30,000,000 fye 1/31/2004
Bonus to be paid within thirty (30) days after computation of the Net Profit
Company's accountants for the prior fiscal year.
5. Benefits.
(a) Employee will be entitled to sick leave in a
reasonable amount.
56
(b) Employee shall be entitled to such medical and
dental insurance, 401(k) contributions, holidays and other benefits as may be
provided by the Company from time to time to other employees.
6. Duties. Employee is engaged as the General Manager of the
Company with his duties and responsibilities to be such as are reasonable and
customary for such a position and as may be determined by the Board of
Directors. The precise services of Employee may be extended or curtailed by the
Company from time to time.
7. Extent of Services. Employee shall devote his entire time,
attention and energies to the Company's business and shall not during the term
of this Agreement be engaged in any other business activity which requires the
devotion of a material amount of Employee's time, attention or energies.
However, Employee may invest his assets in such form or manner as will not
require his services in the operations of the affairs of the companies in which
such investment is made.
8. Disclosure of Information. Employee acknowledges that in
connection with his employment Employee will have access to certain confidential
and proprietary information which is a special and unique asset of the Company's
business. Employee will not during or after the term of his employment disclose
such information to any person, firm, corporation, association or other entity
for any reason or purpose whatsoever. In addition to any other remedies, Company
shall be entitled to an injunction restraining Employee from disclosing in whole
or in part such information.
9. Expenses. Employee may incur reasonable expenses for promoting
the Company's business, including expenses for entertainment, travel and similar
items. Company will reimburse Employee for such expenses upon Employee's
periodic presentation of an itemized account of such expenditures.
10. Vacations. Employee shall be entitled each year to a vacation
of three weeks during which time his compensation shall be paid in full.
Vacation time must be used each contract year. Employee shall receive no
compensation for unused vacation time, except on termination in accordance with
paragraph 12(a)(1) below.
11. Termination Without Cause.
(a) Company may, without cause, terminate this Agreement
at any time upon written notice to Employee. In the event of termination without
cause, the Company shall continue to be obligated to pay to Employee to the end
of the contract term his base salary as provided in paragraph 4(a), plus the
average annual bonus which Employee earned under paragraph 4(b) prior to the
date of his termination. Said base salary to continue to be paid monthly and the
bonus paid annually, less all amounts required to be withheld and deducted. In
addition, Employee shall receive the following:
(1) Accrued, but unused vacation prorated to the
date of termination (said sum to be payable on termination).
57
(2) Any bonus to which Employee may be entitled
under the terms of paragraph 4(b) prorated to the date of
termination payable within thirty (30) days of the close of the
Company's fiscal year.
(b) In the event of a sale of the Company, if the
purchaser employs or offers to employ Employee to perform duties similar to
those Employee provided to Company prior to the sale, any compensation paid to
the Employee (or which would have been paid to the Employee had the Employee
accepted the employment offer) shall be credited to any amounts due to Employee
under the preceding paragraph.
(c) Employee may terminate his employment at any time on
sixty (60) days written notice to Company. Upon receipt of such notice, Company
may immediately terminate Employee without payment of any compensation other
than amounts due as of the date of termination.
12. Termination for Cause. This Agreement may be terminated at
any time by Company for just cause without payment of any compensation other
than amounts owing as of the date of termination. For purposes of this
Agreement, just cause shall be limited to the following:
(a) Employee's failure or refusal after written notice to
comply with the reasonable policy standards and regulations of the Company
(b) Employee's failure to perform his regularly assigned
duties as established from time to time in a reasonable manner, consistent with
his salary, benefits and the expertise an employer would reasonably expect from
a General Manager for a business of the size and type conducted by Company.
(c) If Employee is guilty of fraud, dishonesty or other
acts of moral turpitude in the performance of his duties on behalf of the
Company.
(d) Employee's death or inability to perform the majority
of his usual and customary duties for a period of 90 days or more.
13. Waiver of Breach. The waiver by Company of a breach of any
provision of this Agreement by Employee shall not operate or be construed as a
waiver of any subsequent breach by Employee. No waiver shall be valid unless in
writing and signed by an authorized officer of Company.
14. Assignment. Employee acknowledges that the services to be
rendered by him are unique and personal. Accordingly, Employee may not assign
any of his rights or delegate any of his duties or obligations under this
Agreement.
15. Entire Agreement. This Agreement contains the entire
understanding of the parties. It may not be changed orally but only by an
agreement in writing signed by the parties against whom enforcement of any
waiver, change, modification, extension or discharge is sought.
58
16. Attorney Fees. In the event of suit or action related to or
arising out of this Agreement or the employment of Employee by Company, the
prevailing party shall be entitled to its reasonable attorney fees at trial or
upon appeal.
17. Arbitration. In the event of any dispute or disagreement
related or arising from this Agreement or Employee's employment with the
Company, the dispute shall be heard first by mediation and in absence of
settlement, by arbitration pursuant to ORS Chapter 36. The prevailing party of
such arbitration shall be entitled to recover in addition to any other costs or
award their reasonable attorney fees.
DATED September 1, 1998.
G. I. JOE'S, INC. "EMPLOYEE"
By:
----------------------------- ------------------------------
XXXX XXXXXXX, PRESIDENT XXXXXXX XXXXX
59
SCHEDULE 8.3(d)(ii)
EMPLOYMENT AGREEMENT OF XXXXXXX XXXXX
1. Parties. The parties to this Agreement are G. I. JOE'S, INC.
("Company") and XXXXX XXXXX ("Employee").
2. Employment. Company employs Employee and Employee accept
employment on the terms and conditions set forth in this Agreement.
3. Term. The term of this Agreement shall begin September 1,
1998, and shall continue until January 31, 2004, unless sooner terminated as
provided herein.
4. Compensation. For all services rendered by Employee, Company
shall pay Employee:
(a) A base salary of $80,000.00 per year payable in
accordance with normal payroll schedules. Salary payment shall be subject to
withholding and all applicable taxes.
(b) An annual bonus equal to .4% of the Company's annual
sales, provided:
(i) The Company earns a net profit (as a % of
sales) before income taxes and bonus payments to Employee
and Xxxxxxx Xxxxx ("Net Profit") as follows:
(a) 10% for fye 1/31/2000;
(b) 12% fye 1/31/2001; and
(c) 15% fye 1/31/2002 and thereafter.
(ii) Company's minimum sales are as follows:
a. $ 5,500,000 fye 1/31/2000
b. $ 8,000,000 fye 1/31/2001
c. $12,000,000 fye 1/31/2002
d. $20,000,000 fye 1/31/2003
e. $30,000,000 fye 1/31/2004
Bonus to be paid within thirty (30) days after computation of the Net Profit
Company's accountants for the prior fiscal year.
5. Benefits.
(a) Employee will be entitled to sick leave in a
reasonable amount.
60
(b) Employee shall be entitled to such medical
and dental insurance, 401(k) contributions, holidays and other benefits as may
be provided by the Company from time to time to other employees.
6. Duties. Employee is engaged as Operations Manager of the
Company with his duties and responsibilities to be such as are reasonable and
customary for such a position and as may be determined by the Board of
Directors. The precise services of Employee may be extended or curtailed by the
Company from time to time.
7. Extent of Services. Employee shall devote his entire time,
attention and energies to the Company's business and shall not during the term
of this Agreement be engaged in any other business activity which requires the
devotion of a material amount of Employee's time, attention or energies.
However, Employee may invest his assets in such form or manner as will not
require his services in the operations of the affairs of the companies in which
such investment is made.
8. Disclosure of Information. Employee acknowledges that in
connection with his employment Employee will have access to certain confidential
and proprietary information which is a special and unique asset of the Company's
business. Employee will not during or after the term of his employment disclose
such information to any person, firm, corporation, association or other entity
for any reason or purpose whatsoever. In addition to any other remedies, Company
shall be entitled to an injunction restraining Employee from disclosing in whole
or in part such information.
9. Expenses. Employee may incur reasonable expenses for promoting
the Company's business, including expenses for entertainment, travel and similar
items. Company will reimburse Employee for such expenses upon Employee's
periodic presentation of an itemized account of such expenditures.
10. Vacations. Employee shall be entitled each year to a vacation
of three weeks during which time his compensation shall be paid in full.
Vacation time must be used each contract year. Employee shall receive no
compensation for unused vacation time, except on termination in accordance with
paragraph 12(a)(1) below.
11. Termination Without Cause.
(a) Company may, without cause, terminate this Agreement
at any time upon written notice to Employee. In the event of termination without
cause, the Company shall continue to be obligated to pay to Employee to the end
of the contract term his base salary as provided in paragraph 4(a), plus the
average annual bonus which Employee earned under paragraph 4(b) prior to the
date of his termination. Said base salary to continue to be paid monthly and the
bonus paid annually, less all amounts required to be withheld and deducted. In
addition, Employee shall receive the following:
(1) Accrued, but unused vacation prorated to the
date of termination (said sum to be payable on
termination).
61
(2) Any bonus to which Employee may be entitled
under the terms of paragraph 4(b) prorated to the date of
termination payable within thirty (30) days of the close
of the Company's fiscal year.
(b) In the event of a sale of the Company, if the
purchaser employs or offers to employ Employee to perform duties similar to
those Employee provided to Company prior to the sale, any compensation paid to
the Employee (or which would have been paid to the Employee had the Employee
accepted the employment offer) shall be credited to any amounts due to Employee
under the preceding paragraph.
(c) Employee may terminate his employment at any time on
sixty (60) days written notice to Company. Upon receipt of such notice, Company
may immediately terminate Employee without payment of any compensation other
than amounts due as of the date of termination.
12. Termination for Cause. This Agreement may be terminated at
any time by Company for just cause without payment of any compensation other
than amounts owing as of the date of termination. For purposes of this
Agreement, just cause shall be limited to the following:
(a) Employee's failure or refusal after written notice to
comply with the reasonable policy standards and regulations of the Company.
(b) Employee's failure to perform his regularly assigned
duties as established from time to time in a reasonable manner, consistent with
his salary, benefits and the expertise an employer would reasonably expect from
an Operations Manager for a business of the size and type conducted by Company.
(c) If Employee is guilty of fraud, dishonesty or other
acts of moral turpitude in the performance of his duties on behalf of the
Company.
(d) Employee's death or inability to perform the majority
of his usual and customary duties for a period of 90 days or more.
13. Waiver of Breach. The waiver by Company of a breach of any
provision of this Agreement by Employee shall not operate or be construed as a
waiver of any subsequent breach by Employee. No waiver shall be valid unless in
writing and signed by an authorized officer of Company.
14. Assignment. Employee acknowledges that the services to be
rendered by him are unique and personal. Accordingly, Employee may not assign
any of his rights or delegate any of his duties or obligations under this
Agreement.
15. Entire Agreement. This Agreement contains the entire
understanding of the parties. It may not be changed orally but only by an
agreement in writing signed by the parties against whom enforcement of any
waiver, change, modification, extension or discharge is sought.
62
16. Attorney Fees. In the event of suit or action related to or
arising out of this Agreement or the employment of Employee by Company, the
prevailing party shall be entitled to its reasonable attorney fees at trial or
upon appeal.
17. Arbitration. In the event of any dispute or disagreement
related or arising from this Agreement or Employee's employment with the
Company, the dispute shall be heard first by mediation and in absence of
settlement, by arbitration pursuant to ORS Chapter 36. The prevailing party of
such arbitration shall be entitled to recover in addition to any other costs or
award their reasonable attorney fees.
DATED September 1, 1998.
G.I. JOE'S, INC. "EMPLOYEE"
By:
------------------------------ ------------------------------
XXXX XXXXXXX, PRESIDENT XXXXX XXXXX
63
ADDENDUM TO ASSET PURCHASE AGREEMENT
THIS ADDENDUM TO ASSET PURCHASE AGREEMENT is entered into this 1st day
of September, 1999, by and among JOE'S DIRECT, INC., an Oregon corporation
("Buyer"); and ATHLETICA, INC., an Oregon corporation ("Athletica"), GRAVITY
GAMES, INC., an Oregon corporation ("Gravity Games"), and TS HOLDING, INC., an
Oregon corporation ("TS") (Athletica, Gravity Games and TS are sometimes
referred to individually as "Seller" and collectively as "Sellers") and Xxxxxxx
X. Xxxxx and Xxxxxxx Xxxxx (collectively, "Shareholders").
On August 24, 1998, the parties executed and delivered an Asset Purchase
Agreement (the "Agreement").
NOW THEREFORE, the parties agree as follows:
1. Defined Terms. Unless given a different meaning herein, a capitalized
terms used in this Addendum to Asset Purchase Agreement ("Addendum") shall have
the meanings ascribed to them in the Agreement.
2. Continuing Effectiveness. Except as expressly modified herein, all of
the terms, conditions, covenants and exhibits set forth in the Agreement remain
in full force and effect among the parties.
3. Closing Date. The Closing Date is September 1, 1998.
4. Closing Date Schedules. The following Schedules are attached hereto
and incorporated in this Addendum and the Agreement by this reference:
(a) Schedule 3.2(f) - Allocation of Purchase Price Among Sellers
(b) Schedule 3.3 - Allocation of Purchase Price Among Assets
The following Schedules replace and supersede the Schedules delivered in
conjunction with the signing of the Agreement:
(c) Schedule 1.1(h) - Contracts/Leases
(d) Schedule 2.1 - Assumed Liabilities
(e) Schedule 5 - Exceptions to Representations and Warranties of Sellers
Page 1
64
5. Deliveries at Closing. Attached hereto are the detailed listing of
Fixed Assets which is part of Schedule 1.l(a) and the detailed inventory list
which is part of Schedule 1. 1(c).
6. Amendment of Section 3.2(d) and 3.2(e). In the event an adjustment to
the Purchase Price is made pursuant to Section 4 of the Agreement, the entire
amount of the adjustment shall be allocated to TS.
7. Amendment of Section A-1. In the third fine of Section 4.1 of the
Agreement, the words "July 31, 1998" are replaced with "September 1, 1998."
IN WITNESS WHEREOF, the parties have executed this Addendum as of the
date first written above.
BUYER:
JOE'S DIRECT, INC.
By: /s/ Xxxx Xxxxxxx
------------------------------------------
Xxxx Xxxxxxx, President
SELLERS
ATHLETICA, INC.
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------------
Xxxxxxx X. Xxxxx, President
GRAVITY GAMES, INC
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------------
Xxxxxxx X. Xxxxx, President
Page 2
65
TS HOLDINGS, INC
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------------
Xxxxxxx X. Xxxxx, President
SHAREHOLDERS:
XXXXXXX X. XXXXX
/s/ Xxxxxxx X. Xxxxx
---------------------------------------------
XXXX XXXXX
/s/ Xxxx Xxxxx
---------------------------------------------
Page 3
66
SCHEDULE 1.1(H)
CONTRACTS/LEASE SCHEDULE
AS OF 7/31/99
Xxxxxxxxx Xxxx Business Park Lease-$1740.00/Month through January 31, 1999
Pitney Xxxxx-Postage machine-$133.05/Quarter through January 2001
OGI-Phone T-1- $1,100/Month for 36 months
Sanwa Leasing-DIM 200 Computer SIN 83 LKL- S 171.97/month 36 month lease.
Sanwa Leasing-DELL Pentium S/N 88TFK-$448.60/month; 36 month lease.
Dell Leasing-XPS 200s S/N COC4M- $113.95/month; 36 month lease.
Gravity Games, Inc.'s obligations under Agreement not to Compete and
Confidentiality Agreement with Xxxxxx Xxxxxx, dated April 28, 1999, for payment
of $125,000; payments of $1,267.93 monthly (including interest at 9.0% per
annum) commencing June 1, 1998 for 15 years.
Approximately 40, non-exclusive Dealer/vendor contracts.
Short Term Advertising contracts; Sellers
Page 4
67
SCHEDULE 2.1
ASSUMED LIABILITIES
The Accounts Payable which comprise the Assumed Liabilities as of the
Closing Date are attached hereto. An updated listing of the other Assumed
Liabilities is attached hereto, and this Schedule replaces and supersedes the
Schedule 2.1 attached to the Agreement.
Page 5
68
SECTION 2.1
ASSUMED LIABILITIES
AS OF 8/15/1998
NOTES
Debtor Amount Rate Term
------ ------ ---- ----
Xxxxxx Xxxxxx $126,539.71 9.0% 15 Years
SPROCOR $259,146.42 Closing
Dynasty Capital $ 57,000.00 Due 11/28/98
GI Joes $100,000.00 On Closing
LEASES
Postage Machine $133.05/quarter 48 months
CTL Management $1740.00/month 6 months
OGI - Phone T-I $1100/Month 36 Months
Sanwa Leasing - DIM 200 Computer S/N 83LKL - 171.97/Month 36 Months Lease
000-000000-000
Sanwa Leasing - DELL Pentium S/N 88TFK - $448.6/Month 36 Months Lease
000-0000000-000
Dell Leasing - XPS 200s S/N COC4M - 113.95/Month 36 Months lease
#000-0000000-000
ALL Accounts Payable - See attached listings.
CREDIT CARD DEBT
First North American $2,770.33
CitiBank $6,555.89
Banc One Visa $9,650.56
Platinum Plus $10,297.11
Corporate American Express $7,525.38
OTHER LIABILITIES
Due to Xxx Xxxx $14,904.96
Due to Xxxx Xxxxx $23,000.00
Due to Xxxx Xxxxx $20,466.56
Due to Xxxxx Xxxxxx $30,000.00
Page 6
69
ATHLETICA
A/P AGING SUMMARY
AS OF AUGUST 31, 1998
Current 1-30 31-60 61-90 > 90 TOTAL
-------- -------- -------- -------- -------- ---------
Airborne Express 0.00 58.00 0.00 226.06 165.67 449.73
Aloha Garbage 0.00 26.85 26.85 0.00 0.00 53.70
AT&T Wireless 0.00 209.42 0.00 0.00 0.00 209.42
Brick Xxxxxxx 0.00 0.00 0.00 8,486.00 8,486.00 8,614.00
Catalog Creatives 6,160.00 3,840.00 0.00 0.00 0.00 12,120.00
Champion Nutrition 0.00 0.00 1,762.58 2.00 2.00 1,764.58
Clif Bar, Inc. 0.00 0.00 1,357.07 0.00 0.00 1,789.07
Competitor / City Sports 0.00 0.00 150.00 0.00 0.00 300.00
Country Companies 0.00 129.50 0.00 0.00 0.00 129.50
Crystal Springs 0.00 35.70 5.95 0.00 0.00 84.10
Dell Computer 0.00 3.80 0.00 0.00 0.00 3.80
DM News 0.00 0.00 178.00 75.00 75.00 253.00
DMA 0.00 1,250.00 0.00 0.00 0.00 1,250.00
Enron 0.00 0.00 33.41 0.00 0.00 33.41
Executive Program 0.00 100.27 0.00 24.89 24.89 125.16
Eyescream Interactive, Inc. 0.00 0.00 0.00 0.00 0.00 3,375.00
Farleigh, Wada & Xxxx, PC 0.00 3,597.32 2,593.94 0.00 0.00 7,430.57
Federal Express 0.00 90.75 185.50 0.00 0.00 276.25
Xxxx Xxxxx 0.00 3,915.00 13,453.11 3,340.97 3,340.97 29,160.93
GTE 0.00 0.00 502.19 0.00 0.00 1,518.29
Xxxxxxxx Publishing Co. 0.00 0.00 0.00 72.50 72.50 72.50
Imagina, Inc. 0.00 0.00 35.00 0.00 0.00 420.00
Internutria Sports 0.00 0.00 0.00 4,039.90 4,039.90 4,039.90
Iron man Magizine 0.00 49.97 0.00 0.00 0.00 49.97
Xxxxxxxx Xxxxxxx 0.00 0.00 0.00 3,920.00 3,910.00 3,910.00
Kick 0.00 300.00 300.00 0.00 0.00 900.00
LeBoeuf, Lamb, Green & XxxXxx 0.00 13,621.28 0.00 3,726.24 3,726.24 17,347.52
Library Of Science 0.00 334.54 0.00 144.62 144.62 479.16
Xxxx Xxx Xxxx 0.00 0.00 0.00 1.400.00 1,400.00 1,400.00
Lycos 0.00 0.00 0.00 1,636.00 1,636.00 1,636.00
Matrix Communications 0.00 108.00 0.00 0.00 0.00 108.00
Mellon First United Leasing 0.00 0.00 9,867.73 0.00 0.00 9,867.73
MNY 0.00 0.00 0.00 -1.05 0.00 -1.05
Multnomah County 0.00 0.00 12.00 0.00 0.00 12.00
Xxxx Xxxxxxx 0.00 0.00 1,440.00 3,690.00 0.00 5,130.00
NW Natural 0.00 0.00 6.00 0.00 0.00 6.00
Offices Inc. 0.00 240.00 0.00 0.00 0.00 240.00
Omnipack 0.00 0.00 31.91 0.00 0.00 -31.91
On Time Delivery Service 0.00 0.00 27.10 0.00 0.00 27.10
Oregon Road Tunners Club 0.00 0.00 0.00 0.00 70.00 70.00
Peace Bridge Brokerage 0.00 9.35 0.00 0.00 78.79 88.14
Pioneer Printing 0.00 0.00 199.50 0.00 0.00 199.50
Pitney Xxxxx 0.00 135.75 45.90 0.00 135.75 317.40
Power Bar 0.00 0.00 2,268.00 1,207.68 0.00 3,475.68
PR Ironman Bar 0.00 0.00 1,359.94 0.00 0.00 1,359.94
Purchase Power 0.00 15.00 0.00 0.00 0.00 15.00
Purolator 0.00 0.00 0.00 0.00 45.00 45.00
Rainbow Publications 0.00 0.00 0.00 0.00 32.00 32.00
Running Commentary 0.00 0.00 19.00 0.00 0.00 19.00
Xxxxxxx & Associates 0.00 0.00 0.00 0.00 400.00 400.00
Sanwa Leasing 0.00 0.00 182.89 0.00 0.00 182.89
SCOR Report 0.00 0.00 280.00 0.00 0.00 280.00
Page 7
70
Current 1-30 31-60 61-90 > 90 TOTAL
-------- -------- -------- -------- -------- ---------
Sports Street Marketing 0.00 0.00 2,334.33 0.00 0.00 2,334.33
Sprint 0.00 0.00 915.69 106.67 171.60 1,193.96
sprint pcs 0.00 218.22 0.00 0.00 0.00 218.22
The Business Journal 0.00 0.00 0.00 68.00 0.00 68.00
The Oregonian 0.00 125.88 117.21 278.37 0.00 521.46
Triathlete 0.00 820.71 793.60 1,109.32 687.95 3,411.58
Ultrarunning 0.00 0.00 115.00 0.00 115.00 230.00
United Healthcare 0.00 1,008.52 0.00 0.00 0.00 1,008.52
UPS 0.00 848.69 1,607.50 954.88 0.00 3,411.07
Upside 0.00 0.00 29.95 0.00 0.00 29.95
US West 647-2097 Athletica 0.00 0.00 52.24 0.00 0.00 52.24
US West Home Office 0.00 582.87 311.42 0.00 0.00 874.29
Xxxx Xxxxxxxx and Associates 0.00 0.00 0.00 0.00 3,557.16 3,557.16
Wall Street Journal 0.00 0.00 0.00 0.00 474.00 474.00
-------- -------- -------- -------- -------- ---------
TOTAL 6,160.00 31,655.39 42,538.69 25,279.64 32,791.04 138,422.76
======== ========= ========= ========= ========= ==========
Page 8
71
GRAVITY GAMES, INC.
A/P AGING SUMMARY
AS OF AUGUST 31, 1998
Current 1-30 31-60 61-90 > 90 TOTAL
-------- -------- ------ ---- ---- --------
AT&T LD 1,715.50 00.0 00.0 00.0 00.0 1,715.57
IMAGINA 00.0 00.0 55.00 00.0 00.0 55.00
Xxxxxx 1,198.00 00.0 00.0 00.0 00.0 1,198.00
Norwest Business Credit 1 00.0 2,000.00 00.0 00.0 00.0 2,000.00
RHYDE SKS PRODUCTS 00.0 00.0 129.31 00.0 00.0 129.31
Stoel Rives LLP 00.0 00.0 249.00 00.0 00.0 249.99
Sunshine Distribution 00.0 1,321.80 00.0 00.0 00.0 1,321.00
Willamette Week
Classifieds 47.70 00.0 00.0 00.0 00.0 47.70
-------- -------- ------ ---- ---- --------
TOTAL 2,961.27 3,321.80 434.30 00.0 00.0 6,717.37
======== ======== ====== ==== ==== ========
Page 9
72
TIDEWATER SPECIALTY
A/P AGING SUMMARY
AS OF AUGUST 31, 1998
Current 1-30 31-60 61-90 > 90 TOTAL
------- ------ --------- ----- ---- ---------
LeBoeuf, Lamb, Green & XxxXxx 00.0 00.0 11,944.06 00.0 00.0 11,944.06
Network Solutions 00.0 105.00 00.0 00.0 00.0 105.00
---- ------ --------- ---- ---- ---------
TOTAL 00.0 105.00 11,944.06 00.0 00.0 12,049.06
==== ====== ========= ==== ==== =========
Page 10
73
SCHEDULE 3.2(F)
ALLOCATION OF PURCHASE PRICE AMONG SELLERS
ITEM ATHLETICA GRAVITY GAMES TS TOTAL
---- ------------- ------------- ------------- -------------
9-1-98 Non-Compete $ -- $ -- $ -- $ 100,000.00
9/1/98 Cash $ 300,000.00 $ 20,000.00 $ 30,000.00 $ 350,000.00
12-1-98 Cash $ 400,000.00 $ 20,000.00 $ 130,000.00 $ 550,000.00
1-1-99 Stock $ 400,000.00 $ 40,000.00 $ 478,738.75 $ 918,738.75
2-1-99 Stock $ 400,000.00 $ 40,000.00 $ 478,738.75 $ 918,738.75
Stock #3 $ 400,000.00 $ 40,000.00 $ 478,738.75 $ 918,738.75
Stock #4 $ 400,000.00 $ 40,000.00 $ 478,738.75 $ 918,738.75
------------- ----------- ------------- -------------
$2,300,000.00 $200,000.00 $2,074,955.00 $4,674,955.00
============= =========== ============= =============
Page 11
74
SCHEDULE 3.3
ALLOCATION OF PURCHASE PRICE AMONG THE ASSETS
ITEM ATHLETICA GRAVITY GAMES TS TOTAL
---- ------------- ------------- ------------- -------------
Current Assets $ 35,796.67 $ 17,541.56 $ -- $ 53,338.23
Fixed Assets $ 55,314.14 $ 5,492.92 $ -- $ 60,807.07
Goodwill/Lists $ -- $ 185,000.00 $ 300,000.00 $ 465,000.00
Goodwill $2,208,889.19 $ 11,965.51 $1,774,955.00 $3,995,809.70
------------- ------------- ------------- -------------
$2,300,000.00 $ 200,000.00 $2,074,955.00 $4,574,955.00
============= ============= ============= =============
Page 12
75
SCHEDULE 5
EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES OF SELLERS
5.1 None of Seller's are licensed or qualified as a foreign corporation
in any state other than the states of their organization.
5.4 The Inventory of Sellers is subject to the security interest
described in 5.8, below.
5.5 Sellers make no representation or warranty as to the financial
condition or operations of any business, the assets or stock of which was
acquired by any Seller within the six month period preceding the Closing Date,
for any period prior to acquisition by such Seller. The balance sheet dated July
31, 1999 provided by Sellers supersedes and replaces any other financial
information provided by any Seller or Shareholder, and no Seller or Shareholder
makes any representation or warranty with regard to any financial information
other than as set forth in the balance sheet dated July 31, 1998.
5.8 The inventory of all of the Sellers secures the $57,000 obligation
to Dynasty Capital disclosed in the balance sheet dated July 31, 1998,
5.9 No tradename or trademark (if any) of any Seller is registered with
the US Patent and Trademark Office.
5.10 The leases to which any Seller is a party are as follows:
Xxxxxxxxx Xxxx Business Park-$1,620/Mouth until January 31, 1999
Pitney Xxxxx-Postage Machine-133.05/Quarter
OGI-Phone T-1--$1,100/Month-3 6 months.
Sanwa Leasing-DM 200 Computer SIN 83 LKL- $171.97/month 36 month lease.
Sanwa Leasing-DELL Pentium SIN 88TFK- $448.60/month, 36 month lease.
Dell leasing- NPS 200s, S/N COC4M- $113.95/month- 36 month lease.
5.11 Sellers are not aware of any permits necessary or material to the
operation of their Business.
5.12 Sellers intend to cancel their insurance when deemed appropriate
after the Closing Date.
Page 13
76
SECOND ADDENDUM TO ASSET PURCHASE AGREEMENT
THIS SECOND ADDENDUM TO ASSET PURCHASE AGREEMENT ("Second Addendum") is
entered into effective as of the 1st day of December, 19998, by and among G.I.
JOE'S, INC., an Oregon corporation ("Buyer"), as assignee of Joe's Direct, Inc.,
and ATHLETICA, INC., an Oregon corporation ("Athletica"), GRAVITY GAMES, INC.,
an Oregon corporation ("Gravity Games"), and TS HOLDING, INC., an Oregon
corporation ("TS") (Athletica, Gravity Games and TS are sometimes referred to
individually as "Seller" and collectively as "Sellers") and Xxxxxxx X.
Xxxxx and Xxxxxxx Xxxxx (collectively "Shareholders").
On August 24, 1998, the parties executed and delivered an Asset Purchase
Agreement (the "Agreement"). On September 1, 1998, the parties executed and
delivered an Addendum to Asset Purchase Agreement (the "Addendum"). The parties
desire to amend the Agreement and Addendum on the terms set forth herein.
NOW THEREFORE, the parties agree as follows:
1. Defined Terms.Unless given a different meaning herein, all
capitalized terms used in this Second Addendum to Asset Purchase Agreement shall
have the meanings ascribed to them in the Agreement and Addendum.
2. Continuing Effectiveness. Except as expressly modified herein, all of
the terms, conditions, covenants and exhibits set forth in the Agreement and
Addendum remain in full force and effect among the parties.
3. December 1, 1998, Payment. Pursuant to Section 3.2(b) of the
Agreement, Buyer agreed to pay to Sellers the sum of $550,000 in cash on or
before December 1, 1998. The parties hereto agree that Buyer shall pay the sum
of $350,000 in cash on or before December 1, 1998, and Buyer will pay the sum of
$200,000 in cash on or before January 3, 1999.
4. Adjustment of Value of Stock. Pursuant to Section 3.2(d) of the
Agreement, the value of the shares of G. I. Joe's, Inc.'s, common stock which
will be issued to Sellers in payment of the balance of the Purchase Price is
based on a value of $11.00 per share, or the actual IPO price for such stock if
the IPO price is less than $8.80 per share. In the event the IPO occurs after
any shares of common stock of Buyer have been issued to Sellers in payment of
the Purchase Price and the IPO prices is less than $8.80 per share, Buyer shall
promptly issue and deliver to Sellers sufficient additional shares of common
stock of Buyer in order to adjust the prior installment payments made to Sellers
PAGE 1 - SECOND ADDENDUM TO ASSET PURCHASE AGREEMENT
77
in stock of Buyer based upon the actual IPO price for such stock. Such stock
valuation shall then also be used for any future payments of the Purchase Price
to be made in stock of Buyer.
5. Schedule 3.2(d). Amend Schedule 3.2(d) of the Agreement as follows:
5.1 The First Performance Standard as defined in paragraph (3) of
Schedule 3.2(d) shall be amended to read as follows:
"The First Performance Standard" shall mean the Catalog and
Internet Sales Division of Joe's (the "Division") shall have
earnings before interest, depreciation, amortization, income
taxes and bonus payments to Xxxxx and Xxxxx of not less than ten
percent (10%) of the Division's gross sales and the Division's
gross sales are not less than $5,500,000."
5.2 The Second Performance Standard as defined in paragraph (4)
of Schedule 3.2(d)(4) shall be amended to read as follows:
"The Second Performance Standard" shall mean the Division shall
have earnings before interest, depreciation, amortization, income
taxes and bonus payments to Xxxxx and Xxxxx of not less than
twelve percent (12%) of the Division's gross sales and the
Division's gross sales are not less than $8,000,000."
6. Employment Agreement of Xxxxxxx Xxxxx. Paragraph 4(b) of the
Employment Agreement (Schedule 8.3(d)(i)) shall be amended to read as follows:
"An annual bonus equal to .6% of the Company's Annual Catalog and
Internet Sales Division (the "Division"), provided:
(i) The Division earns a net profit (as a percentage of
Division sales) before income taxes and bonus payments to
Employee as follows:
(a) 10% for fye 1/31/2000;
(b) 12% for fye 1/31/2001; and
(c) 15% for fye 1/31/2002 and thereafter.
(ii) The Division's minimum sales are as follows:
(a) $5,500,000 fye 1/31/2000;
PAGE 2 - SECOND ADDENDUM TO ASSET PURCHASE AGREEMENT
78
(b) $8,000,000 for fye 1/31/2001;
(c) $12,000,000 fye 1/31/2002;
(d) $20,000,000 fye 1/31/2003; and
(e) $30,000,000 fye 1/31/2004.
Bonus to be paid within thirty (30) days after computation of the
Division's net profits by Company's accountants for the prior
fiscal year.
IN WITNESS WHEREOF, the parties have executed this Second Addendum as of
the date first written above.
ALPHACO, INC. BETACO, INC.
(FNA GRAVITY GAMES, INC.) (FNA TS HOLDING, INC.)
By:__________________________ By:___________________________
XXXXXXX XXXXX, President XXXXXXX XXXXX, President
ZETACO, INC. G.I. JOE'S, INC.
(FNA ATHLETICA, INC.)
By:__________________________ By:___________________________
XXXXXXX XXXXX, President XXXX XXXXXXX, President
_____________________________ ___________________________________
XXXXXXX XXXXX, Shareholder XXXXXXX XXXXX, Shareholder
PAGE 3 - SECOND ADDENDUM TO ASSET PURCHASE AGREEMENT
