EXHIBIT 2.01
STOCK PURCHASE AND SALE AGREEMENT
THIS STOCK PURCHASE AND SALE AGREEMENT (the "Agreement"), made and entered
into as of the 18th day of December, 1998, by and among AVID SPORTSWEAR, INC., a
California corporation ("Corporation"), XXXXXX X. XXXXXXX and XXXXX XXXXXXXX
(collectively "Principal"), Xxxx X. Xxxxxx and Xxxxx X. Xxxxxx, Trustees of the
Xxxxxx Family Trust dated April 7, 1988, Xxxx X. Xxxxxxx and Xxxx X. Xxxxxxx,
Trustees of The Xxxxxxx Family Trust dated August 1, 1988, Xxxxxx X. Xxxxxxx,
Xxxxxxx X. Xxxxxxx, Xxxxx X. Xxxxxxx and Xxxxxxx X. Xxxxxxx, Xxxxxxx X. Xxxxxxx
and Xxxxxxx X. Xxxxxxx, Trustees of The Xxxxxxx Family Trust, Xx Xxxxxxxx,
Xxxxxxx Xxxxxx and Xxxxx Xxxxxx, Trustee of The Xxxxxxx and Xxxxx Xxxxxx Trust,
Xxxxx X. Xxxxxxxx, Xxxxxxxxx Xxxxxxxx and Xxxx Xxxxxxxx (all of the foregoing
and the Principal collectively "Shareholders" and individually "Shareholder")
and GOLF INNOVATIONS CORP., a Nevada corporation ("Buyer").
WHEREAS, Corporation owns and operates a golf shirt business (the
"Business"); and
WHEREAS, Shareholders own all of the issued and outstanding capital stock
of Corporation ("Stock"); and
WHEREAS, Buyer desires to buy all of the Stock and the Shareholders desire
to sell the Stock, upon and subject to the terms and conditions provided herein;
and
WHEREAS, the Principal join in this Agreement in order to make certain
covenants, warranties and representations to induce Buyer to enter into this
transaction with the Shareholders.
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements herein set forth and for other good and valuable consideration, the
receipt and sufficiency of all of which are hereby acknowledged, it is agreed as
follows:
ARTICLE I. SALE AND PURCHASE. On the Closing Date (as hereinafter
defined), Shareholders shall sell and Buyer shall buy all of the Stock of
Corporation, free and clear of all liens, encumbrances, security interests,
other impairments of title, claims and liabilities, for the Purchase Price
hereinafter specified.
ARTICLE II. DEFINITIONS.
Section II.1. CLOSING DATE. The Closing of the sale contemplated herein
shall be held on December 29, 1998 ("Closing Date"), or as soon thereafter as
practicable after all conditions precedent to Closing set forth in Sections 7.2
and 7.3 hereof have been fulfilled or waived by the party entitled to the
benefits thereof, but in no event later than December 31, 1998, after which time
either party may terminate this Agreement if the Closing has not occurred.
Section II.2. ASSETS. "Assets" means all tangible and intangible assets of
Corporation constituting a part of, used in or pertaining or relating to the
operation of the Business, including, but not be limited to:
A. All cash, certificates of deposits, investments, cash equivalents,
accounts receivable and other liquid assets;
B. All equipment, machinery, tools, motor vehicles, furniture, fixtures,
supplies and other personal property of every kind and nature owned by
Corporation and used or useful in the operation of the Business wherever
located, including but not limited, to all items described on Schedule II.2B
attached hereto and all personal property and leasehold improvements attached to
the Real Estate hereinafter described, (all such property being herein called
"Tangible Personal Property");
C. All of Corporation's customers, customer contracts, customer lists,
accounts, information relating to customers, vendors, suppliers, files,
notebooks and records relating to the Business, including, but not limited to,
those more particularly described in Schedule II.2C attached hereto (the
"Customers and Contracts");
D. All licenses and permits held by Corporation in connection with the
operation of the Business, to the extent the same are transferable (the
"Licenses and Permits");
E. All of Corporation's inventory of shirts, logos and other clothing
apparel, held for sale in the ordinary course of the Business ("Inventory"),
provided that as to any Inventory which is stored off-site or held by others for
processing, Corporation will provide Buyer with receipts, bills of lading or
other documentation at Closing, with appropriate assignments, to permit Buyer to
obtain possession of such Inventory; and
F. The trade name "Avid Sportswear" and "Avid" (collectively "Avid") and
all goodwill and custom and trade associated therewith (the "Trade Name"), and
the exclusive right to use such Trade Name, with full warranty as to such
exclusive use.
All of the Assets are now, and will on the Closing Date be, located on
Corporation's business premises at 00000 Xxxxx Xxxxx Xxxx Xxxx, Xxxxxx,
Xxxxxxxxxx 00000 (the "Real Estate") unless otherwise noted on Schedule II.2A
attached hereto. As to any Tangible Personal Property which is stored off-site
or in the possession of others, Corporation will provide Buyer with appropriate
documentation at Closing to permit Buyer to obtain possession of such items.
Section II.3. THE REAL ESTATE. The Real Estate is being leased by
Corporation pursuant to a Lease currently with VBP7IC, LLC, successor to Akira
Industries Co., Ltd., dated August 18, 1994 (the "Lease"), a copy of which Lease
is attached hereto as Schedule II.3.
Section II.4. PURCHASE PRICE. The Purchase Price shall be comprised of
Seven Hundred Twenty-Five Thousand Dollars ($725,000.00) in cash and 1,100,000
shares of common stock of Buyer valued at $.25 per share, all as more
particularly described in Schedule II.4. Any notes payable from the Corporation
to Buyer which are outstanding at the time of Closing shall be treated as
advance payments toward trade payables and liabilities which Buyer represents it
has paid prior to the date hereof, under Section III.22.
Section II.5. LIABILITIES PAID AT CLOSING. At the Closing, Buyer shall
cause the Corporation to pay the liabilities of the Corporation set forth in
Schedule II.5 by wire transfer of funds. Buyer shall cause the Shareholders to
be released from individual liability under the guaranties to Nations Bank for
the Corporation's liability to Nations Bank described on Schedule II.5 and
indemnify the Shareholders against any liability therefor.
Section II.6. TRADE PAYABLES. Buyer shall cause the Corporation to
discharge all of Corporation's trade liabilities as set forth in Schedule II.6
and any trade payables or operating expenses incurred in the ordinary course of
business.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF CORPORATION. Corporation
and Shareholders, jointly and severally, represent and warrant to Buyer:
Section III.1. CORPORATE STATUS AND POWER OF CORPORATION. Corporation is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California, with the power and authority to enter into and
perform this Agreement, make the representations and warranties herein made by
it, consummate the transactions contemplated by this Agreement and incur the
obligations undertaken by it hereunder.
Section III.2. CAPITALIZATION. The entire authorized capital stock of
Corporation consists of 34,485.720 shares of common stock having a par value of
$_____ per share, of which 34,485.720 shares are issued and outstanding. The
issued and outstanding shares of the capital stock of Corporation are described
as _____ follows:
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NAME SHARES
---- ------
Xxxxxx Family Trust 11,142.860
Xxxxxxx Family Trust 1,714.300
Xxxxxx X. Xxxxxxx 2,571.430
Xxxxxxx X. Xxxxxxx 857.150
Xxxxx X. Xxxxxxx and Xxxxxxx X. 2,114.270
Xxxxxxx
Xxxxxxx Family Trust 3,371.420
Xx Xxxxxxxx 571.430
Xxxxxxx Xxxxxx and Xxxxx Xxxxxx 1,714.290
Trust
Xxxxx X. Xxxxxxxx 10,000.000
Xxxxxxxxx Xxxxxxxx 214.285
Xxxx Xxxxxxxx 214.285
There are no outstanding or authorized options, warrents, rights,
contracts, calls, puts, rights to subscribe, conversion rights or other
agreements or commitments to which Corporation is a party or which are binding
on Corporation providing for the issuance, disposition or acquisition of any of
Corporation's capital share.
Section III.3. CORPORATE ACTION. Corporation has duly taken all necessary
corporate and shareholder action to permit the execution, delivery and
performance of this Agreement and this Agreement constitutes the valid and
binding agreement of Corporation and is enforceable against Corporation in
accordance with its terms except as enforceability may be limited by applicable
bankruptcy, insolvency or other laws affecting creditors' rights.
Section III.4. ENFORCEABILITY. This Agreement constitutes the valid and
binding agreement of the Shareholders and is enforceable against the
Shareholders in accordance with its terms except as enforceability may be
limited by applicable bankruptcy, insolvency or other laws affecting creditors'
rights.
Section III.5. LICENSES. Corporation possesses all governmental licenses,
consents, authorities, and permits necessary or required or desirable in order
for Corporation to own and operate the Assets and to conduct the Business as it
is now conducted. To the knowledge of the Corporation and the Shareholders, no
act, condition or other state of facts has occurred or exists which could result
in a fine, penalty or other cost to Buyer or interfere with Buyer at any time in
any manner in the operation of the Business.
Section III.6. PERFORMANCE OF AGREEMENT. No action or proceeding before a
court or other governmental agency or officer is pending or, to the best of
their knowledge, threatened which could restrain or prevent Shareholders from
consummating the sale and transfer of the Stock or from performing all of their
obligations under this Agreement.
Section III.7. LEGAL PROCEEDINGS. Neither Corporation nor Shareholders has
received notice of any violations or enforcement of legal, governmental or
administrative proceedings of any kind or nature pending or threatened against
Corporation, Shareholders or the Assets, the Business or the Real Estate except
as described on Exhibit "C" attached hereto, and none of the Assets or the Real
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Estate is subject to any judgment, lien, levy, attachment, seizure, distraint,
injunction, fine, penalty or other writ or legal proceeding or any
administrative or governmental action or proceeding.
Section III.8. JUDGMENTS. There are no judgments, liens, suits, actions or
legal or administrative proceedings pending or, to the best of their knowledge,
threatened against Corporation or the Assets and there are no bankruptcy,
receivership, arrangement or other debtor relief, insolvency or liquidation
proceedings, either voluntary or involuntary, pending or, to the best of their
knowledge, threatened against or for the benefit of Corporation.
Section III.9 CONDUCT OF BUSINESS. To the knowledge of the Corporation and
the Shareholders, there are no existing or uncured material violations of any
laws or regulations affecting the Business. Neither Corporation, Shareholders
nor anyone on its or their behalf has contracted to sell to any person other
than Buyer, or has granted to any person an option to purchase, all or any part
of the Stock, or executed, incurred, granted, assumed, created or suffered any
conveyance, mortgage, lease, pledge, security agreement, financing statement,
lien or other charge or encumbrance of any nature with respect to the Stock
except as shown on Schedule III.9. Corporation has not operated the Business
under any trade name other than Avid and Avid Sportswear.
Section III.10. NO ADVERSE CHANGE. There exists no fire, explosion,
accident, strike, work stoppage, attempt to organize employees, condemnation,
litigation, nor has there been any governmental action which could adversely
affect the Business nor to the knowledge of the Corporation and the Shareholders
any threat of any of the foregoing.
Section III.11. INVENTORY. All Inventory of the Business is useable and
saleable in the ordinary course of the Business. Corporation has used prudent
business methods to ensure that the Inventory is not, and does not become
nonsaleable.
Section III.12. ASSETS. Corporation is the absolute and sole owner of, and
has good and marketable title to, all of the Assets. None of the Assets are
leased by Corporation. All of the Assets are free and clear of all liens,
encumbrances, security interests, impairments of title, claims and liabilities
of every kind and nature whatsoever except the lien in favor of NationsBank and
as set forth on Schedule III.2 attached hereto. Corporation has paid all
personal property taxes which were due and payable with respect to the Assets in
the year of Closing.
Section III.13. CONDITION OF PROPERTIES. The Tangible Personal Property
shall be delivered at Closing in the same condition as it was in on the date
that it was inspected by Buyer within the last thirty (30) days, ordinary wear
and tear only excepted. All Assets and the Real Estate conform to and comply
with, and do not violate the material provisions of any, legal and
administrative requirements of every kind, including, but not limited to, any
rule, regulation, order or ordinance, notice or statute relating to zoning,
health, safety, the environment, disabled persons or fire protection; neither
Corporation nor Shareholders has received any notice of violation of any rules,
regulations, orders, ordinances or other laws.
Section III.14. NO COMMITMENTS OF CORPORATION. Except as set forth on
Schedule III.14 attached hereto, the Assets are not bound by any contracts,
agreements, leases or other commitments in connection-with the operation of the
Business, except for orders of pre-sold Inventory as set forth in Schedule
III.14 attached hereto.
Section III.15. NO BROKERAGE. Neither Corporation nor Shareholders has
made any representation or commitment by which Buyer might be obligated to pay
any commission or compensation to any finder, broker, agent or advisor.
Section III.16. EMPLOYEES. Except as set forth on Schedule III.16 attached
hereto, all of Corporation's employees of the Business are "at-will" employees
and Buyer will not have any obligation to retain any employees of the Business.
Corporation is not a party to any collective bargaining agreement with any labor
union with respect to any employees of the Business. Buyer has not incurred or
has any liability or obligation whatsoever with respect to any pension, profit
sharing or retirement plan or similar employee benefit program for the benefit
of any present or former employees of the Business.
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Section III.17. TAXES. Corporation has paid in full, and will continue to
pay when due, all county, state and federal income, withholding, social
security, unemployment insurance, sales and property taxes and all other taxes
of every kind and nature due or to become due or assessed in connection with the
Assets, the Real Estate and the operation of the Business to the Closing Date
and none of the Assets or the Real Estate is subject to any tax lien, levy,
seizure or other process with respect to any such taxes.
Section III.18. REAL ESTATE. Corporation is the leasehold owner of the
Real Estate. The Real Estate is suitably zoned for use as an assembly and
distribution facility for the Assets and, to the knowledge of the Corporation
and the Shareholders, there are no covenants, restrictions or easements
affecting the Real Estate which would prevent or interfere with such use.
Neither Corporation nor Shareholders are aware of or have received notice of any
uncured zoning violation affecting the Real Estate. The Real Estate is currently
leased by Corporation and is occupied by Corporation for the operation of the
Business, which Lease between the landlord and Corporation will be assigned to
Buyer at Closing with the consent of landlord. All payments to the landlord
under the Lease are current and none are delinquent. Corporation shall obtain at
Closing an estoppel letter from landlord confirming the existence of the Lease,
that there are no amendments or modifications to the Lease, and that the
Corporation is not in default of the Lease. The Real Estate is served by all
necessary utility services, which are adequate for the operation of the
Business. Corporation has no knowledge of any significant defects in any of the
improvements on the Real Estate which require immediate repair or replacement at
a cost which would exceed One Thousand Dollars ($1,000.00) in the aggregate.
Section III.19. FINANCIAL STATEMENTS. The Financial Statements attached
hereto as Schedule III.19 have been prepared from the books and records of the
Corporation and fairly represent the results and operations of Corporation
consistent with past practices of accounting by Corporation. Corporation has no
liabilities except as disclosed in the Financial Statements except which have
arisen in the ordinary course of business and are not delinquent or as provided
in Schedule III.19 attached hereto. To their knowledge, all of the receivables
disclosed in the Financial Statements are collectible in the ordinary course of
business.
Section III.20. OPERATIONS. Except as reflected on Schedule III.20
attached hereto, since September 30, 1998, Corporation has not:
A. sold, leased, transferred or assigned any of its assets, tangible or
intangible, other than for a fair consideration in the ordinary course of
business;
B. entered into any material agreement, contract, lease or license (or
series of related agreements, contracts, leases and licenses) outside the
ordinary course of business;
C. accelerated, terminated, modified or canceled any material agreement,
contract, lease or license (or series of related agreements, contracts, leases
and licenses) to which the Corporation is a party or by which it is bound
outside the ordinary course of business;
D. imposed any security interest upon any of its assets, tangible or
intangible;
E. made any capital expenditure (or series of related capital
expenditures) outside the ordinary course of business;
F. made any capital investment in, any loan to, or any acquisition of the
securities or assets of, any other person or entity (or series of related
capital investments, loans and acquisitions) outside the ordinary course of
business;
G. except for notes issued to Buyer, issued any note, bond or other debt
security or created, incurred, assumed or guaranteed any indebtedness for
borrowed money or capitalized lease obligation either involving more than
$10,000 singly or $50,000 in the aggregate;
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H. delayed or postponed the payment of accounts payable and other
liabilities when due except in the ordinary course of business;
I. canceled, compromised, waived or released any right or claim (or series
of related rights and claims) outside the ordinary course of business;
J. granted any license or sublicense of any rights under or with respect
to the Trade Names;
K. made any loan to, or entered into any other transaction with, any of
its directors, officers and employees;
L. granted any increase in the base compensation of any of its directors,
officers and employees;
M. made any material change in employment terms for any of its directors,
officers and employees;
N. entered into any employment contract or collective bargaining agreement
or materially modified the terms of any existing such contract or agreement;
O. adopted, amended, modified or terminated any bonus, profit sharing,
incentive, severance or other plan, contract or commitment for the benefit of
any of its directors, officers and employees (or taken any such action with
respect to any other Employee Benefit Plan);
P. made or pledged to make any material charitable or other capital
contribution.
Section III.21. TAX MATTERS.
A. The Corporation has filed all federal, state and local tax returns
required to be filed, and paid all taxes currently due and owing, and all such
tax returns were prepared in all material respects in compliance with all
applicable laws and regulations, and are correct and complete in all material
respects.
B. Corporation has not waived any statute of limitations in respect of
taxes or agreed to any extension of time with respect to a tax assessment,
collection or deficiency.
C. Corporation is not a party to any tax allocation or sharing agreement.
D. Corporation has withheld and paid all taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee in
connection with his or her employment with Corporation.
E. No deficiency or proposed adjustment which has not been settled or
otherwise resolved for any amount of tax of Corporation has been proposed,
asserted or assessed by any taxing authority against Corporation and there is no
action, suit, taxing authority proceeding or audit now pending or, to
Corporation's knowledge, threatened against the Corporation. No claim has ever
been made by a taxing authority in a jurisdiction where the Corporation does not
file tax returns that the Corporation is or may be subject to taxes assessed by
such jurisdiction. There are no liens for taxes (other than for current taxes
not yet due and payable) upon the assets of the Corporation as of immediately
prior to the Closing.
F. The Shareholders shall make the election under Section 338 (h)(10) of
the Internal Revenue Code of 1986, as amended, and shall cooperate in all
respects with Buyer in making this election.
Section III.22. BUYER NOTES. The Corporation has utilized all funds
provided by Buyer prior to the date of this Agreement to pay trade payables and
liabilities of the Corporation.
Section III.23. ADEQUACY OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties made by Corporation or Shareholders herein, nor
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any of the written material required under this Agreement or in the Schedules
hereto, contain any untrue statement of a material fact. All such
representations and warranties shall be deemed made on and as of the date hereof
and on and as of the Closing Date.
The continuing existence, truth and accuracy of all of the facts and
matters represented and warranted herein by Corporation and Shareholders to
Buyer until the Closing Date shall constitute a condition precedent to the
closing of this transaction.
ARTICLE IV. COVENANTS OF CORPORATION. Corporation covenants to Buyer that
between the date hereof and the Closing Date:
Section IV.1. PRESERVATION OF BUSINESS. Corporation will use its best
efforts to preserve the Business organization intact and to keep available to
Buyer the present employees of Corporation (other than employees Buyer chooses
to terminate) and will preserve for Buyer the relationships of Corporation with
its suppliers, vendors, manufacturers of inventory, customers and others having
business relations with the Business; and will keep and preserve the Business
and the Assets in the same operating condition as it is in on the date hereof.
Section IV.2. TAXES. Corporation shall file all required tax returns and
reports and promptly pay and discharge when due all taxes, assessments and other
charges which may be lawfully imposed on Corporation prior to the Closing.
Section IV.3. PAYMENTS TO EMPLOYEES. No compensation or benefit for
employees shall be increased or added for any employees of Corporation, and all
salary payments shall be paid in the ordinary course of business. Corporation
will pay all payroll and employee fringe benefits (including, without
limitation, pension contributions and any accumulated vacation pay) due and
owing to or earned by its employees to and including the day of Closing,
together with withholding taxes, Social Security, Medicare, FICA, FUTA and any
other taxes pertaining thereto, and Corporation and Principal will indemnify,
defend and hold Buyer harmless from and against any liability or claims for any
such amounts, which indemnity shall survive the Closing.
Section IV.4. NO EXTRAORDINARY ACTS. Corporation shall carry on the
Business in the ordinary course, and except for sales of Inventory in the
ordinary course of business, Corporation shall not sell, lease, transfer or
otherwise dispose of all or any part of the Assets, or give any option to
purchase all or any of the same, or convey, mortgage, lease, pledge, grant a
security interest or a Lien or other encumbrance with respect to the Assets, and
Corporation shall maintain the Assets in good operating condition and repair.
Section IV.5. AGREEMENTS AND COMMITMENTS. Without Buyer's prior written
consent, Corporation shall not enter into any contract, agreement or other
commitment except in the ordinary course of business, nor amend, renew or
terminate any contracts, permits, franchises or licenses.
Section IV.6. INSURANCE. Corporation shall maintain in full force and
effect all insurance policies held on the Assets in such amounts and of such
kinds as may be in effect on the date of this Agreement.
Section IV.7. BUSINESS TO BE LAWFUL. Corporation shall conduct the
Business in compliance with all laws, ordinances, rules and regulations of all
governmental authority.
Section IV.8. DISCLOSURE. Corporation shall promptly notify Buyer of any
change in the business or affairs of the Business or any newly discovered
matters which could constitute a violation of or a change in any covenant,
representation or warranty made by Corporation or could adversely affect Buyer.
Section IV.9. LEASE. Corporation shall remain current on its Lease
obligations and shall not be in default of the Lease, however Buyer understands
the Lease expires December 31, 1998.
Section IV.10. ACTIONS CAUSING REPRESENTATIONS AND WARRANTIES TO BE
UNTRUE. Neither Corporation nor Shareholders will take any action which would
cause any representation or warranty contained herein to be untrue.
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Section IV.11. AUTHORIZATION. Corporation will obtain as soon as
practicable all consents, authorization, orders and approvals of any
governmental commission or board or required for, or in connection with, the
performance of the transaction contemplated hereby and Corporation will
cooperate fully with the Buyer in assisting Buyer to obtain any such consent,
authorizations, orders and approvals, including, but not limited to, those
consents, authorizations, orders and approvals necessary for the transfer or
assignment of any and all permits, licenses or other agreements for operating
the Business.
ARTICLE V. REPRESENTATIONS; WARRANTIES AND COVENANTS OF BUYER. Buyer
hereby makes the following representations, warranties and covenants to
Corporation:
Section V.1. COMPANY STATUS AND POWER OF BUYER. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Nevada, with the power and authority to enter into and perform this
Agreement, make the representations and warranties herein made by it, consummate
the transactions contemplated by this Agreement and incur the obligations
undertaken by it hereunder.
Section V.2. COMPANY ACTION. Buyer has duly taken all necessary company
action to permit the execution, delivery and performance of this Agreement and
upon due execution and delivery, this Agreement will constitute a valid and
binding agreement of Buyer. Buyer is purchasing the shares for investment
purposes and not with the intent of resell.
Section V.3. NO BROKERAGE. Buyer has made no representation or commitment
by which Corporation might be obligated to pay any commission or compensation to
any finder, broker, agent or advisor.
Section V.4. PERFORMANCE OF AGREEMENT. No action or proceeding before a
court or other governmental agency or officer is pending or, to the best of
Buyer's knowledge, threatened which could restrain or prevent Buyer from
consummating the purchase of the Assets or from performing all of their
obligations under this Agreement.
Section V.5. JUDGMENTS. There are no judgments, liens, suits, actions or
legal or administrative proceedings pending or, to the best of Buyer's
knowledge, threatened against Buyer and there are no bankruptcy, receivership,
arrangement or other debtor relief, insolvency or liquidation proceedings,
either voluntary or involuntary, pending or, to the best of Buyer's knowledge,
threatened against or for the benefit of Buyer.
Section V.6. TRUTH AS OF THE DATE OF CLOSING. All representations and
warranties of Buyer in this Agreement are true as of the date hereof, and will
be true as of the Closing Date as if made at the Closing.
Section V.7. INVESTMENT. Buyer is acquiring the Shares solely for its own
account and not with a view to a sale or distribution thereof in violation of
any securities laws. Buyer understands that the Shares have not been registered
under the Securities Act or the securities act of any state, and that as a
result thereof, there is no market for the Shares, and Buyer must assume the
risk of investment therein unless the Shares are subsequently registered under
the Securities Act or unless an exemption from such registration is available.
ARTICLE VI. INDEMNITY.
A. Subject to the limitations set forth in this Agreement, including but
not limited to this Article VI, each of the Shareholders will indemnify Buyer
and hold Buyer harmless from and against any actual, direct and "out-of-pocket"
costs or expenses (including, but not limited to, interest, penalties, costs of
preparation and investigation, and the reasonable fees, disbursements and
expenses of attorneys, accountants and other professional advisors but excluding
punitive, consequential or losses calculated or measured by or based upon a
damage theory involving a multiple of lost profits or earnings or a multiple of
lost anticipated profits or earnings) (collectively, "Losses) which Buyer may
suffer, sustain or become subject to, resulting from, arising out of or caused
by:
(i) any inaccuracy in or breach of any representation or warranty of the
Corporation or Shareholders pursuant to this Agreement in any respect, including
the disclosure schedules delivered pursuant hereto; or
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(ii) any failure of the Corporation or Shareholders to duly perform or
observe any covenant to be performed or observed by the Corporation or such
Shareholders(whichever is required to perform hereunder), pursuant to this
Agreement.
(iii) any undisclosed liability which is not the subject of a
representation or warranty set forth in Section III and which arises as a result
of the operation of the Corporation prior to the Closing Date, except for trade
payables and operating expenses incurred in the ordinary course of business.
The obligations of the Corporation and Shareholders to indemnify, defend
and hold Buyer harmless as described herein shall survive Closing and the
consummation of the transactions contemplated by this Agreement.
The Buyer shall give Shareholders prompt written notice of any written
claim, demand, assessment, action, suit, proceeding or awareness of facts which
might lead to such a claim or notice of any claim of a third party that may
reasonably be expected to result in a claim by Buyer against Shareholders to
which the indemnity set forth in this Article VI applies. If the document
evidencing such claim or demand is a court pleading, Buyer shall give such
notice within 10 days of receipt of such pleading, otherwise, Buyer shall give
such notice within 30 days of the date it receives written notice of such claim.
Failure to give timely notice of a matter which may give rise to an
indemnification claim shall not affect the rights of the Buyer to collect such
Loss from Shareholders so long as such failure to so notify does not materially
adversely affect Shareholders' ability to defend such Loss against a third
party. Such notice shall specify the breach of representation or warranty or
violation of covenant claimed by the Buyer and the Losses incurred by, or
imposed upon, the Buyer on account thereof. If such Losses are liquidated in
amount, the notice shall so state and such amount shall be deemed the amount of
the claim of the Buyer. If the amount is not liquidated, the notice shall so
state and in such event a claim shall be deemed asserted against the
Shareholders on behalf of the Buyer, but no payment shall be made on account
thereof until the amount of such claim is liquidated and the claim is finally
determined.
If any of the Shareholders shall object to any notice of claim seeking
recovery for a Loss (whether such claim arises from a third-party claim or
otherwise), (a "Notice of Claim") such Shareholder shall deliver to Buyer and
the other Shareholders a written notice of objection (the "Notice of Objections)
to the Buyer. The Notice of Objection shall set forth the grounds upon which the
objection is based and state whether such Seller objects to all or only a
portion of the matter described in the Notice of Claim. If such claim or claims
shall not have been resolved or compromised within 60 days from the date of
delivery of the Notice of Objection, then such claims shall be settled by
arbitration pursuant to Section IX.9 hereof. The arbitrator shall promptly
obtain such information regarding the matter the arbitrator deems necessary and
shall decide the matter and render a written award which shall be delivered to
the Buyer and the Shareholders. Any award shall be a conclusive determination of
the matter and shall be binding upon the Buyer and the Shareholders. If, by
arbitration, it shall be determined that the Buyer shall be entitled to any
indemnification by reason of its claim or claims (a "Liquidated Indemnification
Liability"), such amount shall be paid to the Buyer in the manner provided
hereafter by the Shareholders without the necessity of further action.
If the Buyer's request for indemnification arises from the claim of a
third party (including a federal or state regulatory authority), the written
notice shall permit Shareholders to assume control of the defense of any such
claim, or any litigation resulting from such claim. Failure by Shareholders to
notify the Buyer of its election to defend a complaint by a third party within
20 days after notice thereof shall be a waiver by Shareholders of its right to
assume control of the defense of such claim or action. If Shareholders assume
control of the defense of such claim or litigation resulting therefrom,
Shareholders shall take all reasonable steps necessary in the defense or
settlement of such claim or litigation resulting therefrom and, if the claim is
subject to indemnification of Buyer by Shareholders, Shareholders shall hold the
Buyer, to the extent provided in this Article VI, harmless from and against all
Losses arising out of or resulting from any settlement approved by Shareholders
or any judgment in connection with such claim or litigation. Notwithstanding
Shareholders' assumption of the defense of such third-party claim or demand, the
Buyer shall have the right to participate in the defense of such third-party
claim or demand at the expense of the Shareholders. The Buyer shall furnish
Shareholders in reasonable detail all information such party may have with
respect to any such third-party claim and shall make available to Shareholders
9
and their representatives all records and other similar materials which are
reasonably required in the defense of such third-party claim and shall otherwise
cooperate with and assist Shareholders.
If the claim is subject to indemnification of Buyer by Shareholders, if
Shareholders do not assume control of the defense of any such third-party claim
or litigation resulting therefrom, the Buyer may defend against such claim or
litigation in such manner as it may reasonably deem appropriate, and
Shareholders shall indemnify the Buyer from any Loss indemnifiable under Article
VI incurred in connection therewith.
No third party claim, demand, action or proceeding (including a claim,
demand, action or proceeding by any federal or state regulatory authority) shall
be settled without the prior written consent of the Buyer.
B. Subject to the limitations set forth in this Agreement, including this
Section VI, the Buyer will indemnify and defend the Shareholders and hold them
harmless from and against any Losses which any Shareholders may suffer, sustain
or become subject to, resulting from, arising out of or caused by:
(i) any inaccuracy or breach by Buyer of any representation or warranty
pursuant to this Agreement;
(ii) any liability or obligation of the Corporation disclosed on the
Financial Statements or undertaken by Buyer herein;
(iii) any failure of Buyer to perform or observe any of the covenants to
be performed or observed by it under this Agreement; and
(iv) any matter which, under the terms of this Agreement, Buyer is
required to indemnify Seller;
The obligations of the Buyer to indemnify, defend and hold the Seller
harmless as described herein shall survive Closing and the consummation of the
transactions contemplated by this Agreement.
The procedural rules set forth in Section (A) of this Article VI shall
apply with respect to indemnification by Buyer except that the parties'
respective obligations shall be reversed as appropriate.
C. Notwithstanding the foregoing, the parties liability pursuant to this
Article VI will be subject to the following limitations:
(i) BASKET. Neither the Shareholders nor the Buyer will be liable for any
Losses described in Article VI (A) or VI (B) above unless and until the
aggregate amount of all such Losses (exclusive of any liabilities for
Environmental Remediation Activities) described in such section exceeds
Twenty-Five Thousand Dollars ($25,000), after which point the indemnifying party
will be obligated, to the extent required by this Article VI, to indemnify the
indemnified parties for all such amounts incurred in excess of such amount.
Notwithstanding the foregoing, this limitation shall not apply to Buyer's
indemnity obligation under VI B (ii), (iii) or (iv) above.
(ii) MAXIMUM. The liability of the Shareholders in the aggregate shall be
limited to $1,525,000.00
D. Each Party will treat all payments made pursuant to this Article VI as
adjustments to the Purchase Price for all purposes. Any indemnification recovery
shall be calculated after full consideration of the amount of any insurance
proceeds or other third party recoveries to which the Company or any of the
indemnified parties becomes entitled.
ARTICLE VII. CLOSING.
Section VII.1. TIME AND PLACE OF CLOSING. The Closing shall be held at
10:00 a.m. on the Closing Date at the offices of the Corporation or such other
place as the parties to this Agreement shall agree. Shareholders shall deliver
possession of all of the Stock to Buyer on the Closing Date free and clear of
all rights and claims of any other person.
10
Section VII.2. CONDITIONS TO CORPORATION'S CLOSING. The obligations of
Corporation under this Agreement are subject to the satisfaction or written
waiver of the following conditions:
A. All representations and warranties of Buyer herein, including in
exhibits, shall be true and complete in all material respects without any change
on and as of Closing Date to the same extent as if such representations and
warranties had been made at such time;
B. Buyer shall have performed and satisfied all agreements, covenants and
conditions required by this Agreement to be performed and satisfied by it prior
to or at the Closing Date; and
C. Buyer shall have delivered all documents required to be delivered
pursuant to Section VII.4 B of this Article VII.
All of the foregoing conditions precedent are for the sole benefit of
Corporation, and Corporation shall not be obligated to close or consummate this
transaction or sell the Assets unless each such condition precedent has been
either satisfied or waived by Corporation in writing at or prior to Closing. Any
of such conditions may be waived by Corporation at any time; provided, however,
that no such waiver shall be effective unless made in writing. If any of said
conditions remains unsatisfied on the Closing Date, Corporation may cancel and
terminate this Agreement.
Section VII.3. CONDITIONS TO BUYER'S CLOSING. Buyer's obligations under
this Agreement are subject to the satisfaction or written waiver of the
following conditions:
A. All representations and warranties of Corporation in this Agreement,
including in exhibits, shall be true and complete in all material respects
without any change on and as of Closing Date to the same extent as if such
representations and warranties had been made at such time;
B. Corporation shall have delivered all documents required to be delivered
pursuant to Section 7.4 A of this Article VII;
All of the foregoing conditions precedent are for the sole benefit of
Buyer, and Buyer shall not be obligated to close or consummate this transaction
or purchase the Assets unless each such condition precedent has been either
satisfied or waived by Buyer in writing at or prior to Closing. Any of such
conditions may be waived by Buyer at any time; provided, however, that no such
waiver shall be effective unless made in writing. If any of said conditions
remains unsatisfied on the Closing Date, Buyer may cancel and terminate this
Agreement.
Section VII.4. DOCUMENTS TO BE DELIVERED AT CLOSING. On or before Closing
Date, the following documents shall be delivered by the respective parties to
this Agreement:
A. DOCUMENTS TO BE DELIVERED BY SHAREHOLDERS. Shareholders shall deliver
to Buyer the following documents:
(1) The Stock Certificates of Shareholders endorsed to Buyer or with stock
powers duly executed in blank transferring all of the Stock of Corporation to
Buyer, free and clear of all liens and encumbrances;
(2) Copies of any contracts, agreement, commitments, leases, deeds,
instruments, pleadings, correspondence or other documents of any kind affecting
the Business or the Assets;
(3) Copies of all records of Corporation pertaining to its customers and
the Assets;
(4) An affidavit of Corporation to the effect that all representations and
warranties of Corporation contained in this Agreement were true on the date
hereof and are true at the Closing Date, in the form attached hereto as Schedule
VII 4A(4);
11
(5) Uniform Commercial Code and Federal Tax Lien searches for the
Corporation and Business updated to a date not more than five (5) days prior to
Closing showing no liens or encumbrances whatsoever affecting any of the Assets
except as heretofore described or, if any liens or encumbrances are shown,
accompanied by necessary lien releases and termination statements (collectively
"Releases") to remove the same;
(6) A current Certificate of Existence for Corporation and true copies of
resolutions of the board of directors and shareholders of Corporation
authorizing and approving the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated herein,
certified by the Secretary of Corporation, and an incumbency certificate
certified by the Secretary of Corporation;
(7) The executed Non-Competition Agreements of Shareholders and Xxxxx
Xxxxxxx in the form of Schedule VII 4A(7) attached hereto;
(8) The executed Employment Agreement and Non-Competition Covenants of
Xxxxx Xxxxxxxx in the form of Schedule VII 4A(8)attached hereto;
(9) Documentation with respect to off-site Inventory and Tangible Personal
Property, if any;
(10) An opinion of legal counsel for Corporation and the Shareholders
satisfactory to Buyer's legal counsel, that:
(a) Corporation is a corporation duly organized and validly existing under
and by virtue of the laws of the State of California;
(b) Corporation and the Shareholders have taken all necessary corporate
action to authorize the execution and performance of this Agreement and all of
the closing documents, and the person executing this Agreement and the closing
documents on behalf of Corporation and Shareholders are duly authorized to do
so;
(c) Corporation and Shareholders possess the requisite power to enter into
this Agreement and to perform its and their obligations hereunder;
(d) this Agreement and all other documents executed by Corporation and the
Shareholders in connection with this transaction have been duly executed and
delivered by Corporation and Shareholders, and are valid and binding agreements
legally enforceable against Corporation in accordance with their respective
terms;
(e) the Stock is owned by the Shareholders free and clear of all liens and
encumbrances and the transfer of the Stock to Buyer shall vest 100% ownership of
Corporation in Buyer; and
(f) to such counsel's knowledge, neither the execution and delivery by
Corporation and the Shareholders of this Agreement, nor compliance by
Corporation and the Shareholders with the terms hereof, will conflict with, or
result in any breach of, or constitute a default under any agreement the breach
of which would adversely affect Buyer;
which opinion shall be addressed to Buyer;
(11) The signature cards for the bank accounts of Corporation shall be
transferred to Buyer;
(12) Any and all other instruments, documents, certificates, affidavits
and other assurances requested or required by Buyer to transfer all of the
Shares to Buyer and to assure Buyer good and clear title thereto;
(13) A Closing Statement; and
(14) The Escrow Agreement if not previously executed. All documents
required to be delivered pursuant to this Section 7.4 A shall be in a form
satisfactory to Buyer and Buyer's counsel.
12
B. DOCUMENTS TO BE DELIVERED BY BUYER. Buyer shall deliver to Corporation
the following:
(1) The Purchase Price;
(2) An opinion of legal counsel for Buyer satisfactory to Corporation and
Shareholders legal counsel that;
(a) Buyer is a corporation duly organized and validly existing under and
by virtue of the laws of the State of Nevada;
(b) Buyer has taken all necessary corporate action to authorize the
execution and performance of this Agreement and all of the closing documents,
and the person executing this Agreement and the closing documents on behalf of
Buyer is duly authorized to do so;
(c) Buyer possesses the requisite power to enter into this Agreement and
to perform its obligations hereunder;
(d) this Agreement and all other documents executed by Buyer in connection
with this transaction have been duly executed and delivered by Buyer, and are
valid and binding agreements legally enforceable against Buyer in accordance
with their respective terms;
(e) to such counsel's knowledge, neither the execution and delivery by
Buyer of this Agreement, nor compliance by Buyer with the terms hereof, will
conflict with, or result in any breach of, or constitute a default under any
agreement the breach of which would adversely affect Corporation and
Shareholders;
which opinion shall be addressed to Corporation and Shareholders; and
(3) A Closing Statement; and
ARTICLE VIII. PAYMENT OF PURCHASE PRICE.
Section VIII.1. PAYMENT OF PURCHASE PRICE. At the Closing, Buyer shall
deliver the cash portion of the Purchase Price to the Shareholders who are to
receive cash by wire transfer of funds in the amounts set forth on schedule
II.4. With respect to the portion of the Purchase Price to be paid in stock,
Buyer shall issue and deliver a stock certificate to each of the Shareholders
who are to receive stock which sets forth the number of shares to be received
pursuant to Schedule II.4.
ARTICLE IX. MISCELLANEOUS PROVISIONS.
Section IX.1. DAMAGE BY FIRE OR OTHER CASUALTY. Corporation assumes all
risk of destruction, loss, or damage to any of the Assets due to fire or other
casualty prior to the Closing Date. In the event of any such casualty, Buyer may
elect to either terminate this Agreement or to proceed with the purchase of the
Assets. In the event Purchaser elects to close the transaction, Corporation
shall assign to Buyer the proceeds of any and all insurance policies affecting
the Assets.
Section IX.2. SURVIVAL OF PROVISIONS. The covenants, obligations,
representations and warranties and indemnities made by Corporation shall survive
the Closing for a period of one year and not be affected by Corporation's
delivery of the Assets or by Buyer's payment of the Purchase Price, subject to
the limitations contained in Section 3.19 hereof.
Section IX.3. OTHER DELIVERIES. Corporation agrees, as often as it shall
be requested, to execute, acknowledge and deliver, or cause to be executed and
acknowledged and delivered, all further bills of sale, assignments, transfers,
13
conveyances, confirmations, approvals, consents and instruments of further
assurance and other instruments as Buyer shall deem desirable, for the better
assigning, transferring, granting, conveying, assuring and confirming to Buyer,
or for aiding in the collection or reducing to possession by Buyer of any of the
Assets.
Section IX.4. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement,
including all exhibits, constitutes the entire understanding and agreement among
the parties hereto as of the date hereof. No modification or termination of this
Agreement shall be binding unless signed by the parties. No waiver of any
provision of this Agreement shall be effective and binding unless in writing and
no waiver of any other provision hereof (whether or not similar) shall
constitute a continuing waiver unless expressly so stated.
Section IX.5. CONFIDENTIALITY. The Corporation and Shareholders shall
maintain the confidentiality of all information they have or obtain regarding
the Buyer and this Agreement except as otherwise required by law. The Buyer
shall maintain the confidentiality of all information it obtains regarding the
Corporation and Shareholders, except as otherwise required by law. In the event
of the breach of any of the provisions of this Section X.5, the non-breaching
party, in addition and supplementary to other rights and remedies existing in
its favor, may apply to any court of law or equity of competent jurisdiction for
specific performance and/or injunctive or other relief (without the posting of
bond or other security) in order to enforce or prevent any violations of the
provisions hereof. In the event that any party reasonably believes after
consultation with counsel that it is required by law to disclose any
confidential information described in this Section X.5, the disclosing party
will (i) provide the other party with prompt notice before such disclosure in
order that such other party may attempt to obtain a protective order or other
assurance that confidential treatment will be accorded such confidential
information and (ii) cooperate with the other party in attempting to obtain such
order or assurance. Notwithstanding the above, Buyer may make such disclosures
as are necessary to comply with any federal or state securities laws applicable
to Buyer.
Section IX.6. GOVERNING LAW. The laws of the State of California shall
govern this Agreement in all aspects, including execution, interpretation,
performance and enforcement.
Section IX.7. BINDING ON SUCCESSORS AND ASSIGNS. All the terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns.
Section IX.8. ADDRESSES. Any notice or communication required or permitted
under this Agreement shall be in writing and shall be delivered by hand, or sent
by registered or certified mail, postage prepaid, as follows:
If to the Corporation: Avid Sportswear, Inc.
Attn: Xxxxxx Xxxxxxx
00000 Xxxxx Xxxxx Xxxx Xxxx
Xxxxxx, XX 00000
With a copy to: Xxxxxx X. Xxxxx
Best, Best & Xxxxxxx, LLP
0000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
If to Buyer: Golf Innovations Corp.
Attn: Xxxx Xxxxxxxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
14
With a copy to: Xxxxxxx X. Xxxxxx, Esq.
XXXX XXXXX XXXXXX & XXXXXXX
0000 Xxx Xxxxxxxx Xxxxxx
Xxx 00000
Xxxxxxxxxxxx, Xxxxxxx 00000
If to Xxxxxx X. Xxxxxxx: 0000 Xxxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
If to Xxxxx X. Xxxxxxxx: 00000 Xxxxx Xxxxx Xxxx Xxxx
Xxxxxx, XX 00000
If to The Xxxxxx Family Trust: 000 X0 Xxxxx Xx.
Xxxxxxxxx, XX 00000
If to The Xxxxxxx Family Trust: 0000 X. Xxxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
If to Xxxxxxx X. Xxxxxxx 000 Xxxxxxxxxx
Xxxxx Xxxxxxx, XX 00000
If to Xxxxx X. Xxxxxxx and Xxxxxxx X. 1160 Corte Tularosa
Xxxxxxx: Xxxxxxxxx, XX 00000
If to Xx Xxxxxxxx: P. O. Xxx 000
Xxxxxxxx, XX 00000
If to The Xxxxxxx and Xxxxx Xxxxxx Trust: 0000 Xxxxx Xxxxxx,
Xxxxxx, XX 00000
If to Xxxxxxxxx Xxxxxxxx: 0000 Xxxxxxx Xx., #0
Xxxxxxx, XX 00000
If to Xxxx Xxxxxxxx: 0000 Xxxxxxxx Xxxxxx, Xxx. 0000
Xxxxxx, XX 00000
Section IX.9. COUNTERPARTS. This Agreement may be executed in counterparts
and when taken together shall constitute one and the same instrument.
Section IX.10. TAX CONSEQUENCES. The parties agree to amend this Agreement
prior to Closing for the sole purpose of minimizing any tax consequences on the
sale of the stock by Xxxxx Xxxxxxxx, Xxxxxxxxx Xxxxxxxx, Xxxx Xxxxxxxx and Xx
Xxxxxxxx. To the extent there are any tax consequences on such sale, Buyer
agrees to reimburse Xxxxx Xxxxxxxx, Xxxxxxxxx Xxxxxxxx, Xxxx Xxxxxxxx and Jo
Morerbeck for any tax liability incurred by them as a result of any gain
recognized by such Shareholders five (5) days prior to the filing of their
Federal tax returns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
15
AVID SPORTSWEAR, INC.,
a California corporation
By: /s/ Xxxxx Xxxxxxxx
----------------------------------------
Xxxxx Xxxxxxxx, President
"Corporation"
/s/ Xxxxxx X. Xxxxxxx
-------------------------------------------
Xxxxxx X. Xxxxxxx
/s/ Xxxxx X. Xxxxxxxx
-------------------------------------------
Xxxxx X. Xxxxxxxx
XXXXXX FAMILY TRUST DATED APRIL 7, 1988
By: /s/ Xxxx X. Xxxxxx
----------------------------------------
Xxxx X. Xxxxxx, Trustee
By: /s/ Xxxxx X. Xxxxxx
----------------------------------------
Xxxxx X. Xxxxxx, Trustee
THE XXXXXXX FAMILY TRUST DATED AUGUST 1,
1988
By: /a/ Xxxx X. Xxxxxxx
----------------------------------------
Xxxx X. Xxxxxxx, Trustee
By: /s/ Xxxx X. Xxxxxxx
----------------------------------------
Xxxx X. Xxxxxxx, Trustee
/s/ Xxxxxxx X. Xxxxxxx
-------------------------------------------
Xxxxxxx X. Xxxxxxx
/s/ Xxxxx X. Xxxxxxx
-------------------------------------------
Xxxxx X. Xxxxxxx
/s/ Xxxxxxx X. Xxxxxxx
-------------------------------------------
Xxxxxxx X. Xxxxxxx
THE XXXXXXX FAMILY TRUST
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------------
Xxxxxxx X. Xxxxxxx, Trustee
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------------
Xxxxxxx X. Xxxxxxx, Trustee
/s/ Xx Xxxxxxxx
-------------------------------------------
Jo [Morerbeck] Moerbeek [/s/ jm]
16
THE XXXXXXX AND XXXXX XXXXXX TRUST
By: /s/ Xxxxxxx Xxxxxx
----------------------------------------
Xxxxxxx Xxxxxx, Trustee
By: /s/ Xxxxx Xxxxxx
----------------------------------------
Xxxxx Xxxxxx, Trustee
/s/ Xxxxxxxxx Xxxxxxxx
-------------------------------------------
Xxxxxxxxx Xxxxxxxx
/s/ Xxxx Xxxxxxxx
-------------------------------------------
Xxxx Xxxxxxxx
"Principal"
GOLF INNOVATIONS CORP.,
By: /s/ Xxxx Xxxxxxxxxx
----------------------------------------
Xxxx Xxxxxxxxxx, President
"Buyer"
17
