File No. _____________
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 1, 1999
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
UNDER SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934
AVID SPORTSWEAR & GOLF CORP.
(Name of Small Business Issuer in Its Charter)
NEVADA 88-0374969
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
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22 South Links Avenue, Suite 204
Sarasota, Florida 34236
Telephone: (941) 330-8051
Copies to:
Clayton E. Parker, Esq. Troy J. Rillo, Esq.
Kirkpatrick & Lockhart LLP Kirkpatrick & Lockhart LLP
201 S. Biscayne Boulevard, Suite 2000 201 S. Biscayne Boulevard, Suite 2000
Miami, Florida 33131 Miami, Florida 33131
Telephone: (305) 539-3300 Telephone: (305) 539-3300
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Securities to be registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class to be so on Which Each Class is to be
Registered Registered
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None None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001 per share
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PART I
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS. THIS FILING CONTAINS
FORWARD-LOOKING STATEMENTS, INCLUDING STATEMENTS REGARDING, AMONG OTHER THINGS,
(A) AVID SPORTSWEAR & GOLF CORP.'S ("AVID SPORTSWEAR" OR THE "COMPANY")
PROJECTED SALES AND PROFITABILITY, (B) THE COMPANY'S GROWTH STRATEGIES, (C)
ANTICIPATED TRENDS IN THE COMPANY'S INDUSTRY, (D) THE COMPANY'S FUTURE FINANCING
PLANS, (E) THE COMPANY'S ANTICIPATED NEEDS FOR WORKING CAPITAL AND (F) BENEFITS
RELATED TO THE ACQUISITION OF AVID SPORTSWEAR, INC., A CALIFORNIA CORPORATION.
IN ADDITION, WHEN USED IN THIS FILING, THE WORDS "BELIEVES," "ANTICIPATES,"
"INTENDS," "IN ANTICIPATION OF," "EXPECTS," AND SIMILAR WORDS ARE INTENDED TO
IDENTIFY CERTAIN FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING STATEMENTS
ARE BASED LARGELY ON THE COMPANY'S EXPECTATIONS AND ARE SUBJECT TO A NUMBER OF
RISKS AND UNCERTAINTIES, MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL. ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THESE FORWARD-LOOKING STATEMENTS AS A
RESULT OF CHANGES IN TRENDS IN THE ECONOMY AND THE COMPANY'S INDUSTRY, DEMAND
FOR THE COMPANY'S PRODUCTS, UNEXPECTED CHANGES IN FASHION TRENDS, PRIOR SEASON
INVENTORIES, COMPETITION, REDUCTIONS IN THE AVAILABILITY OF FINANCING AND
AVAILABILITY OF RAW MATERIALS, THE SEASONAL NATURE OF THE COMPANY'S BUSINESS,
THE EXTREMELY COMPETITIVE NATURE OF THE GOLF APPAREL AND SPORTSWEAR INDUSTRIES
AND OTHER FACTORS. IN LIGHT OF THESE RISKS AND UNCERTAINTIES, THERE CAN BE NO
ASSURANCE THAT THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS FILING WILL IN
FACT OCCUR. THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO PUBLICLY RELEASE
THE RESULTS OF ANY REVISIONS TO THESE FORWARD-LOOKING STATEMENTS TO REFLECT ANY
FUTURE EVENTS OR CIRCUMSTANCES.
ITEM 1. DESCRIPTION OF BUSINESS.
OVERVIEW
Through our wholly-owned subsidiary, Avid Sportswear, Inc., we design,
manufacture and market distinctive premium and moderately-priced sportswear. We
sell our products primarily through golf pro shops and resorts, corporate sales
accounts and better specialty stores. Our sportswear is marketed under the
following labels:
o Avid Sportswear;
o Dockers Golf Collection; and
o British Open Collection.
We market larger size sportswear under the "Avid Sportswear" label, in
both premium and moderately-priced product categories. Our moderately-priced
product, regular size product category is marketed under the "Dockers Golf
Collection" label, while our premium-priced, regular size product category is
marketed under the "British Open Collection" label. Eventually our product line
may include non-apparel, golf-related products. Our products feature
distinctive, comfortable designs made primarily of natural fibers. All of our
products are manufactured by independent contractors located mainly in Southern
California. Embroidering, warehousing and certain other functions are performed
in a leased facility located in Gardena, California. Our goal is to become one
of the most recognized and respected brands in sports apparel by purchasing
other apparel businesses or licensing other brand names. We believe this
industry is highly fragmented and ripe for consolidation.
We were formed on September 19, 1997 in Nevada under the name Golf
Innovations Corp. We had no significant operations until March 1, 1999, at which
time we acquired Avid Sportswear, Inc. From its inception on October 6, 1988 in
California, Avid Sportswear, Inc.'s business has involved the design,
manufacture and marketing of golf apparel. On March 1, 1999, Avid Sportswear,
Inc. became our wholly-owned subsidiary and it continues to operate as a
separate legal entity. To better identify ourselves with the "Avid Sportswear"
brand, we changed our name to Avid Sportswear & Golf Corp. on May 27, 1999. All
of our operations are conducted through Avid Sportswear, Inc.
PURCHASE OF AVID SPORTSWEAR, INC.
On December 18, 1998, we entered into an agreement to purchase Avid
Sportswear, Inc. from its shareholders. The purchase was completed on March 1,
1999. We paid $725,000 in cash and issued 1,100,000 shares of our common stock
to the former shareholders of Avid Sportswear, Inc. In connection with the
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purchase, we were required to advance $1,826,111 to Avid Sportswear, Inc. to be
used to satisfy certain liabilities owed by Avid Sportswear, Inc. Avid
Sportswear, Inc. remains liable for any liabilities which existed on March 1,
1999. We received standard representations and warranties from the former
shareholders of Avid Sportswear, Inc., who also agreed to indemnify us for
certain events.
LICENSES TO USE CERTAIN TRADEMARKS
Of the three labels our products are marketed under, the "Dockers Golf
Collection" and "British Open Collection" are licensed from their respective
owners. The "Avid Sportswear" label is owned by our wholly-owned subsidiary. A
description of these licenses follows:
BRITISH OPEN COLLECTION. On December 8, 1998, our wholly-owned subsidiary
obtained the sole and exclusive right and license to use certain trademarks
associated with the British Open Golf Championship. The licensor is The
Championship Committee Merchandising Limited, which is the exclusive licensor of
certain trademarks from The Royal & Ancient Golf Club of St. Andrews, Scotland.
This license is for the United States and its territories and has a seven year
term. Under this license, our wholly-owned subsidiary may manufacture,
advertise, distribute and sell products bearing the licensed trademarks to
specialty stores and the menswear departments of department stores. It is not
permitted to sell these products to discount stores or mass-market retail
chains. In return for this license, our wholly-owned subsidiary must pay the
licensor, on a quarterly basis, a royalty equal to five percent of net wholesale
sales of products bearing these trademarks, subject to a guaranteed minimum
royalty. Net wholesale sales means the invoiced wholesale billing price, less
shipping, discounts actually given, duties, insurance, sales taxes, value-added
taxes and credits allowed for returns or defective merchandise. Our wholly-owned
subsidiary may also deduct uncollectible accounts up to a total of five percent
of such sales. The guaranteed minimum royalty is as follows:
CONTRACT YEAR: MINIMUM ROYALTY:
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1 $100,000
2 $125,000
3 $150,000
4 $175,000
5 $200,000
6 $200,000
7 $200,000
The licensor has the right to approve or disapprove in advance of sale the
quality, style, color, appearance, material and worksmanship of all licensed
products and packaging. It may also approve or disapprove any and all
endorsements, trademarks, trade names, designs and logos used in connection with
the license. Our wholly-owned subsidiary must submit samples of the licensed
products to the licensor for examination and approval or disapproval prior to
sale.
DOCKERS GOLF COLLECTION. On May 10, 1999, our wholly-owned subsidiary
obtained the exclusive, nonassignable right to use the "Dockers Golf Collection"
trademark solely in connection with the manufacturing, advertising, distribution
and sale of products to approved retailers. The licensor is Levi Strauss & Co.
This license is for the United States, its territories and Bermuda. This license
requires us to pay royalties to Levi Strauss & Co., subject to a minimum
royalty. A description of the license has been omitted because the Company has
sought confidential treatment from the Securities and Exchange Commission.
BUSINESS STRATEGY
Our goal is to become one of the most recognized and respected brands in
sports apparel. Key elements of our business strategy include:
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o EXPAND PRODUCT LINE. We intend to expand our product line by licensing or
purchasing existing brands of sportswear. We expect to target brands which
will complement the existing brands by filling a perceived market niche,
having name recognition and/or offering new price points. We believe this
strategy is best demonstrated by the purchase of the "Avid Sportswear"
label and the license of the "Dockers Golf Collection" and "British Open
Collection" labels. We also intend to continue to expand our product line
to include slacks, shorts and outerwear by capitalizing on our existing
and future brands.
o MARKET PENETRATION OF EXISTING LABELS. We hope to leverage our brands into
greater shelf space by cross-promoting our products and by offering
in-store fixturing programs. In addition, we intend to hire additional
sales staff and independent sales representatives to broaden our customer
base. Our customer base consists of approximately 5,500 customers in the
United States compared to a market, we estimate, of more than 15,000 golf
pro shops and 3,500 better specialty stores. We intend to use our labels
and sales staff to broaden our customer base and increase our average
order size.
o INTERNATIONAL MARKETS. We believe the international markets will provide
us with new opportunities for the Avid Sportswear label and other labels
we may acquire in the future. We intend to enter these markets by using
distributors and licensees who are familiar with the local markets. We
believe international markets are receptive to American lifestyle apparel
brands in general and will be receptive to the Avid Sportswear label in
particular.
MARKET
According to industry estimates, net sales of apparel at retail were $177
billion in 1998, with $54.3 billion and $92.6 billion spent on men's and women's
apparel, respectively. Sportswear represents a growing portion of consumer
wardrobes because of a trend toward casual dress in the workplace. For example,
according to industry estimates, between 1996 and 1998 sales of men's and
women's apparel grew 10.0% and 8.9%, respectively. Our target customers are
sports-minded professional men and women who like casual, high-quality and
distinctively styled apparel that reflects an active lifestyle.
Golf apparel represents a subset of the apparel industry. Golf's
popularity has risen in recent years. As a result, golf apparel sales at retail
were $1.16 billion in 1996, $1.92 billion in 1997 and were estimated at $2.10
billion in 1998. In addition, the number of rounds played in the United States
increased from 431 million in 1987 to 547 million in 1997. Over this same time
frame, the number of golfers in the United States increased from 21.2 million to
26.5 million. The National Golf Foundation projects the market for sales apparel
sold through all golf facilities to increase between 3% to 5% annually through
2005. As indicated above, we believe there are over 15,000 golf pro shops and
3,500 better specialty stores in the United States.
COMPETITION
The sportswear and outerwear segments of the apparel industry are highly
competitive. Competition is based primarily on brand recognition, product
differentiation and quality, style and production flexibility. Five companies
account for about one-quarter of all apparel sales in the industry. These
companies are: Polo/Ralph Lauren, Cutter & Buck, Ashworth, Antiqua and Izod.
Between 200 and 300 companies account for the remaining apparel sales in the
industry. Many of these companies have greater resources and sell brands with
greater name recognition than us. We are attempting to differentiate ourselves
from our competitors by purchasing or licensing well-established brand names and
producing high quality, stylish sportswear.
PRODUCTS
We design industry-leading products which feature high-quality materials,
such as fine-gauge combed cotton, virgin wools and performance microfibers. Our
products are finished with unique trims, special fabric finishes and washes and
extra needlework. All of our manufacturing is outsourced to independent
contractors located mainly in Southern California. We offer distinctive products
under the following three labels:
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o Avid Sportswear;
o Dockers Golf Collection; and
o British Open Collection.
AVID SPORTSWEAR. The Avid Sportswear label is designed exclusively for the
men's market and is sold in the premium and mid-priced product categories. This
product line features larger sizing, higher quality materials and sewing, and
more detailed designs in the premium category than in the mid-priced category.
It is marketed to golfers and others.
DOCKERS GOLF COLLECTION. The Dockers Golf Collection label is designed for
the men's and women's market. It is marketed to brand-conscious golfers seeking
moderately priced, high quality golf apparel. This label appeals to the casual
market, and is rugged and durable.
BRITISH OPEN COLLECTION. The British Open Collection label is designed for
the men's market. It is marketed exclusively as a premium brand, and will
combine the elegance and tradition that characterizes the British Open Golf
Tournament. This label is made of the finest quality material and features
detailed designs and embroidery.
PRODUCT DEVELOPMENT
Our experienced product development team determines product strategy,
color and fabric selection. With respect to the "British Open Collection" and
"Dockers Golf Collection" labels, the respective licensors have the right to
approve or disapprove the design and other aspects of our products prior to sale
and may require modifications. Our design and production teams coordinate
product development, negotiate price and quantity with cutting and sewing
contractors, purchase fabrics and trim, and establish production scheduling.
These teams also coordinate the inspection of fabric deliveries and perform
fabric testing for shrinkage and color-fastness. Except for embroidering, all
manufacturing is outsourced to independent contractors. We do not have any
long-term agreements with our contractors. Our quality control personnel are
responsible for inspecting finished goods on arrival from our contractors.
The production of our product lines is time sensitive. Due to seasonal
variations in the demand for golf apparel, we are required to forecast market
demand, place raw material orders and schedule cutting and sewing services in
order to have inventory available to meet projected sales. Our designs are
usually finalized between six and nine months prior to the display of our
seasonal product lines by customers. We design for two collections per year, the
spring/summer and winter/fall seasons. Collections are shipped about three to
four months in advance of display by our customers.
Since we did not begin significant operations until March 1, 1999, the
date we acquired Avid Sportswear, Inc., we did not spend any money on product
development in 1998 or 1997. We estimate that Avid Sportswear, Inc. spent
$250,000 in 1998 and $175,000 in 1997. We estimate that Avid Sportswear, Inc.
will spend $350,000 in 1999 on product development. None of these costs were
borne directly by our customers.
SOURCES OF SUPPLY
The design staff is responsible for creating innovative products for our
two seasonal collections. During the design process, our manufacturing sources
develop new seasonal textiles in association with the design team. This enables
us to source a wide variety of textile and printed artwork designs. Our
materials are sourced from a wide variety of domestic and foreign suppliers. The
only key supplier we significantly rely on is Levi Strauss & Co., which sources
some of the products sold under the Dockers Golf Collection label. We believe we
can replace the loss of any supplier other than Levi Strauss & Co.
without causing any material harm to our business.
DISTRIBUTION AND SALES
GENERAL. Our products are distributed in the United States primarily
through golf pro shops, resorts and specialty stores. Our products are sold
through a dedicated sales staff as well as independent sales representatives. As
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of September 30, 1999, our sales staff was composed of five employees and
twenty-two independent sales representatives. Each employee or sales
representative is responsible for serving targeted accounts in a specific
geographic region through merchandise consultation and training, and for meeting
specific account growth and average-order-size goals. They present our
collections each season at national and regional trade shows and at customers'
stores through promotional literature and samples. In addition to other
responsibilities, these employees and sales representatives implement our
merchandise fixturing program with suitable golf pro shops, resorts and
specialty stores. Our products are typically sold on open account with payment
required within thirty days. Department stores and other chains may require
extended credit terms as a condition to carrying a product line. We will where
required conform to this industry practice.
AVID SPORTSWEAR. The Avid Sportswear product line is distributed in the
United States primarily through golf pro shops, resorts and specialty stores.
This product line has a base of approximately 5,500 customers, and is an
approved vendor with Collegiate Licensing Company and sells to several
professional sports teams.
BRITISH OPEN COLLECTION. The British Open Collection product line is
distributed in the United States primarily through department stores and
high-end golf pro shops. This product line has a base of approximately 500
customers. In the upcoming season, we intend to expand our customer base by
targeting high-end golf pro shops, resorts and specialty stores.
DOCKERS GOLF COLLECTION. The Dockers Golf Collection product line is
distributed in the United States primarily through golf pro shops and specialty
golf stores. This product line has a base of approximately 2,000 customers. We
believe this product line will have broad appeal and expect to target
traditional mass merchandise retail outlets as well as the golf pro shops,
resorts and specialty stores.
MERCHANDISING AND MARKETING
We believe our three labels are well-positioned to cater to three distinct
product categories - the larger size, premium-priced and moderately-priced
product categories. Avid Sportswear features harder-to-find, larger sizes in the
premium and moderately priced product categories. The British Golf Collection is
an upscale, premium priced product line, and the Dockers Golf Collection is a
brand conscious, moderately priced product line. We hope to leverage these
brands to expand our product offerings, customer base and average-order-size.
All of our products have golf-themes and are color-related. Our labels are
generally featured prominently on our products and displays to help build brand
loyalty. Our products are directed at sports-minded professional men and woman
who like casual, high-quality and distinctively styled apparel that reflects an
active lifestyle. We expect our product lines to appeal to both golfers and
others who identify with an active lifestyle.
We currently advertise in national and regional trade magazines and
participate in various trade shows. Our products are also marketed on the World
Wide Web at http://www.avidsportswear.com, where we provide information and
pictures of products. Our promotional program offers point-of-sale displays
maintained by our sales staff and independent sales representatives. This
in-store fixturing program helps to showcase these collections and enhances our
brand image at the point of sale. The fixtures are designed to display assorted
elements of our collections and allow the consumer to easily assemble and
purchase coordinated outfits.
Our merchandise is sold and shipped to customers in collection groups. We
believe this will help to reinforce the strength of our product offerings.
For specialty items, have developed an in-house embroidery service and
also work with independent embroiderers to embroider the customer's name or logo
on our garments.
ORDER BOOKING CYCLE AND BACKLOG
We receive our orders for a season over a ten month period beginning when
samples are first shown to customers and continuing into the season. We begin to
take orders for our fall collections in January, generally for delivery between
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May and October and for our spring collection in August, generally for delivery
between November and April. Our domestic backlog, which consists of open,
unfilled customer orders, has not historically comprised a significant part of
our business. We expect our domestic backlog to become significant in the future
with the appeal of the Dockers Golf Collection and British Open Collection
labels.
INTELLECTUAL PROPERTY
We are attempting to build a brand name in the golf apparel industry. To
that end, we have received trademark protection in the United States for the
"Avid" and "Avid Sportswear" names and logos. We are evaluating whether to apply
for trademark protection in other countries. Our name and logo are regarded as
valuable assets and critical to marketing our products.
The names and logos associated with the "British Open Collection" and
"Dockers Golf Collection" are licensed from their respective owners.
EMPLOYEES
We have a total of 55 full-time employees in the United States. Of the
total number of full-time employees, 5 work in marketing and sales, 25 in
embroidery and sewing, 10 work in warehousing and delivery and 15 work in
administrative and other support positions. We also contract with 22 independent
sales representatives. None of our employees is a member of a union. We consider
our relations with our employees to be good.
FACILITIES
Our corporate headquarters are located at 22 South Links Avenue, Suite
204, Sarasota, Florida 34236. The telephone number is (941) 330-8051. Our
corporate headquarters occupies about 2,017 square feet pursuant to a five year
lease which will expire on June 30, 2004. Most of our operations are conducted
from a 39,640 square foot production and warehouse facility in Gardena,
California leased by our wholly-owned subsidiary. This lease has a five year
term, expiring on March 31, 2004. We believe our existing facilities will be
adequate for the foreseeable future.
CHANGE OF CONTROL
As mentioned earlier in this filing, we were formed on September 19, 1997
in Nevada. On or about June 4, 1998, Lido Capital Corporation, an entity
wholly-owned by our President, purchased 3,000,000 shares of common stock
(adjusted for a 3 for 1 stock split) for $150,000 from our founding
shareholders, Thomas Gelfand, Robert Gelfand and Jin Sook Lee. At the time of
the purchase, the Company had 6,300,000 shares of common stock outstanding
(adjusted for a 3 for 1 stock split). As a result, Lido Capital Corporation
obtained a controlling interest in the Company, having acquired 47.6% of its
outstanding capital stock. Lido Capital Corporation currently owns 39.9% of the
Company's outstanding capital stock.
CERTAIN BUSINESS RISK FACTORS
Our Company is subject to various risks which may materially harm our
business, financial condition and results of operations. YOU SHOULD CAREFULLY
CONSIDER THE RISKS AND UNCERTAINTIES DESCRIBED BELOW AND THE OTHER INFORMATION
IN THIS FILING BEFORE DECIDING TO PURCHASE OUR COMMON STOCK. THESE ARE NOT THE
ONLY RISKS AND UNCERTAINTIES THAT WE FACE. IF ANY OF THESE RISKS OR
UNCERTAINTIES ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL CONDITION OR OPERATING
RESULTS COULD BE MATERIALLY HARMED. IN THAT CASE, THE TRADING PRICE OF OUR
COMMON STOCK COULD DECLINE AND YOU COULD LOSE ALL OR PART OF YOUR INVESTMENT.
WE HAVE HISTORICALLY LOST MONEY AND LOSSES MAY CONTINUE IN THE FUTURE
We have historically lost money. In the years ended December 31, 1998 and
December 31, 1997, we sustained losses of $241,548 and $5,609, respectively.
These losses exclude the operating results of our wholly-owned subsidiary
because it was not acquired until March 1, 1999. Assuming the purchase of our
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wholly-owned subsidiary had occurred on January 1, 1998 instead of on March 1,
1999, we would have sustained losses of $1,163,341 in 1998. For the nine months
ended September 30, 1999 (which includes the operating results of our
wholly-owned subsidiary), we sustained losses of $2,425,565. Future losses are
likely to occur. Our independent auditors have noted that our Company does not
have significant cash or other material assets to cover its operating costs and
to allow it to continue as a going concern. Our ability to obtain additional
funding will determine our ability to continue as a going concern. Accordingly,
we may experience significant liquidity and cash flow problems if we are not
able to raise additional capital as needed and on acceptable terms. No
assurances can be given that we will be successful in reaching or maintaining
profitable operations.
WE RELY ON EXTERNAL CAPITAL TO FINANCE OPERATIONS
We rely on significant external financing to fund our operations. Such
financing has historically come from a combination of borrowings and sale of
common stock. We will continue to depend on external financing for the
foreseeable future. We will need to raise additional capital to fund future
expansion. Among other things, external financing will be required to cover our
operating costs and to fulfill our obligations under the licenses for the
"Dockers Golf Collection" and "British Open Collection" brands. These licenses
require the payment of minimum guaranteed royalties, whether we sell licensed
products or not. We cannot assure you that external financing will be available
when needed or on favorable terms. We do not have a formal commitment for
additional capital and we cannot assure you that any such capital will be
forthcoming. The sale of our common stock to raise capital may cause dilution to
our existing shareholders. Our inability to obtain adequate financing will
result in the need to curtail business operations, and may also jeopardize our
ability to satisfy the guaranteed minimum royalty obligations referred to above.
Such an event may result in the termination of our licenses. Any of these events
would be materially harmful to our business.
WE HAVE BEEN IN BUSINESS FOR A SHORT PERIOD OF TIME
Because we have been in business for a short period of time, there is
limited information upon which investors can evaluate our business. We were
formed on September 19, 1997 but did not begin significant operations until the
purchase of our wholly-owned subsidiary on March 1, 1999. You should consider
the likelihood of our future success to be highly speculative in view of our
limited operating history, as well as the complications frequently encountered
by other companies in the early stages of development, particularly companies in
the highly competitive sports apparel industry.
OUR PLANNED PURSUIT OF ACQUISITIONS INVOLVES RISKS THAT MAY ADVERSELY
AFFECT OUR OPERATING RESULTS AND FINANCIAL CONDITION
As part of our growth strategy, we plan to pursue acquisitions. Candidates
for acquisition include businesses that are anticipated to allow us to:
o Achieve economies of scale in terms of purchasing, distribution and
profitability; o Enhance our name recognition and reputation; o Obtain rights to
well-recognized brand names; o Fill a perceived market niche; or o Acquire
products offering new price points.
If we are not correct when we assess the value, strength, weaknesses,
liabilities and potential profitability of acquisition candidates or we are not
successful in integrating the operations of the acquired businesses, our results
of operations or financial position could be adversely effected and we could
lose money. We also may not be successful in finding desirable acquisition
candidates or completing acquisitions with candidates that we identify. Future
acquisitions that we finance through issuing equity securities could be dilutive
to existing shareholders. In addition, future acquisitions may require
additional capital and the consent of our lenders. There can be no assurances
that our lenders will consent to any capital raising or acquisitions.
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WE MAY BE UNABLE TO MANAGE GROWTH
Successful implementation of our business strategy requires us to manage
our growth. Growth could place an increasing strain on our management and
financial resources. To manage growth effectively, we will need to:
o Implement changes in certain aspects of our business;
o Enhance our information systems and operations to respond to increased
demand;
o Attract and retain qualified personnel; and
o Develop, train and manage an increasing number of management-level and
other employees.
If we fail to manage our growth effectively, our business, financial
condition or operating results could be materially harmed.
WE RELY ON CONTRACTORS FOR OUR PRODUCTION
All of our production is outsourced to independent contractors. We do not
have long-term agreements with contractors. Our contractors are concentrated
over a small number of companies. This concentration could materially harm our
business if the contractors had an interruption of business or were unable or
unwilling to meet our production needs. We would experience significant delays
in shifting our production needs to other contractors because of complex
fabrication, unique trims and extensive detailing of our products. Delays in
production, inconsistent or inferior garment quality and other factors beyond
our control would materially harm our relationship with customers, our
reputation in the industry, our sales and profitability and our relationship
with licensors.
WE RELY ON FOREIGN SUPPLIERS
We obtain all of our garments from independent foreign and domestic
suppliers. We do not have formal agreements with these suppliers. Our reliance
on foreign suppliers may be effected by economic, political, governmental and
labor conditions in such foreign countries. This may delay or cut-off our
ability to source materials needed in production or may increase the price of
such materials. Such events would harm our business.
WE MAY BE HARMED BY IMPORT RESTRICTIONS
Our imported materials are subject to certain quota restrictions and U.S.
customs duties, which are a material part of our cost of goods. A decrease in
quota restrictions or an increase in customs duties could harm our business by
making needed materials scarce or by increasing the cost of such materials.
OUR COMMON STOCK MAY BE DELISTED FROM THE OTC BULLETIN BOARD
Our common stock is currently traded on the OTC Bulletin Board under the
symbol "AVSG." Our common stock is subject to delisting on December 2, 1999 if
this Form 10-SB has not been declared effective by the Securities and Exchange
Commission by such date. In this event, we would anticipate that our common
stock would be traded in the "pink sheets" and relisted on the OTC Bulletin
Board if this Form 10-SB becomes effective.
NO SALES OF RESTRICTED STOCK FOR 90 DAYS
Much of our outstanding common stock constitutes "restricted securities"
under Rule 144 promulgated under the Securities Act of 1933, as amended (the
"1933 ACT"). Restricted securities are securities acquired from an issuer or an
affiliate of an issuer in a transaction not involving a public offering (i.e., a
private placement). Such securities may be sold in accordance with Rule 144.
Upon the effective date of this filing, our Company will become a "reporting"
company and will be required to file periodic reports with the Securities and
Exchange Commission. Pursuant to Rule 144, a reporting company must be subject
to the reporting requirements for a period of at least 90 days immediately prior
to a sale of restricted securities. As such, holders of restricted securities
will not be able to rely on Rule 144 to sell restricted securities for a 90 day
period immediately following the effective date of this filing. As a result,
holders of restricted securities will not be able to sell such securities during
the 90 day period. Even after the expiration of this 90 day period, holders of
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restricted securities must, prior to selling such securities, present the
Company with a legal opinion in satisfactory form stating that such securities
may be sold in reliance on Rule 144.
OUR COMMON STOCK IS SUBJECT TO SIGNIFICANT PRICE VOLATILITY
Our common stock has experienced, and is likely to experience in the
future, significant price and volume fluctuations which could adversely affect
the market price of our common stock without regard to our operating
performance. In addition, we believe that factors such as quarterly fluctuations
in our financial results, announcements by other designers and marketers of
men's and women's sportswear, and changes in the overall economy or the
condition of the financial markets could cause the price of our common stock to
fluctuate substantially.
10
<PAGE>
OUR COMMON STOCK MAY BE DEEMED TO BE "PENNY STOCK"
Our common stock may be deemed to be "penny stock" as that term is defined
in Rule 3a51-1 promulgated under the Securities Exchange Act of 1934, as amended
(the "1934 Act"). Penny stocks are stock:
o With a price of less than $5.00 per share;
o That are not traded on a "recognized" national exchange;
o Whose prices are not quoted on the Nasdaq automated quotation system
(Nasdaq listed stock must still have a price of not less than $5.00 per
share); or
o In issuers with net tangible assets less than $2.0 million (if the issuer
has been in continuous operation for at least three years) or $5.0 million
(if in continuous operation for less than three years), or with average
revenues of less than $6.0 million for the last three years.
Section 15(g) of the 1934 Act and Rule 15g-2 promulgated under the 1934
Act require broker/dealers dealing in penny stocks to provide potential
investors with a document disclosing the risks of penny stocks and to obtain a
manually signed and dated written receipt of the document before effecting any
transaction in a penny stock for the investor's account. Potential investors in
our common stock are urged to obtain and read such disclosure carefully before
purchasing any shares that are deemed to be "penny stock." Moreover, Rule 15g-9
promulgated under the 1934 Act requires broker/dealers in penny stocks to
approve the account of any investor for transactions in such stocks before
selling any penny stock to that investor. This procedure requires the
broker/dealer to:
o Obtain from the investor information concerning his or her financial
situation, investment experience and investment objectives;
o Reasonably determine, based on that information, that transactions in
penny stocks are suitable for the investor and that the investor has
sufficient knowledge and experience as to be reasonably capable of
evaluating the risks of penny stock transactions;
o Deliver to the investor a written statement setting forth the basis on
which the broker or dealer made the determination required in the second
item above; and
o Receive a signed and dated copy of such statement from the investor,
confirming that it accurately reflects the investor's financial situation,
investment experience and investment objectives.
Compliance with these requirements may make it more difficult for
investors in our common stock to resell shares to third parties or to otherwise
dispose of them.
OUR BUSINESS IS SEASONAL
Our business has been, and will continue to be, highly seasonal, and our
quarterly operating results will fluctuate due to the seasonality of our sales
of sportswear, among other things. Our sales tend to be highest during our first
and second calendar quarters, and lowest during our third and fourth calendar
quarters. Other factors contributing to the variability of our operating results
include:
o Seasonal fluctuation in consumer demand;
o The timing and amount of orders from key customers; and
o The timing and magnitude of sales of seasonal remainder merchandise and
availability of products.
As a result of these and other factors, our operating results may fall
below market analysts' expectations in some future quarters, which could
materially harm the market price of our common stock.
11
<PAGE>
OUR OFFICERS AND DIRECTORS CONTROL A LARGE BLOCK OF STOCK
Our executive officers and directors beneficially own approximately 57.7%
of our outstanding common stock. As a result, these shareholders acting together
would be able to exert significant influence over most matters requiring
shareholder approval, including the election of directors. They would also be
able to delay or deter a change in control.
WE DEPEND UPON KEY PERSONNEL
Our success largely depends on the efforts and abilities of key executives
and consultants, including Earl T. Ingarfield, our Chairman and Chief Executive
Officer, Jerry L. Busiere, our Secretary, Treasurer and a Director, and Barnum
Mow, Chief Executive Officer and President of our wholly-owned subsidiary and a
Director of the Company. The loss of the services of any of these people could
materially harm our business. We do not have employment agreements with Mr.
Ingarfield or Mr. Busiere. We have entered into three year employment agreement
with Mr. Mow. We do not maintain key-man life insurance policies on any of these
people.
THE YEAR 2000 MAY RESULT IN UNFORESEEN PROBLEMS FOR OUR BUSINESS
Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without considering
the impact of the upcoming change in the Year 2000. If not corrected in our
computer applications or those of our suppliers and customers, this problem may
cause computer applications to fail or to create erroneous results by or at the
Year 2000. We expect to complete both our internal and eternal Year 2000
compliance assessment by December 31, 1999. We do not believe that the cost of
preparing for Year 2000 compliance will exceed $5,000, although we could face
additional expenses to fix any Year 2000 problems if our estimates are
incorrect. In addition, utility companies, third party service providers and
others outside our control may not be Year 2000 compliant. This could result in
a systematic failure beyond our control. Finally, our suppliers may face
difficulties due to the non-compliance of their systems or those of their third
party providers. This could result in our inability to obtain our products in a
timely manner. If we encounter difficulties obtaining our products, our business
could be materially harmed.
WE FACE RISKS RELATED TO COLLECTION OF RECEIVABLES
We extend credit to our customers based on an assessment of their
financial circumstances, generally without requiring collateral. Our business is
seasonal and we may, in the future, offer customer discounts for placing
pre-season orders and extended payment terms for taking delivery before the peak
shipping season. Any such extended payment terms increase our exposure to the
risk of uncollectible receivables. Some of our customers have experienced
financial difficulties in the past, and future financial difficulties of
customers could materially harm our business. We have a limited amount of
experience in managing our credit and collection operations. Our inability to
properly manage this credit risk could materially harm our business.
WE COULD FAIL TO ANTICIPATE CHANGES IN FASHION TRENDS
Fashion trends can change rapidly, and our business is particularly
sensitive to such changes because we typically design and arrange for the
manufacture of our apparel substantially in advance of sales of our products to
consumers. We cannot assure you that we will accurately anticipate shifts in
fashion trends, or in the popularity of golf, and adjust our merchandise mix to
appeal to changing consumer tastes in apparel in a timely manner. If we misjudge
the market for our products or are unsuccessful in responding to changes in
fashion trends or in market demand, we could experience insufficient or excess
inventory levels, missed market opportunities or higher markdowns, any of which
could substantially harm our business and our brand image.
WE FACE SUBSTANTIAL COMPETITION IN OUR BUSINESS
The sportswear and outerwear segments of the apparel industry are highly
competitive. Competition is based primarily on brand recognition, product
12
<PAGE>
differentiation and quality, style and production flexibility. Our future growth
and financial success depend on our ability to further penetrate and expand our
distribution channels, including golf, corporate, international and retail
sales. We encounter substantial competition in the golf distribution channel
from Polo/Ralph Lauren, Cutter & Buck, Ashworth, Antiqua and Izod. Many of our
competitors are significantly larger and more diversified than we are and have
substantially greater resources available for developing and marketing their
products. Many of our competitors' brands also have greater name recognition
than our brands. In addition, our competitors may be able to enter the emerging
e-commerce marketplace more quickly or more efficiently than us. We cannot
assure you that we will successfully compete in this industry.
THE APPAREL INDUSTRY IS SENSITIVE TO ECONOMIC CONDITIONS
The apparel industry historically has been subject to substantial cyclical
variations. Any downturn, whether real or perceived, in economic conditions or
prospects could change consumer spending habits and materially harm our
business. During the past several years, various specialty retailers, including
some of our customers, have experienced financial problems which impact the size
of our prospective customer base and increase the risk of extending credit to
those retailers.
WE DO NOT PAY DIVIDENDS
We have never declared or paid any dividends on our common stock. We
intend to retain any future earnings for funding growth and, therefore, do not
expect to pay any cash dividends for the foreseeable future.
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
THE FOLLOWING INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AND THE NOTES THERETO APPEARING
ELSEWHERE IN THIS FILING.
OVERVIEW
Through our wholly-owned subsidiary, we design, manufacture and market
distinctive premium and moderately-priced sportswear. We sell our products
primarily through golf pro shops and resorts, corporate sales accounts and
better specialty stores. Our sportswear is marketed under three distinct labels:
Avid Sportswear, British Open Collection and Dockers Golf Collection. From our
incorporation on September 19, 1997 until March 1, 1999, we had no operations.
On March 1, 1999, we acquired Avid Sportswear, Inc., which has been in the
business of designing, manufacturing and marketing golf apparel since October 6,
1988. For accounting purposes, the acquisition was treated as a purchase of Avid
Sportswear, Inc. All of our business operations are conducted through Avid
Sportswear, Inc.
The following financial statements of the Company are included in this
filing:
o Audited balance sheet as of December 31, 1998 and audited statements of
income, cash flows and changes in stockholders' equity for the years'
ended December 31, 1998 and 1997; and
o Unaudited balance sheet as of September 30, 1999 and unaudited statements
of income, cash flows and changes in stockholders' equity for the
nine-month period ended September 30, 1999.
The Company's unaudited financial statements for the nine-month period
ended September 30, 1999 include the results of Avid Sportswear, Inc. since
March 1, 1999.
The following financial statements of Avid Sportswear, Inc. are included
in this filing:
o Audited balance sheet as of December 31, 1998 and audited statements of
income, cash flows, and changes in stockholders' equity for the years
ended December 31, 1998 and 1997.
Note 10 of Avid Sportswear, Inc.'s audited financial statements includes
an unaudited consolidated pro forma balance sheet as of December 31, 1998 and an
unaudited consolidated pro forma statement of income for the year ended December
31, 1998. These pro forma financial statements assume for comparison purposes
that the Company had acquired Avid Sportswear, Inc. on January 1, 1998 instead
of March 1, 1999.
Because the Company did not have revenues from operations in each of 1998
and 1997, or 1998 and the nine-month period ended September 30, 1999, we are
required to report our plan of operation.
PLAN OF OPERATIONS
ADDITIONAL FUND RAISING ACTIVITIES. As of September 30, 1999, we had no
cash-on-hand. Since that time, we have funded our operations through a
combination of internally generated cash and drawing down on the line of credit
with First State Bank. On November 19, 1999, we replaced our existing $500,000
loan with First State Bank with a new $1,000,000 loan. This revolving line of
credit is secured by substantially all of our assets. These funds are expected
to last for approximately seven months. We will need to raise additional funds
to meet expected demand for our products in next year's fall/winter season and
beyond. Expenses are anticipated to increase in preparation of the upcoming
season due to, among other things, the addition of the Dockers Golf Collection
and British Open Collection labels. Our need for funding will increase likewise.
If we underestimate demand or incur unforeseen expenses in our product design or
other areas, such funds may be required earlier. We expect to raise additional
funding from the sale of unregistered securities. We have had discussions with a
registered broker-dealer about acting as a placement agent in a private
placement transaction. The terms of such an offering have not been finalized
with such broker-dealer. We hope to raise at least $4.0 million in such a
14
<PAGE>
transaction, although no assurances can be given that we will be successful in
so doing or that the terms of such an offering will not be dilutive to existing
shareholders.
SUMMARY OF ANTICIPATED PRODUCT DEVELOPMENT. We expect to spend
approximately $350,000 on product development in each of 1999 and 2000 in
preparing for future seasons and in designing products for the Dockers Golf
Collection and British Open Collection labels. Because these product development
efforts are in their infancy, having obtained the licenses in 1999, we expect
these efforts to continue into the foreseeable future. Initially, these efforts
are expected to focus on golf-related apparel and may eventually include other
types of apparel. Even after our product lines mature, we expect product
development to remain a significant expense due to changing fashions and other
factors. We expect a national roll-out of our Dockers Golf Collection and
British Open Collection labels in the Fall of 2000.
SIGNIFICANT PLANT AND EQUIPMENT PURCHASES.
In 2000, we expect to purchase computer hardware and software, telephone
and embroidery equipment. We estimate that the cost of this equipment to be
approximately $725,000.
CHANGES IN NUMBER OF EMPLOYEES. We currently have 55 employees. As shown
in the following chart, we anticipate hiring additional personnel during 2000 in
connection with our expected growth plans. We believe that these personnel will
be adequate to accomplish the tasks set forth in the plan.
EXISTING PROJECTED
EMPLOYEES EMPLOYEES
DEPARTMENT 1999 2000
---------- ---- ----
Marketing and Sales 5 7
Embroidery and Sewing 25 26
Warehousing and Delivery 10 27
Administrative and other
Support Positions 15 23
-------- --------
Total Employees 55 83
-------- --------
Independent Contractors - 22 26
Sales
-------- --------
15
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods presented, the percentage
of net sales represented by certain items in the Company's Statement of
Operations for the nine months ended September 30, 1999 and in Avid Sportswear,
Inc.'s Statements of Operations for the years ended December 31, 1998 and 1997:
PERCENTAGE OF NET SALES
COMPANY AVID SPORTSWEAR, INC. AVID SPORTSWEAR, INC.
NINE MONTHS
ENDED YEAR ENDED YEAR ENDED
SEPT. 30, 1999 DEC. 31, 1998 DEC. 31, 1997
-------------- ------------- -------------
Sales, net 100.0% 100.0% 100.0%
Cost of goods sold (69.4%) (72.0%) (69.0%)
------- ------- -------
Gross margin 30.6% 28.0% 31.0%
------- ------- -------
Operating expenses (135.4%) (43.8%) (44.4%)
------- ------- -------
(Loss) Income from
operations (101.9%) (15.8%) (13.3%)
Interest expense (1.7%) (3.6%) (3.7%)
------- ------- -------
Net loss (103.6%) (20.0%) (18.3%)
------- ------- -------
Our results of operations for the nine-month period ended September 30,
1999 include both the Company and Avid Sportswear, Inc. Our operating expenses
in this period were 135.4% of net sales. This was primarily attributable to the
issuance of 1,500,000 shares of common stock to Lido Capital Corporation, an
entity wholly-owned by Earl Ingarfield, President and Chairman of the Company,
1,000,000 shares of common stock to Thomas Browning, a director of the Company,
and 1,000,000 shares of common stock to Michael LaValliere, a director of the
Company. These shares were issued in exchange for guaranteeing a loan owed by
the Company to an institutional lender. We could not have obtained this loan
without the guarantees of Messrs. Ingarfield, Browning and LaValliere. The
issuance of these 3,500,000 shares of common stock, together with the issuance
of 1,600,000 shares of common stock to two other shareholders of the Company for
guaranteeing the same loan, resulted in an operating expense of $1,275,000.
SEASONALITY
Our business has been, and will continue to be, highly seasonal, and our
quarterly operating results will fluctuate due to the seasonality of our sales
of sportswear, among other things. Our sales tend to be highest during our first
and second calendar quarters, and lowest during our third and fourth calendar
quarters. Other factors contributing to the variability of our operating results
include:
o Seasonal fluctuation in consumer demand;
o The timing and amount of orders from key customers; and
o The timing and magnitude of sales of seasonal remainder merchandise and
availability of products.
As a result of these and other factors, our operating results may fall
below market analysts' expectations in some future quarters, which could
materially harm the market price of our common stock.
16
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1998, we had $154,237 in cash-on-hand, consisting
mainly of the net proceeds form the sale of securities. We used all of these
funds during the nine-month period ended September 30, 1999. As a result, we had
no cash-on-hand on September 30, 1999. A discussion of how we generated and used
cash in the period follows:
OPERATING ACTIVITIES. Our operating activities used $650,092 in cash
during the period, consisting mainly of a net loss of $2,425,656. Of that net
loss, $1,275,000 was a non-cash operating expense attributable to the issuance
of common stock in exchange for guarantees.
INVESTING ACTIVITIES. Our investing activities used $365,977 in cash
during the period, consisting mainly of sewing, folding and steam machines and
embroidery equipment.
FINANCING ACTIVITIES. Financing activities provided net cash of $861,832,
generated mainly by the sale of common stock in the amount of $1,859,576, the
receipt of a related party receivable of $352,300 and the receipt of loan
proceeds of $1,340,735. These loan proceeds consisted primarily of a $500,000
revolving line of credit from an institutional lender, a convertible note of
$375,000 and term loans of $230,000 from Messrs. Ingarfield, Browning and
LaValliere This cash received during the period was partially offset by the cash
used to purchase Avid Sportswear, Inc. The purchase price consisted of $725,000
paid to the former shareholders of Avid Sportswear and $1,826,111 paid to
satisfy certain liabilities of Avid Sportswear, Inc.
Since September 30, 1999, we have funded our operations through a
combination of internally generated cash and drawing down on the line of credit
with First State Bank. On November 19, 1999, we replaced our existing $500,000
loan with First State Bank with a new $1,000,000 loan. This loan is secured by
substantially all of our assets. These funds are expected to last for
approximately seven months. We will need to raise additional funds to meet
expected demand for our products in next year's fall/winter season and beyond.
Expenses are anticipated to increase in preparation of the upcoming season due
to, among other things, the addition of the Dockers Golf Collection and British
Open Collection labels. Our need for funding will increase likewise. If we
underestimate demand or incur unforeseen expenses in our product design or other
areas, such funds may be required earlier. We expect to raise additional funding
from the sale of unregistered securities. We have had discussions with a
registered broker-dealer about acting as a placement agent in a private
placement transaction. The terms of such an offering have not been finalized
with such broker-dealer. We hope to raise up to $5.0 million in such a
transaction, although no assurances can be given that we will be successful in
so doing or that the terms of such an offering will not be dilutive to existing
shareholders.
GOING CONCERN OPINION
Our independent auditors have added an explanatory paragraph to their
audit opinions issued in connection with the 1998 and 1997 financial statements
which states that our Company does not have significant cash or other material
assets to cover its operating costs and to allow it to continue as a going
concern. Our ability to obtain additional funding will determine our ability to
continue as a going concern. Our financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
YEAR 2000 ISSUES
Many currently installed computer systems, software packages and
microprocessor dependent equipment are coded to accept only two-digit entries in
a date code field and cannot reliably distinguish dates into the Year 2000 and
beyond. We may realize exposure and risk if the systems upon which we are
dependent do not correctly process dates beginning in 2000. Our potential areas
of exposure include electronic data exchange systems operated by third parties
with which we transact business, and computers, software, telephone systems and
other equipment purchased from third parties and used internally.
We expect to complete both our internal and external Year 2000 compliance
assessment by December 31, 1999. In addition, utility companies, third party
17
<PAGE>
service providers and others outside our control may not be Year 2000 compliant.
This could result in a systematic failure beyond our control. Finally, our
suppliers may face difficulties due to the non-compliance of their systems or
those of their third party providers. This could result in our inability to
obtain our products in a timely manner. If we encounter difficulties obtaining
our products, our business could be materially harmed. In an attempt to evaluate
our exposure to Year 2000 problems, we have been communicating with the
suppliers and others with whom we do business to assess their Year 2000
readiness. The responses we have received to date generally have indicated that
steps are currently being undertaken by the respondents to address this concern.
However, if such third parties are not able to make all systems Year 2000
compliant, there could be a material adverse impact on our business and
financial condition.
We do not believe that the cost of preparing for Year 2000 compliance will
exceed $5,000, although we could face additional expenses to fix any Year 2000
problems if our estimates are incorrect. Anticipated costs associated with our
Year 2000 compliance program do not include time costs that may be incurred as a
result of any potential failure of third parties to become Year 2000 compliant
or cost to implement our contingency plans.
ITEM 3. DESCRIPTION OF PROPERTY.
Our corporate headquarters are located at 22 South Links Avenue, Suite
204, Sarasota, Florida 34236. Our corporate headquarters occupies about 2,017
square feet pursuant to a five year lease which will expire on June 30, 2004.
Most of our operations are conducted from a 39,640 square foot production and
warehouse facility in Gardena, California leased by our wholly-owned subsidiary.
This lease has a five year term, expiring on March 31, 2004. We believe our
existing facilities will be adequate for the foreseeable future.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth as of November 1, 1999, the names,
addresses and stock ownership in the Company for the current directors and named
executive officers of the Company and every person known to the Company to own
five percent (5%) or more of the issued and outstanding shares of the common
stock:
18
<PAGE>
<TABLE>
<CAPTION>
Shares Percentage of
Title of Class: Name and Address of Beneficial Owner: Beneficiary Owned: Class(1):
-------------- ------------------------------------ ----------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common Lido Capital Corporation(2) 10,500,000 39.9%
22 South Links Avenue, Suite 204
Sarasota, Florida 34236
Common Jerry L. Busiere 100,000 0.4%
22 South Links Avenue, Suite 204
Sarasota, Florida 34236
Common Thomas L. Browning 1,800,000 6.8%
22 South Links Avenue, Suite 204
Sarasota, Florida 34236
Common Michael LaValliere 1,800,000 6.8%
22 South Links Avenue, Suite 204
Sarasota, Florida 34236
Common David Roderick 1,000,000 3.8%
22 South Links Avenue, Suite 204
Sarasota, Florida 34236
Common Barnum Mow 0 0.0%
22 South Links Avenue, Suite 204
Sarasota, Florida 34236
All Officers and Directors as a Group (3) 15,200,000 57.7%
</TABLE>
- ----------------------
(1) Based on the number of shares of common stock outstanding as of
November 1, 1999. On such date, we had 26,345,108 shares of common stock
outstanding, and we had no outstanding options or other securities convertible
into shares of common stock.
(2) Earl T. Ingarfield, our Chairman, Chief Executive Officer and
President, is the sole owner, officer and director of Lido Capital Corporation.
As a result, Mr. Ingarfield has the sole ability to vote the shares of our
common stock held by Lido Capital Corporation. All of the shares of common stock
of Lido Capital Corporation are deemed to be beneficially owned by Mr.
Ingarfield.
(3) Includes the shares held by Lido Capital Corporation because such
shares are controlled by Mr. Ingarfield.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
Information concerning our current executive officers and directors is set
forth in the following table:
NAME: AGE: POSITION:
---- --- --------
Earl T. Ingarfield 40 President, Chief Executive Officer
and Director
Jerry L. Busiere 65 Secretary, Treasurer and Director
Michael E. LaValliere 39 Director
Thomas L. Browning 39 Director
Barnum Mow 43 Director and Chief Executive Officer
and President of Avid Sportswear, Inc.
David Roderick 47 Vice-President of Production and Design
of Avid Sportswear, Inc.
19
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EARL T. INGARFIELD has been a the Chief Executive Officer, President and a
Director since June 1998. Since June 30, 1995, Mr. Ingarfield has also been the
owner of Lido Capital Corporation, a privately-held company in Sarasota,
Florida, and a principal shareholder of the Company. From 1979 to 1987, he was a
professional hockey player for the Atlanta Flames, Calgary Flames and Detroit
Red Wings. For many years, he has also been involved in Indy-car racing,
offshore boat racing and is an avid golfer.
JERRY L. BUSIERE has been the Secretary, Treasurer and a Director since
June 1998. Mr. Busiere has over forty-one years of experience in accounting and
taxation. From 1997 to July 1998, he was Controller of Lido Capital Corporation,
a privately-held company owned by Mr. Ingarfield. From 1989 to 1995, he was a
Senior Rate Analyst and Chief Financial Officer of Poly-Portables, Inc., a
Georgia-based manufacturing company. From 1962 to 1988, he owned his own
accounting practice. He has served as a consultant for numerous companies, such
as Wellcraft Boat Manufacturing, Englewood Disposal Service, Poly-Portables,
Inc., Colony Beach Resort, Buccaneer Inn and Far Horizon Resorts. He received an
A.S. Degree in 1973 from the University of South Florida in Sarasota, Florida.
MICHAEL E. LAVALLIERE has been a Director of the Company since June, 1998.
Since 1996, he has also been President and CEO of Collaborative Marketing
Services, Inc. ("CMS"), a leader in the marketing and distribution of kiosk
advertising programs and point of sale machines in a broad range of
applications. Under Mr. LaValliere's leadership, CMS has become an industry
leader in the area of web page design activities for the Internet. From 1993 to
1996, he served as Vice President of Sales and Marketing for Interactive Golf
Services, Inc. ("IGSI"), a company which provided touch screen kiosks to the
golf market. Under Mr. LaValliere's direction, IGSI developed a client base
which included Maxfli Golf Co., Taylor Made Golf Co. and Cleveland Golf Co. From
1981 to 1995, he was a professional baseball player for fourteen years as a
member of the Philadelphia Phillies (1981-1984), St. Louis Cardinals
(1985-1986), Pittsburgh Pirates (1987-1992) and Chicago White Sox (1993-1995).
While a member of the Pirates and White Sox, he was elected to serve as the
player union representative with negotiation responsibilities in the area of
labor contracts, pension plans, player marketing rights and licensing
agreements.
THOMAS L. BROWNING has been a Director of the Company since June, 1998.
From 1992 to 1996, he was a member of the Cincinnati Reds Major League Baseball
team. Since retiring from professional baseball, Mr. Browning has been a General
Partner of Ashley Canterbury, a residential construction company in the greater
Cincinnati area, and also serves an active role in community youth programs and
the United Way. He graduated from Tennessee Wesleyan College in 1982 with a B.A.
Degree in Business Management and Economics.
BARNUM MOW has been Chief Executive Officer and President of Avid
Sportswear, Inc. since September, 1999. From 1983 until September 1999, Mr. Mow
was Senior Vice President of Bugle Boy Industries, a wholesale and retail
apparel company with combined annual sales of $550,000,000. Over a sixteen year
period of progressive management responsibility, Mr. Mow became responsible for
Bugle Boy's operations, distributions, sales, and management information
systems. Most recently, he led a management team, comprised for four
vice-presidents and four directors, which was responsible for over nine hundred
employees and a $40,000,000 annual operating budget. Mr. Mow managed four
distribution sites, totaling over one million square feet in size and which
supported two thousand five hundred wholesale accounts and two hundred sixty
retail stores; the integration of software development with hardware platforms
used to support Bugle Boy's activities; and Bugle Boy's website, intranet,
telecommunications, video conferencing, and Internet e-commerce. He was fully
responsible for costing, merchandising, product development, production, and
bringing to market four different line breaks per year. Mr. Mow was also the
National Sales Manager for Bugle Boy Active Wear, Swim Wear and T-shirts, which
accounted for $70,000,000 in annual sales. Mr. Mow received a B.S. in Business
Administration from the University of Southern California.
DAVID RODERICK had been a Director of the Company from March 1, 1999 to
November 26, 1999 and has been Vice-President of Production and Sales of our
wholly-owned subsidiary since September, 1999. In this capacity, Mr. Roderick is
primarily responsible for the Company's three brands: Avid Sportswear, Dockers
Golf Collection and British Open Collection. Mr. Roderick founded Avid
20
<PAGE>
Sportswear, Inc. in October of 1988. He served as President of Avid Sportswear,
Inc. until September, 1999, during which time he was responsible for the product
and brand development of the Avid Sportswear brand name.
21
<PAGE>
ITEM 6. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE. The following table provides information about
the compensation paid by the Company to its Chief Executive Officer and all
other current executive officers who were serving as executive officers at the
end of 1998 and who received in excess of $100,000:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-----------------------------------------------------
Securities
Other Annual Underlying All Other
Name and Principal Year Salary($) Bonus($) Compensation Options Compensation
Position(s) ($) (#s)(1) ($)(2)
- ------------------- ------ --------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Earl T. 1998 -- -- -- -- --
Ingarfield(1)
Chief Executive
Officer, Present
and Chairman of the
Board of Directors
Jerry L. Busiere(2) 1998 -- -- -- -- --
Secretary,
Treasurer and
Director
Steven Kroll(3) 1998 64,704 -- -- -- --
David Roderick, 1998 150,000 -- 12,000 -- --
President of Avid
Sportswear, Inc.
</TABLE>
- ---------------------
(1) Mr. Ingarfield became Chief Executive Officer, President and Chairman
of the Board of Directors in June, 1998.
(2) Mr. Busiere became Secretary, Treasurer and a Director in June, 1998.
(3) Mr. Kroll was an independent contractor who served in a policy making
function during 1998.
EMPLOYMENT AGREEMENTS
We have not entered into employment agreements with Messrs. Ingarfield or
Busiere.
Our wholly-owned subsidiary entered into a three year employment agreement
with Barnum Mow, commencing September 17, 1999. Upon the expiration of the
initial term, the agreement will automatically renew for one year terms unless
either party elects not to renew the agreement by providing written notice to
the other party at least four months' prior to the expiration of any term. Mr.
Mow is employed as the Chief Executive Officer and President of our wholly-owned
subsidiary, Avid Sportswear, Inc. His base salary is $300,000 per year, subject
to increases as determined by the employer. In addition to his salary, Mr.
Barnum also received a bonus of $75,000 in 1999. His bonus will be the same for
each year during the term unless the employer establishes a formal bonus plan.
The employer will reimburse Mr. Mow for all reasonable expenses incurred in
connection with the performance of his duties. Additional terms of employment
are set forth in his employment agreement, which is included as an exhibit to
this filing.
Our wholly-owned subsidiary also entered into a five year employment
agreement with David Roderick, effective January 1, 1999. From January, 1999,
until September, 1999, Mr. Roderick was employed as the President of Avid
Sportswear, Inc. In September, 1999, Mr. Roderick became the Vice President of
Production and Sales. His base salary is $150,000, subject to increases as
determined by the employer. In addition, Mr. Roderick will be eligible for
bonuses at the discretion of the Board of Directors. The employer will reimburse
Mr. Roderick for all reasonable expenses incurred in connection with the
performance of his duties. Additional terms of employment are set forth in his
employment agreement, which is included as an exhibit to this filing.
22
<PAGE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
LOANS. From time to time we have entered into related party transactions
primarily to finance the operations of the Company. Below is a summary of all
loans to and from related parties since January 1, 1999:
o As of January 1, 1999, the Company owed Mr. Ingarfield a total of
$100,000 and Lido Capital Corporation, an entity wholly-owned by Mr.
Ingarfield, a total of $153,500. These amounts were loaned to the
Company to help finance its operations.
o In January, 1999, the Company repaid Mr. Ingarfield a total of $20,000
and Lido Capital Corporation a total of $90,500. The Company also
received a $50,000 loan from Mr. Browning.
o In February, 1999, the Company repaid Mr. Ingarfield a total of
$20,000 and borrowed a total of $5,000 from Lido Capital Corporation.
o In March, 1999, Lido Capital Corporation loaned the Company a total of
$15,000.
o In April, 1999, Mr. Ingarfield loaned the Company a total of $6562 and
the Company repaid Lido Capital Corporation a total of $83,000. In
addition, the Company loaned Lido Capital Corporation a total of
$18,250.
o In May, 1999, Mr. Ingarfield loaned a total of $15,292 to the Company
and the Company loaned an additional $165,000 to Lido Capital
Corporation. As of May 31, 1999, Lido Capital Corporation owed the
Company a total of $183,250.
o In June, 1999, the Company loaned an additional $82,000 to Lido
Capital Corporation. As of June 30, 1999, Lido Capital Corporation
owed the Company a total of $265,250.
o In July, 1999, Lido Capital Corporation repaid a total of $46,000 to
the Company. As of July 31, 1999, Lido Capital Corporation owed the
Company a total of $219,250.
o In August, 1999, the Company loaned an additional $60,000 to Lido
Capital Corporation. As of August 30, 1999, Lido Capital Corporation
owed a total of $279,250 to the Company.
o In September, 1999, Lido Capital Corporation repaid the Company a
total of $5,300. The Company also received a loan of $50,000 from Mr.
LaValliere and a loan of $50,000 from Mr. Browning. As of September
30, 1999, Lido Capital Corporation owed the Company a total of
$273,950 and the Company owed Mr. Ingarfield a total of $82,558. In
addition, the Company owed Mr. Browning a total of $100,000 and Mr.
LaValliere a total of $50,000.
SALE OF STOCK. In addition to the loans referenced above, the Company has
sold common stock to Lido Capital Corporation, Thomas Browning, Michael
LaValliere and David Roderick in order to help finance the Company's operations.
Below is a summary of all sales of common stock to such persons since January 1,
1999:
o On June 6, 1998, the Company sold 6,000,000 shares of common stock to
Lido Capital Corporation for $0.0033 in cash per share.
o On August 27, 1998, the Company sold 500,000 shares of common stock to
Mr. Browning for $0.15 in cash per share.
o On January 5, 1999, the Company sold 50,000 shares of common stock to
Mr. Ingarfield and 50,000 shares of common stock to Mr. Ingarfield's
wife, in each case for $0.25 in cash per share.
23
<PAGE>
o On January 27, 1999, the Company sold 1,000,000 shares of common stock
to Mr. Roderick for $0.25 in cash per share.
o On March 11, 1999, the Company issued 1,500,000 shares of common stock
to Lido Capital Corporation in exchange for its guaranty of a loan
owed by the Company to an institutional lender. On that date, the
Company also issued 1,000,000 shares of common stock to Mr. Browning
and 1,000,000 shares of common stock to Mr. LaValliere in exchange for
their guaranty of a loan owed by the Company to an institutional
lender.
ITEM 8. DESCRIPTION OF SECURITIES.
AUTHORIZED CAPITAL STOCK. The authorized capital stock of the Company
consists of 50,000,000 shares of common stock and 10,000,000 shares of Preferred
Stock. As of the date hereof, the Company has 26,345,108 shares of common stock
outstanding. The following description is a summary of our capital stock and is
subject to and qualified in its entirety by reference to the provisions of the
Articles of Incorporation and the Bylaws of the Company, which are included as
exhibits to this filing.
COMMON STOCK. Each share of common stock entitles the holder to one vote
on each matter submitted to a vote of our shareholders, including the election
of directors. There is no cumulative voting. Subject to preferences that may be
applicable to any outstanding preferred stock, shareholders are entitled to
receive ratably such dividends, if any, as may be declared from time to time by
the Board of Directors. Shareholders have no preemptive, conversion or other
subscription rights. There are no redemption or sinking fund provisions
available to the common stock. In the event of liquidation, dissolution or
winding up of the Company, shareholders are entitled to share ratably in all
assets remaining after payment of liabilities, subject to prior distribution
rights of preferred stock, if any, then outstanding.
PREFERRED STOCK. The Board of Directors is authorized, subject to any
limitations prescribed by the Nevada Revised Statutes, or the rules of any
quotation system or national securities exchange on which stock of the Company
may be quoted or listed, to provide for the issuance of shares of preferred
stock in one or more series; to establish from time to time the number of shares
to be included in each such series; to fix the rights, powers, preferences, and
privileges of the shares of such series, without any further vote or action by
the shareholders. Depending upon the terms of the preferred stock established by
the Board of Directors, any or all series of preferred stock could have
preference over the common stock with respect to dividends and other
distributions and upon liquidation of the Company or could have voting or
conversion rights that could adversely affect the holders of the outstanding
common stock. The Company has no present plans to issue any shares of preferred
stock.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE ARTICLES OF INCORPORATION, BYLAWS AND
NEVADA LAW
The following provisions of the Articles of Incorporation and Bylaws of
the Company could discourage potential acquisition proposals and could delay or
prevent a change in control of the Company. Such provisions may also have the
effect of preventing changes in the management of the Company.
AUTHORIZED BUT UNISSUED STOCK. The authorized but unissued shares of
common stock and preferred stock are available for future issuance without
shareholder approval. These additional shares may be utilized for a variety of
corporate purposes, including future public offerings to raise additional
capital, corporate acquisitions and employee benefit plans.
BLANK CHECK PREFERRED STOCK. The existence of authorized but unissued and
unreserved shares of preferred stock may enable the Board of Directors to issue
shares to persons friendly to current management which would render more
difficult or discourage an attempt to obtain control of the Company by means of
a proxy contest, tender offer, merger or otherwise, and thereby protect the
continuity of the Company's management.
NEVADA BUSINESS COMBINATION LAW. The State of Nevada has enacted
legislation that may deter or frustrate takeovers of Nevada corporations. The
Nevada Business Combination Law generally prohibits a Nevada corporation from
24
<PAGE>
engaging in a business combination with an "interested shareholder" (defined
generally as any person who beneficially owns 10% or more of the outstanding
voting stock of the Company or any person affiliated with such person) for a
period of three years following the date that such shareholder became an
interested shareholder, unless the combination or the purchase of shares made by
the interested shareholder on the interested shareholder's date of acquiring
shares is approved by the board of directors of the corporation before that
date. A corporation may not engage in any combination with an interested
shareholder of the corporation after the expiration of three years after his
date of acquiring shares unless:
o The combination or the purchase of shares made by the interested
shareholder is approved by the board of directors of the corporation
before the date such interested shareholder acquired such shares;
o A combination is approved by the affirmative vote of the holders of
stock representing a majority of the outstanding voting power not
beneficially owned by the interested shareholder proposing the
combination, or any affiliate or associate of the interested
shareholder proposing the combination, at a meeting called for that
purpose no earlier than three years after the interested shareholder's
date of acquiring shares; or
o If the aggregate amount of cash and the market value, as of the date
of consummation, of consideration other than cash to be received per
share by all of the holders of outstanding common shares of the
corporation not beneficially owned by the interested shareholder,
satisfies the fair value requirements of Section 78.441 of Nevada
Revised Statutes.
SPECIAL MEETINGS OF SHAREHOLDERS. Special meetings of the shareholders of
the Company may be called by its Board of Directors or other persons authorized
to do so under Nevada law. Under applicable Nevada law, shareholders do not have
the right to call a special meeting of the shareholders. This may have the
effect of discouraging potential acquisition proposals and could delay or
prevent a change in control of the Company by precluding a dissident shareholder
from forcing a special meeting to consider removing the Board of Directors or
otherwise.
25
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS.
The Company's shares of common stock began trading on the Over-the-Counter
Bulletin Board on March 24, 1998, under the symbol "GFIO." On July 22, 1999, the
Company's symbol was changed to "AVSG." The Company's high and low bid prices by
quarter during 1998 and 1999 are as follows:
CALENDAR YEAR 1999(1)
High Bid Low Bid
-------- -------
First quarter $2.0000 $0.7500
Second quarter $1.4688 $0.8750
Third quarter $1.0000 $0.7500
Fourth quarter
CALENDAR YEAR 1998(1)
High Bid Low Bid
-------- -------
Second quarter $1.2500 $0.5000
Third quarter $3.0000 $0.7500
Fourth quarter $1.5000 $0.4375
- -------------------------
(1) These quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission, and may not necessarily represent actual transactions.
On October 31, 1999, the Company had approximately 81 shareholders of
record. The Company believes that it has in excess of 125 beneficial owners.
We have not paid dividends in the past on any class of stock and we do not
anticipate paying dividends in the foreseeable future. There are no restrictions
that limit the payment of future dividends on any class of stock.
ITEM 2. LEGAL PROCEEDINGS.
We are involved in various claims and legal actions arising in the
ordinary course of business. In our opinion, the ultimate disposition of these
matters will not materially harm our Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
On or about July 23, 1998, our shares of common stock were split
three-for-one (I.E., two new shares of stock were issued for every one share of
stock outstanding). All of the transactions listed below have been adjusted to
reflect the three-for-one stock split.
On October 8, 1997, the Company issued 3,000,000 shares of common stock
for $0.00333 in cash per share to the original founders. The total offering
price of this transaction was $10,000.
In February 1998, the Company issued 300,000 shares of common stock to
Y.K. International Co., Ltd. in exchange for the assignment of certain
distribution rights under a Distribution Agreement dated as of September 8, 1997
between Bo Ah Industrial Co. and Y.K. International Co., Ltd. These rights were
valued at $25,000.
26
<PAGE>
In February 1998, the Company issued 3,000,000 shares of common stock for
$0.08333 in cash per share. The total offering price of this transaction was
$250,000.
On June 18, 1998, the Company issued 6,000,000 shares of common stock for
$0.000333 in cash per share. All of these shares were purchased by Lido Capital
Corporation. Mr. Ingarfield, our Chairman, Chief Executive Officer and
President, is the sole owner, officer and director of Lido Capital Corporation.
The total offering price of this transaction was $20,000.
On August 17, 1998, the Company issued 1,500,000 shares of common stock
for $0.15 in cash per share. The total offering price of this transaction was
$225,000.
On August 27, 1998, the Company issued 400,000 shares of common stock for
$0.15 per share. All of these shares were purchased by Thomas Browning, a
Director of the Company. The total offering price of this transaction was
$60,000. This amount is reflected as a subscriptions receivable in the Company's
financial statements.
On December 21, 1998, the Company issued 412,000 shares of common stock
for $0.25 in cash per share. The total offering price of this transaction was
$103,000.
In January, 1999, the Company converted a $210,000 note payable into
373,336 shares of common stock. These shares were valued at $0.56 per share.
Between January and March, 1999, the Company issued a total of 9,464,338
shares of common stock, of which 1,534,341 shares were sold for $0.75 in cash
per share, 2,030,000 shares were sold for $0.25 in cash per share, 5,100,000
shares were issued in exchange for guarantees valued at $1,275,000 and 800,000
shares were issued in exchange for advertising and promotional services valued
at $275,000. In these transactions, Mr. Ingarfield's parents purchased a total
of 100,000 shares of common stock for $0.25 in cash per share, David Roderick,
Vice President of Production and Design for Avid Sportswear, Inc., purchased a
total of 1,000,000 shares for $0.25 in cash per share. In addition, Lido Capital
Corporation, an entity wholly-owned by Mr. Ingarfield, received a total of
1,500,000 shares in exchange for guaranteeing certain loans owed by the Company
to an institutional lender and each of Messrs. Browning and LaValliere received
1,000,000 shares for guaranteeing a loan owed by the Company to an institutional
lender. An additional 1,600,000 shares were issued to two other shareholders in
exchange for guarantees on the same loan. The Company incurred an operating
expense of $875,000 for the issuance of 3,500,000 shares of common stock to Lido
Capital Corporation, Mr. Browning and Mr. LaValliere. The Company incurred an
additional operating expense of $400,000 for the issuance of 1,600,000 shares of
common stock to two other shareholders. The total offering price of these
transactions was $1,816,586.50, plus guarantees valued at $1,275,000 and
advertising and promotional services valued at $275,000.
In April, 1999, the Company issued a total of 2,000,000 shares to two
investors for $100,000 in cash and a guaranty of the Company's indebtedness to
an institutional lender. The Company incurred an operating expense of $400,000
in connection with the shares issued for the guaranty.
In May, 1999, the Company issued a total of 117,767 shares of common stock
for $0.75 in cash per share. The total offering price of these transactions was
$88,325.
On September 22, 1999, the Company issued a total of 50,000 shares of
common stock for $0.25 in cash per share. The total offering price of this
transaction was $12,500.
With respect to the sale of unregistered securities referenced above, all
transactions were exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933, as amended (the "1933 ACT"), and Regulation D
promulgated under the 1933 Act. In each instance, the purchaser had access to
sufficient information regarding the Company so as to make an informed
27
<PAGE>
investment decision. More specifically, and except with respect to the purchase
by Lido Capital Corporation and Messrs. Ingarfield, Browning, LaValliere and
Roderick, each purchaser signed a written subscription agreement with respect to
their financial status and investment sophistication in which they represented
and warranted, among other things, that they had:
o the ability to bear the economic risks of an investment in the shares
of the Company;
o a certain net worth sufficient to meet the suitability standards of
the Company; and
o been provided with all material information requested by the purchaser
or his or her representatives, and been provided an opportunity to ask
questions of and receive answers from the Company concerning the
Company and the terms of the offering.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 78.751 of Nevada Revised Statutes provides, in effect, that any
person made a party to any action by reason of the fact that he is or was a
director, officer, employee or agent of the Company may and, in certain cases,
must be indemnified by the Company against, in the case of a non-derivative
action, judgments, fines, amounts paid in settlement and reasonable expenses
(including attorneys' fees) incurred by him as a result of such action, and in
the case of a derivative action, against expenses (including attorneys' fees),
if in either type of action he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Company. This
indemnification does not apply, in a derivative action, to matters as to which
it is adjudged that the director, officer, employee or agent is liable to the
Company, unless upon court order it is determined that, despite such
adjudication of liability, but in view of all the circumstances of the case, he
is fairly and reasonably entitled to indemnification for expenses, and, in a
non-derivative action, to any criminal proceeding in which such person had
reasonable cause to believe his conduct was lawful.
As authorized by Section 78.037 of Nevada Revised Statutes, our Articles
of Incorporation eliminate or limit the personal liability of a director to the
Company or to any of its shareholders for monetary damage for a breach of
fiduciary duty as a director, except for:
o Acts or omissions which involve intentional misconduct, fraud or
knowing violation of law; or
o The payment of distributions in violation of Section 78.300 of Nevada
Revised Statutes.
Our Articles of Incorporation provide for indemnification of officers and
directors to the fullest extent permitted by Nevada law. Such indemnification
applies in advance of the final disposition of a proceeding.
The Company maintains an insurance policy that provides protection, within
the maximum liability limits of the policy and subject to a deductible amount
for each claim, to the Company under its indemnification obligations and to the
directors and officers of the Company with respect to certain matters that are
not covered by the Company's indemnification obligations.
At present, there is no pending litigation or proceeding involving any
director or officer as to which indemnification is being sought, nor are we
aware of any threatened litigation that may result in claims for indemnification
by any director or officer.
28
<PAGE>
PART F/S
Index to Financial Statements:
o The Company's unaudited balance sheet as of September 30, 1999 and
unaudited statements of income, cash flows and changes in
stockholders' equity for the nine-month period ended September 30,
1999;
o The Company's audited balance sheet as of December 31, 1998 and
audited statements of income, cash flows and changes in stockholders'
equity for the years' ended December 31, 1998 and 1997; and
o Avid Sportswear, Inc.'s audited balance sheet as of December 31, 1998
and audited statements of income, cash flows, and changes in
stockholders' equity for the years ended December 31, 1998 and 1997.
29
<PAGE>
AVID SPORTSWEAR AND GOLF
(Formerly Golf Innovations Corp. and Subsidiary)
CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999 and December 31, 1998
<PAGE>
C O N T E N T S
Consolidated Balance Sheets..................................................F-3
Consolidated Statements of Operations........................................F-5
Consolidated Statement of Stockholders' Equity (Deficit).....................F-6
Consolidated Statements of Cash Flows........................................F-8
Notes to the Consolidated Financial Statements..............................F-10
<PAGE>
<TABLE>
<CAPTION>
AVID SPORTSWEAR AND GOLF
(Formerly Golf Innovations Corp. and Subsidiary)
Consolidated Balance Sheets
ASSETS
September 30, December 31,
1999 1998
------------------- ----------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ -- $ 154,237
Accounts receivable, net 95,572 --
Inventory 1,357,137 --
Prepaid expenses 30,114 21,949
--------- -------
Total Current Assets 1,484,823 176,186
--------- -------
EQUIPMENT
Machinery and equipment 424,210 2,276
Furniture and fixtures 227,414 --
Show booths 298,479 --
Leasehold improvements 29,397 --
Less: accumulated depreciation (417,621) (114)
--------- -------
Total Equipment 561,879 2,162
--------- -------
OTHER ASSETS
Goodwill 1,690,457 --
Trademarks 2,902 --
--------- -------
Total Other Assets 1,693,359 --
--------- -------
TOTAL ASSETS $ 3,740,061 $ 178,348
========= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
AVID SPORTSWEAR AND GOLF
(Formerly Golf Innovations Corp. and Subsidiary)
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
September 30, December 31,
1999 1998
---------------------- ----------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Cash overdraft $ 79,666 $ --
Accounts payable 658,501 --
Notes payable - related 412,235 --
Notes payable 500,000 --
Convertible notes payable 375,000 210,000
------------ -----------
Total Current Liabilities 2,025,402 210,000
------------ -----------
Total Liabilities 2,025,402 210,000
------------ -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock; 10,000,000 share authorized of $0.001 par
value, zero issued and outstanding -- --
Common Stock; 50,000,000 shares authorized of $0.001
par value, 26,464,106 and 14,612,000 shares issued
and outstanding, respectively 26,464 14,612
Additional paid-in capital 4,405,917 613,193
Common stock subscription receivable (45,000) (60,000)
Receivable - related parties -- (352,300)
Accumulated deficit (2,672,722) (247,157)
------------ -----------
Total Stockholders' Equity (Deficit) 1,714,659 (31,652)
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
$ 3,740,061 $ 178,348
============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
AVID SPORTSWEAR AND GOLF
(Formerly Golf Innovations Corp. and Subsidiary)
Consolidated Statements of Operations
(Unaudited)
For the Nine Months Ended For the Three Months Ended
September 30, September 30,
-------------------------- -------------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
SALES, NET $ 2,340,939 $ -- $ 781,808 $ --
COST OF GOODS SOLD 1,623,989 -- 402,596
------------ ----------- ------------ ----------
--
Gross Margin 716,950 -- 379,212 --
------------ ----------- ------------ ----------
OPERATING EXPENSES
Selling expenses 529,677 -- 148,456 --
Depreciation and amortization expense 163,010 -- 71,157 --
General and administrative expenses 2,409,958 163,001 256,456 163,001
------------ ----------- ------------ ----------
Total Operating Expenses 3,102,645 163,001 476,069 163,001
------------ ----------- ------------ ----------
(Loss) from Operations (2,385,695) (163,001) (96,857) (163,001)
------------ ----------- ------------ ----------
OTHER INCOME (EXPENSE)
Interest expense (39,870) -- (17,500) --
Loss of valuation of assets -- (25,000) -- --
------------ ----------- ------------ ----------
Total Other Income (Expense) (39,870) (25,000) (17,500) --
------------ ----------- ------------ ----------
NET LOSS $ (2,425,565) $ (188,001) $ (114,357) $ (163,001)
------------ ----------- ------------ ----------
BASIC LOSS PER SHARE $ (0.16) $ (0.01) $ (0.01) $ (0.01)
============ =========== ============ ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
AVID SPORTSWEAR AND GOLF
(Formerly Golf Innovations Corp. and Subsidiary)
Consolidated Statements of Stockholders' Equity (Deficit)
Accumulated
Common Stock Additional During the
------------------------- Paid-in Subscriptions Development
Shares Amount Capital Receivable Stage
------ ------ ---------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997 3,000,000 $ 3,000 $ 7,000 $ -- $ (5,609)
February 1998, common stock issued for
assets at $0.08333 per share 300,000 300 24,700 -- --
February 1998, common stock issued for
cash at $0.08333 per share 3,000,000 3,000 247,000 -- --
June 1998, common stock issued for cash
at $0.00333 per share 6,000,000 6,000 14,000 -- --
August 1998, common stock issued for
cash at $0.15 per share 1,500,00 1,500 223,500 -- --
August 1998, common stock issued for
subscriptions at $0.15 per share 400,000 400 59,600 (60,000) --
December 1998, common stock issued for
cash at $0.25 per share 412,000 412 102,588 -- --
Stock offering costs -- -- (65,195) -- --
Net loss for the year ended
December 31, 1998 -- -- -- -- (241,548)
---------- ---------- ---------- ----------- ----------
Balance, December 31, 1998 14,612,000 $ 14,612 $ 613,193 $ (60,000) $ (247,147)
========== ========== ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
AVID SPORTSWEAR AND GOLF
(Formerly Golf Innovations Corp. and Subsidiary)
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Common Stock Additional
------------------------- Paid-in Subscriptions Accumulated
Shares Amount Capital Receivable Deficit
------ ------ ------- ---------- -------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1998 14,612,000 $ 14,612 $ 613,193 $ (60,000) $ (247,157)
Common stock issued for debt conversion
at $0.56 per share (unaudited)
373,336 373 209,627 -- --
Common stock issued for acquisition of
AVID Sportswear, Inc. at $0.43 per share --
(unaudited) 1,100,000 1,100 273,900 --
--
Common stock issued for cash at $0.43
per share (unaudited) 4,028,770 4,029 1,715,547 -- --
Common stock issued for advertising and
promotion services at $0.25 per share
(unaudited) 800,000 800 199,200 -- --
Receipt of stock subscription
(unaudited) -- -- -- 15,000 --
Common stock issued for personal
guarantee of officers and directors at
$0.25 per share (unaudited) 3,500,000 3,500 871,500 -- --
Common stock issued for personal
guarantee of officers and directors and
cash (unaudited) 2,000,000 2,000 498,000 -- --
Common stock issued for cash at $0.25
per share (unaudited) 50,000 50 24,950 -- --
Net loss for the nine months ended
September 30, 1999 (unaudited) -- -- -- -- (2,425,565)
--------- ---------- ----------- ----------- -------------
Balance, June 30, 1999 (unaudited) 26,464,106 $ 26,464 $ 4,405,917 $ (45,000) $ (2,672,722)
========== ========== =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
<TABLE>
<CAPTION>
AVID SPORTSWEAR AND GOLF
(Formerly Golf Innovations Corp. and Subsidiary)
Consolidated Statements of Cash Flows
(Unaudited)
For the Nine Months Ended For the Three Months Ended
September 30, September 30,
------------------------- --------------------------
1999 1998 1999 1998
------------------------- --------------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (2,425,565) $ (188,001) $ (114,357) $ (163,001)
Adjustments to reconcile net (loss) to net
cash used in operating activities:
Depreciation and amortization 163,010 -- 71,157 --
Loss on valuation of asset -- 25,000 -- --
Common stock issued for services 1,475,000 -- -- --
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 199,061 -- 408,113 --
(Increase) decrease in inventory (467,272) -- (270,373) --
(Increase) decrease in prepaid expenses (8,165) (29,417) 33,979 (29,417)
Increase (decrease) in accounts payable 294,012 -- (38,665) --
Increase (decrease) in accrued expenses 119,827 -- 165,249 --
------------- ------------ ---------- ----------
Net Cash Used in Operating Activities (650,092) (192,418) 255,103 (192,418)
------------- ------------ ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (365,977) -- (170,096) --
------------- ------------ ---------- ----------
Net Cash Used in Investing Activities (365,977) -- (170,096) --
------------- ------------ ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash purchased with AVID 40,282 -- -- --
Payment to Avid shareholders (725,000) -- -- --
Payments on notes payable (2,006,061) -- (126,750) --
Proceeds from notes payable 1,340,735 -- 16,743 --
Issuance of stock for cash 1,859,576 250,000 25,000 --
Receipt of related party receivable 352,300 -- -- --
------------- ------------ ---------- ----------
Net Cash Provided by Financing Activities 861,832 250,000 (85,007) --
------------- ------------ ---------- ----------
NET INCREASE (DECREASE) IN CASH (154,237) 57,582 -- (192,418)
CASH AND CASH EQUIVALENT AT
BEGINNING OF PERIOD 154,237 3,391 -- 253,391
------------- ------------ ---------- ----------
CASH AND CASH EQUIVALENT AT
END OF PERIOD -- $ 60,973 $ -- $ 60,973
============= ============ ========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE>
<TABLE>
<CAPTION>
AVID SPORTSWEAR AND GOLF
(Formerly Golf Innovations Corp. and Subsidiary)
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
For the Nine Months Ended For the Three Months Ended
September 30, September 30,
------------------------- --------------------------
1999 1998 1999 1998
------------------------- --------------------------
<S> <C> <C> <C> <C>
CASH PAID FOR:
Interest $ 39,870 $ -- $ 17,500 $ --
Income tax $ -- $ -- $ -- $ --
SCHEDULE OF NON-CASH FINANCING ACTIVITIES
Issuance of common stock for subsidiary $ 275,000 $ -- $ -- $ --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
<PAGE>
AVID SPORTSWEAR AND GOLF
(Formerly Golf Innovations Corp. and Subsidiary)
Notes to the Consolidated Financial Statements
NOTE 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been
prepared by the Company without audit. In the opinion of management,
all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of
operations and cash flows at September 30, 1999 and 1998 and for all
periods presented have been made.
Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. It is suggested that these condensed consolidated financial
statements be read in conjunction with the financial statements and
notes thereto included in the Company's December 31, 1998 audited
consolidated financial statements. The results of operations for
periods ended September 30, 1999 and 1998 are not necessarily
indicative of the operating results for the full years.
The accompanying notes are an integral part of these consolidated financial
statements.
F-10
<PAGE>
GOLF INNOVATIONS CORP.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
<PAGE>
C O N T E N T S
Independent Auditors' Report...............................................F-3
Balance Sheet..............................................................F-4
Statements of Operations...................................................F-5
Statement of Stockholders' Equity (Deficit)................................F-6
Statements of Cash Flows...................................................F-7
Notes to the Financial Statements..........................................F-8
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders of Golf Innovations Corp.
(A Development Stage Company)
Sarasota, Florida
We have audited the accompanying balance sheet of Golf Innovations Corp. (a
development stage company) as of December 31, 1998 and the related statements of
operations, stockholders' equity (deficit) and cash flows for the year ended
December 31, 1998 and from inception on September 19, 1997 through December 31,
1997 and 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Golf Innovations Corp. (a
development stage company) as of December 31, 1998, and the results of its
operations and its cash flows for the year ended December 31, 1998 and from
inception on September 19, 1997 through December 31, 1997 and 1998 in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company is a development stage company with no
significant operating results to date, which raises substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 3. The financial statements do not include
any adjustments that might result from the outcome of the uncertainty.
/s/ Jones, Jensen & Company
Jones, Jensen & Company
Salt Lake City, Utah
March 4, 1999
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
GOLF INNOVATIONS CORP.
(A Development Stage Company)
Balance Sheet
ASSETS
December 31,
1998
------------
CURRENT ASSETS
Cash (Note 1) $ 154,237
Prepaid insurance 21,949
-----------
Total Current Assets 176,186
-----------
FIXED ASSETS (Note 2)
Computers - net 2,162
-----------
Total Fixed Assets 2,162
-----------
TOTAL ASSETS $ 178,348
===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Convertible notes payable (note 8) $ 210,000
-----------
Total Current Liabilities 210,000
-----------
TOTAL LIABILITIES 210,000
-----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock: 25,000,000 share authorized of $0.001 par
value, 14,612,000 shares issued and outstanding 14,612
Additional paid-in capital 613,193
Common stock subscription receivable (Note 4) (60,000)
Receivable - related parties (Note 5) (352,300)
Deficit accumulated during the development stage (247,157)
-----------
Total Stockholders' Equity (Deficit) (31,652)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 178,348
===========
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
GOLF INNOVATIONS CORP.
(A Development Stage Company)
Statements of Operations
From Inception on
September 19, 1997 through
December 31 December 31
--------------------------
1998 1997 1998
----------- --------- ---------
<S> <C> <C> <C>
REVENUE $ -- $ -- $ --
EXPENSES
Depreciation 114 -- 114
General and administration 187,006 5,609 192,615
--------- --------- ---------
Total Expenses 187,120 5,609 192,729
--------- --------- ---------
LOSS FROM OPERATIONS (187,120) (5,609) (192,729)
--------- --------- ---------
OTHER INCOME (LOSS)
Interest income 45 -- 45
Other income 527 -- 527
Loss on valuation of asset (Note 7) (55,000) -- (55,000)
--------- --------- ---------
Total Other Income (Loss) (54,428) -- (54,428)
--------- --------- ---------
NET LOSS (241,548) (5,609) (247,157)
OTHER COMPREHENSIVE INCOME -- -- --
--------- --------- ---------
NET COMPREHENSIVE LOSS $ (241,548) $ (5,609) $ (247,157)
========= =========
BASIC LOSS PER SHARE $ (0.02) $ (0.00)
========= =========
FULLY DILUTED LOSS PER SHARE $ (0.02) $ (0.00)
========= ========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
GOLF INNOVATIONS CORP.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
Deficit
Accumulated
Common Stock Additional During the
----------------------- Paid-in Subscriptions Development
Shares Amount Capital Receivable Stage
------ ------ ------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Balance at inception on September 19, 1997 -- $ -- $ -- $ -- $ --
October 1997, common stock issued for
cash at $0.00333 per share 3,000,000 3,000 7,000 -- --
Net loss for the year ended December 31, 1997
-- -- -- -- (5,609)
--------- ------- ----------- ----------- -----------
Balance,
December 31, 1997 300,000 3,000 7,000 -- (5,609)
February 1998, common stock issued
for assets at $0.08333 per share 300,000 300 24,700 -- --
February 1998, common stock issued
for cash at $0.08333 per share 3,000,000 3,000 247,000 -- --
June 1998, common stock issued for
cash at $0.00333 per share 6,000,000 6,000 14,000 -- --
August 1998, common stock issued for
cash at $0.15 per share 1,500,00 1,500 223,500 -- --
August 1998, common stock issued for
subscriptions at $0.15 per share 400,000 400 59,600 (60,000) --
December 1998, common stock issued
for cash at $0.25 per share 412,000 412 102,588 -- --
Stock offering costs -- -- (65,195) -- --
Net loss for the year ended December 31, 1998 -- -- -- -- (241,548)
--------- ------- ----------- ----------- -----------
Balance,
December 31, 1998 14,612,000 $ 14,612 $ 613,193 $ (60,000) $ (247,147)
========== ========= ========= ========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
GOLF INNOVATIONS CORP.
(A Development Stage Company)
Statements of Cash Flows
From Inception on
September 19, 1997 through
December 31,
December 31, --------------------------
1998 1997 1998
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (241,548) $ (5,609) $(247,157)
Adjustments to reconcile net loss to net cash (used) by operating activities:
Loss on valuation of asset 55,000 -- 55,000
Depreciation 114 -- 114
Changes in Operating Assets and Liabilities:
(Increase) decrease in prepaid expenses (20,949) (1,000) (21,949)
----------- -------- ---------
Net Cash (Used) by Operating Activities (207,383) (6,609) (213,992)
----------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (32,276) -- (32,276)
----------- -------- ---------
Net Cash (Used) by Investing Activities (32,276) -- (32,276)
----------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on notes payable 210,000 -- 210,000
Loans to related parties (352,300) -- (352,300)
Common stock issued for cash 598,000 10,000 608,000
Stock offering costs (65,195) -- (65,195)
----------- -------- ---------
Net Cash Provided by Financing Activities 390,505 10,000 400,505
----------- -------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 150,846 3,391 154,237
CASH AND CASH EQUIVALENTS AT BEGINNING 3,391 -- --
OF PERIOD
----------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 154,237 $ 3,391 $ 154,237
=========== ======== =========
Cash Paid For:
Interest $ -- $ -- $ --
Income taxes $ -- $ -- $ --
Non-Cash Financing Activities:
Issuance of common stock on subscription $ 60,000 $ -- $ 60,000
Issuance of common stock for assets $ 25,000 $ -- $ 25,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
GOLF INNOVATIONS CORP.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1998
NOTE 1 - NATURE OF ORGANIZATION
This summary of significant accounting policies of Golf Innovations
Corp. is presented to assist in understanding the Company's financial
statements. The financial statements and notes are representations of
the Company's management, which is responsible for their integrity and
objectivity. These accounting policies conform to generally accepted
accounting principles and have been consistently applied in the
preparation of the financial statements.
a. Organization and Business Activities
Golf Innovations Corp. was incorporated under the laws of the State of
Nevada on September 19, 1997. The Company has been in the development
stage since incorporation.
b. Depreciation
Depreciation is provided using the straight-lien method over the
assets' estimated useful life of five years.
c. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting. The Company has elected a December 31 year end.
d. Cash and Cash Equivalents
For the purpose of the statement of cash flows, the Company considers
all highly liquid investments purchased with a maturity of three
months or less to be cash equivalents.
e. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
f. Basic Loss Per Share
The computation of basic loss per share of common stock is based on
the weighted average number of shares of common stock outstanding
during the period presented. The fully diluted loss per share
computation includes the shares to be issued from the convertible
notes payable.
F-8
<PAGE>
GOLF INNOVATIONS CORP.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1998
NOTE 1 - NATURE OF ORGANIZATION (Continued)
g. Income Taxes
No provision for income taxes has been accrued because the Company has
net operating losses from inception. The net operating loss
carryforwards of approximately $247,000 at December 31, 1998 which
expire in 2013. No tax benefit has been reported in the financial
statements because the Company is uncertain if the carryforwards will
expire unused. Accordingly, the potential tax benefits are offset by a
valuation account of the same amount.
h. Uninsured Corporate Cash Balances
The Company maintains its corporate cash balances at one bank.
Corporate cash accounts at banks are insured by the FDIC for up to
$100,000. Amounts in excess of insured limits were approximately
$54,237 at December 31, 1998.
i. Change in Accounting Principle
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes standards for
reporting and display of comprehensive income and its components
(revenues, expenses gains, and losses) in a full set of general
purpose financial statements. This statement requires that an
enterprise (a) classify items of other comprehensive income by their
nature in a financial statement and (b) display the accumulated
balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a
statement of financial position. SFAS No. 130 is effective for fiscal
years beginning after December 15, 1997. The Company has retroactively
applied the provisions of this new standard by showing the other
comprehensive income for all years presented.
NOTE 2 - FIXED ASSETS
Fixed assets at December 31, 1998 consisted of the following:
December 31,
1998
-----------
Computers $ 2,276
Less accumulated depreciation (114)
-----------------
Net Fixed Assets $ 2,162
=================
Depreciation expense for the year ended December 31, 1998 was $114.
Depreciation expense is computed using the straight-line method over a
three year life.
F-9
<PAGE>
GOLF INNOVATIONS CORP.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1998
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the relation of assets and liquidation of liabilities in
the normal course of business. However, the Company does not have
significant cash or other material assets, nor does it have an
established source of revenues sufficient to cover its operating costs
and to allow it to continue as a going concern. The Company is in the
process of acquiring a company in the sports wear industry and
investigating other companies for possible future acquisition. It also
intends to collect the proceeds of its stock subscriptions and loans
receivable. In the interim, management has committed to meeting its
operating costs.
NOTE 4 - STOCK SUBSCRIPTION RECEIVABLE
The Company has issued 400,000 shares of its common stock pursuant to
a subscription to officers and directors of the Company. The
subscription price is $0.15 per share and the subscription provides
that the principal and interest accrued at 8 percent (8%) per annum
from August 1998 is to be paid in full in August of 1999. In the event
that the borrower is unable to make available the necessary funds to
complete payment upon demand, the Company agrees to negotiate
installment terms to satisfy that demand.
NOTE 5 - RELATED PARTY TRANSACTIONS
At December 31, 1998, the Company was owed in the amount of $412,300
monies from officers, directors or affiliated business ventures
consisting of the following:
Notes receivable $ 253,500
Loans receivable 98,800
Stock subscriptions receivable (Note 4) 60,000
-----------------
$ 412,300
=================
NOTE 6 - ORGANIZATION COSTS
The Company incurred one-time start-up costs since the date of
inception which were accrued as follows:
DECEMBER 31,
----------------------------------
1998 1997
---------------- --------------
Start-up costs $ 47,895 $ 5,609
============== =============
Consistent with the adoption of SOP 98-5, these costs were expensed as
incurred as of the balance sheet dates presented.
F-10
<PAGE>
GOLF INNOVATIONS CORP.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1998
NOTE 7 - LOSS ON VALUATION OF ASSET
During the year ended December 31, 1998, the Company purchased
distribution rights for $30,000 cash plus 100,000 shares of its common
stock valued at par. Accordingly, an asset was recorded in the amount
of $55,000. As of December 31, 1998, the Company's management
determined that the agreement had a net realizable value of $-0-,
therefore, the asset was written off producing a loss of $55,000.
NOTE 8 - CONVERTIBLE NOTES PAYABLE
On December 30, 1998, the Company received $210,000 cash and issued a
note payable which was convertible into 373,336 shares of the
Company's common stock. The note is unsecured, non-interest bearing
and due upon demand (see Note 9).
NOTE 9 - SUBSEQUENT EVENTS
As of January 28, 1999, payment had been received in the amount of
$237,000 of the loans receivable - related party as presented in the
accompanying balance sheet at December 31, 1998.
Subsequent to the date of the balance sheet, the note payable in the
amount of $210,000 was converted into 373,336 shares of the Company's
common stock.
NOTE 10 - PURCHASE OF AVID SPORTSWEAR, INC.
On December 18, 1998, the Company entered into a stock purchase and
sales agreement (Agreement) with Avid Sportswear, Inc. (AVID), a
California corporation. This Agreement was finalized on March 1, 1999.
The Agreement called for the Company to purchase all of the
outstanding stock of AVID for $725,000 and 1,100,000 shares of stock.
Additionally, the Company was to pay off all of the notes payable to
the shareholders of AVID and the notes payable to Nations Bank, fka
Bank IV. The total amounts of these notes was $1,826,119 at the date
of closing.
The following is an unaudited proforma consolidated balance sheet and
income statement assuming the issuance of 1,100,000 shares of common
stock by the Company to acquire 100% of the outstanding shares of
common stock of AVID. The acquisition of AVID by the Company will be
accounted for as a purchase of AVID.
F-11
<PAGE>
<TABLE>
<CAPTION>
GOLF INNOVATIONS CORP.
Consolidated Proforma Balance Sheet
December 31, 1998
(Unaudited)
ASSETS
Proforma
Adjustments Increase Proforma
Golf Innovations Inc. Avid Sportswear Inc. (Decrease) Consolidated
--------------------- -------------------- ---------- ------------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash $ 154,237 $ 40,282 $ 994,576 $ 1,189,095
Prepaid insurance 21,949 -- -- 21,949
Accounts receivable (net) -- 296,633 -- 296,633
Inventory -- 889,865 -- 889,865
------------- ------------ ------------- ------------
Total Current Assets 176,186 1,226,780 994,576 2,397,542
------------- ------------ ------------- ------------
FIXED ASSETS (NET) 2,162 271,293 -- 273,455
------------- ------------ ------------- ------------
OTHER ASSETS
Trademarks -- 2,902 -- 2,902
Goodwill -- -- 1,779,428 1,779,428
Accumulated amortization -- -- (177,943) (177,943)
------------- ------------ ------------- ------------
Total Other Assets -- 2,902 1,601,485 1,604,387
------------- ------------ ------------- ------------
TOTAL ASSETS $ 178,348 $ 1,500,975 $ 2,596,061 $ 4,275,384
============= ============ ============= ============
</TABLE>
F-12
<PAGE>
<TABLE>
<CAPTION>
GOLF INNOVATIONS CORP.
Consolidated Proforma Balance Sheet
December 31, 1998
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Proforma
Adjustments Increase Proforma
Golf Innovations Inc. Avid Sportswear Inc. (Decrease) Consolidated
--------------------- -------------------- ---------- ------------
<S> <C> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable
Accrued expenses -- 63,353 -- 63,353
Notes payable 210,000 1,852,561 -- 2,062,561
----------- ----------- ----------- -----------
Total Current Liabilities 210,000 2,280,403 -- 2,490,403
----------- ----------- ----------- -----------
TOTAL LIABILITIES 210,000 2,280,403 -- 2,490,403
----------- ----------- ----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock: 25,000,000 shares
authorized of $0.001 par value,
19,740,770 shares issued and
outstanding 14,612 764,170 (759,041) 19,741
Additional paid-in capital 613,193 -- 1,989,447 2,602,640
Stock subscription receivable (60,000) -- -- (60,000)
Receivable from related parties (352,300) -- -- (352,300)
Accumulated deficit (247,157) (1,543,598) 1,365,655 (425,100)
----------- ----------- ------------ ------------
Total Stockholders' Equity (Deficit) (31,652) (779,428) 2,596,061 1,784,981
----------- ----------- ------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT) $ 178,348 $ 1,500,975 $ 2,596,061 $ 4,275,384
=========== =========== ============ ============
</TABLE>
F-13
<PAGE>
<TABLE>
<CAPTION>
GOLF INNOVATIONS CORP.
Consolidated Proforma Statement of Operations
December 31, 1998
(Unaudited)
Proforma Adjustments Increase Proforma
Golf Innovations Inc. Avid Sportswear Inc. (Decrease) Consolidated
--------------------- -------------------- ---------- ------------
<S> <C> <C> <C> <C>
SALES, NET $ -- $ 3,721,829 $ -- $ 3,721,829
COST OF GOODS SOLD -- 2,678,906 -- 2,678,906
--------------- -------------- ----------- -----------
Gross Profit -- 1,042,923 -- 1,042,923
--------------- -------------- ----------- -----------
OPERATING EXPENSE
Selling expenses -- 576,260 -- 576,260
Depreciation and amortization 114 74,441 177,943 252,498
General and administrative 187,006 980,134 -- 1,167,140
--------------- -------------- ----------- -----------
Total Operating Expenses (187,120) 1,630,835 177,943 1,995,898
--------------- -------------- ----------- -----------
OPERATING (LOSS) INCOME (187,120) (587,912) (177,943) (952,975)
--------------- -------------- ----------- -----------
OTHER INCOME EXPENSES
Bad debt expenses -- (21,554) -- (21,554)
Interest income 45 -- -- 45
Other income 527 -- -- 527
Loss on valuation of asset (55,000) -- -- (55,000)
Interest expense -- (134,384) -- (134,384)
--------------- -------------- ----------- -----------
Total Other Income Expenses (54,428) (155,938) -- (210,366)
--------------- -------------- ----------- -----------
LOSS BEFORE INCOME TAXES (241,548) (743,850) -- (1,163,341)
INCOME TAXES -- -- -- --
--------------- -------------- ----------- -----------
NET LOSS $ (241,548) $ (743,850) $ (177,943) $ (1,163,341)
=============== ============== =========== ==========
</TABLE>
F-14
<PAGE>
<TABLE>
<CAPTION>
GOLF INNOVATIONS CORP.
Summary of Proforma Adjustments
December 31, 1998
(Unaudited)
<S> <C>
Proforma Adjustments
1) Goodwill (Golf Innovations) $ 1,779,428
Common stock (Avid) 764,170
Retained earnings (Avid) (1,543,598)
Common stock (Golf Innovations) (1,100)
Additional paid-in capital (Golf Innovations) (273,900)
Cash (Golf Innovations) (725,000)
-----------------
$ --
=================
To record purchase of Avid through the issuance of 1,100,000 shares of common stock valued at
$0.25 per share and $725,000 cash.
2) Cash (Golf Innovations) $ 1,719,576
Common stock (Golf Innovations) (4,029)
Additional paid-in capital (Golf Innovations) (1,715,547)
-----------------
$ --
=================
To record the sale of 4,028,770 shares of common stock to fund the purchase of AVID.
3) Amortization expense $ 177,943
Accumulated amortization - goodwill (177,943)
-----------------
$ --
=================
To record 1 year of amortization expense based on a ten year life.
</TABLE>
F-15
<PAGE>
AVID SPORTSWEAR, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
<PAGE>
C O N T E N T S
Independent Auditors' Report...............................................F-3
Balance Sheet..............................................................F-4
Statements of Operations...................................................F-5
Statements of Stockholders' Equity (Deficit)...............................F-7
Statements of Cash Flows...................................................F-8
Notes to the Financial Statements..........................................F-9
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Avid Sportswear, Inc.
Carson, California
We have audited the accompanying balance sheet of Avid Sportswear, Inc. as of
December 31, 1998 and the related statements of operations, stockholders' equity
(deficit) and cash flows for the years ended December 31, 1998 and 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Avid Sportswear, Inc. as of
December 31, 1998 and the results of its operations and its cash flows for the
years ended December 31, 1998 and 1997 in conformity with generally accepted
accounting principles.
/s/ Jones, Jensen & Company
Jones, Jensen & Company
Salt Lake City, Utah
April 22, 1999
F-3
<PAGE>
AVID SPORTSWEAR, INC.
BALANCE SHEET
ASSETS
December 31,
1998
-----------------
CURRENT ASSETS
Cash $ 40,282
Accounts receivable, net (Note 2) 296,633
Inventory (Note 3) 889,865
-----------------
Total Current Assets 1,226,780
-----------------
EQUIPMENT (Note 4)
Machinery and equipment 244,790
Furniture and fixtures 79,304
Show booths 283,406
Leasehold improvements 3,748
Less: accumulated depreciation (339,955)
-----------------
Total Equipment 271,293
-----------------
OTHER ASSETS
Trademarks 2,902
-----------------
Total Other Assets 2,902
-----------------
TOTAL ASSETS $ 1,500,975
=================
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
AVID SPORTSWEAR, INC.
BALANCE SHEET (CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
December 31,
1998
-----------------------
<S> <C>
CURRENT LIABILITIES
Cash overdraft $ --
Accounts payable 364,489
Accrued expenses 63,353
Notes payable - related (Note 5) 943,000
Notes payable (Note 6) 909,561
-----------------
Total Current Liabilities 2,280,403
-----------------
Total Liabilities 2,280,403
-----------------
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, no par value, 1,000,000 shares
authorized; 34,485.72 and 32,771.42 shares
issued and outstanding, respectively 764,170
Accumulated deficit (1,543,598)
-----------------
Total Stockholders' Equity (Deficit) (779,428)
-----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ $1,500,975
=================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
AVID SPORTSWEAR, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------------------------------
1998 1997
----------------------- -----------------------
<S> <C> <C>
SALES, NET $ 3,721,829 $ 2,848,815
COST OF GOODS SOLD 2,678,906 1,964,284
----------------------- -----------------------
Gross Margin 1,042,923 884,531
----------------------- -----------------------
OPERATING EXPENSES
Selling expenses 576,260 459,952
Depreciation expense 74,441 53,057
General and administrative expenses 980,134 751,813
----------------------- -----------------------
Total Operating Expenses 1,630,835 1,264,822
----------------------- -----------------------
(Loss) from Operations (587,912) (380,291)
----------------------- -----------------------
OTHER (EXPENSE)
Interest expense (134,384) (105,849)
Bad debt expense (21,554) (36,216)
----------------------- -----------------------
Total Other Income (Expense) (155,938) (142,065)
----------------------- -----------------------
NET (LOSS) $ (743,850) $ (522,356)
======================= =======================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
AVID SPORTSWEAR, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
COMMON STOCK
---------------------------------------
STOCK ACCUMULATED
SHARES AMOUNT SUBSCRIPTION DEFICIT
----------------- ----------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1996 28,142.88 $ $539,170 $ (75,000) $ (277,392)
Issuance of common stock for cash at
$37.81 per share 4,628.54 175,000 -- --
Net loss for the year ended
December 31, 1997 -- -- -- (522,356)
----------------- ----------------- ------------------ ------------------
Balance, December 31, 1997 32,771.42 714,170 -- (799,748)
Receipt of stock subscription -- -- 75,000 --
Common stock issued for cash at $29.17
per share 1,714.30 50,000 -- --
Net loss for the year ended
December 31, 1998 -- -- -- (743,850)
----------------- ----------------- ------------------ ------------------
Balance, December 31, 1998 34,485.72 $ 764,170 $ -- $ (1,543,598)
================= ================= ================== ==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
<TABLE>
<CAPTION>
AVID SPORTSWEAR, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED
DECEMBER 31,
-----------------------------------------
1998 1997
------------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss) $ (743,850) $ (522,356)
Adjustments to reconcile net (loss) to net cash used in operating activities:
Depreciation and amortization 74,441 53,057
Bad debt expense 21,554 36,216
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 9,810 (93,649)
(Increase) decrease in inventory 108,513 (387,166)
(Increase) decrease in other assets 17,153 2,307
Increase (decrease) in accounts payable (60,977) 225,242
Increase (decrease) in accrued expenses 11,254 6,711
------------------- -------------------
Net Cash Provided (Used) in Operating Activities (562,102) (679,638)
------------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (190,312) (101,089)
------------------- ------------------
Net Cash Used in Investing Activities (190,312) (101,089)
------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on notes payable -- (50,000)
Proceeds from notes payable 99,696 --
Issuance of stock 50,000 250,000
New borrowings from related parties 643,000 180,000
------------------- -------------------
Net Cash Provided by Financing Activities 792,696 380,000
------------------- -------------------
NET INCREASE (DECREASE) IN CASH 40,282 (400,727)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR -- 400,727
------------------- -------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 40,282 $ --
=================== ===================
CASH PAID FOR:
Interest $ 42,387 $ 31,592
Income taxes $ -- $ --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
AVID SPORTSWEAR, INC.
Notes to the Financial Statements
December 31, 1998 and 1997
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
The financial statements presented are those of Avid Sportswear, Inc.
(the Company). The Company was incorporated in the state of California
on October 6, 1988 to carry on any lawful activity under the laws of
California. The Company is engaged in the business of designing and
producing golfwear and other custom made clothing.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting. The Company has elected a December 31 year end.
b. Income Taxes
The Company had elected to be taxed as a Sub-Chapter S corporation,
accordingly, there is no provision for income taxes at the corporate
level.
c. Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less to be cash equivalents.
d. Inventory
Inventories of raw materials, finished goods and work-in-process are
stated at the lower of cost or market. The cost of the inventory
includes the purchase price and direct costs such as freight-in.
e. Revenue Recognition
The Company's revenue is derived primarily from the sale of apparel.
The revenue is recognized upon completion and shipment to the customer.
The cost of work-in-process and finished goods includes all direct
materials, labor and those indirect costs related to the apparel.
Selling, general and administrative costs are expensed as incurred.
f. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
g. Allowance for Doubtful Accounts
The Company's accounts receivable are shown net of an allowance for
doubtful accounts of $250,947 and $124,611 at December 31, 1998 and
1997, respectively.
h. Reclassification
Certain December 31, 1997 balances have been reclassified to conform
with the December 31, 1998 financial statement presentation.
i. Advertising Expense
The Company expenses advertising costs as incurred.
F-9
<PAGE>
<TABLE>
<CAPTION>
AVID SPORTSWEAR, INC.
Notes to the Financial Statements
December 31, 1998 and 1997
NOTE 3 - INVENTORY
Inventories for December 31, 1998 consisted of the following: December 31,
1998
---------------------
<S> <C>
Finished goods $ 402,222
Work-in-process 149,247
Raw materials and supplies 338,396
---------------------
Total $ 889,865
=====================
</TABLE>
NOTE 4 - EQUIPMENT
All equipment is accounted for at cost. Equipment is depreciated over
its estimated useful lives using accelerated methods. For the years
ended December 31, 1998 and 1997, the Company expensed $74,441 and
$53,057 in depreciation.
NOTE 5 - NOTE PAYABLE - RELATED PARTY
The Company has received advances from related parties which bear
interest at various rates, from 8% to 10.25% are unsecured and due on
demand. The balances due at December 31, 1998 and 1997 were $943,000
and $300,000. All of the notes were paid off subsequent to December 31,
1998 in conjunction with the merger with Golf Innovations, Inc. (Note
10).
NOTE 6 - NOTES PAYABLE
<TABLE>
<CAPTION>
<S> <C>
Notes payable at December 31, 1998 consisted of the following:
Note payable to Nations Bank, fka Bank IV; secured by accounts receivable,
inventory and fixed assets, bearing interest at 10% and due February 1,
1999. $ 469,865
Line of credit payable to Nations Bank, fka Bank IV, secured by accounts
receivable, inventory and fixed assets, bearing interest at 10.25% and
due February 1, 1999. 340,000
Irrevocable letter of credit due to Nations Bank, fka Bank IV, secured by accounts
receivable, inventory and fixed assets, bearing interest at 10.25% and due February 1,
1999. 99,696
---------
$ 909,561
=========
</TABLE>
All of these notes payable were paid off subsequent to year end in
conjunction with the merger with Golf Innovations, Inc. (Note 10).
NOTE 7 - COMMITMENTS AND CONTINGENCIES
a. Office Lease
The Company leases its office and warehouse space on a month-to-month
basis. Rent expense for the years ended December 31, 1998 and 1997 was
$52,241 and $51,600, respectively.
F-10
<PAGE>
AVID SPORTSWEAR, INC.
Notes to the Financial Statements
December 31, 1998 and 1997
NOTE 7 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
b. Royalty Agreement
BRITISH OPEN COLLECTION. On December 8, 1998, the Company obtained the
sole and exclusive right and license to use certain trademarks
associated with the British Open Golf Championship. The licensor is The
Championship Committee Merchandising Limited, which is the exclusive
licensor of certain trademarks from The Royal & Ancient Golf Club of
St. Andrews, Scotland. This license is for the United States and its
territories and has a seven year term. Under this license, the Company
may manufacture, advertise, distribute and sell products bearing the
licensed trademarks to specialty stores and the menswear departments of
department stores. It is not permitted to sell these products to
discount stores or mass-market retail chains. In return for this
license, the Company must pay the licensor, on a quarterly basis, a
royalty equal to five percent of net wholesale sales of products
bearing these trademarks, subject to a guaranteed minimum royalty. Net
wholesale sales means the invoiced wholesale billing price, less
shipping, discounts actually given, duties, insurance, sales taxes,
value-added taxes and credits allowed for returns or defective
merchandise.
CONTRACT YEAR MINIMUM ROYALTY
1 $100,000
2 $125,000
3 $150,000
4 $175,000
5 $200,000
6 $200,000
7 $200,000
NOTE 8 - CONCENTRATIONS OF RISK
a. Cash
The Company maintains a cash account at a financial institution located
in Carson, California. The account is insured by the Federal Deposit
Insurance Corporation up to $100,000. The Company's balances
occasionally exceed that amount.
b. Accounts Receivable
The Company provides for accounts receivable as part of operations.
Management does not believe that the Company is subject to credit risks
outside the normal course of business.
c. Royalty Agreement
The Company has signed a licensing agreement with Major League Baseball
which expires on December 31, 1999. The agreement calls for the Company
to pay a royalty fee of 11% of sales of Major League Baseball apparel.
Royalty expense for the years ended December 31, 1998 and 1997 was
$17,942 and $23,500, respectively.
F-11
<PAGE>
AVID SPORTSWEAR, INC.
Notes to the Financial Statements
December 31, 1998 and 1997
NOTE 9 - CUSTOMERS AND EXPORT SALES
During 1998 and 1997, the Company operated one industry segment which
includes the manufacturing and marketing of apparel.
The Company's financial instruments subject to credit risk are
primarily trade accounts receivable from its customers.
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------------------------------
1998 1997
----------------------- ---------------------
Foreign sales $ -- $ --
Domestic sales 3,721,829 2,848,815
----------------------- ---------------------
$ 3,721,829 $ 2,848,815
======================= =====================
NOTE 10 - MERGER WITH GOLF INNOVATIONS, INC.
On December 18, 1998, the Company entered into a stock purchase and
sales agreement (Agreement) with Golf Innovations, Inc. (GFIO), a
Nevada corporation. This Agreement was finalized on March 1, 1999. The
Agreement called for GFIO to purchase all of the outstanding stock of
the Company for $725,000 and 1,100,000 shares of GFIO stock.
Additionally, GFIO was to pay off all of the notes payable to the
shareholders of the Company and the notes payable to Nations Bank, fka
Bank IV. The total amounts of these notes was $1,826,119 at the date of
closing.
The following is an unaudited proforma consolidated balance sheet and
income statement assuming the issuance of 1,100,000 shares of common
stock by GFIO to acquire 100% of the outstanding shares of common stock
of the Company. The acquisition of the Company by GFIO will be
accounted for as a purchase of the Company by GFIO.
F-12
<PAGE>
<TABLE>
<CAPTION>
AVID SPORTSWEAR, INC.
CONSOLIDATED PROFORMA BALANCE SHEET
DECEMBER 31, 1998
(UNAUDITED)
PROFORMA
ADJUSTMENTS
INCREASE PROFORMA
GOLF INNOVATIONS, INC. AVID SPORTSWEAR, INC. (DECREASE) CONSOLIDATED
-----------------------------------------------------------------------------------------------
CURRENT ASSETS
<S> <C> <C> <C> <C>
Cash $ 154,237 $ 40,282 $ 994,576 $ 1,189,095
Prepaid insurance 21,949 -- -- 21,949
Accounts receivable (net) -- 296,633 -- 296,633
Inventory -- 889,865 -- 889,865
-------------- -------------- ----------- ----------
Total Current Assets 176,186 1,226,780 994,576 2,397,542
-------------- -------------- ----------- ----------
FIXED ASSETS (NET) 2,162 271,293 -- 273,455
-------------- -------------- ----------- ----------
OTHER ASSETS
Trademarks -- 2,902 -- 2,902
Goodwill -- -- 1,779,428 1,779,428
Accumulated amortization -- -- (177,943) (177,943)
-------------- -------------- ----------- ----------
Total Other Assets -- 2,902 1,601,485 1,604,387
-------------- -------------- ----------- ----------
TOTAL ASSETS $ 178,348 $ 1,500,975 $ 2,596,061 $ 4,275,384
============== ============== =========== ==========
</TABLE>
F-13
<PAGE>
<TABLE>
<CAPTION>
AVID SPORTSWEAR, INC.
CONSOLIDATED PROFORMA BALANCE SHEET
DECEMBER 31, 1998
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
PROFORMA
ADJUSTMENTS
INCREASE PROFORMA
GOLF INNOVATIONS, INC. VID SPORTSWEAR, INC. (DECREASE) CONSOLIDATED
---------------------- -------------------- ---------- ------------
<S> <C> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable $ -- $ 364,489 $ -- $ 364,489
Accrued expenses -- 63,353 -- 63,353
Notes payable 210,000 1,852,561 -- 2,062,561
------------ -------------- --------- ----------
Total Current Liabilities 210,000 2,280,403 -- 2,490,403
------------ -------------- --------- ----------
TOTAL LIABILITIES 210,000 2,280,403 -- 2,490,403
------------ -------------- --------- ----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock: 25,000,000 shares
authorized of $0.001 par value,
19,740,770 shares issued and
outstanding 14,612 764,170 (759,041) 19,741
Additional paid-in capital 613,193 -- 1,989,447 2,602,640
Stock subscription receivable (60,000) -- -- (60,000)
Receivable from related parties (352,300) -- -- (352,300)
Accumulated deficit (247,157) (1,543,598) 1,365,655 (425,100)
------------ -------------- --------- ----------
Total Stockholders' Equity (Deficit) (31,652) (779,428) 2,596,061 1,784,981
------------ -------------- --------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 178,348 $ 1,500,975 $ 2,596,061 $ 4,275,384
============ ============== ========= ----------
</TABLE>
F-14
<PAGE>
<TABLE>
<CAPTION>
AVID SPORTSWEAR, INC.
CONSOLIDATED PROFORMA STATEMENT OF OPERATIONS
DECEMBER 31, 1998
(UNAUDITED)
PROFORMA
ADJUSTMENTS
INCREASE PROFORMA
GOLF INNOVATIONS, INC. AVID SPORTSWEAR, INC. (DECREASE) CONSOLIDATED
---------------------- --------------------- ---------- ------------
<S> <C> <C> <C> <C>
SALES, NET $ -- $ 3,721,829 $ -- $ 3,721,829
------------ --------------- ------------ ------------
COST OF GOODS SOLD -- 2,678,906 -- 2,678,906
------------ --------------- ------------ ------------
Gross Profit -- 1,042,923 -- 1,042,923
------------ --------------- ------------ ------------
OPERATING EXPENSE
Selling expenses -- 576,260 -- 576,260
Depreciation and amortization 114 74,441 177,943 252,498
General and administrative 187,006 980,134 -- 1,167,140
------------ --------------- ------------ ------------
Total Operating Expenses 187,120 1,630,835 177,943 1,995,898
------------ --------------- ------------ ------------
OPERATING (LOSS) INCOME (187,120) (587,912) (177,943) (952,975)
------------ --------------- ------------ ------------
OTHER INCOME EXPENSES
Bad debt expenses -- (21,554) -- (21,554)
Interest income 45 -- -- 45
Other income 527 -- -- 527
Loss on valuation of asset (55,000) -- -- (55,000)
Interest expense -- (134,384) -- (134,384)
------------ --------------- ------------ ------------
Total Other Income Expenses (54,428) (155,938) -- (210,366)
------------ --------------- ------------ ------------
LOSS BEFORE INCOME TAXES (241,548) (743,850) -- (1,163,341)
INCOME TAXES -- -- -- --
------------ --------------- ------------ ------------
NET LOSS $ (241,548) $ (743,850) $ (177,943) $ (1,163,341)
============ =============== ============ ------------
</TABLE>
F-15
<PAGE>
<TABLE>
<CAPTION>
AVID SPORTSWEAR, INC.
SUMMARY OF PROFORMA ADJUSTMENTS
DECEMBER 31, 1998
(UNAUDITED)
<S> <C>
Proforma Adjustments
1) Goodwill (Golf Innovations) $ 1,779,428
Common stock (Avid) 764,170
Retained earnings (Avid) (1,543,598)
Common stock (Golf Innovations) (1,100)
Additional paid-in capital (Golf Innovations) (273,900)
Cash (Golf Innovations) (725,000)
=======================
$ --
=======================
To record purchase of Avid through the issuance of 1,100,000 shares of common stock valued
at $0.25 per share and $725,000 cash.
2) Cash (Golf Innovations) $ 1,719,576
Common stock (Golf Innovations) (4,029)
Additional paid-in capital (Golf Innovations) (1,715,547)
=======================
$ --
=======================
To record the sale of 4,028,770 shares of common stock to fund the purchase of AVID.
3) Amortization expense $ 177,943
Accumulated amortization - goodwill (177,943)
-----------------------
$ --
=======================
</TABLE>
To record 1 year of amortization expense based on a ten year life using the
straight-line method.
F-16
<PAGE>
PART III
ITEMS 1 AND 2. INDEX TO EXHIBITS AND DESCRIPTION.
EXHIBIT
NO. DESCRIPTION LOCATION
2.01 Stock Purchase and Sale Provided herewith.
Agreement dated as of December
18, 1998 among the Company, Avid
Sportswear, Inc. and the
shareholders of Avid Sportswear,
Inc.
3.01 Articles of Incorporation filed Provided herewith.
on September 19, 1997 with the
Nevada Secretary of State
3.02 Amended Articles of Provided herewith.
Incorporation filed on May 12,
1999 with the Nevada Secretary
of State
3.03 Certificate of Amendment to Provided herewith.
Articles of Incorporation filed
on May 27, 1999 with the Nevada
Secretary of State
3.04 Bylaws Provided herewith.
10.01 Agreement dated as of December Provided herewith.
8, 1998 between the Championship
Committee Merchandising Limited
and Avid Sportswear Inc.
10.02 Lease dated as of March 1, 1999 Provided herewith.
between F & B Industrial
Investments, LLC and Avid
Sportswear, Inc.
10.03 Lease dated as of April 30, 1999 Provided herewith.
between Links Associates, Ltd.
and the Company
10.04 Employment Agreement dated as of Provided herewith.
September 11, 1999 between Barnum
Mow and Avid Sportswear, Inc.
10.05 Trademark License Agreement Provided herewith.
dated as of May 10, 1999 between
Levi Strauss & Co. and Avid
Sportswear, Inc.*
10.06 Employment Agreement dated as of Provided herewith.
January 1, 1999 between David E.
Roderick and Avid Sportswear,
Inc.
10.07 Promissory Note in the original Provided herewith.
principal amount of $180,000 dated
as of June 4, 1999 from the Company
to First State Bank
10.08 Commercial Security Agreement Provided herewith.
dated as of November 17, 1999
between First State Bank and the
Company
10.09 Promissory Note dated as of Provided herewith.
November 17, 1999 in the
original principal amount of
$1,000,000 given by the Company
to First State Bank
30
<PAGE>
10.10 Business Loan Agreement dated as Provided herewith.
of November 17, 1999 between
First State Bank and the Company
11.01 Statement re: Computation of Not Applicable.
Earnings
16.01 Letter on Change in Certifying Not Applicable.
Accountant
21.01 Subsidiaries of the Company Provided herewith.
23.01 Consent of Independent Provided herewith.
Accountants
24.01 Power of Attorney Not Applicable.
27.01 Financial Data Schedule Provided herewith.
- --------------------
* The Company has sought confidential treatment of the License Agreement
with Levi Strauss & Co. As a result, Exhibit 10.05 has been omitted and filed
separately with the Securities and Exchange Commission.
31
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunder duly authorized.
DATE: November 30, 1999 AVID SPORTSWEAR & GOLF CORP.
By: /s/ Earl T. Ingarfield
---------------------------------------
Name: Earl T. Ingarfield
-------------------------------------
Title: President
------------------------------------
32
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"), STEVEN M. CROWELL and DAVID RODERICK
(collectively "Principal"), Dean E. Ulrich and Janis L. Ulrich, Trustees of the
Ulrich Family Trust dated April 7, 1988, Rolf D. Scherer and Mary S. Scherer,
Trustees of The Scherer Family Trust dated August 1, 1988, Steven M. Crowell,
William M. Borgers, Brian D. Iverson and Deborah K. Iverson, Michael L. Iverson
and Barbara M. Iverson, Trustees of The Iverson Family Trust, Jo Moerbeek,
Richard Butkus and Helen Butkus, Trustee of The Richard and Helen Butkus Trust,
David E. Roderick, Stephanie Wickliff and John Wickliff (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");
<PAGE>
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 17909 South Adria Maru Lane, Carson,
California 90746 (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
---- ------
Ulrich Family Trust 11,142.860
Scherer Family Trust 1,714.300
Steven M. Crowell 2,571.430
William M. Borgers 857.150
Brian D. Iverson and Deborah K. 2,114.270
Iverson
Iverson Family Trust 3,371.420
Jo Moerbeek 571.430
Richard Butkus and Helen Butkus 1,714.290
Trust
David E. Roderick 10,000.000
Stephanie Wickliff 214.285
John Wickliff 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
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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.
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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
<PAGE>
(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 Steve
Crowell in the form of Schedule VII 4A(7) attached hereto;
(8) The executed Employment Agreement and Non-Competition Covenants of
David Roderick 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
<PAGE>
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
<PAGE>
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: Steven Crowell
17909 South Adria Maru Lane
Carson, CA 90746
With a copy to: George M. Reyes
Best, Best & Kreiger, LLP
3750 University Avenue, Suite 400
Riverside, CA 92502
If to Buyer: Golf Innovations Corp.
Attn: Earl Ingarfield
1133 Fourth Street
Sarasota, FL 34236
14
<PAGE>
With a copy to: Jeffrey A. Abrams, Esq.
DANN PECAR NEWMAN & KLEIMAN
2300 One American Square
Box 82008
Indianapolis, Indiana 46282
If to Steven M. Crowell: 2060 Bentcreek Manor
Alphretta, GA 30005
If to David E. Roderick: 17909 South Adria Maru Lane
Carson, CA 90746
If to The Ulrich Family Trust: 329 E1 Tuaca Ct.
Camarillo, CA 93010
If to The Scherer Family Trust: 6035 N. Greentree Drive
Camarillo, CA 93010
If to William M. Borgers 750 Rockbridge
Santa Barbara, CA 93108
If to Brian D. Iverson and Deborah K. 1160 Corte Tularosa
Iverson: Camarillo, CA 93010
If to Jo Moerbeek: P. O. Box 276
Surfside, CA 90746
If to The Richard and Helen Butkus Trust: 3930 Villa Costra,
Malibu, CA 90265
If to Stephanie Wickliff: 2842 Adeline St., #3
Oakland, CA 94608
If to John Wickliff: 1515 Arapahoe Street, Ste. 1545
Denver, CO 80202
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 David Roderick, Stephanie Wickliff, John Wickliff and Jo
Moerbeck. To the extent there are any tax consequences on such sale, Buyer
agrees to reimburse David Roderick, Stephanie Wickliff, John Wickliff 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
<PAGE>
AVID SPORTSWEAR, INC.,
a California corporation
By: /s/ David Roderick
----------------------------------------
David Roderick, President
"Corporation"
/s/ Steven M. Crowell
-------------------------------------------
Steven M. Crowell
/s/ David E. Roderick
-------------------------------------------
David E. Roderick
ULRICH FAMILY TRUST DATED APRIL 7, 1988
By: /s/ Dean E. Ulrich
----------------------------------------
Dean E. Ulrich, Trustee
By: /s/ Janis L. Ulrich
----------------------------------------
Janis L. Ulrich, Trustee
THE SCHERER FAMILY TRUST DATED AUGUST 1,
1988
By: /a/ Rolf D. Scherer
----------------------------------------
Rolf D. Scherer, Trustee
By: /s/ Mary S. Scherer
----------------------------------------
Mary S. Scherer, Trustee
/s/ William M. Borgers
-------------------------------------------
William M. Borgers
/s/ Brian D. Iverson
-------------------------------------------
Brian D. Iverson
/s/ Deborah K. Iverson
-------------------------------------------
Deborah K. Iverson
THE IVERSON FAMILY TRUST
By: /s/ Michael L. Iverson
----------------------------------------
Michael L. Iverson, Trustee
By: /s/ Barbara M. Iverson
----------------------------------------
Barbara M. Iverson, Trustee
/s/ Jo Moerbeek
-------------------------------------------
Jo [Morerbeck] Moerbeek [/s/ jm]
16
<PAGE>
THE RICHARD AND HELEN BUTKUS TRUST
By: /s/ Richard Butkus
----------------------------------------
Richard Butkus, Trustee
By: /s/ Helen Butkus
----------------------------------------
Helen Butkus, Trustee
/s/ Stephanie Wickliff
-------------------------------------------
Stephanie Wickliff
/s/ John Wickliff
-------------------------------------------
John Wickliff
"Principal"
GOLF INNOVATIONS CORP.,
By: /s/ Earl Ingarfield
----------------------------------------
Earl Ingarfield, President
"Buyer"
17
EXHIBIT 3.01
ARTICLES OF INCORPORATION
OF
GOLF INNOVATIONS CORP.
The undersigned, to form a Nevada corporation, CERTIFIES THAT:
I. NAME: The name of the corporation is: GOLF INNOVATIONS CORP.
II. REGISTERED OFFICE; RESIDENT AGENT: The location of the registered
office of this corporation within the State of Nevada is 1025 Ridgeview Drive,
Suite 400, Reno, Nevada 89509; this corporation may maintain an office or
offices in such other place within or without the State of Nevada as may be from
time to time designated by the Board of Directors or by the By-Laws of the
corporation; and this corporation may conduct all corporation business of every
kind or nature, including the holding of any meetings of directors or
shareholders, inside or outside the State of Nevada, as well as without the
State of Nevada.
The Resident Agent for the corporation shall be Michael J. Morrison, Esq.,
1025 Ridgeview Drive, Suite 400, Reno, Nevada 89509.
III. PURPOSE: The purpose for which this corporation is formed is: To
engage in any lawful activity.
IV. AUTHORIZATION OF CAPITAL STOCK: The amount of the total authorized
capital stock of the corporation shall be TWENTY-FIVE THOUSAND Dollars
($25,000.00), consisting of TWENTY-FIVE MILLION (25,000,000) shares of COMMON
STOCK, par value $.001 per share.
V. INCORPORATOR: The name and post office address of the Incorporator
signing these Articles of Incorporation is as follows:
NAME POST OFFICE ADDRESS
---- -------------------
Rita S. Dickson 1025 Ridgeview
Drive #400
Reno Nevada 89509
VI. DIRECTORS: The governing board of this corporation shall be known as
directors, and the first Board shall consist of three (3) directors.
So long as all of the shares of this corporation are owned beneficially
and of record by either one or two shareholders, the number of Directors may be
fewer than three, but not fewer than the number of shareholders.
The number of directors may, pursuant to the By-Laws, be increased or
decreased by the Board of Directors, provided there shall be no less than one
(1) nor more than nine (9) Directors.
The name and post office addresses of the directors constituting the first
Board of Directors are as follows:
<PAGE>
NAME POST OFFICE ADDRESS
---- -------------------
ROBERT MICHAEL GELFAND #30 B Cedar Tower, President
Park
99 Soi Kasem Sukhumvit 24 Road
Klogton, Klongtoey, Bangkok
10110
THAILAND
THOMAS GELFAND 6240 Ash Street
Vancouver, BC
CANADA V5Z 3G9
FREDERICK STEVEN FISHER #30 B Cedar Tower, President
Park
99 Soi Kasem Sukhumvit 24 Road
Klogton, Klongtoey, Bangkok
10110
THAILAND
VII. STOCK NON-ASSESSABLE: The capital stock, or the holders thereof,
after the amount of the subscription price has been paid in, shall not be
subject to any assessment whatsoever to pay the debts of the corporation.
VII. TERM OF EXISTENCE: This corporation shall have perpetual existence.
IX. CUMULATIVE VOTING: No cumulative voting shall be permitted in the
election of directors.
X. PREEMPTIVE RIGHTS: Shareholders shall not be entitled to preemptive
rights.
XI. LIMITED LIABILITY: No officer or director of the Corporation shall be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as an officer or director, except for liability (i)
for any breach of the officer or director's duty of loyalty to the Corporation
or its Stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, or (iii) for any
transaction from which the officer or director derived any improper personal
benefit. If the Nevada General Corporation Law is amended after the date of
incorporation to authorize corporate action further eliminating or limiting the
personal liability of officers or directors, then the liability of an officer or
director of the Corporation shall be eliminated or limited to the fullest extent
permitted by the Nevada General Corporation Law, or amendments thereto. No
repeal or modification of this paragraph shall adversely affect any right or
protection of an officer or director of the Corporation existing at the time of
such repeat or modification.
XII. INDEMNIFICATION: Each person who was or is made a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
for whom he or she is the legal representative, is or was an officer or director
of the Corporation or is or was serving at the request of the Corporation as an
officer or director of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans whether the basis of such proceeding is alleged action in an official
capacity as an officer or director or in any other capacity while serving as an
officer or director shall be indemnified and held harmless by the Corporation to
the fullest extent authorized by the Nevada General Corporation Law, as the same
exists or may hereafter be amended, (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than said law permitted the Corporation to
provide prior to such amendment), against all expense, liability and loss
(including attorneys' fees, judgments, fines, excise taxes or penalties and
amounts to be paid in settlement) reasonably incurred or suffered by such person
in connection therewith and such indemnification shall continue as to a person
who has ceased to be an officer or director and shall inure to the benefit of
his or her heirs, executors and administrators; provided, however, that except
as provided herein with respect to proceedings seeking to enforce rights to
indemnification, the corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
2
<PAGE>
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors of the Corporation. The right to indemnification conferred in
this Section shall be a contract right and shall include the right to be paid by
the Corporation the expenses incurred in defending any such proceeding in
advance of its final disposition; provided however, that, if the Nevada General
Corporation Law requires the payment of such expenses incurred by an officer or
director in his or her capacity as an officer or director (and not in any other
capacity in which service was or is rendered by such person while an officer or
director, including, without limitation, service to any employee benefit plan)
in advance of the final disposition of a proceeding, payment shall be made only
upon delivery to the Corporation of an undertaking, by or on behalf of such
officer or director, to repay all amounts so advanced if it shall ultimately be
determined that such officer or director is not entitled to be indemnified under
this Section or otherwise.
If a claim hereunder is not paid in full by the Corporation within ninety
days after a written claim has been received by the Corporation, the claimant
may, at any time thereafter, bring suit against the Corporation to recover the
unpaid amount of the claim and, if successful, in whole or in part, the claimant
shall be entitled to be paid the expense of prosecuting such claim. It shall be
a defense to any such action (other than an action brought to enforce a claim
for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any, is required, has been
tendered to the Corporation) that the claimant has not met the standards of
conduct which make it permissible under the Nevada General Corporation Law for
the Corporation to indemnify the claimant for the amount claimed, but the burden
or proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Nevada General Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Section shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, By-Law, agreement, vote of Stockholders or disinterested
directors or otherwise.
The Corporation may maintain insurance, at its expense, to protect itself
and any officer, director, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss, whether or not the Corporation would have the power
to indemnify such person against such expense, liability or loss under the
Nevada General Corporation law.
The Corporation may, to the extent authorized from time to time by the
Board of Directors, grant rights to indemnification to any employee or agent of
the Corporation to the fullest extent of the provisions of this section with
respect to the indemnification and advancement of expenses of officers and
directors of the Corporation or individuals serving at the request of the
Corporation as an officer, director, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise.
THE UNDERSIGNED, being the Incorporator hereinbefore named for the purpose
of forming a corporation pursuant to the General Corporation law of the Sate of
Nevada, does make and file these Articles of Incorporation, hereby declaring and
certifying the facts herein stated are true, and, accordingly, has hereunto set
her hand this 21st day of August, 1997.
/s/ Rita S. Dickson
-------------------------------------
Rita S. Dickson
3
<PAGE>
4
STATE OF NEVADA )
) SS.
COUNTY OF WASHOE )
On this 21st day of August, 1997, before me, a Notary Public, personally
appeared Rita S. Dickson, who acknowledged to me that she executed the above
instrument.
[NOTARY SEAL OF WILLETT Y. SMITH] /s/ Willett Y. Smith
-------------------------------------
Notary Public
CERTIFICATE OF ACCEPTANCE
OF APPOINTMENT BY RESIDENT AGENT
In the matter of GOLF INNOVATIONS CORP., I, Michael J. Morrison, with
address at 1025 Ridgeview Drive, Suite 400, Reno, Nevada 89509, hereby accept
the appointment as Resident Agent of the above-entitled corporation in
accordance with NRS 78.090.
Furthermore, that the mailing address for the above registered office is
1025 Ridgeview Drive, Suite 400, Reno, Nevada 89509.
IN WITNESS WHEREOF, I hereunto set my hand this 21st day of August, 1997.
By: /s/ MICHAEL J. MORRISON
----------------------------------
Michael J. Morrison, Resident Agent
4
EXHIBIT 3.02
AMENDED
ARTICLES OF INCORPORATION
OF
GOLF INNOVATIONS CORP.
----------------------
The undersigned, being the President and Secretary of Golf Innovations
Corp., hereby declare that the original Articles of the corporation were filed
with the Secretary of State of the State of Nevada on September 19, 1997.
Pursuant to the provisions of NRS 78.385-390, at a duly noticed and convened
meeting on April 19, 1999, the Shareholders of the corporation, representing a
majority of the of the voting power of the company's common stock, unanimously
voted for the following amendment to the Articles of Incorporation:
FOURTH. The amount of the total authorized capital stock of the
corporation shall be Sixty Thousand Dollars ($60,000.00), consisting of Fifty
Million (50,000,000) shares of Common Stock, par value $.001 per share, and
10,000,000 shares of Preferred Stock, par value $.001 per share.
THE UNDERSIGNED, being the President and Secretary of Golf Innovations
Corp. hereby declare and certify that that the facts herein stated are true and,
accordingly, have hereunto set their hands this [19TH] day of April, 1999.
/s/ Earl T. Ingarfield /s/ Jerry L. Busiere
- --------------------------------- --------------------------------------
Earl T. Ingarfield, President Jerry L. Busiere, Secretary
STATE OF FLORIDA )
) ss.
COUNTY OF SARASOTA )
On this [19th] day of April, 1999, before me, a Notary Public, personally
appeared Earl T. Ingarfield and Jerry L. Busiere, personally known to me, and
who acknowledged that they are the President and Secretary of Golf Innovations
Corp. and that he executed the above instrument.
[NOTARY SEAL OF ANGELINE M. BERGER] /s/ Angeline M. Berger
-------------------------------------
Notary Public
EXHIBIT 3.03
CERTIFICATE OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
GOLF INNOVATIONS CORP.
The undersigned, being the President and Secretary of Golf Innovations
Corp. hereby declare that the original Articles of the corporation were filed
with the Secretary of State of the State of Nevada on September 19, 1997.
Pursuant to the provisions of NRS 78.385-390, at a duly noticed and convened
meeting on May 24, 1999, the Shareholders of the corporation, representing a
majority of the of the voting power of the company's common stock, unanimously
voted for the following amendment to the Articles of Incorporation:
ARTICLE I. NAME: The name of the corporation is: Avid Sportswear & Golf
Corp.
THE UNDERSIGNED, being the President and Secretary of Golf Innovations
Corp. hereby declare and certify that that the facts herein stated are true and,
accordingly, have hereunto set their hands this [24TH] day of May, 1999.
/s/ Earl T. Ingarfield
-------------------------------------
Earl T. Ingarfield, President
/s/ Jerry L. Busiere
-------------------------------------
Jerry L. Busiere, Secretary
STATE OF FLORIDA )
) ss.
COUNTY OF SARASOTA )
On this [24] day of May, 1999, before me, a Notary Public, personally
appeared Earl T. Ingarfield and Jerry L. Busiere, personally known or proven to
me to be the President and Secretary, respectively, of Golf Innovations Corp.
and that they executed the above instrument.
[NOTARY SEAL OF MERRI C. MOYLAN] /s/ Merri C. Moylan
-------------------------------------
Notary Public
EXHIBIT 3.04
BYLAWS
OF
GOLF INNOVATIONS CORP.
ARTICLE 1.
OFFICES
1.1 BUSINESS OFFICE
The principal business office ("principal office") of the corporation
shall be located at any place either within or without the State of Nevada as
designated in the corporation's most current Annual Report filed with the Nevada
Secretary of State. The corporation may have such other offices, either within
or without the State of Nevada, as the Board of Directors may designate or as
the business of the corporation may require from time to time. The corporation
shall maintain at its principal office a copy of certain records, as specified
in Section 2.14 of Article 2.
1.2 REGISTERED OFFICE
The registered office of the corporation shall be located within Nevada
and may be, but need not be, identical with the principal office, provided the
principal office is located within Nevada. The address of the registered office
may be changed from time to time by the Board of Directors.
ARTICLE 2.
SHAREHOLDERS
2.1 ANNUAL SHAREHOLDER MEETING
The annual meeting of the shareholders shall be held on the [19TH] day of
[September], each year, beginning with the year 19[98], at the hour of [10]
o'clock [A].m., or at such other time on such other day within such month as
shall be fixed by the Board of Directors' for the purpose of electing directors
and for the transaction of such other business as may come before the meeting.
If the day fixed for the annual meeting shall be a legal holiday in the State of
Nevada, such meeting shall be held on the next succeeding business day.
If the election of directors shall not be held on the day designated
herein for any annual meeting of the shareholders, or at any subsequent
continuation after adjournment thereof, the Board of Directors shall cause the
election to be held at a special meeting of the shareholders as soon thereafter
as convenient.
2.2 SPECIAL SHAREHOLDER MEETINGS.
Special meetings of the shareholders, for any purpose or purposes
described in the notice of meeting, may be called by the president, or by the
Board of Directors, and shall be called by the president at the request of the
holders of not less than one-tenth of all outstanding shares of the corporation
entitled to vote on any issue at the meeting.
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2.3 PLACE OF SHAREHOLDER MEETINGS
The Board of Directors may designate any place, either within or without
the State of Nevada, as the place for any annual or any special meeting of the
shareholders, unless by written consent, which may be in the form of waivers of
notice or otherwise, all shareholders entitled to vote at the meeting designate
a different place, either within or without the State of Nevada, as the place
for the holding of such meeting. If no designation is made by either the Board
of Directors or unanimous action of the voting shareholders, the place of
meeting shall be the principal office of the corporation in the State of Nevada.
2.4 NOTICE OF SHAREHOLDER MEETING
(a) REQUIRED NOTICE. - Written notice stating the place, day and hour of
any annual or special shareholder meeting shall be delivered not less than 10
nor more than 60 days before the date of the meeting, either personally or by
mail, by or at the direction of the president, the Board of Directors, or other
persons calling the meeting, to each shareholder of record entitled to vote at
such meeting and to any other shareholder entitled by the laws of the State of
Nevada governing corporations (the "Act") or the Articles of Incorporation to
receive notice of the meeting. Notice shall be deemed to be effective at the
earlier of: (1) when deposited in the United States mail, addressed to the
shareholder at his address as it appears on the stock transfer books of the
corporation, with postage thereon prepaid); (2) on the date shown on the return
receipt if sent by registered or certified mail, return receipt requested, and
the receipt is signed by or on behalf of the addressee; (3) when received; or
(4) 5 days after deposit in the United States mail, if mailed postpaid and
correctly addressed to an address, provided in writing by the shareholder, which
is different from that shown in the corporation's current record of
shareholders.
(b) ADJOURNED MEETING. - If any shareholder meeting is adjourned to a
different date, time, or place, notice need not be given of the new date, time,
and place if the new date, time, and place is announced at the meeting before
adjournment. But if a new record date for the adjourned meeting is, or must be
fixed (see Section 2.5 of this Article 2) then notice must be given pursuant to
the requirements of paragraph (a) of this Section 2.4, to those persons who are
shareholders as of the new record date.
(c) WAIVER OF NOTICE. - A shareholder may waive notice of the meeting (or
any notice required by the Act, Articles of Incorporation, or Bylaws), by a
writing signed by the shareholder entitled to the notice, which is delivered to
the corporation (either before or after the date and time stated in the notice)
for inclusion in the minutes of filing with the corporate records.
A shareholder's attendance at a meeting:
(1) waives objection to lack of notice or defective notice of the meeting
unless the shareholder, at the beginning of the meeting, objects to holding the
meeting or transacting business at the meeting;
and
(2) waives objection to consideration of a particular matter at the
meeting that is not within the purpose or purposes described in the meeting
notice, unless the shareholder objects to consideration of the matter when it is
presented.
(d) CONTENTS OF NOTICE. - The notice of each special shareholder meeting
shall include a description of the purpose or purposes for which the meeting is
called. Except as provided in this Section 2.4(d), or as provided in the
corporation's articles, or otherwise in the Act, the notice of an annual
shareholder meeting need not include a description of the purpose or purposes
for which the meeting is called.
If a purpose of any shareholder meeting is to consider either: (1) a
proposed amendment to the Articles of Incorporation (including any restated
articles requiring shareholder approval); (2) a plan of merger or share
exchange; (3) the sale, lease, exchange or other disposition of all, or
substantially all of the corporation's property; (4) the dissolution of the
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corporation; or (5) the removal of a director, the notice must so state and be
accompanied by, respectively, a copy or summary of the: (a) articles of
amendment; (b) plan of merger or share exchange; and (c) transaction for
disposition of all, or substantially all, of the corporation's property. If the
proposed corporate action creates dissenters' rights, as provided in the Act,
the notice must state that shareholders are, or may be entitled to assert
dissenters' rights, and must be accompanied by a copy of relevant provisions of
the Act. If the corporation issues, or authorizes the issuance of shares for
promissory notes or for promises to render services in the future, the
corporation shall report in writing to all the shareholders the number of shares
authorized or issued, and the consideration received with or before the notice
of the next shareholder meeting. Likewise, if the corporation indemnifies or
advances expenses to an officer or a director, this shall be reported to all the
shareholders with or before notice of the next shareholder meeting
2.5 FIXING OF RECORD DATE
For the purpose of determining shareholders of any voting group entitled
to notice of or to vote at any meeting of shareholders, or shareholders entitled
to receive payment of any distribution or dividend, or in order to make a
determination of shareholders for any other proper purpose, the Board of
Directors may fix in advance a date as the record date. Such record date shall
not be more than 70 days prior to the date on which the particular action
requiring such determination of shareholders entitled to notice of, or to vote
at a meeting of shareholders, or shareholders entitled to receive a share
dividend or distribution. The record date for determination of such shareholders
shall be at the close of business on:
(a) With respect to an annual shareholder meeting or any special
shareholder meeting called by the Board of Directors or any person specifically
authorized by the Board of Directors or these Bylaws to call a meeting, the day
before the first notice is given to shareholders;
(b) With respect to a special shareholder meeting demanded by the
shareholders, the cat-e the first shareholder signs the demand;
(c) With respect to the payment of a share dividend, the date the Board of
Directors authorizes the share dividend;
(d) With respect to actions taken in writing without a meeting (pursuant
to Article 2, Section 2.12), the first date any shareholder signs a consent; and
(e) With respect to a distribution to shareholders, (other than one
involving a repurchase or reacquisition of shares), the date the Board of
Directors authorizes the distribution
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made, as provided in this section, such determination
shall apply to any adjournment thereof unless the Board of Directors fixes a new
record date, which it must do if the meeting is adjourned to a date more than
120 days after the date fixed for the original meeting.
If no record date has been fixed, the record date shall be the date the
written notice of the meeting is given to shareholders.
2.6 SHAREHOLDER LIST
The officer or agent having charge of the stock transfer books for shares
of the corporation shall, at least ten (10) days before each meeting of
shareholders, make a complete record of the shareholders entitled to vote at
each meeting of shareholders, arranged in alphabetical order, with the address
of and the number of shares held by each. The list must be arranged by class or
series of shares. The shareholder list must be available for inspection by any
shareholder' beginning two business days after notice of the meeting is given
for which the list was prepared and continuing through the meeting. The list
shall be available at the corporation's principal office or at a place in the
city where the meeting is to be held, as set forth in the notice of meeting. A
shareholder, his agent, or attorney is entitled, on written demand, to inspect
and, subject to the requirements of Section 2.14 of this Article 2, to copy the
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list during regular business hours and at his expense, during the period it is
available for inspection. The corporation shall maintain the shareholder list in
written form or in another form capable of conversion into written form within a
reasonable time.
2.7 SHAREHOLDER QUORUM AND VOTING REQUIREMENTS
A majority of the outstanding shares of the corporation entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of
shareholders. If less than a majority of the outstanding shares are represented
at a meeting, a majority of the shares so represented may adjourn the meeting
from time to time without further notice. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have beer transacted at the meeting as originally notified. The
shareholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting, unless a new record date is or must be set for that
adjourned meeting.
If a quorum exists, a majority vote of those shares present voting at a
duly organized meeting shall suffice to defeat or enact proposal unless the
Statutes of the State of Nevada, the Articles Incorporation or these Bylaws
require a greater-than-majority vote, which event the higher vote shall be
required for the action constitute the action of the corporation.
2.8 INCREASING EITHER QUORUM OR VOTING REQUIREMENTS
For purposes of this Section 2.8, a "supermajority" quorum is a
requirement that more than a majority of the votes of the voting group be
present to constitute a quorum; and a "supermajority" voting requirement is any
requirement that requires the vote of more than a majority of the affirmative
votes of a voting group at a meeting.
The shareholders, but only if specifically authorized to do so by the
Articles of Incorporation, may adopt, amend, or delete a Bylaw which fixes a
"supermajority" quorum or "supermajority" voting requirement.
The adoption or amendment of a Bylaw that adds, changes, or deletes a
"supermajority" quorum or voting requirement for shareholders must meet the same
quorum requirement and be adopted by the same vote required to take action under
the quorum and voting requirement then if effect or proposed to be adopted,
whichever is greater.
A Bylaw that fixes a supermajority quorum or voting requirement for
shareholders may not be adopted, amended, or repealed by the Board of Directors.
2.9 PROXIES
At all meetings of shareholders, a shareholder may vote in person, or vote
by written proxy executed in writing by the shareholder or executed by his duly
authorized attorney-in fact. Such proxy shall be filed with the secretary of the
corporation or other person authorized to tabulate votes before or at the time
of the meeting. No proxy shall be valid after eleven (11) months from the date
of its execution unless otherwise specifically provided in the proxy or coupled
with an interest.
2.10 VOTING OF SHARES
Unless otherwise provided in the articles, each outstanding share entitled
to vote shall be entitled to one vote upon each matter submitted to a vote at a
meeting of shareholders.
Shares held by an administrator, executor, guardian or conservator may be
voted by him, either in person or by proxy, without the transfer of such shares
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into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority to do so is
contained in an appropriate order of the Court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares are transferred into the name of the pledgee, and
thereafter, the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to the corporation or held by it in a
fiduciary capacity shall not be voted, directly or indirectly, at any meeting,
and shall not be counted in determining the total number of outstanding shares
at any given time.
Redeemable shares are not entitled to vote after notice of redemption is
mailed to the holders and a sum sufficient to redeem the shares has been
deposited with a bank, trust company, or other financial institution under an
irrevocable obligation to pay the holders the redemption price on surrender of
the shares.
2.11 CORPORATION'S ACCEPTANCE OF VOTES
(a) If the name signed on a vote, consent, waiver, or proxy appointment
corresponds to the name of a shareholder, the corporation, if acting in good
faith, is entitled to accept the vote, consent, waiver, or proxy appointment and
give it effect as the act of the shareholder.
(b) If the name signed on a vote, consent, waiver, or proxy appointment
does not correspond to the name of its shareholder, the corporation, if acting
in good faith, is nevertheless entitled to accept the vote, consent, waiver, or
proxy appointment and give it effect as the act of the shareholder if:
(1) the shareholder is an entity, as defined in the Act, and the name
signed purports to be that of an officer or agent of the entity;
(2) the name signed purports to be that of an administrator, executor,
guardian or conservator representing the shareholder and, if the corporation
requests, evidence of fiduciary status acceptable to the corporation has been
presented with respect to the vote, consent, waiver, or proxy appointment;
(3) the name signed purports to be that of a receiver or trustee in
bankruptcy of the shareholder and, if the corporation requests, evidence of this
status acceptable to the corporation has been presented with respect to the
vote, consent, waiver or proxy appointment;
(4) the name signed purports to be that of a pledgee, beneficial owner, or
attorney-in-fact of the shareholder and, if the corporation requests, evidence
acceptable to the corporation of the signatory's authority to sign for the
shareholder has been presented with respect to the vote, consent, waiver, or
proxy appointment; or
(5) the shares are held in the name of two or more persons as co-tenants
or fiduciaries and the name signed purports to be the name of at least one of
the co-owners and the person signing appears to be acting on behalf of all the
co-owners.
(c) The corporation is entitled to reject a vote, consent, waiver, or
proxy appointment if the secretary or other officer or agent authorized to
tabulate votes, acting in good faith, has reasonable basis for doubt about the
validity of the signature on it or about the signatory's authority to sign for
the shareholder.
(d) The corporation and its officer or agent who accepts or rejects a
vote, consent, waiver, or proxy appointment in good faith and in accordance with
the standards of this Section 2.11 are not liable in damages to the shareholder
for the consequences of the acceptance or rejection.
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(e) Corporation action based on the acceptance or rejection of a vote,
consent, waiver, or proxy appointment under this Section is valid unless a court
of competent jurisdiction determines otherwise.
2.12 INFORMAL ACTION BY SHAREHOLDERS
Any action required or permitted to be taken at a meeting of the
shareholders may be taken without a meeting if one or- more written consents,
setting forth the action so taken, shall be signed by shareholders holding a
majority of the shares entitled to vote with respect to the subject matter
thereof, unless a "supermajority" vote is required by these Bylaws, in which
case a "supermajority" vote will be required. Such consent shall be delivered to
the corporation secretary for inclusion in the minute book. A consent signed
under this Section has the effect of a vote at a meeting and may be described as
such in any document.
2.13 VOTING FOR DIRECTORS
Unless otherwise provided in the Articles of Incorporation, directors are
elected by a plurality of the votes cast by the shares entitled to vote in the
election at a meeting at which a quorum is present.
2.14 SHAREHOLDERS' RIGHTS TO INSPECT CORPORATE RECORDS
Shareholders shall have the following rights regarding inspection of
corporate records:
(a) MINUTES AND ACCOUNTING RECORDS - The corporation shall keep, as
permanent records, minutes of all meetings of its shareholders and Board of
Directors, a record of all actions taken by the shareholders or Board of
Directors without a meeting, and a record of all actions taken by a committee of
the Board of Directors in place of the Board of Directors on behalf of the
corporation. The corporation shall maintain appropriate accounting records.
(b) ABSOLUTE INSPECTION RIGHTS OF RECORDS REQUIRED AT PRINCIPAL OFFICE -
If a shareholder gives the corporation written notice of his demand at least
five business days before the date on which he wishes to inspect and copy, he,
or his agent or attorney, has the right to inspect and copy, during regular
business hours, any of the following records, all of which the corporation is
required to keep at its principal office:
(I) its Articles or restated Articles of Incorporation and all amendments
to them currently in effect;
(2) its Bylaws or restated Bylaws and all amendments to them currently in
effect;
(3) resolutions adopted by its Board of Directors creating one or more
classes or series of shares, and fixing their relative rights, preferences and
limitations, if shares issued pursuant to those resolutions are outstanding;
(4) the minutes of all shareholders' meetings, and records of all action
taken by shareholders without a meeting, for the past three years;
(5) all written communications to shareholders within the past three
years, including the financial statements furnished for the past three years to
the shareholders;
(6) a list of the names and business addresses of its current directors
and officers; and
(7) its most recent annual report delivered to the Nevada Secretary of
State.
(c) CONDITIONAL INSPECTION RIGHT - In addition, if a shareholder gives the
corporation a written demand, made in good faith and for a proper purpose, at
least five business days before the date on which he wishes to inspect and copy,
describes with reasonable particularity his purpose and the records he desires
to inspect, and the records are directly connected to his purpose, a shareholder
of a corporation, or his duly authorized agent or attorney, is entitled to
inspect and copy, during regular business hours at a reasonable location
specified by the corporation, any of the following records of the corporation:
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(1) excerpts from minutes of any meeting of the Board of Directors;
records of any action of a committee of the Board of Directors on behalf of the
corporation; minutes of any meeting of the shareholders; and records of action
taken by the shareholders or Board of Directors without a meeting, to the extent
not subject to inspection under paragraph (a) of this Section 2.14;
(2) accounting records of the corporation; and
(3) the record of shareholders (compiled no earlier than the date of the
shareholder's demand).
(d) COPY COSTS - The right to copy records includes, if reasonable, the
right to receive copies made by photographic, xerographic, or other means. The
corporation may impose a reasonable charge, to be paid by the shareholder on
terms set by the corporation, covering the costs of labor and material incurred
in making copies of any documents provided to the shareholder.
(e) "SHAREHOLDER" INCLUDES BENEFICIAL OWNER - For purposes of this Section
2.14, the term "shareholder" shall include a beneficial owner whose shares are
held in a voting trust or by a nominee on his behalf.
2.15 FINANCIAL STATEMENTS SHALL BE FURNISHED TO THE SHAREHOLDERS.
(a) The corporation shall furnish its shareholders annual financial
statements, which may be consolidated or combined statements of the corporation
and one or more of its subsidiaries, as appropriate, that include a balance
sheet as of the end of the fiscal year, an income statement for that year, and a
statement of changes in shareholders' equity for the year, unless that
information appears elsewhere in the financial statements. If financial
statements are prepared for the corporation on the basis of generally accepted
accounting principles, the annual financial statements for the shareholders must
also be prepared on that basis.
(b) If the annual financial statements are reported upon by a public
accountant, his report must accompany them. If not, the statements must be
accompanied by a statement of the president or the person responsible for the
corporation's accounting records:
(1) stating his reasonable belief that the statements were prepared on the
basis of generally accepted accounting principles and, if not, describing the
basis of preparation; and
(2) describing any respects in which the statements were not prepared on a
basis of accounting consistent with the statements prepared for the preceding
year.
(c) A corporation shall mail the annual financial statements to each
shareholder within 120 days after the close of each fiscal year. Thereafter, on
written request from a shareholder who was not mailed the is statements, the
corporation shall mail him the latest financial statements.
2.16 DISSENTERS' RIGHTS.
Each shareholder shall have the right to dissent from and obtain payment
for his shares when so authorized by the Act, Articles of Incorporation, these
Bylaws, or a resolution of the Board of Directors.
2.17 ORDER OF BUSINESS.
The following order of business shall be observed at all meetings of the
shareholders, as applicable and so far as practicable:
(a) Calling the roll of officers and directors present and determining
shareholder quorum requirements;
(b) Reading, correcting and approving of minutes of previous meeting;
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(c) Reports of officers;
(d) Reports of Committees;
(e) Election of Directors;
(f) Unfinished business;
(g) New business; and
(h) Adjournment
ARTICLE 3.
BOARD OF DIRECTORS
3.1 GENERAL POWERS.
Unless the Articles of Incorporation have dispensed with or limited the
authority of the Board of Directors by describing who will perform some or all
of the duties of a Board of Directors, all corporate powers shall be exercised
by or under the authority of, and the business and affairs of the corporation
shall be managed under the direction of the Board of Directors.
3.2 NUMBER, TENURE AND QUALIFICATION OF DIRECTORS.
Unless otherwise provided in the Articles of Incorporation, the authorized
number of directors shall be not less than 1 (minimum number) nor more than 9
(maximum number). The initial number of directors was established in the
original Articles of Incorporation. The number of directors shall always be
within the limits specified above, and as determined by resolution adopted by
the Board of Directors. After any shares of this corporation are issued, neither
the maximum nor minimum number of directors can be changed, nor can a fixed
number be substituted for the maximum and minimum numbers, except by a duly
adopted amendment to the Articles of Incorporation duly approved by a majority
of the outstanding shares entitled to vote. Each director shall hold office
until the next annual meeting of shareholders or until removed. However, if his
term expires, he shall continue to serve until his successor shall have been
elected and qualified, or until there is a decrease in the number of directors.
Unless required by the Articles of Incorporation, directors do not need to be
residents of Nevada or Shareholders of the corporation.
3.3 REGULAR MEETINGS OF THE BOARD OF DIRECTORS.
A regular meeting of the Board of Directors shall be held without Other
notice than this Bylaw immediately after, and at the same place as, the annual
meeting of shareholders. The Board of Directors may provide, by resolution, the
time and place for the holding of additional regular meetings without other
notice than such resolution. (If permitted by Section 3.7, any regular meeting
may be held by telephone).
3.4 SPECIAL MEETING OF THE BOARD OF DIRECTORS.
Special meetings of the Board of Directors may be called by or at the
request of the president or any one director. The person or persons authorized
to call special meetings of the Board of Directors may fix any place, either
within or without the State of Nevada, as the place for holding any special
meeting of the Board of Directors or, if permitted by Section 3.7, any special
meeting may be held by telephone.
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3.5 NOTICE OF, AND WAIVER OF NOTICE OF SPECIAL MEETINGS OF THE BOARD OF
DIRECTORS.
Unless the Articles of Incorporation provide for a longer or shorter
period, notice of any special meeting of the Board of Directors shall be given
at least two days prior thereto, either orally or in writing. If mailed, notice
of any director meeting shall be deemed to be effective at the earlier of: (1)
when received; (2) five days after deposited in the United States mail,
addressed to the director' E business office, with postage thereon prepaid; or
(3) the date shown on the return receipt, if sent by registered or certified
mail, return receipt requested, and the receipt is signed by or on behalf of the
director. Notice may also be given by facsimile and, in such event, notice shall
be deemed effective upon transmittal thereof to a facsimile number of a
compatible facsimile machine at the director's business office. Any director may
waive notice of any meeting. Except as otherwise provided herein, the waiver
must be in writing, signed by the director entitled to the notice, and filed
with the minutes or corporate records. The attendance of a director at a meeting
shall constitute a waiver of notice of such meeting, except where a director
attends a meeting for the express purpose of objecting to the transaction of any
business and at the beginning of the meeting, or promptly upon his arrival,
objects to holding the meeting or transacting business at the meeting, and does
not thereafter vote for or assent to action taken at the meeting. Unless
required by the Articles of Incorporation or the Act, neither the business to be
transacted at, nor the purpose of, any special meeting of the Board of Directors
need be specified in the notice or waiver of notice of such meeting.
3.6 DIRECTOR QUORUM.
A majority of the number of directors fixed, pursuant to Section 3.2 of
this Article 3, shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, unless the Articles of Incorporation or the
Act require a greater number for a quorum.
Any amendment to this quorum requirement is subject to the provisions of
Section 3.8 of this Article 3.
Once a quorum has been established at a duly organized meeting, the Board
of Directors may continue to transact corporate business until adjournment,
notwithstanding the withdrawal of enough directors to leave less than a quorum.
3.7 ACTIONS BY DIRECTORS.
The act of the majority of the directors present at a meeting at
which a quorum is present when the vote is taken shall be the act of the Board
of Directors, unless the Articles of Incorporation or the Act require a greater
percentage. Any amendment which changes the number of directors needed to take
action is subject to the provisions of Section 3.8 of this Article 3.
Unless the Articles of Incorporation provide otherwise, any or all
directors may participate in a regular or special meeting by, or conduct the
meeting through the use of, any means of communication by which all directors
participating may simultaneously hear each other during the meeting. Minutes of
any such meeting shall be prepared and entered into the records of the
corporation. A director participating in a meeting by this means is deemed to be
present in person at the meeting.
A director who is present at a meeting of the Board of Directors or a
committee of the Board of Directors when corporate action is taken is deemed to
have assented to the action taken unless: (1) he objects at the beginning of the
meeting, or promptly upon his arrival, to holding it or transacting business at
the meeting; or (2) his dissent or abstention from the action taken is entered
in the minutes of the meeting; or (3) he delivers written notice of his dissent
or abstention to the presiding officer of the meeting before its adjournment or
to the corporation within 24 hours after adjournment of the meeting. The right
of dissent or abstention is not available to a director who votes in favor of
the action taken.
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3.8 ESTABLISHING A "SUPERMAJORITY" QUORUM OR VOTING REQUIREMENT FOR THE
BOARD OF DIRECTORS.
For purposes of this Section 3.8, a "supermajority" quorum is a
requirement that more than a majority of the directors in office constitute a
quorum; and a "supermajority" voting requirement is one which requires the vote
of more than a majority of those directors present at a meeting at which a
quorum is present to be the act of the directors.
A Bylaw that fixes a supermajority quorum or supermajority voting
requirement may be amended or repealed:
(1) if originally adopted by the shareholders, only by the shareholders
(unless otherwise provided by the shareholders); or
(2) if originally adopted by the Board of Directors, either by the
shareholders or by the Board of Directors.
A Bylaw adopted or amended by the shareholders that fixes a supermajority
quorum or supermajority voting requirement for the Board of Directors may
provide that it may be amended or repealed only by a specified vote of either
the shareholders or the Board of Directors.
Subject to the provisions of the preceding paragraph, action by the Board
of Directors to adopt, amend, or repeal a Bylaw that changes the quorum or
voting requirement for the Board of Directors must meet the same quorum
requirement and be adopted by the same vote required to take action under the
quorum and voting requirement then in effect or proposed to be adopted,
whichever is greater.
3.9 DIRECTOR ACTION WITHOUT A MEETING.
Unless the Articles of Incorporation provide otherwise, any action
required or permitted to be taken by the Board of Directors at a meeting may be
taken without a meeting if all the directors sign a written consent describing
the action taken. Such consents shall be filed with the records of the
corporation. Action taken by consent is effective when the last director signs
the consent, unless the consent specifies a different effective date. A signed
consent has the effect of a vote at a duly noticed and conducted meeting of the
Board of Directors and may be described as such in any document.
3.10 REMOVAL OF DIRECTORS.
The shareholders may remove one or more directors at a meeting called for
that purpose if notice has been given that a purpose of the meeting is such
removal. The removal may be with or without cause unless the Articles of
Incorporation provide that directors may only be removed for cause. If
cumulative voting is not authorized, a director may be removed only if the
number of votes cast in favor of removal exceeds the number of votes cast
against removal.
3.11 BOARD OF DIRECTOR VACANCIES.
Unless the Articles of Incorporation provide otherwise, if a vacancy
occurs on the Board of Directors, excluding a vacancy resulting from an increase
in the number of directors, the director(s) remaining in office shall fill the
vacancy. If the directors remaining in office constitute fewer than a quorum of
the Board of Directors, they may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office.
If a vacancy results from an increase in the number of directors, only the
shareholders may fill the vacancy.
A vacancy that will occur at a specific later date (by reason of a
resignation effective at a later date) may be filled by the Board of Directors
before the vacancy occurs, but the new director may not take office until the
vacancy occurs.
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The term of a director elected to fill a vacancy expires at the next
shareholders' meeting at which directors are elected. However, if his term
expires, he shall continue to serve until his successor is elected and qualifies
or until there is a decrease in the number of directors.
3.12 DIRECTOR COMPENSATION.
Unless otherwise provided in the Articles of Incorporation, by resolution
of the Board of Directors, each director may be paid his expenses, if any, of
attendance at each meeting of the Board of Directors, and may be paid a stated
salary as director or a fixed sun for attendance at each meeting of the Board of
Directors, or both. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
3.13 DIRECTOR COMMITTEES.
(a) CREATION OF COMMITTEES. Unless the Articles of Incorporation provide
otherwise, the Board of Directors may create one or more committees and appoint
members of the Board of Directors to serve on them. Each committee must have two
or more members, who serve at the pleasure of the Board of Directors.
(b) SELECTION OF MEMBERS. The creation of a committee and appointment of
members to it must be approved by the greater of (1) a majority of all the
directors in office when the action is taken, or (2) the number of directors
required by the Articles of Incorporation to take such action.
(c) REQUIRED PROCEDURES. Sections 3.4, 3.5, 3.6, 3.7, 3.8 and 3.9 of this
Article 3 apply to committees and their members.
(d) AUTHORITY. Unless limited by the Articles of Incorporation or the Act,
each committee may exercise those aspects of the authority of the Board of
Directors which the Board of Directors confers upon such committee in the
resolution creating the committee. Provided, however, a committee, may not:
(1) authorize distributions to shareholders;
(2) approve or propose to shareholders any action that the Act requires be
approved by shareholders;
(3) fill vacancies on the Board of Directors or on any of its-committees;
(4) amend the Articles of Incorporation;
(5) adopt, amend, or repeal Bylaws;
(6) approve a plan of merger not requiring shareholder approval;
(7) authorize or approve reacquisition of shares, except according to a
formula or method prescribed by the Board of Directors; or
(8) authorize or approve the issuance or sale, or contract for sale of
shares, or determine the designation and relative rights, preferences, and
limitations of a class or series of shares; except that the Board of Directors
may authorize a committee to do so within limits specifically prescribed by the
Board of Directors.
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ARTICLE 4.
OFFICERS
4.1 DESIGNATION OF OFFICERS.
The officers of the corporation shall be a president, a secretary, and a
treasurer, each of whom shall be appointed by the Board of Directors. Such other
officers and assistant officers as may be deemed necessary, including any
vice-presidents, may be appointed by the Board of Directors. The same individual
may simultaneously hold more than one office in the corporation.
4.2 APPOINTMENT AND TERM OF OFFICE.
The officers of the corporation shall be appointed by the Board of
Directors for a term as determined by the Board of Directors. If no term is
specified, they shall hold office until the first meeting of the directors held
after the next annual meeting of shareholders. If the appointment of officers is
not made at such meeting, such appointment shall be made as soon thereafter as
is convenient. Each officer shall hold office until his successor has been duly
appointed and qualified, until his death, or until he resigns or has been
removed in the manner provided in Section 4.3 of this Article 4.
The designation of a specified term does not grant to the officer any
contract rights, and the Board of Directors can remove the officer at any time
prior to the termination of such term.
Appointment of an officer shall not of itself create any contract rights.
4.3 REMOVAL OF OFFICERS.
Any officer may be removed by the Board of Directors at any time, with or
without cause. Such removal shall be without prejudice to the contract rights,
if any, of the person so removed.
4.4 PRESIDENT.
The president shall be the principal executive officer of the corporation
and, subject to the control of the Board of Directors, shall generally supervise
and control all of the business and affairs of the corporation. He shall, when
present, preside at all meetings of the shareholders. He may sign, with the
secretary or any other proper officer of the corporation thereunto duly
authorized by the Board of Directors, certificates for shares of the corporation
and deeds, mortgages, bonds, contracts, or other instruments which the Board Of
Directors has authorized to be executed, except in cases where the signing and
execution thereof shall be expressly delegated by the Board of Directors or by
these Bylaws to some other officer or agent of the corporation, or shall be
required by law to be otherwise signed or executed. The president shall
generally perform all duties incident to the office of president and such other
duties as may be prescribed by the Board of Directors from time to time.
4.5 VICE-PRESIDENT.
If appointed, in the absence of the president or in the event of the
president's death, inability or refusal to act, the vice-president (or in the
event there be more than one vice-president, the vice-presidents in the order
designated at the time of their election, or in the absence of any designation,
then in the order of their appointment) shall perform the duties of the
president, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the president. If there is no vice-president, then the
treasurer shall perform such duties of the president. Any vice-president may
sign, wit! the secretary or an assistant secretary, certificates for shares of
the corporation the issuance of which have been authorized by resolution of the
Board of Directors. A vice-president shall perform such other duties as from
time to time may be assigned to him by the president or by the Board of
Directors.
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4.6 SECRETARY.
The secretary shall (a) keep the minutes of the proceedings of the
shareholders and of the Board of Directors in one or more books provided for
that purpose; (b) see that all notices are duly given in accordance with the
provisions of these Bylaws or as required by law; (c) be custodian of the
corporate records and of any seal of the corporation and, if there is a seal of
the corporation, see that it is affixed to all documents, the execution of which
on behalf of the corporation under seal is duly authorized; (d) when requested
or required, authenticate any records of the corporation; (e) keep a register of
the post office address of each shareholder, as provided to the secretary by the
shareholders; (f) sign with the president, or a vice-resident, certificates for
shares of the corporation, the issuance of which has been authorized by
resolution of the Board of Directors; (g) have general charge of the stock
transfer books of the corporation; and (h) generally perform all duties incident
to the office of secretary and such other duties as from time to time may be
assigned to him by the president or by the Board of Directors.
4.7 TREASURER.
The treasurer shall (a) have charge and custody of and be responsible for
all funds and securities of the corporation; (b) receive and give receipts for
moneys due and payable to the corporation from any source whatsoever, and
deposit all such moneys in the name of the corporation in such banks, trust
companies, or other depositaries as may be selected by the Board of Directors;
and (c) generally perform all of the duties incident to the office of treasurer
and such other duties as from time to time may be assigned to him by the
president or by the Board of Directors.
If required by the Board of Directors, the treasurer shall give a bond for
the faithful discharge of his duties in such sum and with such surety or
sureties as the Board of Directors shall determine.
4.8 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS.
The assistant secretaries, when authorized by the Board of Directors, may
sign with the president, or a vice-president, certificates for shares of the
corporation, the issuance of which has been authorized by a resolution of the
Board of Directors. The assistant treasurers shall respectively, if required by
the Board of Directors, give bonds for the faithful discharge of their duties in
such sums and with such sureties as the Board of Directors shall determine.
The assistant secretaries and assistant treasurers, generally, shall
perform such duties as may be assigned to them by the secretary or the
treasurer, respectively, or by the president or the Board of Directors.
4.9 SALARIES.
The salaries of the officers, if any, shall be fixed from time to time by
the Board of Directors.
ARTICLE 5.
INDEMNIFICATION OF DIRECTORS, OFFICERS, AGENTS, AND EMPLOYEES
5.1 INDEMNIFICATION OF OFFICERS, DIRECTORS EMPLOYEES AND AGENTS.
Unless otherwise provided in the Articles of Incorporation, the
corporation shall indemnify any individual made a party to a proceeding because
he is or was an officer, director, employee or agent of the corporation against
liability incurred in the proceeding, all pursuant to and consistent with the
provisions of NRS 78.751, as amended from time to time.
5.2 ADVANCE EXPENSES FOR OFFICERS AND DIRECTORS.
The expenses of officers and directors incurred in defending a civil or
criminal action, suit or proceeding shall be paid by the corporation as they are
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incurred and in advance of the final disposition of the action, suit or
proceeding, but only after receipt by the corporation of an undertaking by or on
behalf of the officer or director on terms set by the Board of Directors, to
repay the expenses advanced if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified by the
corporation.
5.3 SCOPE OF INDEMNIFICATION.
The indemnification permitted herein is intended to be to the fullest
extent permissible under the laws of the State of Nevada, and any amendments
thereto.
ARTICLE 6.
CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.1 CERTIFICATES FOR SHARES.
(a) CONTENT - Certificates representing shares of the corporation shall at
minimum, state on their face the name of the issuing corporation; that the
corporation is formed under the laws of the State of Nevada; the name of the
person to whom issued; the certificate number; class and par value of shares;
and the designation of the series, if any, the certificate represents. The form
of the certificate shall be as determined by the Board of Directors. Such
certificates shall be signed (either manually or by facsimile) by the president
or a vice-president and by the secretary or an assistant secretary and may be
sealed with a corporate seal or a facsimile thereof. Each certificate for shares
shall be consecutively numbered or otherwise identified.
(b) LEGEND AS TO CLASS OR SERIES - If the corporation is authorized to
issue different classes of shares or different series within a class, the
designations, relative rights, preferences, and limitations applicable to each
class and the variations in rights, preferences, and limitations determined for
each series (and the authority of the Board of Directors to determine variations
for future series) must be summarized on the front or back of the certificate
indicating that the corporation will furnish the shareholder this information on
request in writing and without charge.
(c) SHAREHOLDER LIST - The name and address of the person to whom the
shares are issued, with the number of shares and date of issue, shall be entered
on the stock transfer books of the corporation.
(d) TRANSFERRING SHARES - All certificates surrendered to the corporation
for transfer shall be canceled and no new certificate shall be issued until the
former certificate for a like number of shares shall have been surrendered and
canceled, except that in case of a lost, destroyed, or mutilated certificate, a
new one may be issued therefore upon such terms as the Board of Directors may
prescribe, including indemnification of the corporation and bond requirements.
6.2 REGISTRATION OF THE TRANSFER OF SHARES.
Registration of the transfer of shares of the corporation shall be made
only on the stock transfer books of the corporation. In order to register a
transfer, the record owner shall surrender the share certificate to the
corporation for cancellation, properly endorsed by the appropriate person or
persons with reasonable assurances that the endorsements are genuine and
effective. Unless the corporation has established a procedure by which a
beneficial owner of shares held by a nominee is to be recognized by the
corporation as the owner, the person in whose name shares stand on the books of
the corporation shall be deemed by the corporation to be the owner thereof for
all purposes.
6.3 RESTRICTIONS ON TRANSFER OF SHARES PERMITTED.
The Board of Directors may impose restrictions on the transfer or
registration of transfer of shares, including any security convertible into, or
carrying a right to subscribe for or acquire shares. A restriction does not
affect shares issued before the restriction was adopted unless the holders of
the shares are parties to the restriction agreement or voted in favor of the
restriction.
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A restriction on the transfer or registration of transfer of shares may be
authorized:
(1) to maintain the corporation's status when it is dependent on the
number or identity of its shareholders;
(2) to preserve exemptions under federal or state securities law; or
(3) for any other reasonable purpose.
A restriction on the transfer or registration of transfer of shares may:
(1) obligate the shareholder first to offer the corporation or other
persons (separately, consecutively, or simultaneously) an opportunity to acquire
the restricted shares;
(2) obligate the corporation or other persons (separately, consecutively,
or simultaneously) to acquire the restricted shares;
(3) require the corporation, the holders or any class of its shares, or
another person to approve the transfer of the restricted shares, if the
requirement is not manifestly unreasonable; or
(4) prohibit the transfer of the restricted shares to designated persons
or classes of persons, if the prohibition is not manifestly unreasonable.
A restriction on the transfer or registration of transfer of share; is
valid and enforceable against the holder or a transferee of the holder if the
restriction is authorized by this Section 6.3 and its existence is noted
conspicuously on the front or back of the certificate. Unless so noted, a
restriction is not enforceable against a person without knowledge of the
restriction.
6.4 ACQUISITION OF SHARES.
The corporation may acquire its own shares and unless otherwise provided
in the Articles of Incorporation, the shares so acquired constitute authorized
but unissued shares.
If the Articles of Incorporation prohibit the reissue of shares acquired
by the corporation, the number of authorized shares is reducer by the number of
shares acquired, effective upon amendment of the Articles of Incorporation,
which amendment shall be adopted by the shareholders, or the Board of Directors
without shareholder action (it permitted by the Act). The amendment must be
delivered to the Secretary of State and must set forth:
(1) the name of the corporation;
(2) the reduction in the number of authorized shares, itemized by class
and series; and
(3) the total number of authorized shares, itemized by class and series,
remaining after reduction of the shares.
ARTICLE 7.
DISTRIBUTIONS
7.1 DISTRIBUTIONS.
The Board of Directors may authorize, and the corporation may make,
distributions (including dividends on its outstanding shares) in the manner and
upon the terms and conditions provided by law.
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ARTICLE 8.
CORPORATE SEAL
8.1 CORPORATE SEAL.
The Board of Directors may adopt a corporate seal which may be circular in
form and have inscribed thereon any designation, including the name of the
corporation, Nevada as the state of incorporation, and the words `"Corporate
Seal."
ARTICLE 9.
EMERGENCY BYLAWS
9.1 EMERGENCY BYLAWS.
Unless the Articles of Incorporation provide otherwise, the following
provisions shall be effective during an emergency, which is defined as a time
when a quorum of the corporation's directors cannot be readily assembled because
of some catastrophic event.
During such emergency:
(a) NOTICE OF BOARD MEETINGS - Any one member of the Board of Directors or
any one of the following officers president, any vice-president, secretary, or
treasurer, may call a meeting of the Board of Directors. Notice of such meeting
need be given only to those directors whom it is practicable to reach, and may
be given in any practical manner, including by publication and radio. Such
notice shall be given at least six hours prior to commencement of the meeting.
(b) TEMPORARY DIRECTORS AND QUORUM - One or more officers of the
corporation present at the emergency board meeting, as is necessary to achieve a
quorum, shall be considered to be directors for the meeting, and shall so serve
in order of rank, and within the same rank, in order of seniority. In the event
that less than a quorum (as determined by Section 3.6 of Article 3) of the
directors are present (including any officers who are to serve as directors for
the meeting), those directors present (including the officers serving as
directors) shall constitute a quorum.
(c) ACTIONS PERMITTED TO BE TAKEN - The Board of Directors, as constituted
in paragraph (b), and after notice as set forth in paragraph (a), may:
(1) OFFICERS' POWERS - Prescribe emergency powers to any officer of the
corporation;
(2) DELEGATION OF ANY POWER - Delegate to any officer or director, any of
the powers of the Board of Directors;
(3) LINES OF SUCCESSION - Designate lines of succession of officers and
agents, in the event that any of them are unable to discharge their duties;
(4) RELOCATE PRINCIPAL PLACE OF BUSINESS - Relocate the principal place of
business, or designate successive or simultaneous principal places of business;
(5) ALL OTHER ACTION - Take any other action which is convenient, helpful,
or necessary to carry on the business of the corporation.
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ARTICLE 10.
AMENDMENTS
10.1 AMENDMENTS
The Board of Directors may amend or repeal the corporation's Bylaws
unless:
(1) the Articles of Incorporation or the Act reserve this power
exclusively to the shareholders, in whole or part; or
(2) the shareholders, in adopting, amending, or repealing a particular
Bylaw, provide expressly that the Board of Directors may not amend or repeal
that Bylaw; or
(3) the Bylaw either establishes, amends or deletes a "supermajority"
shareholder quorum or voting requirement, as defined in Section 2.8 of Article
2.
Any amendment which changes the voting or quorum requirement for the Board
of Directors must comply with Section 3.8 of Article 3, and for the
shareholders, must comply with Section 2.8 of Article 2.
The corporation's shareholders may also amend or repeal corporation's
Bylaws at any meeting held pursuant to Article 2.
CERTIFICATE OF THE SECRETARY
I hereby certify that I am the Secretary of GOLF INNOVATIONS CORP. and
that the foregoing Bylaws, consisting of twenty-eight (28) pages, constitutes
the Code of GOLF INNOVATIONS CORP. as duly adopted by the Board of directors of
the corporation on this [30th] day of [September], 19[97].
IN WITNESS WHEREOF, I have hereunto subscribed my name this [30th] day of
[September], 19[97].
/s/ Robert M. Gelfand
--------------------------------
Secretary
EXHIBIT 10.01
AGREEMENT
THIS AGREEMENT, made and entered into as of this 8th day of December,
1998, by and between THE CHAMPIONSHIP COMMITTEE MERCHANDISING LIMITED, a
corporation organized and existing under the laws of England and having an
office at The Pier House, Strand on the Green, Chiswick, London, W4 3NN, England
(hereinafter referred to as "Licensor") and AVID SPORTSWEAR INC. of 17909 South
Adria Maru Lane, Carson, California 90746 (hereinafter referred to as
"Company").
WITNESSETH:
WHEREAS, the British Open Golf Championship is a sporting event organized
by The Royal & Ancient Golf Club of St. Andrews, Scotland (hereinafter referred
to as "The Royal & Ancient"), the name and identification of which has
commercial value;
WHEREAS, The Royal & Ancient has granted to Licensor the exclusive right
and license to supply, sell, advertise and promote goods, merchandise and
services of any description with the use of the British Open Identification (as
defined hereinbelow) and to so authorize others;
WHEREAS, Company so desires to obtain the right to use the British Open
Identification within the Contract Territory (as hereinafter defined) on and in
connection with the manufacture, promotion and sale of high-quality products, as
hereinbelow described; and
WHEREAS, Licensor is willing to grant to Company such a license, upon the
terms and conditions hereinafter contained.
NOW, THEREFORE, for and in consideration of the premises and of the mutual
promises and conditions herein contained, the parties do hereby agree as
follows:
1. DEFINITIONS. As used herein, the following terms shall be defined as
(a) "British Open Identification" as used herein shall mean the names
"British Open" and "British Open Golf Championship," together with the British
Open Trophy Logo (in the form shown as Exhibit A attached hereto and made a part
hereof), and any reference thereto as may be approved in advance by Licensor,
together with the "Trademarks" as defined in Paragraph 15(a) below.
(b) "Products" as used herein shall mean men's apparel consisting of
shirts, sweaters, casual slacks, jackets and other items of outerwear
(manufactured of fleece and micro-fiber).
(c) "Licensed Products" as used herein shall mean all Products which are
advertised, promoted and sold by or for Company with the use of the British Open
Identification.
(d) "Contract Period" shall mean that period of seven (7) Contract Years
commencing January 1, 1999, and continuing until June 30, 2006.
(e) "Contract Year" shall mean a period of twelve (12) successive months
commencing on any 1st day of July during the Contract Period, except that the
First Contract Year shall commence January 1, 1999 and shall continue until June
30, 2000.
(f) "Contract Territory" shall mean the United States of America, its
territories and possessions.
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2. LICENSOR WARRANTY. Licensor hereby warrants that it has no commitment,
express or implied, with any other person, firm or corporation which is in
conflict with the terms, conditions and understandings contained in this
Agreement. Licensor warrants that it has all of the rights necessary to enter
into this Agreement and to make the grant therein contained.
3. GRANT. (a) Subject to all of the terms and conditions of this
Agreement, Licensor hereby grants to Company during the Contract Period and any
extension thereof, the sole and exclusive right and license to use the British
Open Identification throughout the Contract Territory in connection with
manufacture, advertisement, distribution and sale of Licensed Products, and
Company does hereby agree to manufacture, advertise, distribute and sell
Licensed Products and to use the British Open Identification in connection
therewith. It is expressly understood and agreed by Company that Company may use
the British Open Identification only in connection with Licensed Products and
only as specifically permitted by the terms hereof.
(b) Company agrees that Licensed Products distributed and sold by Company
pursuant to this agreement shall at all times be identified as a part of the
"British Open" collection of Licensed Products. Company shall have the right to
use the name "The Royal & Ancient Golf Club of St. Andrews" only in a
subordinate manner (of smaller type and lessor prominence than the name "British
Open Collection"), and such name shall be used only to indicate that The Royal &
Ancient has granted its approval of Licensed Products. Company agrees that a
notice to such effect, stating that each Licensed Product is "Authorized by the
Championship Committee of The Royal & Ancient Golf Club of St. Andrews,
Proprietor of the British Open Golf Championship" shall be printed irremovably
upon the container or packaging (or attached by means of hangtag) to all
Licensed Products sold by Company during the Contract Period.
(c) Company shall have the right to make arrangements for the subcontract
manufacture, finishing, packaging and storing of Licensed Products, provided
that Company shall ensure that no such subcontractor shall take any action
contrary to or inconsistent with the terms and conditions set forth in this
Agreement, and further provided that no company name, trade name or brand name
other than Company's may be used on or in connection with Licensed Products.
4. DISTRIBUTION. Company hereby acknowledges and agrees that the foregoing
rights to advertise, distribute and sell Licensed Products shall be limited to
the distribution and sale thereof only through men's specialty stores and the
menswear departments of department stores, and Company agrees that Company shall
not distribute or sell Licensed Products through discount stores or mass market
retail chains. For these purposes "mass market retail chains shall mean general
merchandise retailers such as, for example, Sears, JC Penny, Kmart and Wal-Mart
but not including department store chains such as, for example, Federated.
5. MARKETING EFFORTS. (a) Company agrees that, during the Contract Period,
it will use its reasonable efforts to promote the sale of Licensed Products
throughout the Contract Territory.
(b) During the Contract Period, and within the Contract Territory, Company
shall not be prohibited from producing, advertising, distributing and selling
any other items of merchandise (of the same generic nature as the Licensed
Products) provided that such other items of merchandise (i) are not distributed
and sold with the use of any names, logos or trademarks similar to or suggestive
of the British Open Identification, and (ii) such other items of merchandise are
not (but for the non-use of the British Open Identification) identical to
Company's collection of Licensed Products.
6. SALES OUTSIDE CONTRACT TERRITORY. Company agrees that it will not
knowingly sell any Licensed Products intended for shipment outside the Contract
Territory, and that it will require each of its customers to agree that they
will not reship Licensed Products outside the Contract Territory. If any of
Company's customers shall, notwithstanding its agreement to the contrary, reship
Licensed Products to markets outside the Contract Territory, Company agrees that
it will either immediately discontinue selling Licensed Products to such
customer or, if Licensor approves, shall only make additional sales to such
customer upon the condition that adequate assurance is given that Licensed
Products will not be reshipped outside the Contract Territory.
<PAGE>
7. GUARANTEED MINIMUM ANNUAL ROYALTY. As compensation to Licensor for the
grant to Company of the above rights, Company shall pay to Licensor, with
respect to each Contract Year during the Contract Period, the following
guaranteed minimum annual royalties:
CONTRACT YEAR GUARANTEED ROYALTY
------------- ------------------
First US$100,000
Second US$125,000
Third US$150,000
Fourth US$175,000
Fifth US$200,000
Sixth US$200,000
Seventh US$200,000
The guaranteed minimum royalty for the First Contract Year shall be payable in
four equal installments due on or before the first day of January, April July
and October, 1999 The guaranteed minimum royalty for each Contract Year
beginning with the Second Contract Year shall be payable in four equal
installments due on or before the first day of July, October, January and April
during the relevant Contract Year.
8. EARNED ROYALTY. (a) Company shall pay to Licensor an earned royalty
which shall consist of a percentage of the total "Net Wholesale Sales" (defined
below) of all Licensed Products sold hereunder by Company during each Contract
Year. Such earned royalty shall be computed at the rate of five percent (5%)
computed on the basis of the total Net Wholesale Sales of all Licensed-Products;
provided however, that the full amount of the guaranteed minimum annual
non-refundable royalty payable to Licensor by Company as described in Paragraph
7 above which is applicable to the Contract Year concerned shall first be
credited against the payment of any earned royalty with respect to sales of
Licensed Products made during such Contract Year. No part of any guaranteed
minimum annual royalty shall be carried forward (or back) as a credit from one
Contract Year to another.
(b) For the purposes hereof, "Net Wholesale Sales" shall mean Company's
invoiced wholesale billing price to its customers or distributors, less only
shipping charges, discounts actually given, duties, insurance, sales taxes,
value-added taxes, and credits allowed for returned or defective merchandise
(but no reserve for returns). All royalties due Licensor shall accrue upon the
sale of the Licensed Products regardless of the time of collection by Company.
Licensed Products shall be considered "sold" as of the date on which such
Licensed Products are invoiced, shipped or paid for, whichever first occurs. If
sales are made to any party affiliated or related to Company, royalties shall be
computed based upon the regular price of such Licensed Products charged to
unrelated third parties. Company shall have the right to deduct uncollectable
accounts from "Net Wholesale Sales" provided that such deduction shall not
(during any Contract Year) exceed five percent (5%) of sales.
(c) Earned royalty shall be payable within forty-five (45) days following
the end of each calendar year quarter with respect to sales made during such
calendar year quarter.
9. SALES REPORTS. Company shall supply Licensor with a sales report with
respect to all sales of Licensed Products sold during each calendar year
quarter, said sales reports to be delivered to Licensor within forty-five (45)
days following the conclusion of each calendar year quarter. Such sales reports
shall indicate, separately for each Product category, the number of each item of
Licensed Products sold during each month, the price at which such items of
merchandise were sold, and the total gross monthly sales volume of each such
item. Company shall keep and maintain accurate books and records with respect to
sales of Licensed Products during each calendar year quarter, and the
computation of royalties with respect thereto, which books and records shall be
available for inspection and copying by Licensor or its representative upon
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reasonable advance notice during business hours prior to the conclusion of a one
( 1) year period following the termination of the relevant Contract Year.
10. PAYMENTS. Unless and until Licensor advises Company to the contrary,
all payments and all sales reports to be submitted by Company to Licensor shall
be made as hereinafter set forth in this paragraph. Payments to Licensor
hereunder shall be made by way of check payable to the order of Licensor's
authorized agent, "International Management, Inc." and mailed to Licensor's
authorized agent at the following address:
International Management, Inc.
IMC Center
1360 East 9th Street
Cleveland, Ohio 44114
Attention: Treasurer
Past due payments hereunder shall bear interest at the rate of (i) one and
one-half percent ( 1.5%) per month, or (ii) the maximum interest rate
permissible under law, whichever is less.
11. APPROVAL OF LICENSED PRODUCTS. (a) Company agrees that Licensor shall
have the right to approve or disapprove in advance of sale the quality, style,
colors, appearance, material and workmanship of all Licensed Products and the
packaging therefor, and to approve or disapprove any and all endorsements,
trademarks, trade names, designs and logos (whether included in the British Open
Identification or not) used in connection with Licensed Products. Company shall
not distribute or sell any such Licensed Product which has not been approved by
Licensor or which is, at any time, disapproved by Licensor in accordance with
the provisions hereinbelow.
(b) In order to accomplish the purposes of subparagraph (a) immediately
above, before selling or distributing any Licensed Products hereunder, Company
shall submit to Licensor, at the address set forth in Paragraph 14 below, for
its examination and approval or disapproval, representative samples of each
style and design of each proposed product *my one color version for each sample)
Company desires to sell using the British Open Identification. Licensor agrees
that it will promptly examine and either approve or disapprove such samples, and
that Licensor will promptly notify Company of its approval or disapproval.
Licensor agrees that it will not unreasonably disapprove any item and, if any is
disapproved, that Company will be advised of the specific reasons in each case.
Licensor agrees that any item submitted for approval hereunder at the address
set forth below may be deemed by Company to have been approved hereunder if the
same is not disapproved in writing within ten (10) business days after receipt
thereof.
12. ADVERTISING. (a) Company agrees that Licensor shall have the right to
approve or disapprove in advance the contents, appearance and presentation of
any and all advertising materials which incorporate the British Open
Identification or which make reference in any way to The Royal & Ancient.
Company agrees that * will not produce, publish or in any manner distribute any
such advertising materials which have not been approved in advance by Licensor
or which are, at any time, disapproved by Licensor in accordance with the
provisions hereinbelow.
(b) Before producing, publishing or distributing any advertising materials
hereunder, Company shall submit to Licensor, at the address set forth in
Paragraph 14 below, for its examination and approval or disapproval, a sample
thereof together with text, coloring and a copy of any photograph proposed to be
used. Licensor agrees that * will promptly examine and either approve or
disapprove such sample advertising material, and that Licensor will promptly
notify Company of its approval or disapproval. Licensor agrees that it will not
unreasonably disapprove any sample advertising and, if any is disapproved, that
Company will be advised of the specific reasons in each case. Licensor agrees
that any item of sample advertising material submitted for approval hereunder at
the address set forth below may be deemed by Company to have been approved
hereunder if the same is not disapproved in writing within ten (10) business
days after receipt thereof.
(c) Licensor agrees to cooperate with Company to enable Company to take
photographs of the clubhouse, grounds and facilities of The Royal & Ancient and
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of the British Open Golf Championship held during the Contract Period, it being
understood that such photography shall be scheduled and conducted at times and
places which are both reasonably convenient to the members and staff of The
Royal & Ancient and which do not interfere with the conduct of the British Open
Golf Championship.
13. GOLFER ENDORSEMENTS. Company understands that the name, photo and
likeness of any golfer who participates in the British Open Golf Championship
may not be used in advertising for Licensed Products in any way which indicates
or suggests that such golfer has endorsed or approved Licensed Products unless
Company shall first obtain the express written authorization from such golfer.
14. SUBMISSIONS AND NOTICES. Any notices required or permitted hereunder
shall be considered as duly made if delivered by hand or certified mail, return
receipt requested, to the party for which intended at the following address
(which may be modified from time to time by any party upon prior written notice
to the other party hereto):
TO LICENSOR:
The Championship Committee Merchandising
Limited
c/o International Management Group (UK) Ltd.
The Pier House
Strand on the Green
Chiswick
London, W4 3NN, England
Attention: Tony Gadsby Peet
and a copy thereof to:
International Management, Inc. IMG Center
1360 East 9th Street
Cleveland, Ohio 44114-1782
Attention: Mark H. McCormack
TO COMPANY:
Avid Sportswear Inc.:
17909 South Adria Maru Lane
Carson, California 90746
Attention: David E. Roderick
AND A COPY THEREOF TO:
Lido Capital Corporation
1133 Fourth Street
Sarasota, Florida 34236
Attention: Earl Ingarfield
AND A COPY THEREOF TO:
Jeffrey A. Abrams
Dann Pecar Newman & Kleiman
One American Square Suite 2300
Box 82008
Indianapolis, Indiana 46282
15. TRADEMARKS. (a) Licensor agrees to exercise diligent efforts to obtain
registration for the names "British Open" and/or "British Open Golf" (the
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"Trademarks") in those trademark classes which relate to Licensed Products in
the Contract Territory. Company understands that Licensor cannot guarantee that
any or all of such marks will finally be registered in the relevant trademark
class in the Contract Territory, but Licensor agrees to use it!; diligent
efforts to attempt to obtain such registrations, and Company agrees to cooperate
with Licensor in this regard (for example, by providing Licensor with samples of
advertising and promotional material which reflects use of the trademarks). If
for any reason Licensor shall be unable to obtain any such registration,
Licensor agrees to so notify Company in writing.
(b) Upon the registration of any of the above-described marks in the name
of Licensor, Licensor agrees to grant to Company a license for the use of such
registered trademarks, which license shall be co-extensive and co-terminus with
the grant set forth herein, and which will require no increase in compensation
payable hereunder.
(c) Company agrees that it will not, during the Contract Period, sanction
any other party to use any mark identical with or confusingly similar to any
part of the British Open Identification, except to the extent permitted by the
license herein granted.
(d) Except as may be provided herein, Company agrees that nothing herein
shall give to Company any right, title or interest in the British Open
Identification (except the licensed rights in accordance with this Agreement),
that each and every part of the British Open Identification is, and is to be,
the sole property of Licensor or The Royal & Ancient and that any and all use by
Company of any part of the British Open Identification, and the goodwill arising
therefrom, shall inure to the benefit of Licensor.
(e) Company agrees that it will not, during the Contract Period, file any
application for any mark or obtain or attempt to obtain ownership of any mark or
trade name, in any country of the world, which refers to or is suggestive of the
names "The Royal & Ancient Golf Club," the names "British Open" or "British Open
Golf," or any other part of the British Open Identification or any mark design
or logo intended to identify products or services endorsed by Licensor or The
Royal & Ancient.
(f) At the request of Licensor, Company shall execute any documents
reasonably deemed necessary or desirable by Licensor to acknowledge the license
herein set forth.
16. TRADEMARK NOTICES. Company shall cause to be imprinted irremovably and
legibly on each Licensed Product manufactured, distributed or sold under this
Agreement and on all material used in connection therewith, including, but not
limited to, advertising, promotional, packaging and wrapping material and any
other such material wherein the Trademarks appear, the designation R or TM, as
the Licensor deems appropriate to protect such trademark (and as is in
compliance with relevant trademark law). Company shall include on packaging
materials or a hangtag for each Licensed Product a statement to the effect
"Official Product of the British Open Golf Championship" or other similar
statement approved by Licensor.
17. INFRINGEMENT OF THE BRITISH OPEN IDENTIFICATION. (a) Licensor agrees
to use its best efforts to reduce or, if possible, eliminate any infringement of
the British Open Identification, and for this purpose Company agrees to notify
Licensor in writing of any infringement or imitations by others of the British
Open Identification on articles similar to the Licensed Products if and when
such become known to Company. Licensor shall have the sole right to determine
whether or not any action shall be taken on account of such infringements or
imitations, and Company agrees to assist Licensor, to the extent necessary, and
at Licensor's request and cost, in Licensor's efforts to eliminate any such
infringement. Company shall not institute any suit or take any action on account
of any such infringements or imitations except with the prior written consent of
Licensor to do so. For these purposes, a "corresponding reduction" shall be
determined by comparing the amount the amount of sales after the commencement of
the infringement in comparison to the amount of sales prior to the infringement.
For these purposes, the parties shall the First Contract Year assume anticipated
Net Wholesale Sales of $2,000,000 (only if infringement occurs during the First
Contract Year). During the Second and each later Contract Year, the calculation
shall be made based upon Company's actual sales.
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(b) If there should occur any infringement of any one or more of the
Trademarks, Licensor and Company agree to consult with each other and with
Licensor's attorneys in order to determine what remedies, if any, may be
available to reduce or eliminate such infringement. If such remedies exist, and
if in the opinion of Licensor they are commercially and financially reasonable
under the circumstances, Licensor will instruct its attorneys to institute such
action.
(c) If there should occur any infringement of any one or more of the
Trademarks, and if action undertaken by Licensor to prevent such infringement
does not substantially reduce or eliminate such infringement within a reasonable
period of time, then Licensor and Company shall agree in good faith upon a
corresponding reduction in the guaranteed minimum annual royalty otherwise
payable by Company with respect to the period that such infringement continues.
18. TRADEMARK INDEMNITY. (a) Licensor agrees to protect, indemnify and
save harmless Company from and against any and all expenses, damages, claims,
suits, actions, Judgments and costs whatsoever (including reasonable attorneys'
fees of attorneys hired by Licensor to defend hereunder, whether or not
litigation is actually commenced), but excluding lost profits, arising out of,
or in any way connected with, any claim for trademark infringement, passing-off
or unfair competition on account of Company's use of the British Open
Identification in accordance with the terms hereof Company shall, at Licensor's
expense, cooperate with and assist Licensor's efforts to have such claim
withdrawn, settled or defended, including, at Licensor's request, providing
Licensor with evidence of the Company's use of the British Open Identification
in advertising, labels, packaging and otherwise. Company shall have the right,
at its own cost and expense, to retain its own attorneys in connection with any
of the foregoing matters.
(b) If any such claim, as aforesaid, is disposed of by an agreed
suspension in the sales of any one or more items of Licensed Products or
modification of the elements of the British Open Identification which Company
shall be permitted to use (or if any court shall direct such suspension or
modification), then Company shall, upon notice from Licensor to that effect, so
suspend its sales of the affected Licensed Products or modify its use of the
British Open Identification on Licensed Products. Licensor shall not agree to
any such suspension without first consulting with Company and attempting to
secure an adequate sell-off period for inventory on hand and in process.
(c) If Company is required to so suspend or limit its sales of Licensed
Products, or modify its, use of the British Open Identification, then Company
shall consult in advance with Licensor and shall institute such reasonable steps
as Licensor may request to minimize the cost and expense of such suspension,
limitation or modification. If such suspension or modification shall
unreasonably interfere with Company's sales efforts with respect to Licensed
Products, then Company may, by written notice to Licensor, terminate the
Contract Period of this agreement.
19. PREMIUMS. Company agrees that Licensed Products will not be sold or
otherwise supplied to any third party if such Licensed Products are intended to
be given away free of charge or sold at a substantial discount by such third
party as a part of any plan intended to promote the products, services or
business of such third party. Further, Company agrees that no item of
merchandise shall be given away free of charge or sold at a substantial discount
as part of any sales promotion plan intended to increase sales of Licensed
Products. If Company wishes to sell or supply Licensed Products for use by any
third party as a premium, as aforesaid, or if Company wishes to obtain the right
to distribute premium items in connection with the promotion of Licensed
Products, Company shall so notify Licensor and shall disclose to Licensor the
nature of such proposed premium arrangement, and in such event Licensor agrees
to consider such proposal in good faith taking into account all of the
circumstances, and if, in the opinion of Licensor, no harm will be done to the
British Open Identification or the reputation of The Royal & Ancient, Licensor
agrees to waive, on a case-by-case basis, this prohibition on premium programs.
20. PRODUCT LIABILITY INDEMNITY. Company agrees to protect, indemnify and
save harmless The Royal & Ancient, Licensor and Licensor's authorized agent, and
any of them, from and against any and all expenses, damages, claims, suits,
actions, judgments and costs whatsoever, including reasonable attorneys' fees,
arising out of, or in any way connected with, any claim or action for person
injury, death or other cause of action involving alleged defects in Company's
Products, and any breach of any statutory obligation, and any infringement by
Company of the patent rights, design rights, copyrights, trademarks or other
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proprietary rights of any third party (not including the licensed rights to the
use of the British Open Identification herein granted to Company) provided that
Company shall be given prompt notice of any such action or claim.
21. LIABILITY INSURANCE. Company agrees to provide and maintain, at its
own expense, product liability insurance with limits of no less than US$
1,000,000 and within thirty (30) days from the date hereof Company shall submit
to Licensor a fully paid policy or certificate of insurance naming Licensor and
The Royal & Ancient as additional insured parties, and requiring that the
insurer shall not terminate or materially modify such policy without written
notice to Licensor at least thirty (30) days in advance thereof.
22. BRITISH OPEN IDENTIFICATION AFTER TERMINATION. It is understood and
agreed by Company that from and after the termination of the Contract Period all
of the rights of Company to the use of the British Open Identification shall,
except as hereinafter expressly provided in the paragraph next following, cease
absolutely, and Company shall not thereafter manufacture or sell any item
whatsoever with the use of the British Open Identification, nor shall Company
publish further or additional quantities of any advertising or promotional
material which incorporates the British Open Identification, it being understood
that Company shall have the right to deplete its inventory of sales brochures
and other similar material which incorporate the British Open Identification
which were printed prior to the date of termination.
23. INVENTORY OF LICENSED PRODUCTS ON TERMINATION. Any Licensed Products
that may have been manufactured by or for Company prior to the- termination of
the Contract Period, or which were in the process of manufacture by Company, or
were required to fill purchase orders from customers accepted by Company on or
prior to date of termination, may be sold by Company during the six (6) month
period or normal selling season, whichever is longer, next following the date of
termination, provided that:
(i) Company is not in default of any term or condition of this Agreement;
(ii) the quantity of Licensed Products in inventory at the time of
termination is not in excess of a reasonable quantity taking into account
Company's past sales of Licensed Products;
(iii) Company shall furnish to Licensor within thirty (30) days after the
effective date of the termination of the Contract Period a written statement of
the number and description of such Licensed Products in inventory as of the
effective date of termination;
(iv) Company shall continue to pay to Licensor with respect to such sales
an earned royalty at the rate specified in Paragraph 8 above; and
(v) earned royalty amounts payable pursuant to this paragraph shall be
paid within thirty (30) days following the end of said sell-off period.
24. TERMINATION FOR DEFAULT. If either party at any time during the period
of this Agreement shall (a) fail to make any payment of any sum of money herein
specified to be made, or (b) fail to observe or perform any of the covenants,
agreements, or obligations hereunder (other than the payment of money), the
non-defaulting party may terminate this Agreement as follows: as to (a) if such
payment is not made within ten (10) days after the defaulting party shall have
received written notice of such failure to make payment, or as to (b) if such
default is not cured within thirty (30) days after the defaulting party shall
have received written notice specifying such default; provided, however, that if
such default cannot reasonably be remedied within thirty (30) days, then the
defaulting party shall have so much time as is reasonably necessary to effect
such remedy providing the defaulting party proceeds in good faith and with
diligence and continuity to remedy the default. Failure to terminate this
Agreement pursuant to this section shall not effect or constitute a waiver of
any remedies the non-defaulting party would have been entitled to demand in the
absence of this section, whether by way of damages, termination or otherwise.
Termination of this Agreement for whatever reason shall be without prejudice to
the rights and liabilities of either party to the other in respect of any matter
arising under this agreement.
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25. EXCLUSIVE REMEDY. Company expressly acknowledges and agrees that in
the event of any default hereunder of any obligation undertaken by Licensor,
and/or any failure or insufficiency of any representation or warranty of
Licensor or the grant of any rights by Licensor hereunder, whether in relation
to matters within the control of Licensor or matters solely within the control
of The Royal & Ancient, Company shall look solely to Licensor for the
satisfaction of any claims, suits, actions, judgments, damages, expenses and
remedies whatsoever, arising out of, or in any way connected with, the subject
matter of this agreement.
26. WAIVER. The failure of either party at any time or times to demand
strict performance by the other of any of the terms, covenants or conditions set
forth herein shall not be construed as a continuing waiver or relinquishment
thereof and each may at any time demand strict and complete performance by the
other of said terms, covenants and conditions.
27. BANKRUPTCY. If Company shall become bankrupt or insolvent, or if
Company's business shall be placed in the hands of a receiver or trustee,
whether by voluntary act of Company or otherwise, the Contract Period shall, at
the option of Licensor, immediately terminate.
28. ASSIGNMENT. This agreement shall bind and inure to the benefit of
Licensor, its successors and assigns. The rights granted Company hereunder shall
be exclusive to it and shall not, without the prior written consent of Licensor
(which consent shall not be withheld capriciously or in bad faith), be
transferred or assigned to any other party. Company shall not, however, be
prohibited from assigning this agreement to any subsidiary of Company or any
company related to or affiliated with Company, provided that Company shall
guarantee the financial obligations of such assignee to Licensor hereunder. In
the event of the merger or consolidation of Company with any other entity which
is not a subsidiary nor a company related to or affiliated with Company, or in
the event Company shall intend to sell, assign or otherwise dispose of its
business related to Licensed Products, Company shall notify Licensor of such
fact within thirty (30) days after the event, and Licensor shall have the right
to terminate the Contract Period by so notifying Company within sixty (60) days
after receiving notice of such merger, consolidation, sale, assignment or
transfer. Licensor agrees, however, that it will exercise this right only for
good and sufficient commercial reasons which relate to the protection of the
reputation, image and good will of Licensor, The Royal & Ancient and the British
Open Golf Championship.
29. SIGNIFICANCE OF HEADINGS. Section headings contained herein are solely
for the purpose of aiding in speedy location of subject matter and are not in
any sense to be given weight in the construction of this Agreement. Accordingly,
in case of any question with respect to the construction of this Agreement, it
is to be construed as though such section headings had been omitted.
30. ENTIRE AGREEMENT. This writing constitutes the entire agreement
between the parties hereof and may not be changed or modified except by a
writing signed by the party or parties to be charged thereby.
31. JOINT VENTURE. This Agreement does not constitute and shall not be
construed as constituting a partnership or joint venture between Licensor and
Company. Neither party shall have any right to obligate or bind the other party
in any manner whatsoever, and nothing herein contained shall give, or is
intended to give, any rights of any kind to any third persons.
32. GOVERNING LAW. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York without regard to conflict of
laws.
33. EXECUTION AND DELIVERY REQUIRED. This instrument when signed by
Company shall be deemed only an application for a license and shall not be
considered to be a binding agreement unless and until signed by all parties
noted at the appropriate place at the conclusion of this instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
THE CHAMPIONSHIP COMMITTEE AVID SPORTSWEAR INC.
MERCHANDISING LIMITED
By: /s/ Tony Gadsby Peet By: /s/ David Roderick
------------------------------ ------------------------------
EXHIBIT 10.02
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD INDUSTRIAL/COMMERICAL SINGLE-TENANT LEASE - GROSS
(DO NOT USE THIS FORM FOR MULTI-TENANT BUILDINGS)
1. BASIC PROVISIONS ("BASIC PROVISIONS")
1.1 PARTIES: This Lease ("LEASE"), dated for reference purposes only,
March 1, 1999, is made by and between F & B Industrial Investments, LLC
("LESSOR") and Avid Sportswear, Inc. a California Corp. ("LESSEE"),
(collectively, the "PARTIES," or individually a "PARTY").
1.2 PREMISES: That certain real property, including all improvements
therein or to be provided by Lessor under the terms of this Lease, and commonly
known as 19143 S. Hamilton Ave. (Gardena P.O. Box) 90248, located in the County
of Los Angeles, State of California, and generally described as (describe
briefly the nature of the property and if applicable the "PROJECT," if the
property is located within a Project) 23,520 S.F. concrete block bldg., located
on approximately, 39,640 S.F. of L.A. County M-2 Zoned Land ("Premises). (See
also Paragraph 2).
1.3 TERM: Five (5) years and 0 months ("ORIGINAL TERM") commencing April
1, 1999 ("COMMENCEMENT DATE") and ending March 31, 2004 ("EXPIRATION DATE").
(See also Paragraph 3).
1.4 EARLY POSSESSION: Mutual Execution of Lease ("EARLY POSSESSION DATE").
(See also Paragraphs 3.2 and 3.3).
1.5 BASE RENT. $10,113.60 per month ("BASE RENT"), payable on the First
day of each month commencing April 1, 1999. (See also Paragraph 4)
[x] if this box is checked, there are provisions in this Lease for the Base Rent
to be adjusted and/or for common area maintenance charges.
1.6 BASE RENT PAID UPON EXECUTION: $10,113.60 as Base Rent for the period
April 1 - April 30, 1999.
1.7 SECURITY DEPOSIT: $ See Addendum #50 ("SECURITY DEPOSIT"). (See also
Paragraph 5).
1.8 AGREED USE: Design, Manufacturing and Distribution of Golf Apparel and
other legal related uses.
1.9 INSURING PARTY: Lessor in the "INSURING PARTY". The Annual "Base
Premium is $ To Be Provided. (See also Paragraph 8).
1.10 REAL ESTATE BROKERS: (See also Paragraph 15).
(a) REPRESENTATION: The following real estate brokers (collectively,
the "BROKERS") and brokerage relationships exist in this transaction (check
applicable boxes):
[x] Gateway Business Properties, David Denitz represents Lessor exclusively
("LESSOR'S BROKER");
[x] CB Richard Ellis, Dean D. Haney represents Lessee exclusively ("LESSEE'S
BROKER"); or
[ ] _____________ represents both Lessor and Lessee ("DUAL AGENCY").
<PAGE>
(b) PAYMENT TO BROKERS: Upon execution and delivery of this Lease by
both Parties, Lessor shall pay to the Broker the fee agreed to in their separate
written agreement (or if there is no such agreement, the sum of Five % of the
total Base Rent for the brokerage services rendered by said Broker).
1.11 GUARANTOR. The obligations of the Lessee under this Lease are to be
guaranteed by Golf Innovations Corporation, a Nevada Corp. ("GUARANTOR"). (See
also Paragraph 37).
1.12 ADDENDA AND EXHIBITS. Attached hereto is an Addendum or Addenda
consisting of Paragraph 50 through 55 and Exhibit A, all of which constitute a
part of this Lease.
2. PREMISES.
2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby leases from
Lessor, the Premises, for the term, at the rental, and upon all of the terms,
covenants and conditions set forth in this Lease. Unless otherwise provided
herein, any statement of size set forth in this Lease, or that may have been
used in calculating rental, is an approximation which the Parties agree is
reasonable and the rental based thereon is not subject to revision whether or
not the actual size is more or less.
2.2 CONDITION. Lessor shall deliver to the Premises broom clean and free
of debris on the Commencement Date or the Early Possession Date, whichever first
occurs ("START Date"), and warrants that the existing electrical, plumbing, fire
sprinkler, lighting, hearing, ventilating and air conditioning systems ("HVAC"),
loading doors, if any, and all other such elements of the building, in the
Premises, other than those constructed by Lessee, shall be in good operating
condition on said date and the surface and structural elements of the roof,
bearing walls and foundation of any buildings on the Premises (the "BUILDING")
shall be free of material defects. If a non-compliance with said warranty exists
as of the Start Date, Lessor shall, except as otherwise provided in this lease,
promptly after receipt of written notice from Lessee setting forth with
specificity the nature and extent of such non-compliance, rectify same at
Lessor's expenses. If, after the Start Date, Lessee does not give Lessor written
notice of any non-compliance with this warranty within (i) six (6) months as to
the HVAC systems or (ii) thirty (30) days as to the remaining systems and other
elements of the Building, correction of such non-compliance shall be the
obligation of Lessee at Lessee's sole cost and expense, except for the roof,
foundations, and bearing walls which are handled as provided in Paragraph 7.
2.3 COMPLIANCE. Lessor warrants that the improvements on the Premises
comply with all applicable laws, covenants or restrictions of record, building
codes, regulations and ordinances ("APPLICABLE REQUIREMENTS") in effect on the
Start Date. Said warranty does not apply to the use of which Lessee will put the
Premises or to any Alterations or Utility Installations (as defined in paragraph
7.3(a)) made or to be made by Lessee. NOTE: Lessee is responsible for
determining whether or not the zoning is appropriate for Lessee's intended use,
and acknowledges that past uses of the Premises may no longer be allowed. If the
Premises do not comply with said warranty, Lessor shall, except as otherwise
provided, promptly after receipt of written notice from Lessee setting forth
with specificity the nature and extent of such non-compliance, rectify the same
at Lessor's expense. If Lessee does not give Lessor written notice of
non-compliance with this warranty within six (6) months following the Start
Date, correction of that non-compliance shall be the obligation of Lessee at
Lessee's sole cost and expense. If the Applicable Requirements are hereafter
changed (as opposed to being in existence at the Start Date, which is addressed
in Paragraph 6.2(e) below) so as to require during the term of this Lease the
construction of an addition to or an alteration of the building, the remediation
of any Hazardous Substance, or the reinforcement or other physical modification
of the Building ("CAPITAL EXPENDITURE"), Lessor of Lessee shall allocate cost of
such work as follows.
(a) Subject to Paragraph 2.3(c) below, if such Capital Expenditures
are required as a result of the specific and unique use of the Premises by
Lessee as compared with uses by tenants in general, Lessee shall be fully
responsible for the cost thereof, provided, however, that if such Capital
Expenditure is required during the last two (2) years of this Lease and the cost
thereof exceeds six (6) months' Base Rent, Lessee may instead terminate this
Lease unless Lessor notifies Lessee, in writing, within ten (10) days after
receipt of Lessee's termination notice that Lessor has elected to pay the
difference between the actual cost thereof and the amount equal to six (6)
months' Base Rent. If Lessee elects termination, Lessee shall immediately cease
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the use of the Premises which requires such Capital Expenditure and deliver to
Lessor written notice specifying a termination date at least ninety (90) days
thereafter. Such termination date shall, however, in no event be earlier than
the last day that Lessee could legally utilize the premises without commencing
such Capital Expenditure.
(b) If such Capital Expenditure is not the result of the specific
and unique use of the Premises by Lessee (such as, governmentally mandated
seismic modifications), then Lessor and Lessee shall allocate the obligation to
pay for such costs pursuant to the provisions of Paragraph 7.1(c); provided,
however, that if such Capital Expenditure is required during the last two years
of this Lease or if Lessor reasonably determines that it is not economically
feasible to pay its share thereof, Lessor shall have the option to terminate
this Lease upon ninety (90) days prior written notice to Lessee unless Lessee
notifies Lessor, in writing within ten (10) days after receipt of Lessor's
termination notice that Lessee will pay for such Capital Expenditure. If Lessor
does not elect to terminate and fails to tender its share of any such Capital
Expenditure, Lessee may advance such funds and deduct same, with Interest, from
Rent until Lessors share of such costs have been fully paid. If Lessee is unable
to finance Lessor's share, or if the balance of the Rent due and payable for the
remainder of this Lease is not sufficient to fully reimburse Lessee on an offset
basis, Lessee shall have the right to terminate this Lease upon thirty (30) days
written notice to Lessor.
(c) Notwithstanding the above, the provisions concerning Capital
Expenditures are intended to apply only to non-voluntary, unexpected, and new
Applicable Requirements. If the Capital Expenditures are instead triggered by
Lessee as a result of an actual or proposed change in use, change in intensity
of use, or modification to the Premises then, and in that event, Lessee shall be
fully responsible for the cost thereof, and Lessee shall not have any right to
terminate this Lease.
2.4 ACKNOWLEDGEMENTS. Lessee acknowledges that: (a) it has been advised by
Lessor and/or Brokers to satisfy itself with respect to the condition of the
Premises (including but not limited to the electrical, HVAC and fire sprinkler
systems, security, environmental aspects, and compliance with Applicable
Requirements), and their suitability for Lessee's intended use, (b) Lessee has
made such investigation as it deems necessary with reference to such matters and
assumes all responsibility therefor as the same relate to its occupancy of the
Premises, and (c) neither Lessor, Lessor's agents, nor any Broker has made any
oral or written representations or warranties with respect to said matters other
than as set forth in this Lease. In addition, Lessor acknowledges that: (a)
Broker has made no representations, promises or warranties concerning Lessee's
ability to honor the Lease or suitability to occupy the Premises, and (b) it is
Lessor's sole responsibility to investigate the financial capability and/or
suitability of all proposed tenants.
2.5 LESSEE AS PRIOR OWNER/OCCUPANT. The warranties made by Lessor in
Paragraph 2 shall be of no force or effect if immediately prior to the Start
Date Lessee was the owner or occupant of the Premises. In such event, Lessee
shall be responsible for any necessary corrective work.
3. TERM.
3.1 TERM. The Commencement Date, Expiration Date and Original Term of this
Lease are as specified in Paragraph 1.3.
3.2 EARLY POSSESSION. If Lessee totally or partially occupies the Premises
prior to the Commencement Date, the obligation to pay Base Rent shall be abated
for the period of such early possession. All other terms of this Lease shall,
however, be in effect during such period. Any such early possession shall not
affect the Expiration Date.
3.3 DELAY IN POSSESSION. Lessor agrees to use its best commercially
reasonable efforts to deliver possession of the Premises to Lessee by the
Commencement Date. If, despite said efforts, Lessor is unable to deliver
possession as agreed, Lessor shall not be subject to any liability therefor, nor
shall such failure affect the validity of this Lease. Lessee shall not, however,
be obligated to pay Rent or perform its other obligations until it receives
possession of the Premises. If possession is not delivered within sixty (60)
days after the Commencement Date, Lessee may, at its option, by notice in
writing within ten (10) days after the end of such sixty (60) day period, cancel
this Lease, in which event the Parties shall be discharged from all obligations
hereunder. If such written notice is not received by Lessor within said ten (10)
day period, Lessee's right to cancel shall terminate. Except as otherwise
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provided, if possession is not tendered to Lessee by the Start Date and Lessee
does not terminate this Lease, as aforesaid, any period of rent abatement that
Lessee would otherwise have enjoyed shall run from the date of delivery of
possession and continue for a period equal to what Lessee would otherwise have
enjoyed under the terms hereof, but minus any days of delay caused by the acts
or omissions of Lessee. If possession of the premises is not delivered within
four (4) months after the Commencement Date, this Lease shall terminate unless
other agreements are reached between Lessor and Lessee, in writing.
3.4 LESSEE COMPLIANCE. Lessor shall not be required to tender possession
of the Premises to Lessee until Lessee complies with its obligation to provide
evidence of insurance (Paragraph 8.5). Pending delivery of such evidence, Lessee
shall be required to perform all of its obligations under this Lease from and
after the Start Date, including the payment of Rent, notwithstanding Lessor's
election to withhold possession pending receipt of such evidence of insurance.
Further, if Lessee is required to perform any other conditions prior to or
concurrent with the Start Date, the Start Date shall occur but Lessor may elect
to withhold possession until such conditions are satisfied.
4. RENT.
4.1. RENT DEFINED. All monetary obligations of Lessee to Lessor under the
terms of this Lease (except for the Security Deposit) are deemed to be rent
("Rent").
4.2 PAYMENT. Lessee shall cause payment of Rent to be received by Lessor
in lawful money of the United States, without offset or deduction (except as
specifically permitted in this Lease), on or before the day on which it is due.
Rent for any period during the term hereof which is for less than one (1) full
calendar month shall be prorated based upon the actual number of days of said
month. Payment of Rent shall be made to Lessor at its address stated herein or
to such other persons or place as Lessor may from time to time designate in
writing Acceptance of a payment which is less than the amount then due shall not
be a waiver of Lessors rights to the balance of such Rent, regardless of Lessors
endorsement of any check so stating.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof the
Security Deposit as security for Lessee's faithful performance of its
obligations under this Lease. If Lessee fails to pay Rent, or otherwise Defaults
under this Lease, Lessor may use, apply or retain all or any portion of said
Security Deposit for the payment of any amount due Lessor or to reimburse or
compensate Lessor for any liability expense, loss or damage which Lessor may
suffer or incur by reason thereof. If Lessor uses or applies all or any portion
of said Security Deposit, Lessee shall within ten (10) days after written
request therefor deposit monies with Lessor sufficient to restore said Security
Deposit to the full amount required by this Lease. If the Base Rent increases
during the term of this Lease, Lessee shall, upon written request from Lessor,
deposit additional monies with Lessor so that the total amount of the Security
Deposit shall at all times bear the same proportion to the increased Base Rent
as the initial Security Deposit bore to the initial Base Rent. Should the Agreed
Use be amended to accommodate a material change in the business of Lessee or to
accommodate a sublessee or assignee, Lessor shall have the right to increase the
Security Deposit to the extent necessary, in Lessor's reasonable judgment, to
account for any increased wear and tear that the Premises may suffer as a result
thereof. If a change in control of Lessee occurs during this Lease and following
such change the financial condition of Lessee is, in Lessor's reasonable
judgment, significantly reduced, Lessee shall deposit such additional monies
with Lessor as shall be sufficient to cause the Security Deposit to be at a
commercially reasonable level based on said change in financial condition.
Lessor shall not be required to keep the Security Deposit separate from its
general accounts. Within fourteen (14) days after the expiration or termination
of this Lease, if Lessor elects to apply the Security Deposit only to unpaid
Rent, and otherwise within thirty (30) days after the premises have been vacated
pursuant to Paragraph 7.4(c) below, Lessor shall return that portion of the
Security Deposit not used or applied by Lessor. No part of the Security Deposit
shall be considered to be held in trust, to bear interest or to be prepayment
for any monies to be paid by Lessee under this Lease.
6. USE.
6.1 USE. Lessee shall use and occupy the Premises only for the Agreed Use,
or any other legal use which is reasonably comparable thereto, and for no other
purpose. Lessee shall not use or permit the use of the Premises in a manner that
is unlawful, creates damage, waste or a nuisance, or that disturbs owners and/or
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occupants of, or causes damage to neighboring properties. Lessor shall not
unreasonably withhold or delay its consent to any written request for a
modification of the Agreed Use, so long as the same will not impair the
structural integrity of the improvements on the Premises or the mechanical or
electrical systems therein, or is not significantly more burdensome to the
premises. If Lessor elects to withhold consent Lessor shall within five (5)
business days after such request give written notification of same, which notice
shall include an explanation of Lessors objections to the change in use.
6.2 HAZARDOUS SUBSTANCES.
(a) REPORTABLE USES REQUIRE CONSENT. The term "HAZARDOUS SUBSTANCE" as
used in this Lease shall mean any product, substance, or waste whose presence,
use, manufacture, disposal, transportation, or release, either by itself or in
combination with other materials expected to be on the Premises, is either (i)
potentially injurious to the public health, safety or welfare, the environment
or the Premises, (ii) regulated or monitored by any governmental authority, or
(iii) a basis for potential liability of Lessor to any governmental agency or
third party under any applicable statute or common law theory. Hazardous
Substances shall include but not be limited to, hydrocarbons, petroleum,
gasoline, and/or crude oil or any products, by-products or fractions thereof.
Lessee shall not engage in any activity in or on the Premises which constitutes
a Reportable Use of Hazardous Substances without the express prior written
consent of Lessor and timely compliance (at Lessee's expense) with all
Applicable Requirements. "Reportable Use" shall mean (i) the installation or use
of any above or below ground storage tank, (ii) the generation, possession,
storage, use, transportation, or disposal of a Hazardous Substance that requires
a permit from, or with respect to which a report, notice, registration or
business plan is required to be filed with, any governmental authority and/or
(iii) the presence at the Premises of a Hazardous Substance with respect to
which any Applicable Requirements requires that a notice be given to persons
entering or occupying the Premises or neighboring properties. Notwithstanding
the foregoing, Lessee may use any ordinary and customary materials reasonably
required to be used in the normal course of the Agreed Use so long as such use
is in compliance with all Applicable Requirements, is not a Reportable Use, and
does not expose the Premises or neighboring property to any meaningful risk of
contamination or damage or expose Lessor to any liability therefor. In addition,
Lessor may condition its consent to any Reportable Use upon receiving such
additional assurances as Lessor reasonably deems necessary to protect itself,
the public, the Premises and/or the environment against damage, contamination,
injury and/or liability, including, but not limited to, the installation (and
removal on or before Lease expiration or termination) of protective
modifications (such as concrete encasements) and/or increasing the Security
Deposit.
(b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable cause
to believe, that a Hazardous Substance has come to be located in, on, under or
about the Premises, other than as previously consented to by Lessor, Lessee
shall immediately give written notice of such fact to Lessor, and provide Lessor
with a copy of any report, notice, claim or other documentation which a has
concerning the presence of such Hazardous Substance.
(c) LESSEE REMEDIATION. Lessee shall not cause or permit any
Hazardous Substance to be spilled or released in, on, under, or about the
Premises (including through the plumbing or sanitary sewer system) and shall
promptly, at Lessee's expense, take all investigatory and/or remedial action
reasonably recommended, whether or not formally ordered or required, for the
cleanup of any contamination of, and for the maintenance, security and/or
monitoring of the Premises or neighboring properties, that was caused or
materially contributed to by Lessee, or pertaining to or involving any Hazardous
Substance brought onto the Premises during the term of this Lease, by or for
Lessee, or any third party.
(d) LESSEE INDEMNIFICATION. Lessee shall indemnify, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, harmless from
and against any and all loss of rents and/or damages, liabilities, judgments,
claims, expenses, penalties, and attorneys" and consultants' fees arising out of
or involving any Hazardous Substance brought onto the Premises by or for Lessee,
or any third party (provided, however, that Lessee shall have no liability under
this Lease with respect to underground migration of any Hazardous Substance
under the Premises from adjacent properties). Lessee's obligations shall
include, but not be limited to, the effects of any contamination or injury to
person, property or the environment created or suffered by Lessee, and the cost
of investigation, removal, remediation, restoration and/or abatement, and shall
survive the expiration or termination of this Lease. No termination,
cancellation or release agreement entered into by Lessor and Lessee shall
release Lessee from its obligations under this Lease with respect to Hazardous
Substances, unless specifically so agreed by Lessor in writing at the time of
such agreement.
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(e) LESSOR INDEMNIFICATION. Lessor and its successors and assigns
shall indemnify, defend, reimburse and hold Lessee, its employees and lenders,
harmless from and against any and all environmental damages, including the cost
of remediation, which existed as a result of Hazardous Substances on the
Premises prior to the Start Date or which are caused by the gross negligence or
willful misconduct of Lessor, its agents or employees. Lessor's obligations, as
and when required by the Applicable Requirements, shall include, but not be
limited to, the cost of investigation, removal, remediation, restoration and/or
abatement, and shall survive the expiration or termination of this Lease.
(f) INVESTIGATIONS AND REMEDIATIONS. Lessor shall retain the
responsibility and pay for any investigations or remediation measures required
by governmental entities having jurisdiction with respect to the existence of
Hazardous Substances on the Premises prior to the Start Date, unless such
remediation measure is required as a result of Lessee's use (including
alterations) of the Premises, in which event Lessee shall be responsible for
such payment. Lessee shall cooperate fully in any such activities at the request
of Lessor, including allowing Lessor and Lessor's agents to have reasonable
access to the Premises at reasonable times in order to carry out Lessor's
investigative and remedial responsibilities.
(g) LESSOR TERMINATION OPTION. If a Hazardous Substance Condition
occurs during the term of this Lease unless Lessee is legally responsible
therefor (in which case Lessee shall make the investigation and remediation
thereof required by the Applicable Requirements and this Lease shall continue in
full force and effect, but subject to Lessors rights under Paragraph 6.2(d) and
Paragraph 13), Lessor may, at Lessors option, either (i) investigate and
remediate such Hazardous Substance Condition, if required, as soon as reasonably
possible at Lessors expense in which event this Lease shall continue in full
force and effect, or (ii) if the estimated cost to remediate such condition
exceeds twelve (12) times the then monthly Base Rent or $100,000, whichever is
greater, give written notice to Lessee, within thirty (30) days after receipt by
Lessor of knowledge of the occurrence of such Hazardous Substance Condition, of
Lessor's desire to terminate this Lease as of the date sixty (60) days following
the date of such notice. In the event Lessor elects to give a termination
notice, Lessee may, within ten (10) days thereafter, give written notice to
Lessor of Lessee's commitment to pay the amount by which the cost of the
remediation of such Hazardous Substance Condition exceeds an amount equal to
twelve (12) times the then monthly Base Rent or $100,000 whichever is greater.
Lessee shall provide Lessor with said funds or satisfactory assurance thereof
within thirty (30) days following such commitment. In such event, this Lease
shall continue in full force and effect, and Lessor shall proceed to make such
remediation as soon as reasonably possible after the required funds are
available. If Lessee does not give such notice and provide the required funds or
assurance thereof within the time provided, this Lease shall terminate as of the
date specified in Lessors notice of termination.
6.3 LESSEE'S COMPLIANCE WITH APPLICABLE REQUIREMENTS. Except as otherwise
provided in this Lease, Lessee shall, at Lessee's sole expense, fully,
diligently and in a timely manner, materially comply with all Applicable
Requirements, the requirements of any applicable fire insurance underwriter or
rating bureau, and the recommendations of Lessor's engineers and/or consultants
which relate in any manner to the Premises, without regard to whether said
requirements are now in effect or become effective after the Start Date. Lessee
shall, within ten (10) days after receipt of Lessor's written request, provide
Lessor with copies of all permits and other documents, and other information
evidencing Lessee's compliance with any Applicable Requirements specified by
Lessor, and shall immediately upon receipt, notify Lessor in writing (with
copies of any documents invoked) of any threatened or actual claim, notice,
citation, warning, complaint or report pertaining to or involving the failure of
Lessee or the Premises to comply with any Applicable Requirements.
6.4 INSPECTION; COMPLIANCE. Lessor and Lessor's "Lender" (as defined in
Paragraph 30 below) and consultants shall have the right to enter into Premises
at any time, in the case of an emergency, and otherwise at reasonable times, for
the purpose of inspecting the condition of the Premises and for verifying
compliance by Lessee with this Lease. The cost of any such inspections shall be
paid by Lessor, unless a violation of Applicable Requirements, or a
contamination is found to exist or be imminent, or the inspection is requested
or ordered by a governmental authority. In such case, Lessee shall upon request
reimburse Lessor for the cost of such inspections, so long as such inspection is
reasonably related to the violation or contamination.
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7. MAINTENANCE; REPAIRS, UTILITY INSTALLATIONS; TRADE FIXTURES AND ALTERATIONS.
7.1 LESSEE'S OBLIGATIONS.
(a) IN GENERAL. Subject to the provisions of Paragraph 2.2
(Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code),
6.3 (Lessee's Compliance with Applicable Requirements), 7.2 (Lessor's
Obligations), 9 (Damage and Destruction), and 14 (Condemnation), Lessee shall,
at Lessee's sole expense, keep the Premises, Utility Installations, and
Alterations in good order, condition and repair (whether or not the portion of
the Premises requiring repairs, or the means of repairing the same, are
reasonably or readily accessible to Lessee, and whether or not the need for such
repairs occurs as a result of Lessee's use, any prior use, the elements or the
age of such portion of the Premises), including, but not limited to, all
equipment or facilities, such as plumbing, heating, ventilating,
air-conditioning, electrical lighting facilities, boilers, pressure vessels,
fire protection system, fixtures, walls (interior and exterior), ceilings,
floors, windows, doors, skylights, landscaping, drive ways parking lots, fences,
signs, sidewalks and parkways located in, on, or adjacent to the Premises.
Lessee is also responsible for keeping the roof and roof drainage clean and free
of debris. Lessor shall keep the surface and structural elements of the roof,
foundations, and bearing walls in good repair (see Paragraph 7.2). Lessee, in
keeping the Premises in good order, condition and repair, shall exercise and
perform good maintenance practices. Lessee's obligations shall include
restorations, replacements or renewals when necessary to keep the Premises and
all improvements thereon or a part thereof in good order, condition and state of
repair. Lessee shall, during the term of this Lease, keep the exterior
appearance of the Building in a first-class condition (including, e.g., graffiti
removal) consistent with the exterior appearance of other similar facilities of
comparable age and see in the vicinity, including, when necessary, the exterior
repainting of the Building.
(b) SERVICE CONTRACTS. Lessee shall, at Lessee's sole expense,
procure and maintain contracts, with copies to Lessor, in customary form and
substance for, and with contractors specializing and experienced in the
maintenance of the following equipment and improvements ("Basic Elements"), if
any, if and when installed on the Premises: (i) HVAC equipment, (ii) boiler and
pressure vessels, (iii) fire extinguishing systems, including fire alarm and/or
smoke detection, (iv) landscaping and irrigation systems, (v) driveways and
parking lots, (vi) clarifiers, (vii) basic utility feed to the perimeter of the
Building, and (viii) any other equipment, if reasonably required by Lessor.
(c) REPLACEMENT. Subject to Lessee's indemnification of Lessor as
set forth in Paragraph 8.7 below, and without relieving Lessee of liability
resulting from Lessee's failure to exercise and perform good maintenance
practices, if the Basic Elements described in Paragraph 7.1(b) cannot be
repaired other than at a cost which is in excess of 50% of the cost of replacing
such Basic Elements, then such Basic Elements shall be replaced by Lessor, and
the cost thereof shall be prorated between the Parties and Lessee shall only be
obligated to pay, each month during the remainder of the term of this Lease, on
the date on which Base Rent is due, an amount equal to the product of
multiplying the cost of such replacement by a fraction, the numerator of which
is one, and the denominator of which is the number of months of the useful life
of such replacement as such useful life is specified pursuant to Federal income
tax regulations or guidelines for depreciation thereof (including interest on
the unamortized balance as is then commercially reasonable in the judgment of
Lessor's accountants), with Lessee reserving the right to prepay its obligation
at any time.
7.2 LESSOR'S OBLIGATIONS. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code), 9
(Damage or Destruction) and 14 (Condemnation), it is intended by the Parties
hereto that Lessor have no obligation, in any manner whatsoever, to repair and
maintain the Premises, or the equipment therein, all of which obligations are
intended to be that of the Lessee, except for the surface and structural
elements of the roof, foundations and bearing walls, the repair of which shall
be the responsibility of Lessor upon receipt of written notice that such a
repair is necessary. It is the intention of the Parties that the terms of this
Lease govern the respective obligations of the Parties as to maintenance and
repair of the Premises, and they expressly waive the benefit of any statute now
or hereafter in effect to the extent it is inconsistent with the terms of this
Lease.
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7.3 UTILITY INSTALLATIONS; TRADE FIXTURES; ALTERATIONS.
(a) DEFINITIONS CONSENT REQUIRED. The term "Utility Installations"
refers to all floor and window coverings, air lines, power panels, electrical
distribution, security and fire protection systems and signs, communication
systems, lighting fixtures, HVAC equipment, plumbing, and fencing in or on the
Premises. The term "Trade Fixtures" shall mean Lessee's machinery and equipment
that can be removed without doing material damage to the Premises. The term
"Alterations" shall mean any modification of the improvements, other than
Utility Installations or Trade Fixtures, whether by addition or deletion.
"Lessee Owned Alterations and/or Utility Installations" are defined as
Alterations and/or Utility Installations made by Lessee that are not yet owned
by Lessor pursuant to Paragraph 7.4(a). Lessee shall not make any Alterations or
Utility Installations to the Premises without Lessor's prior written consent.
Lessee may, however, make non-structural Utility Installations to the interior
of the Premises (excluding the roof) without such consent but upon notice to
Lessor, as long as they are not visible from the outside, do not involve
puncturing, relocating or removing the roof or any existing walls, and the
cumulative cost thereof during this Lease as extended does not exceed $50,000 in
the aggregate or $10,000 in any one year.
(b) CONSENT. Any Alterations or Utility installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with detailed plans. Consent shall be deemed
conditioned upon Lessee's: (i) acquiring all applicable governmental permits,
(ii) furnishing Lessor with copies of both the permits and the plans and
specifications prior to commencement of the work, and (iii) compliance with all
conditions of said permits and other Applicable Requirements in a prompt and
expeditious manner. Any Alterations or Utility Installations shall be performed
in a workmanlike manner with good and sufficient materials. Lessee shall
promptly upon completion furnish Lessor with as-built plans and specifications.
For work which costs an amount equal to the greater of one month's Base Rent, or
$10,000 Lessor may condition its consent upon Lessee providing a lien and
completion bond in an amount equal to one and one-half times the estimated cost
of such Alteration or Utility Installation and/or upon Lessee's posting an
additional Security Deposit with Lessor.
(c) INDEMNIFICATION. Lessee shall pay, when due, all claims for
labor or materials furnished or alleged to have been furnished to or for Lessee
at or for use on the Premises, which claims are or may be secured by any
mechanic's or materialmen's lien against the Premises or any interest therein.
Lessee shall give Lessor not less than ten (10) days' notice prior to the
commencement of any work in, on or about the Premises, and Lessor shall have the
right to post notices of non-responsibility. If Lessee shall contest the
validity of any such lien, claim or demand, then Lessee shall, at its sole
expense defend and protect itself, Lessor and the Premises against the same and
shall pay and satisfy any such adverse judgment that may be rendered thereon
before the enforcement thereof. If Lessor shall require, Lessee shall furnish a
surety bond in an amount equal to one and one-half times the amount of such
contested lien, claim or demand, indemnifying Lessor against liability for the
same. If Lessor elects to participate in any such action, Lessee shall pay
Lessors attorneys' fees and costs.
7.4 OWNERSHIP; REMOVAL; SURRENDER; AND RESTORATION.
(a) OWNERSHIP. Subject to Lessor's right to require removal or elect
ownership as hereinafter provided, all Alterations and Utility Installations
made by Lessee shall be the property of Lessee, but considered a part of the
Premises. Lessor may, at any time, elect in writing to be the owner of all or
any specified part of the Lessee Owned Alterations and Utility Installations.
Unless otherwise instructed per Paragraph 7.4(b) hereof, all Lessee Owned
Alterations and Utility Installations shall, at the expiration or termination of
this Lease, become the property of Lessor and be surrendered by Lessee with the
Premises.
(b) REMOVAL. By delivery to Lessee of written notice from Lessor not
earlier than ninety (90) and not later than thirty (30) days prior to the end of
the term of this Lease, Lessor may require that any or all Lessee Owned
Alterations or Utility Installations be removed by the expiration or termination
of this Lease. Lessor may require the removal at any time of all or any part of
any Lessee Owned Alterations or Utility Installations made without the required
consent.
(c) SURRENDER/RESTORATION. Lessee shall surrender the premises by
the Expiration Date or any earlier termination date, with all of the
improvements, pads and surfaces thereof broom clean and free of debris, and in
good operating order, condition and state of repair, ordinary wear and tear
excepted. "Ordinary wear and tear" shall not include any damage or deterioration
that would have been prevented by good maintenance practice. Lessee shall repair
any damage occasioned by the installation, maintenance or removal of Trade
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Fixtures, Lessee Owned Alterations and/or Utility Installations, furnishings,
and equipment as well as the removal of any storage tank installed by or for
Lessee and the removal, replacement, or remediation of any soil, material or
groundwater contaminated by Lessee. Trade Fixtures shall remain the property of
Lessee and shall be removed by Lessee. The failure by Lessee to timely vacate
the Premises pursuant to this Paragraph 7.4(c) without the express written
consent of Lessor shall constitute a holdover under the provisions of Paragraph
26 below.
8. INSURANCE; INDEMNITY.
8.1 PAYMENT OF PREMIUM INCREASES
(a) Lessee shall pay to Lessor any insurance cost increase
("Insurance Cost Increase") occurring during the term of this Lease. "Insurance
Cost Increase" is defined as any increase in the actual cost of the insurance
required under Paragraphs 8.2(b), 8.3(a) and 8.3(b) ("Required Insurance), over
and above the Base Premium as hereinafter defined calculated on an annual basis.
"Insurance Cost increase" shell include but not be limited to increases
resulting from the nature of Lessee's occupancy, any act or omission of Lessee,
requirements of the holder of mortgage or deed of trust covering the Premises,
increased valuation of the Premises and/or a premium rate increase. The Parties
are encouraged to fill in the Base Premium in Paragraph 1.9 with a reasonable
premium for the Required Insurance based on the Agreed Use of the premises. If
the Parties fail to insert a dollar amount in Paragraph 1.9, then the Base
Premium shall be the lowest annual premium reasonably obtainable for the
Required Insurance as of the commencement of the Original Term for the Agreed
Use of the Premises. In no event, however, shall Lessee be responsible for any
portion of the increase in the premium cost attributable to liability insurance
canted by Lessor under Paragraph 8.1(b) in excess of $2,000,000 per occurrence.
(b) Lessee shall pay any such Insurance Cost Increase to Lessor
within thirty (30) days after receipt by Lessee of a copy of the premium
statement or other reasonable evidence of the amount due. If the insurance
policies maintained hereunder cover other property besides the Premises, Lessor
shall also deliver to Lessee a statement of the amount of such Insurance Cost
Increase attributable only to the Premises showing in reasonable detail the
manner in which such amount was computed. Premiums for policy periods commencing
prior to, or extending beyond the term of this Lease, shall be prorated to
correspond to the term of this Lease.
8.2 LIABILITY INSURANCE.
(a) Carried by Lessee. Lessee shall obtain and keep in force a
Commercial General Liability Policy of Insurance protecting Lessee and Lessor
against claims for bodily injury, personal injury and property damage based upon
or arising out of the ownership, use, occupancy or maintenance of the Premises
and all areas appurtenant thereto. Such insurance shall be on an occurrence
basis providing single limit coverage in an amount not less than $2,000,000 per
occurrence with an "Additional Insured-Managers or Lessors of Premises
Endorsement" and contain the "Amendment of the Pollution Exclusion Endorsement"
for damage caused by heat, smoke or fumes from a hostile fire. The Policy shall
not contain any intra-insured exclusions as between insured Persons or
organizations, but shall include coverage for liability assumed under this Lease
as an "insured contract" for the performance of Lessee's indemnity obligations
under this Lease. The limits of said insurance shall not, however, limit the
liability of Lessee nor relieve Lessee of any obligation hereunder. All
insurance earned by Lessee shall be primary to and not contributory with any
similar insurance earned by Lessor, whose insurance shall be considered excess
insurance only.
(b) CARRIED BY LESSOR. Lessor shall maintain liability insurance as
described in Paragraph 8.2(a), in addition to, and not in lieu of, the insurance
required to be maintained by Lessee. Lessee shall not be named as an additional
insured therein.
8.3 PROPERTY INSURANCE - BUILDING, IMPROVEMENTS AND RENTAL VALUE.
(a) BUILDING AND IMPROVEMENTS. The Insuring Party shall obtain and
keep in force a policy or policies in the name of Lessor, with loss payable to
Lessor, any groundlessor, and to any Lender(s) insuring loss or damage to the
Premises. The amount of such insurance shall be equal to the full replacement
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cost of the Premises, as the same shall exist from time to time, or the amount
required by any Lenders, but in no event more than the commercially reasonable
and available insurable value thereof. If Lessor is the Insuring Party, however,
Lessee Owned Alterations and Utility Installations, Trade Fixtures, and Lessee's
personal property shall be insured by Lessee under Paragraph 8.4 rather than by
Lessor. If the coverage is available and commercially appropriate, such policy
or policies shall insure against all risks of direct physical loss or damage
(except the perils of flood and/or earthquake unless required by a Lender or
included in the Base Premium), including coverage for debris removal and the
enforcement of any Applicable Requirements requiring the upgrading, demolition,
reconstruction or replacement of any portion of the Premises as the result of a
covered loss. Said policy or policies shall also contain an agreed valuation
provision in lieu of any coinsurance clause, waiver of subrogation, and
inflation guard protection causing an increase in the annual property insurance
coverage amount by a factor of not less than the adjusted U.S. Department of
Labor Consumer Price Index for All Urban Consumers for the city nearest to where
the Premises are located.
(b) RENTAL VALUE. The Insuring Party shall obtain and keep in force
a policy or policies in the name of Lessor, with loss payable to Lessor and any
Lender insuring the loss of the full Rent for one (1) year. Said insurance shall
provide that in the event the Lease is terminated by reason of an insured loss,
the period of indemnity for such coverage shall be extended beyond the date of
the completion of repairs or replacement of the Premises, to provide for one
full year's loss of Rent from the date of any such loss. Said insurance shall
contain an agreed valuation provision in lieu of any coinsurance clause, and the
amount of coverage shall be adjusted annually to reflect the projected Rent
otherwise payable by Lessee, for the next twelve (12) month period.
(c) ADJACENT PREMISES. If the Premises are part of a larger
building, or of a group of buildings owned by Lessor which are adjacent to the
remises the Lessee shall pay for any increase in the premiums for the property
insurance of such building or buildings if said increase is caused by Lessee's
acts, omissions, use or occupancy of the Premises.
8.4 LESSEE'S PROPERTY/BUSINESS INTERRUPTION.
(a) PROPERTY DAMAGE. Lessee shall obtain and maintain insurance
coverage on all of Lessee's personal property, Trade Fixtures, and Lessee Owned
Alterations and Utility Installations. Such insurance shall be full replacement
cost coverage with a deductible of not to exceed $1,000 per occurrence. The
proceeds from any such insurance shall be used by Lessee for the replacement of
personal property, Trade Fixtures and Lessee Owned Alterations and Utility
Installations. Lessee shall provide Lessor with written evidence that such
insurance is in force.
(b) BUSINESS INTERRUPTION. Lessee shall obtain and maintain loss of
income and extra expense insurance in amounts as will reimburse Lessee for
direct or indirect loss of earnings attributable to all perils commonly insured
against by prudent lessees in the business of Lessee or attributable to
prevention of access to the Premises as a result of such perils.
(c) NO REPRESENTATION OF ADEQUATE COVERAGE. Lessor makes no
representation that the limits or forms of coverage of insurance specified
herein are adequate to cover Lessee's property, business operations or
obligations under this Lease.
8.5 INSURANCE POLICIES. Insurance required herein shall be by companies
duty licensed or admitted to transact business in the state where the Premises
are located, and maintaining during the policy term a "General Policyholders
Rating" of at least B+, V, as set forth in the most current issue of `Best's
Insurance Guide", or such other rating as may be required by a Lender. Lessee
shall not do or permit to be done anything which invalidates the required
insurance policies. Lessee shall, prior to the Start Date, deliver to Lessor
certified copies of policies of such insurance or certificates evidencing the
existence and amounts of the required insurance. No such policy shall be
cancelable or subject to modification except after thirty (30) days prior
written notice to Lessor. Lessee shall, at least thirty (30) days prior to the
expiration of such policies, furnish Lessor with evidence of renewals or
"insurance binders" evidencing renewal thereof, or Lessor may order such
insurance and charge the cost thereof to Lessee, which amount shall be payable
by Lessee to Lessor upon demand. Such policies shall be for a term of at least
one year, or the length of the remaining term of this Lease, whichever is less.
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If either Party shall fail to procure and maintain the insurance required to be
carried by it, the other Party may, but shall not be required to, procure and
maintain the same.
8.6 WAIVER OF SUBROGATION. Without affecting any other rights or remedies,
Lessee and Lessor each hereby release and relieve the other, and waive their
entire right to recover damages against the other, for loss of or damage to its
property arising out of or incident to the perils required to be insured against
herein. The effect of such releases and waivers is not limited by the amount of
insurance carried or required, or by any deductibles applicable hereto. The
Parties agree to have their respective property damage insurance carriers waive
any right to subrogation that such companies may have against Lessor or Lessee,
as the case may be, so long as the insurance is not invalidated thereby.
8.7 INDEMNITY. Except for Lessor's gross negligence or willful misconduct,
Lessee shall indemnify, protect, defend and hold harmless the Premises, Lessor
and its agents, Lessor's master or ground lessor, partners and Lenders, from and
against any and all claims, loss of rents and/or damages, liens, judgments,
penalties, attorneys' and consultants' fees, expenses and/or liabilities arising
out of, involving, or in connection with, the use and/or occupancy of the
Premises by Lessee. If any action or proceeding is brought against Lessor by
reason of any of the foregoing matters, Lessee shall upon notice defend the same
at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor
shall cooperate with Lessee in such defense. Lessor need not have first paid any
such claim in order to be defended or indemnified.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, HVAC or lighting fixtures, or from any other cause,
whether the said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building of which the Premises are a
part, or from other sources or places. Lessor shall not be liable for any
damages arising from any act or neglect of any other tenant of Lessor.
Notwithstanding Lessor's negligence or breach of this Lease, Lessor shall under
no circumstances be liable for injury to Lessee's business or for any loss of
income or profit therefrom.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "Premises Partial Damage" shall mean damage or destruction to
the improvements on the Premises, other than Lessee Owned Alterations, Utility
Installations and Trade Fixtures, which can reasonably be repaired in six (6)
months or less from the date of the damage or destruction. Lessor shall notify
Lessee in writing within thirty (30) days from the date of the damage or
destruction as to whether or not the damage is Partial or Total.
(b) "Premises Total Destruction" shall mean damage or destruction to
the Premises, other than Lessee Owned Alterations and Utility Installations and
Trade Fixtures, which cannot reasonably be repaired in six (6) months or less
from the date of the damage or destruction. Lessor shall notify Lessee in
writing within thirty (30) days from the date of the damage or destruction as to
whether or not the damage is Partial or Total.
(c) "Insured Loss" shall mean damage or destruction to improvements
on the Premises, other than Lessee Owned Alterations and Utility Installations
and Trade Fixtures, which was caused by an event required to be covered by the
insurance described in Paragraph 8.3(a), irrespective of any deductible amounts
or coverage limits involved.
(d) "Replacement Cost" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of Applicable Requirements, and without
deduction for depreciation.
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(e) "Hazardous Substance Condition" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2 PARTIAL DAMAGE - INSURED LOSS. If a Premises Partial Damage that is an
Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such damage
(but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
full force and effect; provided, however, that Lessee shall, at Lessor's
election, make the repair of any damage or destruction the total cost to repair
of which is $10,000 or less, and, in such event, Lessor shall make any
applicable insurance proceeds available to Lessee on a reasonable basis for that
purpose. Notwithstanding the foregoing, if the required insurance was not in
force or the insurance proceeds are not sufficient to effect such repair, the
Insuring Party shall promptly contribute the shortage in proceeds as and when
required to complete said repairs. In the event, however, such shortage was due
to the fact that, by reason of the unique nature of the improvements, full
replacement cost insurance coverage was not commercially reasonable and
available, Lessor shall have no obligation to pay for the shortage in insurance
proceeds or to fully restore the unique aspects of the Premises unless Lessee
provides Lessor with the funds to cover same, or adequate assurance thereof,
within ten (10) days following receipt of written notice of such shortage and
request therefor. If Lessor receives said funds or adequate assurance thereof
within said ten (10) day period, the party responsible for making the repairs
shall complete them as soon as reasonably possible and this Lease shall remain
in full force and effect. If such funds or assurance are not received, Lessor
may nevertheless elect by written notice to Lessee within ten (10) days
thereafter to: (i) make such restoration and repair as is commercially
reasonable with Lessor paying any shortage in proceeds, in which case this Lease
shall remain in full force and effect; or (ii) have this Lease terminate thirty
(30) days thereafter. Lessee shall not be entitled to reimbursement of any funds
contributed by Lessee to repair any such damage or destruction. Premises Partial
Damage due to flood or earthquake shall be subject to Paragraph 9.3,
notwithstanding that there may be some insurance coverage, but the net proceeds
of any such insurance shall be made available for the repairs if made by either
Party.
9.3 PARTIAL DAMAGE - UNINSURED LOSS. If a Premises Partial Damage that is
not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense),
Lessor may either: (i) repair such damage as soon as reasonably possible at
Lessor's expense, in which event this Lease shall continue in full force and
effect, or (ii) terminate this Lease by giving written notice to Lessee within
thirty (30) days after receipt by Lessor of knowledge of the occurrence of such
damage. Such termination shall be effective sixty (60) days following the date
of such notice. In the event Lessor elects to terminate this Lease, Lessee shall
have the right within ten (10) days after receipt of the termination notice to
give written notice to Lessor of Lessee's commitment to pay for the repair of
such damage without reimbursement from Lessor. Lessee shall provide Lessor with
said funds or satisfactory assurance thereof within thirty (30) days after
making such commitment. In such event this Lease shall continue in full force
and effect, and Lessor shall proceed to make such repairs as soon as reasonably
possible after the required funds are available. If Lessee does not make the
required commitment, this Lease shall terminate as of the date specified in the
termination notice.
9.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof, if a
Premises Total Destruction occurs, this Lease shall terminate sixty (60) days
following such Destruction. If the damage or destruction was caused by the gross
negligence or willful misconduct of Lessee, Lessor shall have the right to
recover Lessor's damages from Lessee, except as provided in Paragraph 8.6.
9.5 DAMAGE NEAR END OF TERM. If at any time during the last six (6) months
of this Lease there is damage for which the cost to repair exceeds one (1)
month's Base Rent, whether or not an insured Loss, Lessor may terminate this
Lease effective sixty (60) days following the date of occurrence of such damage
by giving a written termination notice to Lessee within thirty (30) days after
the date of occurrence of such damage. Notwithstanding the foregoing, if Lessee
at that time has an exercisable option to extend this Lease or to purchase the
Premises, then Lessee may preserve this Lease by, (a) exercising such option and
(b) providing with any shortage in insurance proceeds (or adequate assurance
thereof) needed to make the repairs on or before the earlier of (i) the date
which is ten days after Lessee's receipt of Lessor's written notice purporting
to terminate this Lease, or (ii) the day prior to the date upon which such
option expires. If Lessee duly exercises such option during such period and
provides Lessor with funds (or adequate assurance thereof) to cover any shortage
in insurance proceeds, Lessor shall, at Lessor's commercially reasonable
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expense, repair such damage as soon as reasonably possible and this Lease shall
continue in full force and effect. If Lessee fails to exercise such option and
provide such funds or assurance during such period, then this Lease shall
terminate on the date specified in the termination notice and Lessee's option
shall be extinguished.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) ABATEMENT. In the event of Premises Partial Damage or Premises
Total Destruction or a Hazardous Substance Condition for which Lessee is not
responsible under this Lease, the Rent payable by Lessee for the period required
for the repair, remediation or restoration of such damage shall be abated in
proportion to the degree to which Lessee's use of the Premises is impaired, but
not to exceed the proceeds received from the Rental Value insurance. All other
obligations of Lessee hereunder shall be performed by Lessee, and Lessor shall
have no liability for any such damage, destruction, remediation, repair or
restoration except as provided herein.
(b) REMEDIES. If Lessor shall be obligated to repair or restore the
Premises and does not commence, in a substantial and meaningful way, such repair
or restoration within ninety (90) days after such obligation shall accrue,
Lessee may, at any time prior to the commencement of such repair or restoration
give written notice to Lessor and to any Lenders of which Lessee has actual
notice, of Lessee's election to terminate this Lease on a date not less than
sixty (60) days following the giving of such notice. If Lessee gives such notice
and such repair or restoration is not commenced within thirty (30) days
thereafter, this Lease shall terminate as of the date specified in said notice.
If the repair or restoration is commenced within said thirty (30) days, this
Lease shall continue in full force and effect. "Commence" shall mean either the
unconditional authorization of the preparation of the required plans, or the
beginning of the actual work on the Premises whichever first occurs.
9.7 TERMINATION - ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to Paragraph 6.2(9) or Paragraph 9, an equitable adjustment shall be
made concerning advance Base Rent and any other advance payments made by Lessee
to Lessor. Lessor shall, in addition, return to Lessee so much of Lessee's
Security Deposit as has not been, or is not then required to be, used by Lessor.
9.8 WAIVE STATUTES. Lessor and Lessee agree that the terms of this Lease
shall govern the effect of any damage to or destruction of the Premises with
respect to the termination of this Lease and hereby waive the provisions of any
present or future statute to the extent inconsistent herewith.
10. REAL PROPERTY TAXES.
10.1 DEFINITION OF "REAL PROPERTY TAXES." As used herein, the term "Real
Property Taxes" shall include any form of assessment; real estate, general,
special, ordinary or extraordinary, or rental levy or tax (other than
inheritance, personal income or estate taxes); improvement bond; and/or license
fee imposed upon or levied against any legal or equitable interest of Lessor in
the Premises, Lessor's right to other income therefrom, and/or Lessor's business
of leasing, by any authority having the direct or indirect power to tax and
where the funds are generated with reference to the Building address and where
the proceeds so generated are to be applied by the city, county or other local
taxing authority of a jurisdiction within which the Premises are located The
term "Real Property Taxes" shall also include any tax, fee, levy, assessment or
charge, or any increase therein, imposed by reason of events occurring during
the term of this Lease including, but not limited to, a change in the ownership
of the Premises.
10.2 (a) PAYMENT OF TAXES. Lessor shall pay the Real Property Taxes
applicable to the Premises provided, however, that Lessee shall pay to Lessor
the amount, if any, by which Real Property Taxes applicable to the Premises
increase over the fiscal tax year during which the Commencement Date occurs
("Tax Increase"). Subject to Paragraph 10.2(b), payment of any such Tax Increase
shall be made by Lessee to Lessor within thirty (30) days after receipt of
Lessor's written statement setting forth the amount due and the computation
thereof. If any such taxes shall cover any period of time prior to or after the
expiration or termination of this Lease, Lessee's share of such taxes shall be
prorated to cover only that portion of the tax bill applicable to the period
that this Lease is in effect.
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(b) ADVANCE PAYMENT. In the event Lessee incurs a late charge on any
Rent payment, Lessor may, at Lessor's option, estimate the current Real Property
Taxes, and require that the Tax Increase be paid in advance to Lessor by Lessee,
either: (i) in a lump sum amount equal to the amount due, at least twenty (20)
days prior to the applicable delinquency date; or (ii) monthly in advance with
the payment of the Base Rent. If Lessor elects to require payment monthly in
advance, the monthly payment shall be an amount equal to the amount of the
estimated installment of the Tax Increase divided by the number of months
remaining before the month in which said installment becomes delinquent. When
the actual amount of the applicable Tax Increase is known, the amount of such
equal monthly advance payments shall be adjusted as required to provide the
funds needed to pay the applicable Tax Increase If the amount collected by
Lessor is insufficient to pay the Tax Increase when due, Lessee shall pay
Lessor, upon demand, such additional sums as are necessary to pay such
obligations. All monies paid to Lessor under this Paragraph may be intermingled
with other monies of Lessor and shall not bear interest. In the event of a
Breach by Lessee in the performance of as obligations under this Lease then any
balance of funds paid to Lessor under the provisions of this Paragraph may, at
the option of Lessor, be treated as an additional Security Deposit.
(c) ADDITIONAL IMPROVEMENTS. Notwithstanding anything to the
contrary in this Paragraph 10.2, Lessee shall pay to Lessor upon demand therefor
the entirety of any increase in Real Property Taxes assessed by reason of
Alterations or Utility Installations placed upon the premises by Lessee or at
Lessee's request.
10.3 JOINT ASSESSMENT. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the Tax Increase for all
of the land and improvements included within the tax parcel assessed' such
proportion to be conclusively determined by Lessor from the respective
valuations assigned in the assessors work sheets or such other information as
may be reasonably available.
10.4 PERSONAL PROPERTY TAXES. Lessee shall pay, prior to delinquency, all
taxes assessed against and levied upon Lessee Owned Alterations, Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee. When possible, Lessee shall cause such property to be assessed and
billed separately from the real property of Lessor. If any of Lessee's said
personal property shall be assessed with Lessor's real property, Lessee shall
pay Lessor the taxes attributable to Lessee's property within ten (10) days
after receipt of a written statement.
11. UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon. If any such services are not
separately metered to Lessee, Lessee shall pay a reasonable proportion, to be
determined by Lessor, of all charges jointly metered.
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or encumber (collectively, "assign or assignment") or sublet
all or any part of Lessee's interest in this Lease or in the Premises without
Lessor's prior written consent.
(b) A change in the control of Lessee shall constitute an assignment
requiring consent. The transfer, on a cumulative basis, of twenty-five percent
(25%) or more of the voting control of Lessee shall constitute a change in
control for this purpose.
(c) The involvement of Lessee or its assets in any transaction, or
series of transactions (by way of merger, sale, acquisition, financing,
transfer, leveraged buyout or otherwise), whether or not a formal assignment or
hypothecation of this Lease or Lessee's assets occurs, which results or will
result in a reduction of the Net Worth of Lessee by an amount greater than
twenty-five percent (25%) of such Net Worth as it was represented at the time of
the execution of this Lease or at the time of the most recent assignment to
which Lessor has consented, or as it exists immediately prior to said
transaction or transactions constituting such reduction, whichever was or is
greater, shall be considered an assignment of this Lease to which Lessor may
withhold its consent. "Net Worth of Lessee" shall mean the net worth of Lessee
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(excluding any guarantors) established under generally accepted accounting
principles.
(d) An assignment or subletting without consent shall, at Lessor's
option, be a Default curable after notice per Paragraph 13.1(c), or a noncurable
Breach without the necessity of any notice and grace period. If Lessor elects to
treat such unapproved assignment or subletting as a noncurable Breach, Lessor
may either (i) terminate this Lease, or (ii) upon thirty (30) days written
notice increase the monthly Base Rent to one hundred ten percent (110%) of the
Base Rent then in effect. Further, in the event of such Breach and rental
adjustment (i) the purchase price of any option to purchase the Premises held by
Lessee shall be subject to similar adjustment to one hundred ten percent (110%)
of the price previously in effect, and (ii) all fixed and non-fixed rental
adjustments scheduled during the remainder of the Lease term shall be increased
to one hundred ten percent (110%) of the scheduled adjusted rent.
(e) Lessee's remedy for any breach of Paragraph 12.1 by Lessor shall
be limited to compensatory damages and/or injunctive relief.
12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
(a) Regardless of Lessor's consent, any assignment or subletting
shall not: (i) be effective without the express written assumption by such
assignee or sublessee of the obligations of Lessee under this Lease; (ii)
release Lessee of any obligations hereunder; or (iii) alter the primary
liability of Lessee for the payment of Rent or for the performance of any other
obligations to be performed by Lessee.
(b) Lessor may accept Rent or performance of Lessee's obligations
from any person other than Lessee pending approval or disapproval of an
assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of Rent or performance shall constitute a waiver or estoppel
of Lessor's right to exercise its remedies for Lessee's Default or Breach.
(c) Lessor's consent to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting.
(d) In the event of any Default or Breach by Lessee, Lessor may
proceed directly against Lessee, or anyone else responsible for the performance
of Lessee's obligations under this Lease, including any assignee or sublessee
without first exhausting Lessor's remedies against any other person or entity
responsible therefore to Lessor, or any security held by Lessor.
(e) Each request for consent to an assignment or subletting shall be
in writing, accompanied by information relevant to Lessor's determination as to
the financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including but not limited to the intended use and/or
required modification of the Premises, if any, together with a fee of $1,000 or
ten percent (10%) of the current monthly Base Rent applicable to the portion of
the Premises which is the subject of the proposed assignment or sublease,
whichever is greater, as consideration for Lessor's considering and processing
said request, Lessee agrees to provide Lessor with such other or additional
information and/or documentation as may be reasonably requested.
(f) Any assignee of, or sublessee under, this Lease shall, by reason
of accepting such assignment or entering into such sublease, be deemed to have
assumed and agreed to conform and comply with each and every term, covenant,
condition and obligation herein to be observed or performed by Lessee during the
term of said assignment or sublease, other than such obligations as are contrary
to or inconsistent with provisions of an assignment or sublease to which Lessor
has specifically consented to in writing.
12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
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(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all Rent payable on any sublease, and Lessor may collect such Rent
and apply same toward Lessee's obligations under this Lease; provided, however,
that until a Breach shall occur in the performance of Lessee's obligations,
Lessee may collect said Rent. Lessor shall not, by reason of the foregoing or
any assignment of such sublease, nor by reason of the collection of Rent, be
deemed liable to the sublessee for any failure of Lessee to perform and comply
with any of Lessee's obligations to such sublessee. Lessee hereby irrevocably
authorizes and directs any such sublessee, upon receipt of a written notice from
Lessor stating that a Breach exists in the performance of Lessee's obligations
under this Lease to pay to Lessor all Rent due and to become due under the
sublease. Sublessee shall rely upon any such notice from Lessor and shall pay
all Rents to Lessor without any obligation or right to inquire as to whether
such Breach exists, notwithstanding any claim from Lessee to the contrary.
(b) In the event of a Breach by Lessee, Lessor may, at its option,
require sublessee to attorn to Lessor, in which event Lessor shall undertake the
obligations of the sublessor under such sublease from the time of the exercise
of said option to the expiration of such sublease; provided, however Lessor
shall not be liable for any prepaid rents or security deposit paid by such
sublessee to such sublessor or for any prior Defaults or Breaches of such
sublessor.
(c) Any matter requiring the consent of the sublessor under a
sublease shall also require the consent of Lessor.
(d) No sublessee shall further assign or sublet all or any part of
the Premises without Lessor's prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach
by Lessee to the sublessee, who shall have the right to cure the Default of
Lessee within the grace period if any, specified in such notice. The sublessee
shall have a right of reimbursement and offset from and against Lessee for any
such Defaults cured by the sublessee.
13. DEFAULT; BREACH; REMEDIES
13.1 DEFAULT; BREACH. A "Default" is defined as a failure by the Lessee to
comply with or perform any of the terms, covenants, conditions or rules under
this Lease. A "Breach" is defined as the occurrence of one or more of the
following Defaults, and the failure of Lessee to cure such Default within any
applicable grace period:
(a) The abandonment of the Premises; or the vacating of the Premises
without providing a commercially reasonable level of security, and/or Security
Deposit or where the coverage of the property insurance described in Paragraph
8.3 is jeopardized as a result thereof, or without providing reasonable
assurances to minimize potential vandalism.
(b) The failure of Lessee to make any payment of Rent or any
Security Deposit required to be made by Lessee hereunder, whether to Lessor or
to a third party, when due, to provide reasonable evidence of insurance or
surety bond, or to fulfill any obligation under this Lease which endangers or
threatens life or property, where such failure continues for a period of three
(3) business days following written notice to Lessee.
(c) The failure by Lessee to provide (i) reasonable written evidence
of compliance with Applicable Requirements, (ii) the service contracts, (iii)
the rescission of an unauthorized assignment or subletting, (iv) a Tenancy
Statement, (v) a requested subordination, (vi) evidence concerning any guaranty
and/or Guarantor, (vii) any document requested under Paragraph 42 (easements) or
(viii) any other documentation or information which Lessor may reasonably
require of Lessee under the terms of this Lease, where any such failure
continues for a period of ten (10) days following written notice to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof,
other than those described in subparagraphs 13.1(a), (b) or (c), above, where
such Default continues for a period of thirty (30) days after written notice;
provided, however, that if the nature of Lessee's Default is such that more than
thirty (30) days are reasonably required for its cure, then it shall not be
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deemed to be a Breach if Lessee commences such cure within said thirty (30) day
period and thereafter diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) the making of
any general arrangement or assignment for the benefit of creditors; (ii)
becoming a "debtor" as defined in 11 U.S.C. ss. 101 or any successor statute
thereto (unless, in the case of a petition filed against Lessee, the same is
dismissed within sixty (60) days); (iii) the appointment of a trustee or
receiver to take possession of substantially all of Lessee's assets located at
the Premises or of Lessee's interest in this Lease, where possession is not
restored to Lessee within thirty (30) days; or (iv) the attachment, execution or
other judicial seizure of substantially all of Lessee's assets located at the
Premises or of Lessee's interest in this Lease, where such seizure is not
discharged within thirty (30) days; provided, however, in the event that any
provision of this subparagraph 13.1 (e) is contrary to any applicable law, such
provision shall be of no force or effect, and not affect the validity of the
remaining provisions.
(f) The discovery that any financial statement of Lessee or of any
Guarantor given to Lessor was materially false.
(g) If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a Guarantor; (ii) the termination of a Guarantor's
liability with respect to this Lease other than in accordance with the teems of
such guaranty; (iii) a Guarantor's becoming insolvent or the subject of a
bankruptcy filing; (iv) a Guarantors refusal to honor the guaranty; or (v) a
Guarantors breach of its guaranty obligation on an anticipatory basis, and
Lessee's failure, within sixty (60) days following written notice of any such
event, to provide written alternative assurance or security which, when coupled
with the then existing resources of Lessee, equals or exceeds the combined
financial resources of Lessee and the Guarantors that existed at the time of
execution of this Lease.
13.2 REMEDIES. If Lessee fails to perform any of its affirmative duties or
obligations, within ten (10) days after written notice (or in case of an
emergency, without notice), Lessor may, at its option, perform such duty or
obligation on Lessee's behalf, including, bud not limited to, the obtaining of
reasonably required bonds, insurance policies, or governmental licenses, permits
or approvals. The costs and expenses of any such performance by Lessor shall be
due and payable by Lessee upon receipt of invoice therefor. If any check given
to Lessor by Lessee shall not be honored by the bank upon which it is drawn,
Lessor, at its option, may require all future payments to be made by Lessee to
be by cashiers check. In the event of a Breach, Lessor may, with or without
further notice or demand, and without limiting Lessor in the exercise of any
right or remedy which Lessor may have by reason of such Breach:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession to Lessor. In such event Lessor shall be
entitled to recover from Lessee: (i) the unpaid Rent which had been earned at
the time of termination, (ii) the worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss that the Lessee proves
could have been reasonably avoided; (iii) the worth at the time of award of the
amount by which the unpaid rent for the balance of the term after the time of
award exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including, but not limited to, the cost of
recovering possession of the Premises, expense of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees and that
portion of any leasing commission paid by Lessor in connection with this Lease
applicable to the unexpired term of this Lease. The worth at the time of award
of the amount referred to in provision (iii) of the immediately preceding
sentence shall be computed by discounting such amount at the discount rate of
the Federal Reserve Bank of the District within which the Premises are located
at the time of award plus one percent (1%). Efforts by Lessor to mitigate
damages caused by Lessee's Breach of this Lease shall not waive Lessor's right
to recover damages under Paragraph 12. If termination of this Lease is obtained
through the provisional remedy of unlawful detainer, Lessor shall have the right
to recover in such proceeding any unpaid Rent and damages as are recoverable
therein, or Lessor may reserve the right to recover all or any part thereof in a
separate suit. If a notice and grace period required under Paragraph 13.1 was
not previously given, a notice to pay rent or quit, or to perform or quit given
to Lessee under the unlawful detainer statute shall also constitute the notice
required by Paragraph 13.1. In such case the applicable grace period required by
Paragraph 13.1 and the unlawful detainer statute shall run concurrently, and the
failure of Lessee to cure the Default within the greater of the two such grace
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periods shall constitute both an unlawful detainer and a Breach of this Lease
entitling Lessor to the remedies provided for in this Lease and/or by said
statute.
(b) Continue the Lease and right to possession and recover the Rent
as it becomes due, in which event Lessee may sublet or assign, subject only to
reasonable limitations. Acts of maintenance, efforts to relet, and/or the
appointment of a receiver to protect the Lessor's interests, shall not
constitute a termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available under the
laws or judicial decisions of the state wherein the Premises are located. The
expiration or termination of this Lease and/or the termination of Lessee's right
to possession shall not relieve Lessee from liability under any indemnity
provisions of this Lease as to matters occurring or accruing during the term
hereof or by reason of Lessee's occupancy of the Premises.
13.3 INDUCEMENT RECAPTURE. Any agreement for free or abated rent or other
charges, or for the giving or paying by Lessor to or for Lessee of any cash or
other bonus, inducement or consideration for Lessee's entering into this Lease,
all of which concessions are hereinafter referred to as "Inducement Provisions,
shall be deemed conditioned upon Lessee's full and faithful performance of all
of the terms covenants and conditions of this Lease. Upon Breach of this Lease
by Lessee, any such Inducement Provision shall automatically be deemed deleted
from this Lease and of no further force or effect, and any rent, other charge,
bonus, inducement or consideration theretofore abated, given or paid by Lessor
under such an inducement Provision shall be immediately due and payable by
Lessee to Lessor, notwithstanding any subsequent cure of said Breach by Lessee.
The acceptance by Lessor of rent or the cure of the Breach which initiated the
operation of this paragraph shall not be deemed a waiver by Lessor of the
provisions of this paragraph unless specifically so stated in writing by Lessor
at the time of such acceptance.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by Lessee
of Rent will cause Lessor to incur costs not contemplated by this Lease, the
exact amount of which will be extremely difficult to ascertain. Such costs
include, but are not limited to, processing and accounting charges, and late
charges which may be imposed upon Lessor by any Lender. Accordingly, if any Rent
shall not be received by Lessor within five (5) days after such amount shall be
due, then, without any requirement for notice to Lessee, Lessee shall pay to
Lessor a one-time late charge equal to ten percent (10%) of each such overdue
amount. The panics hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of such late
payment. Acceptance of such late charge by Lessor shall in no event constitute a
waiver of Lessee's Default or Breach with respect to such overdue amount, nor
prevent the exercise of any of the other rights and remedies granted hereunder.
In the event that a late charge is payable hereunder, whether or not collected,
for three (3) consecutive installments of Base Rent, then notwithstanding any
provision of this Lease to the contrary, Base Rent shall, at Lessor's option,
become due and payable quarterly in advance.
13.5 INTEREST. Any monetary payment due Lessor hereunder, other than late
charges, not received by Lessor, when due as to scheduled payments (such as Base
Rent) or within thirty (30) days following the date on which it was due for
non-scheduled payment, shall bear interest from the date when due, as to
scheduled payments, or the thirty-first (31st) day after it was due as to
non-scheduled payments. The interest ("Interest") charged shall be equal to the
prime rate reported in the Wall Street Journal as published closest prior to the
date when due plus four percent (4%), but shall not exceed the maximum rate
allowed by law. Interest is payable in addition to the potential late charge
provided for in Paragraph 13.4.
13.6 BREACH BY LESSOr.
(a) NOTICE OF BREACH. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph, a reasonable
time shall in no event be less than thirty (30) days after receipt by Lessor,
and any Lender whose name and address shall have been furnished Lessee in
writing for such purpose, of written notice specifying wherein such obligation
of Lessor has not been performed; provided, however, that if the nature of
Lessor's obligation is such that more than thirty (30) days are reasonably
required for its performance, then Lessor shall not be in breach if performance
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is commenced within such thirty (30) day period and thereafter diligently
pursued to completion.
(b) PERFORMANCE BY LESSEE ON BEHALF OF LESSOR. In the event that
neither Lessor nor Lender cures said breach thirty (30) days after receipt of
said written notice, or if having commenced said cure they do not diligently
pursue it to completion, then Lessee may elect to cure said breach at Lessee's
expense and offset from Rent an amount equal to the greater of one month's Base
Rent or the Security Deposit, and to pay an excess of such expense under
protest, reserving Lessee's right to reimbursement from Lessor. Lessee shall
document the cost of said cure and supply said documentation to Lessor.
14. CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(collectively "Condemnation"), this Lease shall terminate as to the part taken
as of the date the condemning authority takes title or possession, whichever
first occurs. If more than ten percent (10%) of any building portion of the
premises, or more than twenty-five percent (25%) of the land area portion of the
premises not occupied by any building, is taken by Condemnation, Lessee may, at
Lessee's option, to be exercised in writing within ten (10) days after Lessor
shall have given Lessee written notice of such taking (or in the absence of such
notice, within ten (10) days after the condemning authority shall have taken
possession) terminate this Lease as of the date the condemning authority takes
such possession. If Lessee does not terminate this Lease in accordance with the
foregoing, this Lease shall remain in full force and effect as to the portion of
the Premises remaining, except that the Base Rent shall be reduced in proportion
to the reduction in utility of the Premises caused by such Condemnation.
Condemnation awards and/or payments shall be the property of Lessor, whether
such award shall be made as compensation for diminution in value of the
leasehold, the value of the part taken, or for severance damages; provided,
however, that Lessee shall be entitled to any compensation for Lessee relocation
expenses, loss of business goodwill and/or Trade Fixtures, without regard to
whether or not this Lease is terminated pursuant to the provisions of this
Paragraph. All Alterations and Utility Installations made to the premises by
Lessee' for purposes of Condemnation only, shall be considered the property of
the Lessee and Lessee shall be entitled to any and all compensation which is
payable therefor. In the event that this Lease is not terminated by reason of
the Condemnation, Lessor shall repair any damage to the Premises caused by such
Condemnation.
15. BROKERS' FEE.
15.1 ADDITIONAL COMMISSION. In addition to the payments owed pursuant to
Paragraph 1.10 above, and unless Lessor and the Brokers otherwise agree in
writing Lessor agrees that: (a) if Lessee exercises any Option; (b) if Lessee
acquires any rights to the Premises or other premises owned by Lessor and
located within the same Project, if any, within which the Premises is located;
(c) if Lessee remains in possession of the Premises, with the consent of Lessor,
after the expiration of this Lease; or (d) if Base Rent is increased, whether by
agreement or operation of an escalation clause herein, then, Lessor shall pay
Brokers a fee in accordance with the schedule of said Brokers in effect at the
time of the execution of this Lease.
15.2 ASSUMPTION OF OBLIGATIONS. Any buyer or transferee of Lessor's
interest in this Lease shall be deemed to have assumed Lessor's obligation
hereunder. Each Broker shall be a third party beneficiary of the provisions of
Paragraphs 1.10, 15, 22 and 31. If Lessor fails to pay to a Broker any amounts
due as and for commissions pertaining to this Lease when due, then such amounts
shall accrue Interest. In addition, if Lessor fails to pay any amounts to
Lessee's Broker when due, Lessee's Broker may send notice to Lessor and Lessee
of such failure and if Lessor fails to pay such amounts within ten (10) days
after said notice, Lessee shall pay said monies to its Broker and offset such
amounts against Rent. In addition, Lessee's Broker shall be deemed to be a third
party beneficiary of any commission agreement entered into by and/or between
Lessor and Lessor s Broker.
15.3 REPRESENTATIONS AND INDEMNITIES OF BROKER RELATIONSHIPS. Lessee and
Lessor each represent and warrant to the other that it has had no dealings with
any person, firm, broker or finder (other than the Brokers, if any) in
connection with this Lease, and that no one other than said named Brokers is
entitled to any commission or finder's fee in connection herewith. Lessee and
Lessor do each hereby agree to indemnify, protect, defend and hold the other
harmless from and against liability for compensation or charges which may be
claimed by any such unnamed broker, finder or other similar party by reason of
any dealings or actions of the indemnifying Party, including any costs,
expenses, and/or attorneys' fees reasonably incurred with respect thereto.
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16. ESTOPPEL CERTIFICATES.
(a) Each Party (as "Responding Party") shall within ten (10) days
after written notice from the other Party (the "Requesting Party") execute,
acknowledge and deliver to the Requesting Party a statement in writing in form
similar to the then most current "Estoppel Certificate" form published by the
American Industrial Real Estate Association, plus such additional information
confirmation and/or statements as may be reasonably requested by the Requesting
Party.
(b) If the Responding Party shall fail to execute or deliver the
Estoppel Certificate within such ten day period, the Requesting Party may
execute an Estoppel Certificate stating that: (i) the Lease is in full force and
effect without modification except as may be represented by the Requesting
Party; (ii) there are no uncured defaults in the Requesting Party's performance;
and (iii) if Lessor is the Requesting Party, not more than one month's rent has
been paid in advance. Prospective purchasers and encumbrancers may rely upon the
Requesting Party's Estoppel Certificate and the Responding Party shall be
estopped from denying he truth of the facts contained in said Certificate.
(c) If Lessor desires to finance, refinance, or sell the Premises,
or any part thereof, Lessee and all Guarantors shall deliver to any potential
lender or purchaser designated by Lessor such financial statements as may be
reasonably required by such lender or purchaser, including, but not limited to,
Lessee's financial statements for the past three (3) years. All such financial
statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.
17. DEFINITION OF LESSOR. The term "Lessor" as used herein shall mean the owner
or owners at the time in question of the fee title to the Premises, or, if this
is a sublease, of the Lessee's interest in the prior lease. In the event of a
transfer of Lessor's title or interest in the Premises or this Lease, Lessor
shall deliver to the transferee or assignee (in cash or by credit) any unused
Security Deposit held by Lessor. Except as provided in Paragraph 15, upon such
transfer or assignment and delivery of the Security Deposit, as aforesaid, the
prior Lessor shall be relieved of all liability respect to the obligations
and/or covenants under Lease thereafter to be performed by the Lessor. Subject
to the foregoing, the obligations and/or covenants in this Lease to be performed
by the Lessor shall be binding only upon the Lessor as hereinabove defined.
Notwithstanding the above, and subject to the provisions of Paragraph 20 below,
the original Lessor under this Lease and all subsequent holders of the Lessor's
interest in this Lease shall remain liable and responsible with regard to the
potential duties and liabilities of Lessor pertaining to Hazardous Substances as
outlined in Paragraph 6 above.
18. SEVERABILITY. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.
19. DAYS. Unless otherwise specifically indicated to the contrary, the word
"days" as used in this Lease shall mean and refer to calendar days.
20. LIMITATION ON LIABILITY. Subject to the provisions of Paragraph 17 above,
the obligations of Lessor under this Lease shall not constitute personal
obligations of Lessor, the individual partners of Lessor or its or their
individual partners, directors, officers or shareholders, and Lessee shall look
to the Premises, and to no other assets of Lessor, for the satisfaction of any
liability of Lessor with respect to this Lease, and shall not seek recourse
against the individual partners of Lessor, or its or their individual partners,
directors, officers or shareholders, or any of their personal assets for such
satisfaction.
21. TIME OF ESSENCE. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.
22. NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Brokers that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to this Lease and as
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to the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party. The liability (including court costs and attorneys'
fees), of any Broker with respect to negotiation, execution, delivery or
performance by either Lessor or Lessee under this Lease or any amendment or
modification hereto shall be limited to an amount up to the fee received by such
Broker pursuant to this Lease; provided, however, that the foregoing limitation
on each Broker's liability shall not be applicable to any gross negligence or
willful misconduct of such Broker.
23. NOTICES.
23.1 NOTICE REQUIREMENTS. All notices required or permitted by this Lease
shall be in writing and may be delivered in person (by hand or by courier) or
may be sent by regular, certified or registered mail or U.S. Postal Service
Express Mail, with postage prepaid, or by facsimile transmission, and shall be
deemed sufficiently given if served in a manner specified in this Paragraph 23.
The addresses noted adjacent to a Party's signature on this Lease shall be that
Party's address for delivery or mailing of notices. Either Party may by written
notice to the other specify a different address for notice, except that upon
Lessee's taking possession of the Premises, the Premises shall constitute
Lessee's address for notice. A copy of all notices to Lessor shall be
concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate in writing.
23.2 DATE OF NOTICE. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown on
the receipt card, or if no delivery date is shown, the postmark thereon. If sent
by regular mail the notice shall be deemed given forty-eight (48) hours after
the same is addressed as required herein and mailed with postage prepaid.
Notices delivered by United States Express Mail or overnight courier that
guarantee next day delivery shall be deemed given twenty-four (24) hours after
delivery of the same to the Postal Service or courier. Notices transmitted by
facsimile transmission or similar means shall be deemed delivered upon telephone
confirmation of receipt, provided a copy is also delivered via delivery or mail.
If notice is received on a Saturday, Sunday or legal holiday, it shall be deemed
received on the next business day.
24. WAIVERS. No waiver by Lessor of the Default or Breach of any term, covenant
or condition hereof by Lessee' shall be deemed a waiver of any other term,
covenant or condition hereof, or of any subsequent Default or Breach by Lessee
of the same or of any other term, covenant or condition hereof. Lessor's consent
to, or approval of, any act shall not be deemed to render unnecessary the
obtaining of Lessor's consent to, or approval of, any subsequent or similar act
by Lessee' or be construed as the basis of an estoppel to enforce the provision
or provisions of this Lease requiring such consent. The acceptance of Rent by
Lessor shall not be a waiver of any Default or Breach by Lessee. Any payment by
Lessee may be accepted by Lessor on account of monies or damages due Lessor,
notwithstanding any qualifying statements or conditions made by Lessee in
connection therewith, which such statements and/or conditions shall be of no
force or effect whatsoever unless specifically agreed to in writing by Lessor at
or before the time of depose of such payment.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees applicable thereto.
26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or termination of this Lease.
In the event that Lessee holds over, then the Base Rent shall be increased to
one hundred fifty percent (150%) of the Base Rent applicable during the month
immediately preceding the expiration or termination. Nothing contained herein
shall be construed as consent by Lessor to any holding over by Lessee.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. COVENANTS AND CONDITIONS; CONSTRUCTION OF AGREEMENT. All provisions of this
Lease to be observed or performed by Lessee are both covenants and conditions.
In construing this Lease, all headings and titles are for the convenience of the
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Parties only and shall not be considered a part of this Lease. Whenever required
by the context, the singular shall include the plural and vice versa. This Lease
shall not be construed as if prepared by one of the Parties, but rather
according to its fair meaning as a whole, as if both Parties had prepared it.
29. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the Parties
their personal representatives, successors and assigns and be governed by the
laws of the State in which the Premises are located. Any litigation between the
Parties hereto concerning this Lease shall be initiated in the county in which
the Premises are located.
30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
30.1 SUBORDINATION. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust or other
hypothecation or security device (collectively, "Security Device"), now or
hereafter placed upon the Premises, to any and all advances made on the security
thereof, and to all renewals, modifications, and extensions thereof. Lessee
agrees that the holders of any such Security Devices (in this Lease together
referred to as "Lessor's Lender") shall have no liability or obligation to
perform any of the obligations of Lessor under this Lease. Any Lender may elect
to have this Lease and/or any Option granted hereby superior to the lien of its
Security Device by giving written notice thereof to Lessee, whereupon this Lease
and such Options shall be deemed prior to such Security Device, notwithstanding
the relative dates of the documentation or recordation thereof.
30.2 ATTORNMENT. Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (i) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership; (ii) be subject to any offsets or defenses
which Lessee might have against any prior lessor; or (iii) be bound by
prepayment of more than one (1 ) month's rent.
30.3 NON-DISTURBANCE. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving a commercially reasonable non-disturbance
agreement (a "Non-Disturbance Agreement") from the Lender which Non-Disturbance
Agreement provides that Lessee's possession of the Premises, and this Lease,
including any options to extend the term hereof, will not be disturbed so long
as Lessee is not in Breach hereof and attorns to the record owner of the
Premises. Further, within sixty (60) days after the execution of this Lease,
Lessor shall use its commercially reasonable efforts to obtain a Non-Disturbance
Agreement from the holder of any pre-existing Security Device which is secured
by the Premises. In the event that Lessor is unable to provide the
Non-Disturbance Agreement within said sixty (60) days, then Lessee may, at
Lessee's option, directly contact Lessor's lender and attempt to negotiate for
the execution and delivery of a Non-Disturbance Agreement.
30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30 shall
be effective without the execution of any further documents; provided, however,
that, upon written request from Lessor or a Lender in connection with a sale,
financing or refinancing of the Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any
subordination, attornment and/or Non-Disturbance Agreement provided for herein.
31. ATTORNEYS' FEES. If any Party or Broker brings an action or proceeding
involving the Premises to enforce the terms hereof or to declare rights
hereunder, the Prevailing Party (as hereafter defined) in any such proceeding,
action, or appeal thereon, shall be entitled to reasonable attorneys' fees. Such
fees may be awarded in the same suit or recovered in a separate suit whether or
not such action or proceeding is pursued to decision or judgment. The term,
"Prevailing Party" shall include, without limitation, a Party or Broker who
substantially obtains or defeats the relief sought, as the case may be, whether
by compromise, settlement, judgment, or the abandonment by the other Party or
Broker of its claim or defense. The attorneys' fees award shall not be computed
in accordance with any court fee schedule, but shall be such as to fully
reimburse all attorneys' fees reasonably incurred. In addition, Lessor shall be
entitled to attorneys' fees, costs and expenses incurred in the preparation and
service of notices of Default and consultations in connection therewith, whether
or not a legal action is subsequently commenced in connection with such Default
or resulting Breach.
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32. LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's agents shall
have the right to enter the Premises at any time, in the case of an emergency,
and otherwise at reasonable times for the purpose of showing the same to
prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises may deem necessary. All such
activities shall be without abatement of rent or liability to Lessee. Lessor may
at any time place on the Premises any ordinary "For Sale" signs and Lessor may
during the last six (6) months of the term hereof place on the Premises any
ordinary "For Lease" signs. Lessee may at any time place on or about the
Premises any ordinary "For Sublease" sign.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, any auction
upon the Premises without Lessor's prior written consent. Lessor shall not be
obligated to exercise any standard of reasonableness in determining whether to
permit an auction.
34. SIGNS. Except for ordinary "For Sublease" signs, Lessee shall not place any
sign upon the Premises without Lessor's prior written consent. All signs must
comply with all Applicable Requirements.
35. TERMINATION; MERGER. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, that Lessor may elect to continue any one or all
existing subtenancies. Lessor's failure within ten (10) days following any such
event to elect to the contrary by written notice to the holder of any such
lesser interest, shall constitute Lessor's election to have such event
constitute the termination of such interest.
36. CONSENTS. Except as otherwise provided herein, wherever in this Lease the
consent of a Party is required to an act by or for the other Party, such consent
shall not be unreasonably withheld or delayed. Lessor's actual reasonable costs
and expenses (including but not limited to architects', attorneys', engineers
and other consultants' fees) incurred in the consideration of, or response to, a
request by Lessee for any Lessor consent, including but not limited to consents
to an assignment, a subletting or the presence or use of a Hazardous Substance,
shall be paid by Lessee upon receipt of an invoice and supporting documentation
therefor. Lessor's consent to any act, assignment or subletting shall not
constitute an acknowledgment that no Default or Breach by Lessee of this Lease
exists, nor shall such consent be deemed a waiver of any then existing Default
or Breach, except as may be otherwise specifically stated in writing by Lessor
at the time of such consent. The failure to specify herein any particular
condition to Lessor's consent shall not preclude the imposition by Lessor at the
time of consent of such further or, other conditions as are then reasonable with
reference to the particular maker for which consent is being given. In the event
that either Party disagrees with any determination made by the other hereunder
and reasonably requests the reasons for such determination, the determining
party shall furnish its reasons in writing and in reasonable detail within ten
(10) business days following such request.
37. GUARANTOR.
37.1 EXECUTION. The Guarantors, if any, shall each execute a guaranty in
the form most recently published by the American Industrial Real Estate
Association, and each such Guarantor shall have the same obligations as Lessee
under this Lease.
37.2 DEFAULT. It shall constitute a Default of the Lessee if any Guarantor
fails or refuses, upon request to provide: (a) evidence of the execution of the
guaranty, including the authority of the party signing on Guarantor's behalf to
obligate Guarantor, and in the case of a corporate Guarantor, a certified copy
of a resolution of its board of directors authorizing the making of such
guaranty, (b) current financial statements, (c) a Tenancy Statement, or (d)
written confirmation that the guaranty is still in effect.
38. QUIET POSSESSION. Subject to payment by Lessee of the Rent and performance
of all of the covenants, conditions and provisions on Lessee's part to be
observed and performed under this Lease, Lessee shall have quiet possession and
quiet enjoyment of the Premises during the term hereof.
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39. OPTIONS.
39.1 DEFINITION. "Option" shall mean: (a) the right to extend the term of
or renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (b) the right of first refusal or first offer to lease
either the Premises or other property of Lessor; (c) the right to purchase or
the right of first refusal to purchase the Premises or other property of Lessor.
39.2 OPTIONS PERSONAL TO ORIGINAL LESSEE. Each Option granted to Lessee in
this Lease is personal to the original Lessee, and cannot be assigned or
exercised by anyone other than said original Lessee and only while the original
Lessee is in full possession of the Premises and, if requested by Lessor, with
Lessee certifying that Lessee has no intention of thereafter assigning or
subletting.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple Options
to extend or renew this Lease, a later Option cannot be exercised unless the
prior Options have been validly exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option: (i) during the
period commencing with the giving of any notice of Default and continuing until
said Default is cured; (ii) during the period of time any Rent is unpaid
(without regard to whether notice thereof is given Lessee); (iii) during the
time Lessee is in Breach of this Lease; or (iv) in the event that Lessee has
been given three (3) or more notices of separate Default whether or not the
Defaults are cured, during the twelve (12) month period immediately preceding
the exercise of the Option.
(b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).
(c) An Option shall terminate and be of no further force or effect,
notwithstanding Lessee's due and timely exercise of the Option, if, after such
exercise and prior to the commencement of the extended term (i) Lessee fails to
pay Rent for a period of thirty (30) days after such Rent becomes due (without
any necessity of Lessor to give notice thereof), (ii) Lessor gives to Lessee
three (3) or more notices of separate Default during any twelve (12) month
period, whether or not the Defaults are cured, or (iii) if Lessee commits a
Breach of this Lease.
40. MULTIPLE BUILDINGS. If the Premises are a part of a group of buildings
controlled by Lessor, Lessee agrees that it will observe all reasonable rules
and regulations which Lessor may make from time to time for the management,
safety, and care of said properties, including the care and cleanliness of the
grounds and including the parking, loading and unloading of vehicles, and that
Lessee will pay its fair share of common expenses incurred in connection
therewith.
41. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee its
agents and invitees and their property from the acts of third parties.
42. RESERVATIONS. Lessor reserves to itself the right, from time to time, to
grant, without the consent or joinder of Lessee, such easements, rights and
dedications that Lessor deems necessary, and to cause the recordation of parcel
maps and restrictions, so long as such easements, rights, dedications, maps and
restrictions do not unreasonably interfere with the use of the Premises by
Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to
effectuate any such easement rights, dedication, map or restrictions.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof. the Party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to institute sun for recovery of such sum. If it shall be adjudged
that here was no legal obligation on the part of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay.
24
<PAGE>
44. AUTHORITY. If either Party hereto is a corporation, trust, limited liability
company, partnership, or similar entity each individual executing this Lease on
behalf of such entity represents and warrants that he or she is duly authorized
to execute and deliver this Lease on its behalf. Each Party shall, within thirty
(30) days after request, deliver to the other party satisfactory evidence of
such authority.
45. CONFLICT. Any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions shall be controlled by the typewritten or
handwritten provisions.
46. OFFER. Preparation of this Lease by either Party or their agent and
submission of same to the other Party shall not be deemed an offer to lease to
the other Party. This Lease is not intended to be binding until executed and
delivered by all Parties hereto.
47. AMENDMENTS. This Lease may be modified only in writing signed by the Parties
in interest at the time of the modification. As long as they do not materially
change Lessee's obligations hereunder, Lessee agrees to make such reasonable
non-monetary modifications to this Lease as may be reasonably required by a
Lender in connection with the obtaining of normal financing or refinancing of
the Premises.
48. MULTIPLE PARTIES. If more than one person or entity is named herein as
either Lessor or Lessee, such multiple Parties shall have pint and several
responsibility to comply with the terms of this Lease.
49. MEDIATION AND ARBITRATION OF DISPUTES. An Addendum requiring the Mediation
and/or the Arbitrator of all disputes between the Parties and/or Brokers rising
out of this Lease is is not attached to this Lease.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME HIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN
INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES. THE PARTIES ARE URGED TO:
1. SEEK ADVISE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.
2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF
THE PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE
POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES, THE
STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, AND
THE SUITABILITY OF THE PREMISES FOR LESSEE'S INTENDED USE.
WARNING: IF THE PREMISE IS LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN
PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE
STATE IN WHICH THE PREMISES IS LOCATED.
The Parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.
Executed at: Los Angeles on March ___, 1999 Executed at: Los Angeles on
by LESSOR March ___, 1999
by LESSEE
F & B Industrial Investments, LLC Avid Sportswear, Inc., a
California Corp.
By: By:
--------------------------------- ------------------------------
Named Printed: Nicholas M. Brown Name Printed: David Roderick
Title: Member/Partner Title: President
By: By:
--------------------------------- ------------------------------
Name Printed: Name Printed:
Title: Title:
Address: 8929 Wilshire Blvd., #400 Address: 26831 Hawhurst Dr.
Beverly Hills, CA 90211 R.P.V., CA 90275
Telephone: (310) 652-8288 Telephone: (310)
Facsimile: (310) 652-4972 Facsimile: ( )
Federal ID No.: Federal ID No.: 95-4209076
NOTE: These forms are often modified to meet changing requirements of law and
industry needs. Always write or call to make sure you are utilizing the most
current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700 S. Flower Street,
Suite 600, Los Angeles, California 90017. (213) 687-8777. Fax No. (213)
687-8616.
26
<PAGE>
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
GUARANTY OF LEASE
WHEREAS, F & B Industrial Investments, LLC "Lessor", and Avid Sportswear,
Inc., a California Corp., hereinafter "Lessee", are about to execute a document
entitled "Lease" dated March 1, 1999 concerning the premises commonly known as
19143 S. Hamilton Ave. (Gardena P.O. Box) Unincorporated L.A. County 90248
wherein Lessor will lease the premises to Lessee, and
WHEREAS, Golf Innovations Corporation, a Nevada Corporation hereinafter
"Guarantors" have a financial interest in Lessee, and, hereinafter
WHEREAS, Lessor would not execute the Lease if Guarantors did not execute
and deliver to Lessor this Guarantee of Lease.
NOW THEREFORE, in consideration of the execution of the foregoing Lease by
Lessor and as a material inducement to Lessor to execute said Lease Guarantors
hereby jointly, severally, unconditionally and irrevocably guarantee the prompt
payment by Lessee of all rents and all other sums payable by Lessee under said
Lease and the faithful and prompt performance by Lessee of each and every one of
the terms, conditions and covenants of said Lease to be kept and performed by
Lessee.
It is specifically agreed that the terms of the foregoing Lease may be
modified by agreement between Lessor and Lessee, or by a course of conduct, and
said Lease may be assigned by Lessor or any assignee of Lessor without consent
or notice to Guarantors and that this Guaranty shall guarantee the performance
of said Lease as so modified.
This Guaranty shall not be released, modified or affected by the failure
or delay on the part of Lessor to enforce any of the rights or remedies of the
Lessor under said Lease, whether pursuant to the terms thereof or at law or in
equity.
No notice of default need be given to Guarantors, it being specifically
agreed that the guarantee of the undersigned is a continuing guarantee under
which Lessor may proceed immediately against Lessee and/or against Guarantors
following any breach or default by Lessee or for the enforcement of any rights
which Lessor may have as against Lessee under the terms of the Lease or at law
or in equity.
Lessor shall have the right to proceed against Guarantors hereunder
following any breach or default by Lessee without first proceeding against
Lessee and without previous notice to or demand upon either Lessee or
Guarantors.
Guarantors hereby waive (a) notice of acceptance of this Guaranty, (b)
demand of payment, presentation and protest, (c) all right to assert or plead
any statute of limitations relating to this Guaranty or the Lease, (d) any right
to require the Lessor to proceed against the Lessee or any other Guarantor or
any other person or entity liable to Lessor, (e) any right to require Lessor to
apply to any default any security deposit or other security it may hold under
the Lease (f) any right to require Lessor to proceed under any other remedy
Lessor may have before proceeding against Guarantors (g) any right of
subrogation.
Guarantors do hereby subrogate all existing or future indebtedness of
Lessee to Guarantors to the obligations owed to Lessor under the Lease and this
Guaranty.
If a Guarantor is married, such Guarantor expressly agrees that recourse
may be had against his or her separate property for all of the obligations
hereunder.
The obligations of Lessee under the Lease to execute and deliver estoppel
statements and financial statements, as therein provided, shall be deemed to
also require the Guarantors hereunder to do and provide the same.
<PAGE>
The term "Lessor" refers to and means the Lessor named in the Lease and
also Lessor's successors and assigns. So long as Lessor's interest in the Lease,
the leased premises or the rents, issues and profits therefrom, are subject to
any mortgage or deed of trust or assignment for security no acquisition by
Guarantors of the Lessor's interest shall affect the continuing obligation of
Guarantors under this Guaranty which shall nevertheless continue in full force
and effect for the benefit of the mortgagee, beneficiary, trustee or assignee
under such mortgage, deed of trust or assignment and their successors and
assigns.
The term "Lessee" refers to and means the Lessee named in the Lease and
also Lessee's successors and assigns.
In the event any action be brought by said Lessor against Guarantors
hereunder to enforce the obligation of Guarantors hereunder, the unsuccessful
party in such action shall pay to the prevailing party therein a reasonable
attorney's fee which shall be fixed by the court.
IF THIS FORM HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR SUBMISSION TO
YOUR ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS
MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, THE REAL ESTATE
BROKER OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL EFFECT, OR TAX
CONSEQUENCES OF THIS FORM OR THE TRANSACTION RELATING THERETO.
Executed at Florida Mr. Earl Ingarfield
on March ___, 1999
Address 1133 4th Street # 304 Sarasota, Mr. Mike LaValliere
Florida 34236
"GUARANTORS"
<PAGE>
Addendum To That Standard Industrial/Commercial
Single Tenant Lease-Gross dated March 1, 1999
By & Between: F & B Industrial Investments, LLC-Lessor
and Avid Sportswear, Inc., A Calif. Corp.-Lessee
Premises known as: 19143 S. Hamilton Ave. (Gardena P.O. Box)
Unincorporated L.A. County 90248
50. Deposits: Lessee upon execution of the lease document, will pay to Lessor
the following:
First Months' Rent: $ 10,113.60
Security Deposit: $ 10,113.60
Lessees' Contribution to
the Tenant Improvements $ 25,000.00
- --------------------------------------------------------------------------------
Total: $ 45,227.20
51. Tenant Improvements: Lessor, at Lessors' sole cost and expense, will
accomplish the Tenant Improvements as outlined on the attached Exhibit A, on or
before April 1, 1999.
52. Fixed Rental Adjustment(s):
The Base Rent shall be increased to the following amounts on the dates set forth
below:
ON: THE NEW BASE RENT SHALL BE:
April 1, 2000 $10,348.80 ($.44)
April 1, 2001 $ 10,584.00 ($.45)
April 1, 2002 $ 10,819.20 ($.46)
April 1, 2003 $11,054.40 ($.47)
53. Maintenance Lessee, at Lessees' sole cost and expense, shall be responsible
for the maintenance and upkeep of the premises. Lessee shall keep the premises
in good order and repair, including, but not limited to all plumbing, heating,
landscaping, driveways, HVAC and other items outlined in paragraph 7, of
Standard Industrial/Commercial Single-Tenant Lease-Gross dated March 1, 1999.
54. Option To Extend: Lessee shall have one (1) five (5) year Option To Extend
at the then Prevailing Market Value. In order to exercise an option to extend,
lessee must give written notice of such election to Lessor and Lessor must
receive the same at least six (6) but not more than nine (9) months prior to the
date that the option period would commence. In no event will the new rental
amount be less than 103% of the monthly rent preceding the month the option is
to be exercised. There shall be annual fixed C.P.I. increases of three (3%)
percent.
55. Guaranty Of Lease: Lessee acknowledges that Golf Innovations Corp., A Nevada
Corporation is to Guaranty this lease for the entire term of the lease,
including the period.(if exercised)
Agreed and Accepted:
F & B INDUSTRIAL INVESTMENTS, LLC AVID SPORTSWEAR, INC.-LESSEE
By: By:
--------------------------------- -----------------------------
Nicholas M. Brown David Roderick
Its: Member Its: President
Date: 1999 Date: 1999
------------------------- -------------------------
EXHIBIT 10.03
LINKS ASSOCIATES, LTD., LEASE
THIS LEASE Agreement made and entered into this [30TH] day of April, 1999,
by and between Links Associates, Ltd., a Florida Limited Partnership,
hereinafter referred to as LANDLORD, address of which is 406 Sarasota Quay,
Sarasota, Florida, 34236, it's successors and assigns; and Golf Innovations
Corporation hereinafter referred to as TENANT, address of which is 1133 Fourth
(4th) Street, Suite 304, Sarasota, FL 34236.
1. PREMISES
In consideration of the rents and covenants herein stipulated to be paid
and performed by Tenant and upon the terms and conditions herein specified,
Tenant takes from Landlord the following described premises (the PREMISES):
Approximately 2,017 square feet of Gross Rentable Area, as such term is
defined below, located on the 2nd floor, known as Suite 204 located at 22 South
Links Avenue, Sarasota, Florida 34236, as shown on exhibit A, attached hereto
and made a part hereof, (The Property). Total gross rentable area is deemed to
be approximately 2,017 square feet. The usable area is deemed to be 1500 square
feet. The actual figures will be generated by the Landlord's architect, Gary
Hoyt, and the actual figures will be substituted in place of the approximations,
once the actual figures are obtained from the architect, these base figures will
be the final figures, and not subject to any further review or change.
(a) ADDITIONAL RENT: all amounts which this Lease requires Tenant to pay
in addition to Base Monthly Rent.
(b) BUILDING: Entire building that the premises is contained in Square
footage of building is estimated to be 22,055 square feet.
(c) BUILDING/PROJECT COMMON AREA EXPENSES: An amount of money equal to the
product obtained by multiplying the Common Area Operating Expenses by a
fraction, the numerator of which is the rentable area of the premises and the
denominator of which is the rentable area of the Project.
(d) BUILDING/PROJECT OPERATING EXPENSES: Any and all reasonable and
customary costs and expenses paid or incurred by Landlord in the operation,
maintenance, servicing and management of the Building, including without
limiting the generality of the foregoing, all utilities and water and sewer
charges, grounds maintenance, air conditioning repair and maintenance,
telephone, security, pest control, building cleaning, painting, supplies,
maintaining, repairing and replacing the building, roof and building systems
equipment, parking lot maintenance and resurfacing, rent loss insurance,
management fees, professional fees and expenses, administration expenses,
insurance, personal property taxes, real estate taxes, garbage and trash
collection and such other miscellaneous items as Landlord may determine to be
necessary, including a contingency charge.
(e) COMMON AREA: All those interior and exterior portions of the Project
as may be designated from time to time by Landlord for use in common by Tenants
of tile Project and their employees, guests, customers or prospective customers,
agents or invitees.
(f) COMMON AREA OPERATING EXPENSES: Any and all reasonable customary costs
and expenses paid or incurred by Landlord in the operation, maintenance,
servicing and management of the Common Area, including, without limiting the
generality of the foregoing, utilities and water and sewer charges, grounds
maintenance, air conditioning repair and maintenance, telephone, security, pest
control, building cleaning, painting, supplies, maintaining, repairing and
replacing the building, roof and building systems equipment, parking lot
maintenance and resurfacing, rent loss insurance, management fees, professional
<PAGE>
fees and expenses, administration expenses, insurance, personal property taxes,
real estate taxes assessed against the common areas of the project, garbage and
trash collection and such other miscellaneous items as Landlord may determine to
be necessary, including a contingency charge.
(g) LEASE: This office Lease (including Rider and Exhibits) as it may be
amended from time to time.
(h) LEASE YEAR: A period of twelve ( 12) consecutive calendar months,
measured from the Commencement Date, or the anniversary thereof: except that if
the Commencement Date does not occur on the first day of a month, then the
period of twelve ( 12) consecutive months measured from the first day (or the
anniversary thereof) of the first full month immediately following the
Commencement Date.
(i) PROJECT: The land and rights with all improvements located thereon.
(j) RENT: The Base Rent and Additional Rent.
(k) TAX YEAR: Means the twelve-month period commencing on January I
immediately proceeding the Commencement Date and each twelve-month period
thereafter during the Lease Term, or if the appropriate governmental tax fiscal
period shall begin on any date other than January 1, such other date.
(l) TENANT'S PERCENTAGE SHARE: Shall be determined from time to time by
Landlord by dividing the Rentable Area of the Premises by the Rentable Area of
the project.
2. USE
Tenant may use the Premises for the operation of a business office or
other purpose Landlord may approve in writing, in advance, but for no other
purpose. Landlord reserves the right to approve or deny any other use, to be
determined in Landlord's sole discretion. Tenant shall, at all times, conduct
its business in a high grade and reputable manner and in conformity with all
applicable state, municipal or other regulatory body having jurisdiction over
the Tenant, and shall not commit waste or create a nuisance on the Premises.
Tenant will conform to the Declaration of Condominium, as well as any rules and
regulations incident thereto. The Tenant shall operate its business under the
name of Golf Innovations Corporation.
3. TERM
Subject to the terms, covenants, agreements and conditions contained
herein, Tenant shall have and hold the Premises for a term of five (5) years,
commencing on July 1, 1999 and terminating June 30, 2004. Except as noted below
- - should the commencement date be other than July 1, 1999, then the termination
date shall be changed by an equal amount of time to reflect a 5 year term. There
shall be no delay in the commencement of the term of this Lease or payment of
Rent as provided where Tenant fails to occupy the Premises when same are
substantially complete and available for Tenant's use. The term shall commence
on the earliest of the following dates (hereinafter the "commencement date"):
(a) Sixty (60) days after the Landlord and Tenant execute this Lease.
(b) The day that the Landlord obtains a certificate of occupancy for the
premises.
(c) July 1, 1999
4 BASE RENT
Tenant covenants to pay Land lord Base Rent, as that term is defined in
this Section 4, which is due and payable upon Tenant's execution of this Lease
as follows; the Base Rent shall be computed at a rate of Thirty-four Thousand
Two Hundred and Eighty-Nine Dollars ($34,289.00) annually equally divided into
2
<PAGE>
Twelve (12) monthly installments of Two Thousand Five Hundred Eighty-seven
Dollars and 41/100 ($2,857.41). The Base Rent shall be due and payable in
advance of the 1st day of each month, without any offset or deduction, at the
office of Landlord or elsewhere as designated by Landlord's written notice to
Tenant.
A. It is understood that this Lease is a triple net Lease. Tenant is
responsible for its proportionate share of common area maintenance, real estate
taxes and insurance. It is estimated that these expenses will be approximately
Five Hundred Four Dollars and 25/100 ($504.25) per month during the first year
of the Lease. Future adjustments are defined in this Lease Agreement.
B. ALLOCATION OF OPERATING EXPENSES: Tenant shall pay as Additional Rent
Tenant's Percentage Share of Project Operating Expenses and Project Common Area
Expenses. On an annual basis and from time to time, as described herein,
Landlord shall advise Tenant of the estimated Tenant's Percentage Share of
Project Operating Expenses and Project Common Area Expenses for the next
relative period. Tenant shall pay in advance in monthly installments the
estimated Tenant's Percentage Share of Operating Expenses and Common Area
Expenses. Tenant shall also pay Tenant's Percentage Share of adjustments to the
actual Operating Expenses and actual Common Area Expenses on a quarterly or
annual basis (as more fully described below) at Landlord's option.
At any time during the Lease Term, but no later then ten (10) days before
the date a rental payment is due, Landlord may deliver to Tenant a written
estimate of any increase in Tenant's Percentage Share of Operating Expenses and
Common Area Expenses which may be reasonably anticipated pursuant to this
Section 5.1. Tenant shall pay to Landlord the amount of any such estimated
increase in equal monthly installments no later than the first day of each month
for such full or partial calendar year for which the estimate was made.
Statements showing Tenant's Percentage Share of the actual Operating
Expenses and actual Common Area Expenses shall be prepared in reasonable detail
and according to Generally Accepted Accounting Principles. Said statements shall
be known as "Statements of Actual Adjustment". Landlord shall deliver such a
Statement of Actual Adjustment to Tenant within one hundred twenty (120) days
after the end of any calendar year in which additional charges were paid by
Tenant under the provisions of this Section 5.1 or, at the option of Landlord,
within forty-five (45) days after the expiration of each calendar quarter. Any
delays in notifying tenant of such charges shall not waive tenants obligation to
pay any charges due.
Within fifteen (15) days after Landlord delivers to Tenant such Statement
of Actual Adjustment, Tenant shall pay to Landlord the amount of any additional
charges shown as being due and unpaid on such Statement. If such Statement of
Actual Adjustment shows that Tenant paid to Landlord an aggregate amount in
excess of the additional charges due for the preceding calendar year, and Tenant
is not then in default under this Lease, Landlord shall credit the amount of
overpayment against subsequent obligations of Tenant, or shall pay such excess
to Tenant in cash if no further payments are due from Tenant hereunder.
If the Lease Term begins on a day other than the first day of a calendar
year, or if the Lease Term terminated on a day other than the last day of a
calendar year, the amount shown as due by Tenant on the Statement of Actual
Adjustment will reflect a proration based on the proportion that the number of
days this Lease was in effect during such calendar year bears to 360.
REAL ESTATE TAXES
C. As used herein, the term "Taxes" shall mean all real property taxes,
rental sales tax, assessments, general or specific (whether commenced or
completed during the Lease Term), ad valorem or non ad valorem taxes specific or
otherwise levied or imposed by any governmental authority on the land, building
or improvements of the Project, or the furniture, fixtures or equipment used to
operate the Project; and also any tax or excise in addition thereto or in
substitution thereof levied by any governmental authority or in respect of, or
by reason of, ownership or operation of the land, building or improvements of
the Project, and incurred by Landlord; and any water charges and sewer rents
which may be assessed, levied, confirmed or imposed on or in respect of the
land, building or improvements of the Project. Taxes, as the term is used in
this Lease, shall not include income, excess profits, franchise, capital stock,
3
<PAGE>
inheritance and transfer taxes and license, inspection and permit fees except
that taxes or governmental impositions later imposed, including any taxes or
governmental imposition on gross or net profits, income or revenues of Landlord
from the operation of the land, improvements or building of the Project or from
the Premises or this Lease, in substitution for or of a character substantially
similar to what are presently known as real estate taxes shall be included in
Taxes as defined herein. The real estate taxes in question are those assessed
against the Condominium Unit of which the premises are a part, as well as it
proportionate share of common area.
D. Landlord shall pay all Taxes levied against the Project.
Notwithstanding the foregoing, Tenant shall pay to Landlord as Additional Rent
Tenant's Proportionate Share of Taxes payable by Landlord with respect to the
project. Tenant's Proportionate Share of Taxes shall be determined by
multiplying Taxes by Tenant's proportionate Share ("Tenant's Proportionate Share
of Taxes").
E. Tenant's estimated payments of Tenant's Proportionate Share of Taxes
shall be made monthly at tile time and in the manner provided in this Lease for
the payment of Base Monthly Rent. Landlord shall estimate and determine from
time to time the amount of Tenant's payment of Tenant's Proportionate Share of
Taxes so that, together with other tenants' estimated tax payments, Landlord
will have sufficient funds available to pay all Taxes at least ten (10) days
before such payments would otherwise be due. Promptly after Landlord's receipt
of bills for such Taxes, Landlord shall advise Tenant of the amounts of such
bills, the total of the Taxes, and Tenant's Proportionate Share of such Taxes,
and shall provide to Tenant copies of all such bills for Taxes. Landlord advises
Tenant that Tenant's proportionate Share of Taxes and operating Expenses is
estimated to be approximately $3.00 per rentable square foot of the premises.
The Tenant is paying real estate taxes against its Condominium Unit (second
and/or third floor as the taxing agency may designate from time to time) based
upon the proportion of rentable square footage that the premises bear to the
total second and/or third floor space (as the taxing agency may designate from
time to time). Any delay in notifications regarding herein shall not waive
Tenants obligations to pay any amounts due to Landlord.
If estimated payments made by Tenant for any Tax Year exceed the required
payments as calculated by Landlord for such Tax Year, or if Landlord
successfully contests the Taxes and receives a refund, Landlord shall pay such
excess portion of the refund in cash to Tenant if the Lease Term has ended and
Tenant has no further obligation to Landlord. If Landlord's required payments
for such Tax Year are greater than the estimated payments made by Tenant for
such Tax Year, Tenant shall pay such difference to Landlord within thirty (30)
days after being so advised.
5. ADDITIONAL RENT; SALES TAX
A. All taxes, charges, costs and expenses payable by Tenant hereunder,
together with all interests and penalties that may accrue thereon in the event
Tenant fails to pay those items, and all other damages, costs, expenses and sums
that Landlord may suffer or incur, or that may become due, by reason of any
default of Tenant or failure by Tenant to comply with the terms and conditions
of this Lease shall tee deemed to be additional rent, and shall be due and
payable consistent with the terms for payment of Base Rent. In the event of
nonpayment, Landlord shall have a Landlord's lien herein provided for failure to
pay rent. Common area charges, real estate taxes, and insurance are considered
additional rent. Tenant shall pay its own tangible tax on personal property and
leasehold improvements.
B. All State of Florida sales tax, tax on rentals and any other charge or
tax imposed on the privilege of renting which may be required by law shall be
paid by the Tenant to the Landlord on a monthly basis in addition to the monthly
base rental payments. This amount shall not include taxes based on Landlord's
net income. It is the intention of the parties that the monthly base rent
referenced in Section 4 herein is net rental, and the Landlord shall receive the
same, free from all sales taxes, that are due from Tenant.
6. SECURITY DEPOSIT
Tenant, concurrently with the execution of this Lease, has deposited with
Landlord the sum of Three Thousand Fifty-seven Dollars and 43/100 ($3,057.43),
the receipt of which is hereby acknowledged by Landlord, which sum shall be
retained by Landlord as security for the payment by Tenant of the rents and all
other payments herein agreed to be paid by Tenant and for the faithful
performance by Tenant of the terms, provisions, covenants and conditions of this
Lease. It is agreed that Landlord, at its option, may at the time of any default
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by Tenant under any terms, provisions, covenant or conditions of this Lease
apply the Security Deposit or any part thereof towards the payment of rent and
all other sums payable by Tenant under this Lease and towards the performance of
each and every one of the Tenant's covenants under this Lease. For all sums of
the Security Deposit which are not utilized by Landlord for the purposes set
forth in this Section, Landlord shall return such balance of the Security
Deposit to tenant within thirty (30) days of the expiration of this Lease Term.
Landlord has no obligation to pay Tenant any interest on the Security Deposit.
The Tenant is required to replenish the security deposit in the event that the
Landlord must utilize any parts of the security deposit to cure defaults of the
Tenant.
7. ADJUSTMENT TO BASE RENT
A. Commencing on the first anniversary of this Lease and annually
thereafter including any option periods, the annual Base Rent shall be adjusted
in accordance with fluctuations of the Consumer Price Index which is published
by the Bureau of Labor Statistics of the United States Department of Labor. The
Index which applies to the "All Item" category for the U.S. City Average for
Urban Wage Owners, Earners and Clerical Workers (the "CPI") shall be used. The
annual Base Rent shall be adjusted as follows:
1. The Annualized CPI for the month which is three months preceding the
anniversary month of the commencement of this Lease shall be designated the
Comparison Index; and = Adjusted Annual Increase
2. The calculation of the adjusted annual Base Rent shall be as follows:
Annual Base x Comparison Index = Adjusted Annual Increase
B. Landlord shall notify Tenant of the adjustment to the Base Rent which
is payable in accordance with this Section. Tenant shall pay such adjusted Base
Rent, together with all other rentals, taxes and costs payable hereunder on the
first day of each and every month thereafter.
C. Application of the adjustment to Base Rent according to fluctuations in
the CPI shall never operate to reduce the rent payable hereunder. The CPI
increase shall not be less than three percent (3%) in any one year.
D. Should the CPI cease to be published or be adjusted to any unit of
measure by the government, Landlord shall substitute a similar index which is
intended to indicate fluctuations in the purchasing power of a United States
dollar and which is published by the United States Department of Labor and other
similar index.
E. Should Landlord delay in notification of CPI Adjustment, said
adjustment shall be retroactive to the date such adjustment should have occurred
hereunder.
8. IMPROVEMENTS AND ALTERATIONS: SIGNAGE
A. Landlord shall deliver the Premises to Tenant in "as is" condition,
except as noted in paragraph #8B.
B. Landlord shall provide a $20.00 per square foot allowance on the
Tenant's usable floor area as a build-out allowance for the Tenant's improvement
of its premises. Landlords architectural fees are to be applied against this
allowance. If the cost to improve Tenants premises exceeds the $20.00 per square
foot allowance, the Tenant shall pay any excess costs directly to the general
contractor for building out Tenant's premises. The build-out of the premises
shall be based on the detailed working drawings prepared by Gary Hoyt Architects
and approved by Landlord and Tenant. The amount of the allowance will be based
on the actual usable square footage, as determined by Landlord's architect at
the time that future plans are prepared and approved.
C. Tenant shall make any additional alterations, additions and
improvements to the space which are in accordance with detailed working drawings
and specifications describing such work which have been submitted in advance to
Landlord, only when approved in such drawings and specifications to Tenant in
writing within fifteen (15) days after their receipt by Landlord (the
"improvements"). The alterations, additions and improvements attached or made to
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the Premises prior to the commencement of the term of the Lease or during the
term of this Lease may not be removed without physical damage to the Premises
and shall become and be Landlord's property and, unless Landlord otherwise
elects, shall be and remain part of the Premises as or the expiation to earlier
termination of the Term.
D. Construction of any Improvements may be made only by a licensed, bonded
and insured contractor who has been approved, in writing, by Landlord which
approval shall not be unreasonably withheld. Tenant agrees that construction of
the Improvements shall be performed diligently and in a good and workmanlike
manner and shall be expeditiously completed in compliance with all applicable
laws, ordinances, orders, rules, regulations and requirements. All work done in
connection with the Improvements shall comply with all requirements of insurance
policies maintained by Landlord, copies of which policies shall be available for
inspection by Tenant.
E. In order to comply with the provisions of Section 713.10, Florida
Statutes, it is specifically provided that neither Tenant nor anyone claiming
by, through or under Tenant, including, but not limited to, contractors,
subcontractors, materialmen, mechanics' or materialmen's liens of any kind
whatsoever upon the Demised Premises or improvements thereon, any such liens are
hereby specifically prohibited. All parties with whom Tenant may deal are put on
notice that Tenant has no power to subject Landlord's interest to any mechanic's
or materialmen's lien of any kind or character, and all such persons so dealing
with Tenant must look solely to the credit of Tenant, and not to Landlord's
interest or assets.
F. Tenant shall maintain the Improvements in a first class manner during
the term of the Lease and shall be responsible for any and all damage to the
Premises, the Building Areas, the fixtures, appurtenances and equipment of
Landlord, or the Building caused by the installation, or removal of the
Improvements or Tenant's Property as defined in Section 9 below. All provisions
of this Section are applicable to any modifications or additions thereto.
G. Tenant shall not have the right to construct, erect, place, put, paint,
maintain or control on the demised premises any exterior sign or signs, without
first obtaining the written consent and approval of the same from the Landlord,
and on obtaining such sign or signs must comply with all rules, regulations,
laws, statutes and ordinances and/or applicable governmental authorities, and
must be erected and maintained so as to not cause damage to the building which
is situated on the demised premises. Tenant agrees to install all signs in
conformance with applicable government regulations and to keep the same in a
good state of repair and save Landlord harmless from any damages. Upper Door
locations may be allowed to post signage on the monument sign at Tenants sole
cost and expense, after receiving written approval from Landlord.
9. PROPERTY OF TENANT
Subject to the provisions of this section, Tenant may place office
fixtures, furnishings, furniture and equipment ("Tenant's Property") in the
Premises. Tenant shall not place a load upon any Door of the Premises exceeding
the floor load per square foot area which Landlord reasonably authorizes in
writing. Business machines and mechanical equipment and Tenant's other personal
property shall be placed and maintained by Tenant, at its expense, in settings
sufficient to absorb and prevent vibration, noise and annoyance. Tenant
covenants and agrees that all Tenant's Property of every kind, nature and
description which may be in or upon the premises or Building, or in the Building
Areas during the term hereof, shall be at the sole risk of Tenant. Tenant hereby
indemnifies Landlord and holds it harmless from and against any liability, loss,
injury, claims or suit resulting directly or indirectly therefrom except as may
be caused by Landlord's gross negligence or willful misconduct.
10. MAINTENANCE AND REPAIR OF THE PREMISES
Tenant shall, at its sole cost and expense, maintain the interior of the
Premises in good order, condition and repair, and shall make all changes and
repairs required to keep the interior of the Premises in good repair, including,
without limitation, repairs to doors, locks, hardware, carpet, walls, ceilings,
electrical fixtures, interior and plate glass, equipment and HVAC systems in the
Premises. Tenant shall be responsible for the repair and replacement of all
glass and/or windows in the demised premises. Structural repairs and common area
maintenance shall be and remain the obligation of the Landlord. Tenant shall
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maintain all areas of the Premises in a clean and sanitary condition free of all
vermin.
11. SERVICES
A. Tenant shall pay, when due, all charges imposed by public or private
utility companies for telephone, electric, water and other utility service
supplied to the Premises.
If Landlord elects or is required to supply any utility services to the
Premises, Tenant agrees to purchase from and pay Landlord for such utilities as
Additional Rent at the applicable rates which the utility company would have
charged Tenant for furnishing such utilities.
B. No electric current shall be used except that furnished or approved by
Landlord, nor shall electric cable or wire be brought into the Premises except
upon the written consent and approval by Landlord. Tenant shall use only office
machines and equipment that operate on the Building's standard electric circuits
but which in no event shall overload the Building's standard electric circuits
from which Tenant obtains electric current. Any consumption of electric current
in excess of that or which requires special circuits or equipment, the
installation of which shall be at Tenant's expense after approval in writing by
Landlord, shall be paid for by Tenant as additional rent and shall be in an
amount determined by Landlord, based upon Landlord's estimated cost of such
excess electric current consumption or based upon the actual cost thereof, if
such excess electric current consumption is separately metered. Landlord shall
maintain the building in a manner consistent with other buildings similar in
nature and character in downtown Sarasota, Florida.
12. INSPECTION AND LANDLORD RESERVATION OF RIGHTS
A. Landlord shall have the right upon twenty four (24) hours notice, and
when accompanied by a representative of Tenant, to enter the Premises to inspect
the same, to exhibit the Premises to prospective tenants or others, and to
introduce conduits and pipes or ducts, or conduct repairs to the Premises not
completed, or otherwise property undertaken by Tenant, as may be necessary. Any
such entry shall not be deemed an eviction or disturbance of Tenant's use or
possession. Landlord shall immediately repair any damage to the Premises
occasioned by the exercise of its rights hereunder. If Tenant is not available
to receive notice of entry, Landlord may enter at will.
B. Tenant agrees to permit Landlord and Landlord's agents, ninety (90)
days prior to the expiration of the term hereby granted, to place in one or more
conspicuous places upon the interior or exterior of the Premises, signs
advertising the Premises "For Sale" and "To Let", and to otherwise prepare the
property for subsequent occupancy.
13. CASUALTY
A. If the Premises or any part thereof are damaged by fire or other
casualty, Tenant shall give immediate notice to Landlord. Landlord shall have
the right to cause such damage to be repaired within thirty (30) days from the
casualty. If the Premises are not rendered tenantable within said thirty (30)
day period, either party shall have the option to cancel this Lease. Upon such
election to cancel rent shall be payable only to the date of the casualty. All
repairs to and replacements of Tenant's Property and Improvements shall be made
by, and at the expense of Tenant. To the extent that the Premises have been
rendered unfit for use and occupation hereunder by reason of such damage, a
portion of the Base Rent as adjusted in accordance with Section 4 hereof shall
be abated until the Premises shall have been restored. Landlord shall not be
liable for delays in the making of any repairs to the Premises which are due to
governmental regulations, casualties and strikes, unavailability of labor and
materials, and other causes beyond the control of Landlord, nor shall Landlord
be liable for any inconvenience or annoyance to Tenant or injury to the business
of Tenant resulting from delays in repairing such damage to the Premises;
provided, however, that during any such period of delay, Base Rent as adjusted
in accordance with 4 hereof shall be equitably abated.
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B. If the Building or any part thereof is so damaged by such fire or other
casualty that substantial alteration or reconstruction of the Building shall be
required, then this Lease may be terminated at the election of either party by
giving a written notice of termination to the other party within one hundred
eighty (180) days following such fire, or other casualty. In the event of any
such termination, this Lease shall expire as of such effective termination date
and Base Rent, as adjusted in accordance with Section 8 hereof, shall be
apportioned and terminate as of the date of the casualty.
14. CONDEMNATION
A. If there is taken by a condemnation proceeding or sought to be taken by
a governmental authority under threat of condemnation any part of the Premises,
the Drive-In Facilities or the Building, excluding any part not interfering with
maintenance, operation or use of the Premises, Landlord may elect to terminate
this Lease or to continue same in effect. If Landlord elects to continue the
Lease, the Base Rent, as adjusted in accordance with Section 7 hereof shall be
abated in proportion to the area of the Premises so taken and Landlord shall
repair any damage to the Premises or Building resulting from such taking. If any
part of the Premises is taken by condemnation, Tenant may erect to terminate
this Lease or to continue same in effect. If Tenant elects to continue this
Lease, the Base Rent, as adjusted in accordance with Section 7 hereof, shall be
abated in proportion to the area of the Premises so taken and Landlord shall
repair any damage to the Premises resulting from such taking. If all of the
Premises is taken by condemnation, this Lease shall terminate on the date of
taking. All sums awarded or agreed upon between Landlord and the condemning
authority for the taking of the Premises, or the total or partial taking, will
be property of Landlord. If this Lease is terminated under the provisions of
this Section, tenant shall pay Landlord all sums, owing hereunder up to the date
possession is taken by the condemning authority. Tenant's right to abatement of
rent or cancellation of this Lease shall be Tenant's sole remedy in the event of
condemnation except that Tenant may maintain any action for recovery of the loss
of its Improvements.
B. If Landlord or Tenant does not elect to terminate this Lease, Landlord
shall, with reasonable diligence, restore the remainder of the Premises, or tile
remainder of the means of access to the Premises so as to provide that they
shall be reasonably usable for Tenant's purposes, or so as to restore reasonable
access. Landlord shall not be liable for any delays in such restoration which
are due to governmental regulations, casualties, strikes, unavailability of
labor or materials, or other causes beyond Landlord's control. Nor shall
Landlord be liable for any inconvenience or annoyance to Tenant or injury to
business of Tenant resulting from delays in such restoration; provided, however,
that during any such period of delay, Base Rent as adjusted in accordance with
Section 7 hereof, shall equitably be abated.
C. Landlord shall have no responsibility to restore or to compensate
Tenant for any taking by condemnation, as that term used in this Section, of the
Premises, or the Improvements or of Tenant's Property.
15. INJURY AND DAMAGE
Landlord shall not be liable for any injury or damage to persons, tangible
personal property, or to the operation of Tenant's business resulting from f re,
explosion, falling plaster, broken glass, steam, gas, electricity, electrical
disturbance, water, rain or leaks from any part of the Building or from pipes,
appliances or plumbing works or from the roof, street, or subsurface or from any
other place or any dampness or by any other cause of whatever nature, unless
caused by or due to the act, omission, fault, gross negligence or willful
misconduct of Landlord, or its agents, servants or employees; nor shall Landlord
or its agents be liable for any such damage caused by either tenants or persons
in the Building or caused by construction operations of any private, public or
quasi-public person; nor shall Landlord be liable for any latent defect in the
Premises or in the Building.
16. INDEMNIFICATION
Tenant hereby indemnifies and covenants to save Landlord harmless from and
against any and all claims, liabilities or penalties asserted by or on behalf of
any person, firm, corporation or public authority:
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A. On account of or based upon any injury to person, or loss of or damage
to a tangible personal property, sustained or occurring on the Premises on
account of or based upon the act, omission, fault, negligence or misconduct or
any person other than Landlord or its servants, agents or employees; and
B. On account of or based upon any injury to person, or loss of or damage
to tangible personal property, sustained or occurring in or about the Premises
and on or about the Common Areas, sidewalks, approaches, roof or other
appurtenances and facilities used in connection with the Building or the
Premises arising out of the use or occupancy of the Building or the Premises by
Tenant or by any person claiming by, through or under Tenant, and caused by the
act, omission, fault, negligence or misconduct of any person other than Landlord
or its servants, agents or employees; and
C. On account of or based upon any work or thing whatsoever done by Tenant
on the Premises during the term of this Lease and during the period of time, if
any, prior to the Commencement Date when Tenant may have been given access to
the Premises; and, in respect of any of the foregoing, from and against all
costs, expenses, reasonable attorney's fees, and liabilities incurred in or in
connection with any such claim, or any action or proceeding brought thereon. If
any action or proceeding be brought against Landlord by reason of any such
claim, Tenant shall, at Tenant's expense, defend such claim, action or
proceedings if so required.
17. INSURANCE
Tenant shall maintain public liability insurance in an amount not less
than $2,000,000 per occurrence, and property damage liability insurance in an
amount not less than $1,000,000 per occurrence, and shall submit and maintain
copies of such policies with Landlord. The insurers under such policies shall be
reasonably satisfactory to Landlord and such policies shall name Landlord,
Landlord's managing agent and Tenant as insured parties, as their interests may
appear, and shall provide twenty (20) days prior written notice to Landlord of
lapse or cancellation.
18. ASSIGNMENT, MORTGAGING, AND SUBLETTING
A. Tenant may not assign, transfer, sublet, mortgage, pledge or otherwise
encumber this Lease or the Premises or any part thereof without prior written
consent of owner. Any assignment of this Lease shall be upon the express
condition that the assignee and Tenant shall promptly execute acknowledge and
deliver to Landlord an agreement in form and substance satisfactory to Landlord
whereby the assignee agrees to be personally bound by the terms, covenants and
conditions of this Lease and shall contain the agreement of the subtenant
thereunder that, upon default of this Lease and upon Landlord's written request,
it will pay all rents under the sublease directly to Landlord. Tenant cannot
assign nor sublet for rent higher than rent stated in Lease.
B. Tenant agrees to pay the reasonable costs and attorney's fees of
Landlord in connection with Tenant's request for Landlord's approval of any
assignment, sublease or other transfer.
C. If this Lease is assigned or if the Premises or any part thereof is
sublet or occupied by anyone other than Tenant, Landlord, after default by
Tenant hereunder, may collect the rents from such assignee, subtenant or
occupant, as the case may be, and apply the net amount collected to the rental
herein reserved. No such assignment, occupancy or collection shall be deemed a
waiver of the requirement set forth in this Section or be deemed the acceptance
by Landlord of such assignee or occupant as Tenant or be deemed a release of
Tenant from the future performance by Tenant of its obligations contained in
this Lease. The consent by Landlord to an assignment of the lease shall not in
any way be construed to relieve Tenant from obtaining the express consent in
writing of Landlord to any further assignment. No assignment, subletting or use
of the Premises shall affect the purpose for which the Premises may be used.
19. DEFAULT
A. If Tenant defaults in the payment of the Base Rent, or any other sums
due hereunder and such default continues for seven (7) days after the date such
sums are payable hereunder, or if Tenant defaults in the performance of any
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other of its obligations or otherwise breaches or fails to perform any other
provision of this Lease and such default continues for ten (10) days after
written notice thereof by Landlord to Tenant unless Tenant diligently commences
to cure said default, or if Tenant files a petition under any bankruptcy,
insolvency law or code, or if Tenant is adjudicated bankrupt or insolvent
according to law, or if Tenant makes any assignment for the benefit of
creditors, or if Tenant files any petition seeking a reorganization, arrangement
or similar relief, or if a receiver, custodian, trustee or similar agent of the
Premises or of all or a substantial part of Tenant's property is appointed, or
if the operation of Tenant's business is assumed by a bank regulatory agency, or
if Tenant's interest in this Lease is taken upon execution or other process of
law in any action against Tenant, or if Tenant abandons the Premises, then
Landlord may lawfully terminate this Lease by written notice to Tenant and,
expel Tenant and those claiming by, through, or under Tenant, and remove their
effects, if necessary, without being deemed guilty of any manner of trespass and
without prejudice to any as aforesaid, this Lease shall terminate. Tenant
covenants, in case of any default by Tenant hereunder, to pay Landlord all costs
of enforcing Landlord's rights under this Lease, including, without limitation,
reasonable attorney's fees and expenses, loss of rent, reletting expenses, and
brokerage fees, together with the agreed liquidated damages described in this
Section. Landlord and Tenant agree that Landlord shall suffer damages from
Tenant's breach of this Lease and Landlord's necessity to recover possession of
the Premises and that such damages are difficult or impossible to ascertain. For
this reason, Landlord and Tenant agree that Tenant shall pay Landlord as
liquidated damages for Tenant's breach of this Lease which remains uncured an
amount equal to the total Base Rent over the term of this Lease and other sums
which would have been payable had the Lease not so terminated, as offset by net
rents actually received by Landlord from reletting, after deducting the expenses
of reletting.
B. Landlord may bring legal proceedings for the recovery of such damages.
Nothing contained herein shall be deemed to require Landlord to postpone suit
until the date when this Lease would have expired if it had not been terminated.
C. Nothing herein contained shall be construed as limiting or precluding
the recovery by Landlord from Tenant of any sums or damages including, without
limitation, reasonable attorney's fees and expenses, to which, in addition to
the damages particularly provided above, Landlord may lawfully be entitled by
reason of any default hereunder on the part of Tenant.
D. Tenant agrees that its failure timely to cure an event of default in
accordance with this provision of SubSection A. of this Section shall entitle
Landlord to declare the balance of the Base Rent for the entire term of this
lease to be immediately due and payable. Upon such declaration, Landlord shall
be entitled to proceed to collect all unpaid Base Rent by Distress or other
Procedure.
E. In addition to any late charges, Tenant shall pay Landlord interest on
any rental due that remains unpaid seven (7) days after its due date. Such
interest will be computed at the rate of eighteen percent (18%) per year.
20. LANDLORD'S RIGHT TO CURE
If Tenant defaults in the performance of any term, covenant or condition
on its part to be performed under this Lease, Land lord, without being under any
obligation to do so without thereby waiving such default, may remedy such
default for the account and at the expense of Tenant, immediately and without
notice in case of emergency, or in any other case, if Tenant fails to remedy
such default with reasonable diligence within the time set forth under Section
20 and after Landlord has notified Tenant of such default. If Landlord makes any
expenditures or incurs any obligations for the payment of money in connection
therewith, including, but not limited to, reasonable attorney's fees, such sums
paid or obligations incurred shall be paid to Landlord by Tenant as additional
rent hereunder.
21. SUBORDINATION
A. This Lease is subject and subordinate in all aspects to any mortgage
which may now or at any time hereafter be placed on or affect this Lease, the
Building Areas, the Links Office Condominium or Landlord's interest or estate
therein, and to each advance make or hereafter to be made under any such
mortgages, and to all renewals, modifications, consolidations, replacements and
extensions thereof and all substitutions therefore end to such mortgagee's
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exercise of all other rights regarding the Building and the Building Areas. This
Section shall be self operative and no further instrument or subordination shall
be required. In confirmation of such subordination, Tenant shall execute and
deliver, within seven (7) days of receipt, any certificate acknowledging or
confirming such subordination that Landlord or any mortgagee or their respective
successors in interest may request from lime to time.
B. If the Building is, at any time, subject to a mortgage, and if Tenant
has received written notice, any mortgagee shall have the right, but not the
obligation, to cure any default on the part of the Landlord of its obligations
under this Lease. Tenant shall accept any cure offered by any such mortgagee as
if it were made by Landlord.
22. SURRENDER OF POSSESSION: HOLDOVER
At the expiration or earlier termination of this Lease, Tenant will remove
Tenant's Property and will peaceably yield up to Landlord the Premises, together
with the Improvements made and designated to remain in the Premises, in the same
condition as they were on the Commencement Date, except for reasonable wear and
tear.
Any holdover by Tenant without a written agreement to extend its occupancy
beyond the expiration date outlined in paragraph 3 of this Lease Agreement,
shall cause the rent due, as outlined in paragraph 4 of this lease agreement, to
be increased (2) two times.
23. NOTICES
Any notice or demand by Tenant to Landlord shall tee served by registered
or certified mail addressed to Landlord at Landlord's address above indicated or
at such other address indicated to Tenant in writing. Any notice or demand by
Landlord to Tenant shall be served by registered or certified mail addressed to
Tenant. Notice shall be deemed effective upon receipt.
24. RULES AND REGULATIONS AND GOVERNMENTAL REGULATIONS
Tenant will faithfully observe and comply with the Rules and Regulations
of the Building, together with all regulations imposed, from time to time, by
local and state governmental entities which regulate the Building. Tenant
acknowledges that the building is designated a "non-smoking building" and
therefore shall not smoke cigarettes, cigars or pipes in the building or in the
Premises, nor allow his employees, agents, representatives or clients/customers
to smoke in the building. Tenant shall also comply with the Declaration of
Condominium.
25. QUIET ENJOYMENT
The Tenant, on paying the Base Rent, as adjusted in accordance with
Section 4 hereof, and other sums payable hereunder and performing the covenants
of this Lease on its part to be performed, shall and may peaceably and quietly
have, hold and enjoy the Premises for the term of this Lease.
26. LIMITATION OF LANDLORD'S LIABILITY
The term "Landlord" as used in this Lease so far as obligations to be
performed by Landlord are concerned is limited to mean and include only the
owner or owners of the Building at the time in question. In the event of any
transfer or transfers of title to the Building occur, the Landlord herein named
and, in case of any subsequent transfers or conveyances, the then grantor shall
be automatically relieved from and after the date of such transfer or conveyance
on the part of the Landlord contained in this Lease on the Part of Landlord
assigns, only during and in respect of the respective successive periods of
ownership of the Building. This paragraph does not release Landlord from
liability for matters, acts, occurrence or obligations, arising before such
conveyance and transfer.
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27. BINDING AGREEMENT
This Lease shall bind and inure to the benefit of the parties hereto and
their respective heirs, representatives, successors or assigns. This Lease
contain the entire agreement of the parties no verbal commitments have been made
or are binding and this Lease may not be modified except by an instrument in
writing.
A. The various rights and remedies contained in this Lease and reserved to
Landlord shall not be exclusive of any other right or remedy of such party, but
shall be constructed as cumulative and shall be in addition to every other
remedy now or hereafter existing at law, in equity or by statute. No delay or
omission of the right to exercise any power by Landlord shall impair any such
right or power, or shall be construed as a waiver of any default or as
acquiescence in any default. One or more waivers of any covenant, term or
condition of this Lease by either party shall not be construed by Landlord as a
waiver of a subsequent breach of the same covenants, terms, or conditions. The
consent or approval of Landlord to or of any act by Tenant of a nature requiring
consent or approval shall not be deemed to waive or render unnecessary consent
to or approval of any subsequent similar act.
B. Payments to Landlord under this Lease are rental for the use of the
Premises and nothing herein contained shall be deemed or construed to make
Landlord a partner or associate of Tenant in the conduct of any business, or
rendering Landlord liable for any debts, liabilities or obligations incurred by
Tenant in the conduct of any business, it being expressly agreed that the
relationship between the parties is, and shall at all times, remain that of
Landlord and Tenant.
C. Where the words "Landlord" and "Tenant" are used in this Lease, they
shall include Landlord and Tenant and shall apply to persons, both men and
women, associations, partnerships and corporations, and in reading this Lease
the necessary grammatical changes required to make in the same manner as if
written in the Lease.
D. Tenant hereby declares that in entering into this Lease, Tenant relied
solely upon the statements contained in this Lease and fully understands that no
agents or representatives of Landlord have authority to in any manner change,
add to, or detract from the terms of this Lease.
E. The invalidity of one or more of the provisions of this Lease shall not
affect the remaining portions of this Lease and if any one or more of the
provisions of this Lease should be declared invalid by final order, decree or
judgment of a court of competent jurisdiction, this Lease shall be construed as
if such invalid provisions had not been included in this Lease.
F. If Tenant shall be two or more persons or entities, each such person or
entity shall be jointly and severally liable for the payment of all sums due to
Landlord from Tenant under this Lease and the performance of all of Tenant's
covenants, agreements obligations under this Lease.
G. On request from Landlord, Tenant shall promptly execute and deliver an
estoppel statement setting forth: The term of the Lease; the rental and all
other sums payable hereunder; and whether Tenant claims any offsets under the
Lease.
H. The captions contained herein are for the convenience of the parties
and do not limit or modify the provisions of this Lease.
28. CONTROL OF COMMON AREAS AND PARKING FACILITIES BY LANDLORD
All automobile parking areas, driveways, entrances and exits thereto,
common areas, the Building Areas, and other facilities furnished by Landlord,
including all parking areas, truck way or ways, loading areas, pedestrian
walkways and ramps, landscaping areas, stairways, corridors, common areas and
other areas, and improvements provided by Landlord for the general use, in
common, of Tenants, their officers, agents, employees, servants, shall be at all
times subject to the exclusive control and management of Landlord and the other
owners of Links Office Condominium acting through the Links Office Condominium
Association (hereinafter "the Association") and pursuant to the Declaration of
the Links Office Condominium and any rules and regulations thereto. Landlord and
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<PAGE>
the Association shall have the right, from time to time to: Establish, modify
and enforce reasonable rules and regulations with respect to all facilities and
areas and improvements; to police same; to change the area, level and location
and arrangement of parking areas and other facilities herein above referred to;
to restrict parking by and enforce parking charges to tenants, their officers,
agents, invitees, employees, servants, licensees, visitors, patrons, and
customers; to close all or any portion of said areas or facilities to such
extent as may, in the option of Landlord's and/or the Association's counsel, be
legally sufficient to prevent a dedication thereof or the accrual of any rights
to any person or the public therein; to close temporarily all or any portion of
the public areas, common areas or facilities; to discourage no-lessee parking;
and to do and perform such other acts in and to said areas and improvements as,
in the sole judgment of Landlord and/or the Association, are advisable with a
view to the improvement of the convenience and use thereof by tenants, their
officers, agents, employees, servants, invitees, visitors, patrons, licensees
and customers. Landlord will operate and maintain the Common Areas, the Building
Areas, and other facilities referred to in such manner as Landlord shall
determine from time to time, in it s sole discretion. Without limiting the scope
of such discretion, Landlord shall have the full right and authority to
designate a manager for the parking facilities, Building Areas, Common Areas and
other facilities who shall have full authority to make Landlord enforce rules
and regulations regarding the use of the same or to employ all personnel to and
necessary for the proper operation and maintenance of the parking areas,
Building Areas and Common Areas and other facilities.
29. PRIOR OCCUPANCY
If Tenant, with Landlord's consent, occupies the Premises prior to the
beginning of the term of this Lease specified in Section 3 hereof, all
provisions of this Lease shall be in full force and effect commencing upon such
occupancy, and the rental commencement date shall be adjusted to reflect the
earlier occupancy date.
30. SHORT FORM LEASE
Tenant shall, if so requested by Landlord at any time, execute a short
form Lease in recordable form setting forth the name of the parties, the term of
the Lease, and the description of the Premises.
31. PAYMENT OF RENTAL
Tenant shall pay all Rental when due and payable, without any set off,
deduction or prior demand therefore whatsoever. If Tenant shall fail to pay any
Rental within seven (7) days after the same is due, Tenant shall be obligated to
pay a late payment charge equal to the greater of One Hundred Dollars ($100.00)
or ten percent (10%) of any Rental payment not paid when due to reimburse
Landlord for its additional administrative costs. In addition, any Rental which
is not paid within seven (7) days after the same is due shall bear interest at
the Default Rate from the first day due until paid. Any additional Rental which
shall become due shall be payable, unless otherwise provided herein, with the
next installment of Annual Basic Rental. Rental and statements required of
Tenant shall be paid and delivered to Landlord at the management office of
Landlord at 406 Sarasota, Quay, Sarasota, FL 34236 between the hours of 9:00
a.m. and 5:00 p.m. Monday through Friday or at such other place as Landlord may,
from time to time, designate in a notice to Tenant. Any payment by Tenant or
acceptance by Landlord of a lesser amount than shall be due from Tenant to
Landlord shall be treated as a payment on account. The acceptance by Landlord of
a cheek for a lesser amount with an endorsement or statement thereon, or upon
any letter accompanying such check, that such lesser amount is payment in full
shall be given no effect, and Landlord may accept such check without prejudice
to any other rights or remedies which Landlord may have against Tenant.
32. DISCLOSURE OF REPRESENTATION
Corporate Property Resources, Inc., is giving notice to Golf Innovations
Corp., that Corporate Property Resources, Inc., is the agent and representative
of Links Associates, Ltd., a Florida Limited Partnership, and is the sole real
estate broker in this transaction and will be compensated by the Landlord.
13
<PAGE>
The Tenant acknowledges that this written notice was received before the
undersigned signed a contractual offer or Lease Agreement, in compliance with
the 475.25 (1) (q), Florida statutes, and Rule 21V-10.033, Florida
Administrative Code.
33. RADON GAS - NOTICE TO PROSPECTIVE TENANT
Radon is a naturally occurring radioactive gas that, when it has
accumulated in a building in sufficient quantities, may present health risks to
person who are exposed to it over time. Levels of radon that exceed federal and
state guidelines have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your county public health
unit. Pursuant to S404.056 (8), Florida Statutes.
34. HAZARDOUS WASTE
Tenant agrees that the Premises shall not be used for the discharge or
storage of any Hazardous Substance as defined in any federal, state or local
statute, rule, regulations or ordinance. Tenant agrees to indemnify Landlord and
hold Landlord harmless from and against any and all losses, liabilities,
including strict liability, damages, injuries, expenses, including reasonable
attorney's fees, paralegal' fees and legal assistants' fees, costs of any
settlement or judgment in claims of any and every kind, whatsoever paid,
incurred or suffered by, or served against Landlord by any person or entity or
governmental agency for, with respect to, or as a direct or indirect result of,
the presence on or under, or the escape, seepage, leakage, spillage, discharge,
emission or release from the Premises, in connection with Tenant's operations
thereon, of any Hazardous Substance, including any such loss or liability
arising under the Comprehensive Environmental Response, Compensation and
Liability Act, and any similar federal, state or local laws or ordinances. If
Tenant receives any notice of: (i) the happening of any material event involving
the escape, seepage leakage, spillage, discharge, emission, release or clean up
of any Hazardous Substance on the Premises in connection with Tenant's
operations thereon, or (ii) any complaint, order, citation, or material notice
with regard to air emission, water discharge or any other environmental health
or safety matter affecting Tenant (an "environmental complaint") from any person
or entity, Tenant shall immediately notify Landlord orally and in writing of
said notice. Any breach of any warranty or representation contained in this
paragraph shall be an event of default under the Lease, which, if not cured
within thirty (30) days of notice thereof, shall entitle Landlord to exercise
any and all remedies provided in the Lease or otherwise provided by law;
provided, however, Landlord agrees that if the remedy or such default cannot be
reasonably achieved within said thirty (30) day period, then Tenant shall have
such further time as is reasonable under the circumstances to effect such remedy
provided that Tenant shall notify Landlord within the thirty (30) day curative
period of the necessity for additional time and provided further that Tenant
shall institute immediate steps to effect such remedy and shall continuously and
diligently pursue such remedy to completion.
35. LANDLORD RESERVATION
Landlord hereby reserves the right at any time, and from time to time, to
add other uses to the Project, to expand the Project to other lands; to make
alterations or additions to, the buildings of the Project, to build adjoining
the same and to install, maintain, use, repair and replace pipes, ducts,
conduits and wire throughout the Premises which will not materially interfere
with Tenant's Permitted Use of the Premises. Landlord also reserves the right to
construct other improvements on the Project from time to time, to make
alterations or additions to such property. Landlord also reserves the right from
time to time to change, modify, rearrange or alter the Common Areas; provided
that such actions by Landlord shall not unreasonably interfere with Tenant's use
and enjoyment of the Premises.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease in
duplicate, the original as a sealed instrument on the day and year first above
written.
WITNESSES: LINKS ASSOCIATES, LTD.,
A FLORIDA LIMITED PARTNERSHIP
"LANDLORD"
/s/ [Illegible] By: /s/ Stephen W. Dore
----------------------------------
Print Name: [Stephen W. Dore]
--------------------------
Print Title: [General Partner]
-------------------------
GOLF INNOVATIONS CORP.
A _____ CORPORATION
/s/ [Illegible] By: /s/ Earl Ingarfield
----------------------------------
Print Name: [Earl Ingarfield]
--------------------------
Print Title: [President]
-------------------------
15
<PAGE>
GUARANTY OF PERFORMANCE
For valuable consideration, the undersigned irrevocably and
unconditionally guaranties to Landlord the full, faithful and punctual
performance by Tenant of all of Tenant's covenants and agreements contained in
this Assignment of Lease, or any extensions or renewals thereof, and agree that
any extensions, postponements, either of payment or enforcement, waivers,
releases of any rights against any party, or releases of any security shall not
affect the undersigned's absolute and unconditional liability hereunder. Demand,
notice of default or of nonpayment, and all suretyship defenses whatsoever are
hereby waived.
Dated, signed, sealed, and delivered this [30TH] day of April, 1999
WITNESSES:
/s/ [Illegible] /s/ Mike La Valliere
-------------------------------------
Mike La Valliere, Individually
[###-##-####]
-------------------------------------
SS#
/s/ [Illegible] /s/ Earl Ingarfield
-------------------------------------
Earl Ingarfield, Individually
[258-338002]
-------------------------------------
SS#
EXHIBIT 10.04
EMPLOYMENT AGREEMENT
1. PARTIES.
The parties to this Agreement are AVID SPORTSWEAR, INC., a California
corporation, hereinafter called "Employer", and BARNUM P. MOW, hereinafter
called "Employee".
2. RECITALS.
This Agreement is made with reference to the following facts:
2.01 Employer desires to employ Employee, as Chief Executive Officer and
President for AVID SPORTSWEAR, INC. and Employee desires to be
employed by Employer in accordance with the provisions of this
Employment Agreement. Employer is desirous of formalizing the
employment of Employee pursuant to this Agreement.
2.02 The parties desire by this Agreement to memorialize the terms and
conditions of employment and the compensation and benefits to be
provided by Employer to Employee.
3. AGREEMENT.
THE PARTIES AGREE AS FOLLOWS:
3.01 EMPLOYMENT. Employer hereby engages Employee, and Employee hereby
accepts employment from Employer, upon the terms and conditions
herein set forth.
3.02 TERM. The term of this Agreement shall be for a period of three (3)
years, commencing on the effective date of this Agreement and
terminating on the third anniversary thereof; subject, however, to
prior termination as herein provided. This Agreement shall be
automatically renewed for succeeding terms of one (1) year each
unless either party, at least four (4) months prior to the
expiration of any term, gives written notice of intent not to renew
this Agreement.
3.03 SERVICES TO BE RENDERED. Employee is engaged as Chief Executive
Officer and President of AVID SPORTSWEAR, INC., to render such
services for and on behalf of Employer as is consistent with such
offices.
Employee shall not, without the express written consent of Employer,
directly or indirectly during the term of this Agreement, render services
of a business nature to or for any other person or firm for compensation,
or engage in any activity competitive with or adverse to Employer's
business in the United States, whether alone, as a partner, or as an
officer, director, employee or shareholder of any other corporation or as
a trustee, fiduciary or other representative of any other entity.
3.04 COMPENSATION. Employer agrees to pay Employee during the term of this
Agreement, and Employee hereby accepts as full compensation for the
performance of services hereunder, the current and deferred compensation
and other benefits set forth on Exhibit "A" attached hereto and
incorporated herein by this reference. All current compensation shall be
subject to customary withholding tax and other employment taxes as
required with respect to compensation paid by an employer to an employee.
<PAGE>
3.05 EXPENSES. During the period of employment, Employee shall be
reimbursed for all reasonable and necessary business expenses in
accordance with the general policy of Employer.
3.06. VACATION. Employee shall be entitled to a paid vacation of four (4)
weeks without loss of compensation, or such greater length as may be
approved from time to time by Employee.
3.07 EMPLOYER'S AUTHORITY. Employee agrees to observe and comply with the
rules and regulations of Employer, either orally or in writing,
respecting performance of Employee's duties and to carry out and to
perform orders, directions and policies stated by Employer to
Employee, from time to time, either orally or in writing, provided
no material change in Employee's responsibilities shall be made.
3.08 ACCOUNTING. True and accurate records of accounts shall be kept in
accordance with good accounting practices and shall be available at
any reasonable time for inspection by Employee.
3.09 TERMINATION. Notwithstanding the term of this Agreement, this
Agreement shall be terminated upon the happening of any of the
following events:
a). Whenever Employer and Employee shall mutually agree to
termination in writing;
b). Death of Employee;
c). Employee remains sick, is disabled or is unable to perform the
essential functions of his job, with or without reasonably
accommodation, for the period of three (3) consecutive months as
determined by professionally qualified medical experts reasonably
acceptable to Employer and to Employee or his agent;
d). For Cause, which shall be deemed to exist if; 1). Employee
willfully refuses to perform his responsibilities hereunder after
written notice thereof specifying the particulars and a reasonable
opportunity (not to exceed thirty (30) days) to cure such failures
are given to Employee; 2). Employee engages in acts of dishonesty or
fraud in connection with his services the performance of Employee's
duties hereunder; or 3). Employee engages in other serious
misconduct of such a nature that the continued employment of
Employee may reasonably be expected to adversely affect the business
of properties of Employer. e).Notwithstanding any of the provisions
of subparagraphs (a) and (b) above, upon sixty (60) days prior
written notice by either Employer or Employee to the other.
Upon termination for any of the foregoing causes, Employer shall be
entitled to receive all compensation accrued but unpaid as of the date of
termination. Upon resignation by Employee other than for Cause in d) above or
for Good Cause, Employee shall receive payment of the greater of twelve (12)
months current salary and the salary payable during the initial three (3) year
term of this Agreement. Employee shall have no duty to mitigate his damages for
a period of twelve (12) months. Mitigation shall be deemed to include
compensation from employment or consultation.
3.10 CONFIDENTIAL INFORMATION. Employee covenants and agrees that he will
not during the term of this Agreement and for one (1) year from the
termination of his employment unless Employee has been terminated
without cause or resigned for Good Cause (as hereafter defined),
use, directly or indirectly, for his own account or for the account
of any third party, without the prior written consent of Employer,
any observations, data, written materials, customer lists, supplier
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<PAGE>
or vendor lists, records or documents relating to Employer which are
of a confidential or proprietary nature and which Employee may have
acquired by virtue of work performed for Employer.
Good Cause shall mean (1) A reduction or non-payment of salary or failure
to annually review salary levels, (2) failure to pay any bonus within
thirty (30) days when due, (3) failure to provide substantially the same
benefits as hereafter provided to other officers of Employer, or (4) a
breach by Employer of the Agreement not cured within thirty (30) days
after notice thereof by Employee, or (5) if Employer relocated its
principal place of business to an area which is outside 25 miles of Los
Angeles County, California, or (6) if Earl Ingarfield should voluntarily
sell his stock in the parent Employer so that his ownership interest is
diluted to less than 30% of his current ownership, or (7) a material
change in the responsibility of Employee without cause.
All written materials, records and documents made by Employee or
coming into his possession during the term of his employment by and
ownership of shares in Employer concerning the business or affairs of
Employer shall be the sole property of Employer and retained by Employer.
3.11 TRADE SECRETS. Employee agrees that any trade secrets, invention,
improvement, patent, patent application, or writing and any program,
system or novel technique (whether or not capable of being
trademarked, copyrighted or patented), conceived, devised, developed
or otherwise obtained by him during his employment by and ownership
of shares in Employer relating to the business, property, methods,
suppliers or customers of Employer shall remain the sole property of
Employer.
3.12 SOLICITATION OF EMPLOYEES. Employee covenants and agrees that during
the term of this Agreement and for a period of one (1) year from the
termination of his employment, he shall not directly or indirectly
solicit, entice or encourage or resignation of any employee of
Employer.
3.13 COVENANT NOT TO COMPETE. Employee recognized, acknowledges and
agrees that the Employer's customer and client lists and other
records and information pertaining to Employer's customers, clients
and business, as such lists, records and information may exist from
time to time, as well as the respective customer and client lists
and other records and information pertaining to the customer,
clients and business of Employer, to which Employee has had access
as an employee of Employer, are valuable, special and unique assets
which constitute protectable interest of Employer. Employee further
recognizes, acknowledges, and agrees that Employer's customer and
client lists and other records and information pertaining to
Employer's customers are not generally known to the public and have
been subject to reasonable efforts by Employer to maintain their
secrecy. Employee covenants and agrees that during the term of this
Agreement and for a period of one (1) year from the termination of
his employment unless Employee has been terminated without cause and
Employer, (2) directly or indirectly, request or advise any person,
firm, company, partnership, corporation, trust, or entity who is in
competition with Employer to withdraw, curtail or cancel business
with Employer; or (3) for himself on behalf of any other person,
firm, company, partnership, corporation, trust, or entity, actively
engage, assist, or have any active interest in any business which is
directly competitive with any aspect of the business of Employer, as
presently conducted or as said business may evolve in the ordinary
course between the date hereof and the termination of this
Agreement. For purposes of this paragraph "competitive business"
shall mean any business which is engaged in the apparel creation,
design, production, marketing, distribution, or sales of golf
apparel which Employer then sells, including, without limitation,
the companies listed on Exhibit "B". "A customer of Employer" shall
be any person or entity that has purchased goods from Employer in
the twelve (12) month period prior to Employee's termination.
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<PAGE>
Employee shall not be prohibited from working for a competitive
business if it engages in the sale of other apparel and Employee
works for such company division selling such other apparel.
3.14 ENFORCEMENT. Employee acknowledges and agrees that the scope, period
of restriction and geographic area of restriction imposed by the
provisions of Section 3.15 are fair and reasonable and are
reasonably required for the protection of Employer. In the event
that any part of these covenants relating to the scope, geographic
area of restriction or the period of restriction shall be determined
by a court of competent jurisdiction to exceed the maximum area or
period of time that such court would deem enforceable under
applicable law, the scope, geographic area of restriction or the
period of restriction, as the case may be, shall be reduced to the
maximum scope, area and period that such court would deem valid and
enforceable.
It is understood by and between the parties hereto that the
foregoing covenants by Employee as set forth above are essential elements of
this Agreement and Employer would not have entered into this Agreement unless
Employee agreed to comply with such covenants. Furthermore, Employee covenants
and agrees that in the event of Employee's actual or threatened breached of any
of the provisions of this Agreement, Employer shall be entitled to an injunction
restraining Employee there from, as damages at law would not be an adequate
remedy. Nothing herein shall be construed as prohibiting Employer from pursuing
any other available remedies for such breach or threatened breach, including the
recovery of damages from Employee. Employer shall also be entitled to recover
attorney fees from Employee in connection with the enforcement of these
provisions.
3.15 GOVERNING CALIFORNIA LAW. This Agreement is drawn to be effective in
and shall be construed in accordance with the laws of the State of
California.
3.16 AMENDMENT. No amendment or variation of the terms of this Agreement
shall be valid unless made in writing and signed by Employee and a
duly authorized representative of Employer. This Agreement
constitutes the only agreement, written or oral, between Employer
and Employee and all prior agreements between Employer and Employee
are of no further force and effect.
3.17 BINDING EFFECT. This Agreement shall bind all parties, their
respective heirs, personal representatives, or assigns, but nothing
herein shall be construed as an authorization or right of any party
to assign the rights or obligations stated hereunder.
3.18 EFFECTIVE DATE OF THIS AGREEMENT. The effective date of this
Agreement is Sept. 11, 1999.
EMPLOYER: EMPLOYEE:
AVID SPORTSWEAR, INC.
A California Corporation
BY: /s/ [Earl T. Ingarfield] /s/ [Barnum P. Mow]
----------------------------- ------------------------------------
Earl T. Ingarfield Barnum P. Mow 9/17/99
Chairman
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<PAGE>
EXHIBIT "A"
SCHEDULE OF COMPENSATION FOR
BARNUM P. MOW
1. Current Compensation.
In accordance with Section 3.04 of the Employment Agreement to which this
Schedule is attached, Employee shall be paid total compensation, as follows:
a. A base salary per year of $300,000 payable at the rate of $25,000.00
per month commencing the effective date of the Employment Agreement.
b. Employee shall be eligible for annual salary increase at discretion
of Employer.
c. In addition to base salary, Employer shall pay to Employee the
following: a bonus of $25,000 will be paid thirty (30) days from the
execution date of this Agreement. A $50,000 bonus will be paid six
(6) months from the execution of this Agreement. If no company bonus
plan is established to by Employer, Employee shall continue to
receive the foregoing bonus during the term of this Agreement, so
long as profitability increases each year.
2. Other Benefits.
Employee shall be entitled to participate fully in all such health, disability,
life insurance and other benefits as made available by Employer to its officers.
3. Stock Options.
Employee shall be entitled to receive the stock options that are developed by
Employer for its highly paid executive employees at such time as Employer
establishes a plan.
4. Employee shall be entitled to receive option of Shares of Restriction
Common Shares of Avid Sportswear, Inc./Golf Corporation on signing of this
document. Percentage of Shares will be a minimum of 3% of the outstanding
shares. Employee and Employer shall agree to work out mutually acceptable
and dilution provisions with respect to such option plan.
<PAGE>
EXHIBIT "B"
LIST OF COMPETING COMPANIES
1). Bobby Jones
2). Como
3). Descente
4). Polo/Ralph Lauren
5). Izod Club
6). Ashworth
7). Cutter & Buck
8). Tommy Hilfiger
EXHIBIT 10.05
TRADEMARK LICENSE AGREEMENT
CONFIDENTIAL TREATMENT
The Company has sought confidential treatment of this license agreement.
As a result, the license agreement has been omitted and filed separately with
the Securities and Exchange Commission.
EXHIBIT 10.06
EMPLOYMENT AGREEMENT
l. PARTIES.
The parties to this Agreement are AVID, INC., a California corporation,
hereinafter called "Employer" and DAVID E. RODERICK, hereinafter called
"Employee."
2. RECITALS.
This Agreement is made with reference to the following facts:
2.01 Employee has been employed by Employer as President, Secretary and
Chief Financial Officer of Employer and Employee is familiar with the business
operations of Employer. Employer is desirous of formalizing the employment of
Employee pursuant to this Agreement.
2.02 Golf Innovations Corp., a Nevada Corporation ("GIC"), is
contemporaneously acquiring all of the shares of Employer, including 10,000
shares owned by Employee.
2.03 The parties desire by this Agreement to provide the terms and
conditions of employment and the benefits to be provided by Employer to
Employee.
3. AGREEMENT.
THE PARTIES AGREE AS FOLLOWS:
3.01 EMPLOYMENT. Employer hereby engages Employee, and Employee hereby
accepts employment from Employer, upon the terms and conditions herein set
forth.
3.02 TERM. The term of this Agreement shall be for a period of five (5)
years, commencing on the effective date of this Agreement and terminating on the
fifth anniversary thereof, subject, however, to prior termination as herein
provided. This Agreement shall be automatically renewed for succeeding terms of
one (1) year each unless either party, at least sixty (60) days prior to the
expiration of any term, gives written notice of intent not to renew this
Agreement.
3.03 SERVICES TO BE RENDERED. Employee is engaged as President to render
services for and on behalf of Employer and agrees to devote Employee's full time
and attention to the business of Employer. Employee shall be primarily
responsible for merchandising, design, market research, sales and production for
Employer.
Employee shall not, without the express written consent of Employer,
directly or indirectly during the term of this Agreement and for a period of two
(2) years thereafter, render services of a business nature to or for any person
or firm for compensation, or engage in any activity competitive with and adverse
to Employer's business in the United States, whether alone, as a partner, or as
an officer, director, employee or shareholder of any other corporation or as a
trustee, fiduciary or other representative of any other entity.
3.04 COMPENSATION. Employer agrees to pay Employee during the term of this
Agreement, and Employee hereby accepts as full compensation for the performance
of services hereunder, the current and deferred compensation and other benefits
set forth on Schedule "A" attached hereto and incorporated herein by this
reference. All current compensation shall be subject to customary withholding
tax and other employment taxes as required with respect to compensation paid by
an employer to an employee.
<PAGE>
3.05 EXPENSES. During the period of employment, Employee shall be
reimbursed for reasonable and necessary business expenses in accordance with the
general policy of Employer.
3.06 REIMBURSEMENT OF DISALLOWED COMPENSATION AND EXPENSES. In the event
any compensation paid to Employee, including expenses paid on behalf of
Employee, or any reimbursement of expenses paid to Employee, shall, upon audit
or other examination of the income tax returns of Employer, be determined not to
be an allowable deduction from the gross income of Employer, and such
determination shall be acceded to by Employer, or such determination shall be
rendered final by the appropriate state or federal taxing authority, or a
judgment of a court of competent jurisdiction, and no appeal shall be taken
therefrom, or the applicable period for filing notice of appeal shall have
expired, then in such event, Employee shall repay to Employer the amount of such
disallowed compensation or expenses, or both. Such repayment may not be waived
by Employer.
3.07 VACATION. Employee shall be entitled to a vacation of four (4) weeks
without loss of compensation, or such greater length as may be approved from
time to time by the Employer.
3.08 EMPLOYER'S AUTHORITY. Employee agrees to observe and comply with the
rules and regulations of Employer, either orally or in writing, respecting
performance of Employee's duties and to carry out and to perform orders,
directions and policies stated by Employer to Employee, from time to time,
either orally or in writing.
3.09 ACCOUNTING. True and accurate records of accounts shall be kept in
accordance with good accounting practices and shall be available at any
reasonable time for inspection by Employee.
3.10 OFFICE SPACE AND EQUIPMENT. Employer shall furnish all necessary
office space, equipment and supplies which may be necessary for the successful
performance of Employee's duties hereunder and the conduct of its business.
3.11 TERMINATION. Notwithstanding the term of this Agreement, this
Agreement shall be terminated upon the happening of any of the following events:
(a) Whenever Employer and Employee shall mutually agree to termination
in writing;
(b) Death of Employee;
(c) Employee remains sick or disabled for the period of three (3)
consecutive months;
(d) For cause, which shall be deemed to exist if: (i) Employee willfully
refused to perform services hereunder, (ii) Employee engages in acts of
dishonesty or fraud in connection with his services hereunder; or (iii) Employee
engages in other serious misconduct of such a nature that the continued
employment of Employee may reasonably be expected to adversely affect the
business of properties of Employer. The shareholders of Employer shall have the
sole discretion to determine whether the conditions constituting a termination
for cause have occurred;
(e) Notwithstanding any of the provisions of subparagraphs (a) and (b)
above, upon sixty (60) days' prior written notice by either Employer or Employee
to the other.
Upon termination for any of the foregoing causes, Employee shall be
entitled to receive all compensation accrued but unpaid as of the date of
termination.
3.12 SEVERANCE PAYMENTS. In the event that this Agreement is terminated by
Employer without cause (i.e., other than "for cause," as defined in Section 3.11
above), Employer shall make severance payments to Employee in the amount of
Twelve Thousand Five Hundred and No/100 Dollars ($12,500.00) per month for a
period of six (6) months. In the event that this Agreement is terminated by
Employee, or is terminated by Employer for cause (as defined in Section 3.11
above), Employer shall not be obligated to make any severance payments to
Employee.
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<PAGE>
3.13 Employee covenants and agrees that he will not for two (2) years from
the date hereof, use, directly or indirectly, for his own account or for the
account of any third party, without the prior written consent of Employer, any
observations, data, written materials, customer lists, supplier or vendor lists,
records or documents relating to Employer which are of a confidential or
proprietary nature and which Employee may have acquired by virtue of work
performed for Employer.
3.14 All written materials, records and documents made by Employee or
coming into his possession during the term of his employment by and ownership of
shares in Employer concerning the business or affairs of Employer shall be the
sole property of Employer and retained by Employer.
3.15 Employee agrees that any trade secrets, invention, improvement,
patent, patent application, or writing and any program, system or novel
technique (whether or not capable of being trademarked, copyrighted or
patented), conceived, devised, developed or otherwise obtained by him during his
employment by and ownership of shares in Employer relating to the business,
property, methods, suppliers or customers of Employer shall remain the sole
property of Employer.
3.16 Employee covenants and agrees that for a period of two (2) years from
the date hereof, he shall not directly or indirectly solicit, entice or
encourage the employment or resignation of any employee of Employer.
3.17 Employee recognizes, acknowledges and agrees that the Employer's
customer and client lists and other records and information pertaining to
Employer's customers, clients and business, as such lists, records and
information may exist from time to time, as well as the respective customer and
client lists and other records and information pertaining to the customers,
clients and business of Employer, to which Employee has had access as an
employee of Employer, are valuable, special and unique assets which constitute
protectable interests of Employer. Employee covenants and agrees that for a
period of two (2) years from the date hereof, he shall not (i) canvas, solicit
or accept any business in connection with the business of Employer, from any
person or entity who is a customer of Employer, (ii) give any person, firm,
corporation or entity the right to canvas, solicit or accept any business in
connection with the business of Employer, from any person or entity who is a
customer of Employer; or (iii) directly or indirectly, request or advise any
person or entity who is a customer of Employer to withdraw, curtain or cancel
business with Employer. "A customer of Employer" shall be any person or entity
that has purchased goods from Employer in the twelve (12) month period prior to
Employee's termination.
3.18 Employee acknowledges and agrees that the scope, period of
restriction and geographic area of restriction imposed by the provisions of
Section 3 are fair and reasonable and are reasonably required for the protection
of Employer. In the event that any part of these covenants relating to the
scope, geographic area of restriction or the period of restriction shall be
determined by a court of competent jurisdiction to exceed the maximum area or
period of time that such court would deem enforceable under applicable law, the
scope, geographic area of restriction or the period of restriction, as the case
may be, shall be reduced to the maximum scope, area and period that such court
would deem valid and enforceable.
It is understood by and between the parties hereto that the foregoing
covenants by Employee as set forth above are essential elements of this
Agreement and the purchase of the shares of Employer by GIC, and that GIC would
not have encouraged that Employer to have entered into this Agreement unless
Employee agreed to comply with such covenants. Furthermore, Employee covenants
and agrees that in the event of Employee's actual or threatened breach of any of
the provisions of this Agreement, Employer shall be entitled to an injunction
restraining Employee therefrom, as damages at law would not be an adequate
remedy. Nothing herein shall be construed as prohibiting Employer from pursuing
any other available remedies for such breach or threatened breach, including the
recovery of damages from Employee. Employer shall also be entitled to recover
attorney fees from Employee in connection with the enforcement of these
provisions.
3.19 CALIFORNIA LAW. This Agreement is drawn to be effective in and shall
be construed in accordance with the laws of the State of California.
3
<PAGE>
3.20 AMENDMENT. No amendment or variation of the terms of this Agreement
shall be valid unless made in writing and signed by Employee and a duly
authorized representative of Employer.
3.21 WAIVER. A waiver of any of the terms and conditions hereof shall not
be construed as a general waiver by Employer, and Employer shall be free to
reinstate any such term or condition, with or without notice to Employee.
3.22 BINDING EFFECT. This Agreement shall bind all parties, their
respective heirs, personal representatives, or assigns, but nothing herein shall
be construed as an authorization or right of any party to assign the rights or
obligations stated hereunder.
3.23 EFFECTIVE DATE OF THIS AGREEMENT. The effective date of this
Agreement is January 1, 1999.
EMPLOYER: EMPLOYEE:
AVID SPORTSWEAR, INC.
A CALIFORNIA CORPORATION
By: /s/ Michael E. [Lavalliere] /s/ David E. Roderick
------------------------------- -------------------------------
Vice President
By: /s/ Jerry L. Busiere
-------------------------------
Secretary
<PAGE>
SCHEDULE A-1
SCHEDULE "A"
SCHEDULE OF COMPENSATION FOR
DAVID E. RODERICK
1. Current Compensation.
In accordance with Section 3.04 of the Employment Agreement to which this
Schedule attached, Employee shall be paid total compensation, as follows:
a. A base salary per year of $150,000.00, payable at the rate of
$12,500.00 per month commencing the effective date of the Employment Agreement.
b. Employee shall be eligible for annual salary increase in discretion of
Employer.
c. In addition to base salary, Employer may pay to Employee such bonuses
or additional compensation as may be determined reasonable from time to time by
its Shareholders.
2. Other Benefits.
Employer may provide to Employee such health, disability and other
benefits as may be determined from time to time by Employer for its employees.
SCHEDULE A-1
EXHIBIT 10.07
PROMISSORY NOTE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
$180,000.00 06-04-1999 700054006 19 02 700054000 MKW
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
</TABLE>
BORROWER: Golf Innovations, Corp. LENDER: First State Bank
1133 4th Street, Ste. 304 Main Office
Sarasota, FL 34236 2323 Stickney Point Road
Sarasota, FL 34231
Principal Amount: $180,000.00 Initial Rate: 8.250% Date of Note: June 4, 1999
PROMISE TO PAY. GOLF INNOVATIONS, CORP. ("BORROWER") PROMISES TO PAY TO FIRST
STATE BANK ("LENDER"), OR ORDER, IN LAWFUL MONEY OF THE UNITED STATES OF
AMERICA, ON DEMAND, THE PRINCIPAL AMOUNT OF ONE HUNDRED EIGHTY THOUSAND & 00/100
DOLLARS ($180,000.00) OR SO MUCH AS MAY BE OUTSTANDING, TOGETHER WITH INTEREST
ON THE UNPAID OUTSTANDING PRINCIPAL BALANCE OF EACH ADVANCE. INTEREST SHALL BE
CALCULATED FROM THE DATE OF EACH ADVANCE UNTIL REPAYMENT OF EACH ADVANCE.
PAYMENT. BORROWER WILL PAY THIS LOAN IMMEDIATELY UPON LENDER'S DEMAND. IN
ADDITION, BORROWER WILL PAY REGULAR MONTHLY PAYMENTS OF ALL ACCRUED UNPAID
INTEREST DUE AS OF EACH PAYMENT DATE, BEGINNING JULY 4, 1999, WITH ALL
SUBSEQUENT INTEREST PAYMENTS TO BE DUE ON THE SAME DAY OF EACH MONTH AFTER THAT.
The annual interest rate for this Note is computed on a 365/360 basis; that is,
by applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual number
of days the principal balance is outstanding. Borrower will pay Lender at
Lender's address shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments will be
applied first to accrued unpaid interest, then to principal, and any remaining
amount to any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an independent index which is the THE BASE RATE
ON CORPORATE LOANS POSTED BY AT LEAST 75% OF THE NATION'S 30 LARGEST BANKS, AS
PUBLISHED IN THE WALL STREET JOURNAL (the "Index"). The Index is not necessarily
the lowest rate charged by Lender on its loans. If the Index becomes unavailable
during the term of this loan, Lender may designate a substitute index after
notice to Borrower. Lender will tell Borrower the current Index rate upon
Borrower's request. Borrower understands that Lender may make loans based on
other rates as well. The interest rate change will not occur more often than
each DAILY. THE INDEX CURRENTLY IS 7.750% PER ANNUM. THE INTEREST RATE TO BE
APPLIED TO THE UNPAID PRINCIPAL BALANCE OF THIS NOTE WILL BE AT A RATE OF 0.500
PERCENTAGE POINTS OVER THE INDEX, RESULTING IN AN INITIAL RATE OF 8.250% PER
ANNUM. NOTICE: Under no circumstances will the effective rate of interest on
this Note be more than the maximum rate allowed by applicable law.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges
are earned fully as of the date of the loan and will not be subject to refund
upon early payment (whether voluntary or as a result of default), except as
otherwise required by law. Except for the foregoing, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments of accrued unpaid interest.
Rather, they will reduce the principal balance due.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
<PAGE>
06-04-1999 PROMISSORY NOTE PAGE 2
LOAN NO 7000540064 (CONTINUED)
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Borrower defaults under any loan, extension of credit,
security agreement, purchase or sales agreement, or any other agreement, in
favor of any other creditor or person that may materially affect any of
Borrower's property or Borrower's ability to repay this Note or perform
Borrower's obligations under this Note or any of the Related Documents. (d) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now or
at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender.
(g) Any guarantor dies or any of the other events described in this default
section occurs with respect to any guarantor of this Note. (h) A material
adverse change occurs in Borrower's financial condition, or Lender believes the
prospect of payment or performance of the Indebtedness is impaired. (i) Lender
in good faith deems itself insecure.
If any default, other than a default in payment, is curable and if Borrower has
not been given a notice of a breach of the same provision of this Note within
the preceding twelve (12) months, it may be cured (and no event of default will
have occurred) if Borrower, after receiving written notice from Lender demanding
cure of such default: (a) cures the default within ten (10) days; or (b) if the
cure requires more than ten (10) days, immediately initiates steps which Lender
deems in Lender's sole discretion to be sufficient to cure the default and
thereafter continues and completes all reasonable and necessary steps sufficient
to produce compliance as soon as reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including failure
to pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, increase the variable interest rate on this Note to 18.000% per
annum, if and to the extent that the increase does not cause the interest rate
to exceed the maximum rate permitted by applicable law. Lender may hire or pay
someone else to help collect this Note if Borrower does not pay. Borrower also
will pay Lender the amount of these costs and expenses, which includes, subject
to any limits under applicable law, Lender's reasonable attorneys' fees and
Lender's legal expenses whether or not there is a lawsuit, including reasonable
attorneys' fees and legal expenses for bankruptcy proceedings (including efforts
to modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgment collection services. If not prohibited by applicable
law, Borrower also will pay any court costs, in addition to all other sums
provided by law. THIS NOTE HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY LENDER
IN THE STATE OF FLORIDA. IF THERE IS A LAWSUIT, BORROWER AGREES UPON LENDER'S
REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF SARASOTA COUNTY, THE
STATE OF FLORIDA. LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL
IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR BORROWER
AGAINST THE OTHER. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF FLORIDA.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $30.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
RIGHT OF SETOFF. Borrower grants to Lender a contractual security interest in,
and hereby assigns, conveys, delivers, pledges, and transfers to Lender all
Borrower's right, title and interest in and to, Borrower's accounts with Lender
(whether checking, savings, or some other account), including without limitation
all accounts held jointly with someone else and all accounts Borrower may open
in the future, excluding however all IRA and Keogh accounts, and all trust
accounts for which the grant of a security interest would be prohibited by law.
Borrower authorizes Lender, to the extent permitted by applicable law, to charge
or setoff all sums owing on this Note against any and all such accounts.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note may be requested orally by Borrower or by an authorized person. Lender
may, but need not, require that all oral requests be confirmed in writing. All
communications, instructions, or directions by telephone or otherwise to Lender
are to be directed to Lender's office shown above. The following party or
parties are authorized to request advances under the line of credit until Lender
receives from Borrower at Lender's address shown above written notice of
revocation of their authority: EARL T. INGARFIELD PRESIDENT, AND MICHAEL E.
LAVALLIERE, DIRECTOR. Borrower agrees to be liable for all sums either: (a)
advanced in accordance with the instructions of an authorized person or (b)
credited to any of Borrower's accounts with Lender. The unpaid principal balance
owing on this Note at any time may be evidenced by endorsements on this Note or
by Lender's internal records, including daily computer print-outs. Lender will
have no obligation to advance funds under this Note if: (a) Borrower or any
guarantor is in default under the terms of this Note or any agreement that
Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Note; (b) Borrower or any guarantor ceases
<PAGE>
06-04-1999 PROMISSORY NOTE PAGE 3
LOAN NO 7000540064 (CONTINUED)
doing business or is insolvent; (c) any guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such guarantor's guarantee of this Note or
any other loan with Lender; (d) Borrower has applied funds provided pursuant to
this Note for purposes other than those authorized by Lender; or (e) LENDER IN
GOOD FAITH DEEMS ITSELF INSECURE UNDER THIS NOTE OR ANY OTHER AGREEMENT BETWEEN
LENDER AND BORROWER.
GENERAL PROVISIONS. This Note is payable on demand. The inclusion of specific
default provisions or rights of Lender shall not preclude Lender's right to
declare payment of this Note on its demand. If any part of this Note cannot be
enforced, this fact will not affect the rest of the Note. Borrower does not
agree or intend to pay, and Lender does not agree or intend to contract for,
charge, collect, take, reserve or receive (collectively referred to herein as
"charge or collect"), any amount in the nature of interest or in the nature of a
fee for this loan, which would in any way or event (including demand prepayment,
or acceleration) cause Lender to charge or collect more for this loan than the
maximum Lender would be permitted to charge or collect by federal law or the law
of the State of Florida (as applicable). Any such excess interest or
unauthorized fee shall, instead of anything stated to the contrary, be applied
first to reduce the principal balance of this loan, and when the principal has
been paid in full, be refunded to Borrower. Lender may delay or forgo enforcing
any of its rights or remedies under this Note without losing them. Borrower and
any other person who signs, guarantees or endorses this Note, to the extent
allowed by law, waive presentment, demand for payment, protest and notice of
dishonor. Upon any change in the terms of this Note, and unless otherwise
expressly stated in writing, no party who signs this Note, whether as maker,
guarantor, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for any
length of time) this loan, or release any party or guarantor or collateral; or
impair, fail to realize upon or perfect Lender's security interest in the
collateral; and take any other action deemed necessary by Lender without the
consent of or notice to anyone. All such parties also agree that Lender may
modify this loan without the consent of or notice to anyone other than the party
with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
Golf Innovations, Corp.
By: /s/ Earl T. Ingarfield (SEAL)
-------------------------------
Earl T. Ingarfield
Variable Rate. Line of Credit. LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver.
3.26c (c) 1999 CFI ProServices, Inc. All rights reserved.
(FL-D20 GOLFINN.LN C4.OVL)
EXHIBIT 10.08
COMMERCIAL SECURITY AGREEMENT
<TABLE>
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No. Call Collateral Account Officer Initials
$1,000,000.00 11-17-1999 11-17-2000 4000013363 4000013300 PAT
- ----------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item
Any item above containing "***"has been omitted due to text length
limitations.
- ---------------------------------------------------------------------------------------------
</TABLE>
BORROWER: Avid Sportswear and Golf Corp. LENDER: First State Bank
22 South Links Avenue, Suite 204 22 South Links Avenue
Sarasota, Florida 34236 Sarasota, Florida 34236
(941) 929-9000
GRANTOR: Avid Sportswear and Golf Corp.
Avid Sportswear, Inc.
22 South Links Avenue, Suite 204
Sarasota, Florida 34236
================================================================================
THIS COMMERCIAL SECURITY AGREEMENT DATED NOVEMBER 17, 1999, IS MADE AND EXECUTED
AMONG AVID SPORTSWEAR AND GOLF CORP.; AND AVID SPORTSWEAR, INC. ("GRANTOR");
AVID SPORTSWEAR AND GOLF CORP. ("BORROWER"); AND FIRST STATE BANK ("LENDER").
GRANT OF SECURITY INTEREST. FOR VALUABLE CONSIDERATION, GRANTOR GRANTS TO LENDER
A SECURITY INTEREST IN THE COLLATERAL TO SECURE THE INDEBTEDNESS AND AGREES THAT
LENDER SHALL HAVE THE RIGHTS STATED IN THIS AGREEMENT WITH RESPECT TO THE
COLLATERAL, IN ADDITION TO ALL OTHER RIGHTS WHICH LENDER MAY HAVE BY LAW.
COLLATERAL DESCRIPTION. The word "Collateral" as used in this Agreement means
the following described property, whether now owned or hereafter acquired,
whether now existing or hereafter arising, and wherever located, in which
Grantor is giving to Lender a security interest for the payment of the
Indebtedness and performance of all other obligations under the Note and this
Agreement:
ALL INVENTORY, CHATTEL PAPER, ACCOUNTS, EQUIPMENT AND GENERAL INTANGIBLES;
WHETHER ANY OF THE FOREGOING IS OWNED NOW OR ACQUIRED LATER; ALL
ACCESSIONS, ADDITIONS, REPLACEMENTS, AND SUBSTITUTIONS RELATING TO ANY OF
THE FOREGOING; ALL RECORDS OF ANY KIND RELATING TO ANY OF THE FOREGOING;
ALL PROCEEDS RELATING TO ANY OF THE FOREGOING (INCLUDING INSURANCE,
GENERAL INTANGIBLES AND OTHER ACCOUNTS PROCEEDS AND PURCHASE MONEY ON ALL
DOCKER INVENTORY PURCHASED FROM LEVI STRAUSS AND COMPANY
In addition, the word "Collateral" also includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter arising, and
wherever located:
(A) All accessions, attachments, accessories, tools, parts, supplies,
replacements and additions to any of the collateral described herein,
whether added now or later.
<PAGE>
(B) All products and produce of any of the property described in this
Collateral section.
(C) All accounts, general intangibles, instruments, rents, monies,
payments, and all other rights, arising out of a sale, lease, or other
disposition of any of the property described in this Collateral section.
(D) All proceeds (including insurance proceeds) from the sale,
destruction, loss, or other disposition of any of the property described
in this Collateral section, and sums due from a third party who has
damaged or destroyed the Collateral or from that party's insurer, whether
due to judgment, settlement or other process.
(E) All records and data relating to any of the property described in this
Collateral section, whether in the form of a writing, photograph,
microfilm, microfiche, or electronic media, together with all of Grantor's
right, title, and interest in and to all computer software required to
utilize, create, maintain, and process any such records or data on
electronic media.
Despite any other provision of this Agreement, Lender is not granted, and will
not have, a nonpurchase money security interest in household goods, to the
extent such a security interest would be prohibited by applicable law. In
addition, if because of the type of any Property, Lender is required to give a
notice of the right to cancel under Truth in Lending for the Indebtedness, then
Lender will not have a security interest in such Property unless and until such
a notice is given.
CROSS-COLLATERALIZATION. In addition to the Note, this Agreement secures all
obligations, debts and liabilities, plus interest thereon, of Borrower to
Lender, or any one or more of them, as well as all claims by Lender against
Borrower or any one or more of them, whether now existing or hereafter arising,
whether related or unrelated to the purpose of the Note, whether voluntary or
otherwise, whether due or not due, direct or indirect, absolute or contingent,
liquidated or unliquidated and whether Borrower may be liable individually or
jointly with others, whether obligated as guarantor, surety, accommodation party
or otherwise, and whether recovery upon such amounts may be or hereafter may
become barred by: any statute of limitations, and whether the obligation to
repay such amounts may be or hereafter may become otherwise unenforceable.
(INITIAL HERE /S/ [ILLEGIBLE])
BORROWER'S WAIVERS AND RESPONSIBILITIES. Except as otherwise required under this
Agreement or by applicable law, (A) Borrower agrees that Lender need not tell
Borrower about any action or inaction Lender takes in connection with this
Agreement; (B) Borrower assumes the responsibility for being and keeping
informed about the Collateral; and (C) Borrower waives any defenses that may
arise because of any action or inaction of Lender, including without limitation
any failure of Lender to realize upon she Collateral or any delay by Lender in
realizing upon she Collateral; and Borrower agrees to remain liable under the
Note no matter what action Lender takes or fails to take under this Agreement.
GRANTOR'S REPRESENTATIONS AND WARRANTIES. Grantor warrants that: (A) this
Agreement is executed at Borrower's request and not at the request of Lender;
(B) Grantor has the full right, power and authority to enter into this Agreement
and to pledge the Collateral to Lender; (C) Grantor has established adequate
means of obtaining from Borrower on a continuing basis information about
Borrower's financial condition; and (D) Lender has made no representation to
Grantor about Borrower or Borrower's creditworthiness.
GRANTOR'S WAIVERS. Grantor waives all requirements of presentment, protest,
demand, and notice of dishonor or non-payment to Grantor, Borrower, or any other
party to the Indebtedness or the Collateral. Lender may do any of the following
with respect to any obligation of any Borrower, without first obtaining the
consent of Grantor: (A) grant any extension of time for any payment, (B) grant
any renewal, (C) permit any modification of payment terms or other terms, or (D)
exchange or release any Collateral or other security. No such act or failure to
act shall affect Lender's rights against Grantor or the Collateral.
2
<PAGE>
RIGHT OF SETOFF. Grantor grants to Lender a contractual security interest in all
Grantor's accounts with Lender (whether checking, savings, or some other
account). This includes all accounts Grantor holds jointly with someone else and
all accounts Grantor may open in the future. However, this does not include any
IRA or Keogh accounts, or any trust accounts for which the grant of a security
interest would be prohibited by law. Grantor authorizes Lender, to the extent
permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts, and, at Lender's option, to
administratively freeze all such accounts to allow Lender to protect Lender's
charge and setoff rights provided in this paragraph.
GRANTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. With
respect to the Collateral, Grantor represents and warrants to Lender that:
PERFECTION OF SECURITY INTEREST. Grantor agrees to execute financing
statements and to take whatever other actions are requested by Lender to
perfect and continue Lender's security interest in the Collateral. Upon
request of Lender, Grantor will deliver to Lender any and all of the
documents evidencing or constituting the Collateral, and Grantor will note
Lender's interest upon any and all chattel paper if not delivered to
Lender for possession by Lender. This Is a continuing Security Agreement
and will continue In effect even though all or any part of the
Indebtedness is paid In full and even though for a period of time Borrower
may not be indebted to Lender.
NOTICES TO LENDER. Grantor will notify Lender in writing at Lender's
address shown above (or such other addresses as Lender may designate from
time to time) prior to any (1) change in Grantor's name, (2) change in
Grantor's assumed business name(s), (3) change in the management of
Grantor, (4) change in the authorized signer(s), (5) change in Grantor's
principal office address, (6) conversion of Grantor to a new or different
type of business entity, or (7) change in any other aspect of Grantor that
directly or indirectly relates to any agreements between Grantor and
Lender. No change in Grantor's name will take effect until after Lender
has been notified.
NO VIOLATION. The execution and delivery of this Agreement will not
violate any law or agreement governing Grantor or to which Grantor is a
party, and its certificate or articles of incorporation and bylaws do not
prohibit any term or condition of this Agreement.
ENFORCEABILITY OF COLLATERAL. To the extent the Collateral consists of
accounts, chattel paper, or general intangibles, as defined by the Uniform
Commercial Code, the Collateral is enforceable in accordance with its
terms, is genuine, and fully complies with all applicable laws and
regulations concerning form, content and manner of preparation and
execution, and all persons appearing to be obligated on the Collateral
have authority and capacity to contract and are in fact obligated as they
appear to be on the Collateral. At the time any Account becomes subject to
a security interest in favor of Lender, the Account shall be a good and
valid account representing an undisputed, bona fide indebtedness incurred
by she account debtor, for merchandise held subject to delivery
instructions or previously shipped or delivered pursuant to a contract of
3
<PAGE>
sale, or for services previously performed by Grantor with or for the
account debtor. So long as this Agreement remains in effect, Grantor shall
not, without Lender's prior written consent, compromise, settle, adjust,
or extend payment under or with regard to any such Accounts. There shall
be no setoffs or counterclaims against any of the Collateral, and no
agreement shall have been made under which any deductions or discounts may
be claimed concerning the Collateral except those disclosed to Lender in
writing.
LOCATION OF THE COLLATERAL. Except in the ordinary course of Grantor's
business, Grantor agrees to keep the Collateral (or to the extent the
Collateral consists of intangible property such as accounts or general
intangibles, the records concerning the Collateral) at Grantor's address
shown above or at such other locations as are acceptable to Lender. Upon
Lender's request, Grantor will deliver to Lender in form satisfactory to
Lender a schedule of real properties and Collateral locations relating to
Grantor's operations, including without limitation the following: (1) all
real property Grantor owns or is purchasing; (2) all real property Grantor
is renting or leasing; (3) all storage facilities Grantor owns, rents,
leases, or uses; and (4) all other properties where Collateral is or may
be located.
REMOVAL OF THE COLLATERAL. Except in the ordinary course of Grantor's
business, including the sales of inventory, Grantor shall not remove the
Collateral from its existing location without Lender's prior written
consent. Grantor shall, whenever requested, advise Lender of the exact
location of the Collateral.
TRANSACTIONS INVOLVING COLLATERAL. Except for inventory sold or accounts
collected in the ordinary course of Grantor's business, Grantor shall not
sell, offer to sell, or otherwise transfer or dispose of the Collateral.
While Grantor is not in default under this Agreement, Grantor may sell
inventory, but only in the ordinary course of its business and only to
buyers who qualify as a buyer in the ordinary course of business. A sale
in the ordinary course of Grantor's business does not include a transfer
in partial or total satisfaction of a debt or any bulk sale. Grantor shall
not pledge, mortgage, encumber or otherwise permit the Collateral to be
subject to any lien, security interest, encumbrance, or charge, other than
the security interest provided for in this Agreement, without the prior
written consent of Lender. This includes security interests even if junior
in right to the security interests granted under this Agreement. Unless
waived by Lender, all proceeds from any disposition of the Collateral (for
whatever reason) shall be held in trust for Lender and shall not be
commingled with any other funds; provided however, this requirement shall
not constitute consent by Lender to any sale or other disposition. Upon
receipt, Grantor shall immediately deliver any such proceeds to Lender.
TITLE. Grantor represents and warrants to Lender that Grantor holds good
and marketable title to the Collateral, free and clear of all liens and
encumbrances except for the lien of this Agreement. No financing statement
covering any of the Collateral is on file in any public office other than
those which reflect the security interest created by this Agreement or to
which Lender has specifically consented. Grantor shall defend Lender's
rights in the Collateral against the claims and demands of all other
persons.
REPAIRS AND MAINTENANCE. Grantor agrees to keep and maintain, and to cause
others to keep and maintain, the Collateral in good order, repair and
condition at all times while this Agreement remains in effect. Grantor
further agrees to pay when due all claims or work done on, or services
rendered or material furnished in connection with the Collateral so that
no lien or encumbrance may ever attach to or be filed against the
Collateral.
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INSPECTION OF COLLATERAL. Lender and Lender's designated representatives
and agents shall have the right at all reasonable times to examine and
inspect the Collateral wherever located.
TAXES, ASSESSMENTS AND LIENS. Grantor will pay when due all taxes,
assessments and liens upon the Collateral, its use or operation, upon this
Agreement, upon any promissory note or notes evidencing the Indebtedness,
or upon any of the other Related Documents. Grantor may withhold any such
payment or may elect to contest any lien if Grantor is in good faith
conducting an appropriate proceeding to contest the obligation to pay and
so long as Lender's interest in the Collateral is not jeopardized in
Lender's sole opinion. If the Collateral is subjected to a lien which is
not discharged within fifteen (15) days, Grantor shall deposit with Lender
cash, a sufficient corporate surety bond or other security satisfactory to
Lender in an amount adequate to provide for the discharge of the lien plus
any interest, costs, reasonable attorneys' fees or other charges that
could accrue as a result of foreclosure or sale of the Collateral. In any
contest Grantor shall defend itself and Lender and shall satisfy any final
adverse judgment before enforcement against the Collateral. Grantor shall
name Lender as an additional obliges under any surety bond furnished in
the contest proceedings. Grantor further agrees to furnish Lender with
evidence that such taxes, assessments, and governmental and other charges
have been paid in full and in a timely manner. Grantor may withhold any
such payment or may elect to contest any lien if Grantor is in good faith
conducting an appropriate proceeding to contest the obligation to pay and
so long as Lender's interest in the Collateral is not jeopardized.
COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Grantor shall comply promptly
with all laws, ordinances, rules and regulations of all governmental
authorities, now or hereafter in effect, applicable to the ownership,
production, disposition, or use of the Collateral. Grantor may contest in
good faith any such law, ordinance or regulation and withhold compliance
during any proceeding, including appropriate appeals, so long as Lender's
interest in the Collateral, in Lender's opinion, is not jeopardized.
HAZARDOUS SUBSTANCES. Grantor represents and warrants that the Collateral
never has been, and never will be so long as this Agreement remains a lien
on the Collateral, used in violation of any Environmental Laws or for the
generation, manufacture, storage, transportation, treatment, disposal,
release or threatened release of any Hazardous Substance. The
representations and warranties contained herein are based on Grantor's due
diligence in investigating the Collateral for Hazardous Substances.
Grantor hereby (1) releases and waives any future claims against Lender
for indemnity or contribution in the event Grantor becomes liable for
cleanup or other costs under any Environmental Laws, and (2) agrees to
indemnify and hold harmless Lender against any and all claims and losses
resulting from a breach of this provision of this Agreement. This
obligation to indemnify shall survive the payment of the Indebtedness and
the satisfaction of this Agreement.
MAINTENANCE OF CASUALTY INSURANCE. Grantor shall procure and maintain all
risks insurance, including without limitation fire, theft and liability
coverage together with such other insurance as Lender may require with
respect to the Collateral, in form, amounts, coverages and basis
reasonably acceptable to Lender and issued by a company or companies
reasonably acceptable to Lender. Grantor, upon request of Lender, will
deliver to Lender from time to time the policies or certificates of
insurance in form satisfactory to Lender, including stipulations that
coverages will not be cancelled or diminished without at least thirty (30)
days' prior written notice to Lender and not including any disclaimer of
the insurer's liability for failure to give such a notice. Each insurance
policy also shall include an endorsement providing that coverage in favor
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of Lender will not be impaired in any way by any act, omission or default
of Grantor or any other person. In connection with all policies covering
assets in which Lender holds or is offered a security interest, Grantor
will provide Lender with such loss payable or other endorsements as Lender
may require. If Grantor at any time fails to obtain or maintain any
insurance as required under this Agreement, Lender may (but shall not be
obligated to) obtain such insurance as Lender deems appropriate, including
if Lender so chooses "single interest insurance," which will cover only
Lender's interest in the Collateral.
APPLICATION OF INSURANCE PROCEEDS. Grantor shall promptly notify Lender of
any loss or damage to the Collateral. Lender may make proof of loss if
Grantor fails to do so within fifteen (15) days of the casualty. All
proceeds of any insurance on the Collateral, including accrued proceeds
thereon, shall be held by Lender as part of the Collateral. If Lender
consents to repair or replacement of the damaged or destroyed Collateral,
Lender shall, upon satisfactory proof of expenditure, pay or reimburse
Grantor from the proceeds for the reasonable cost of repair or
restoration. If Lender does not consent to repair or replacement of the
Collateral, Lender shall retain a sufficient amount of the proceeds to pay
all of the Indebtedness, and shall pay the balance to Grantor. Any
proceeds which have not been disbursed within six (6) months after their
receipt and which Grantor has not committed to the repair or restoration
of the Collateral shall be used to prepay the Indebtedness.
INSURANCE RESERVES. Lender may require Grantor to maintain with Lender
reserves for payment of insurance premiums, which resumes shall be created
by monthly payments from Grantor of a sum estimated by Lender to be
sufficient to produce, at least fifteen (15) days before the premium due
date, amounts at least equal to the insurance premiums to be paid. If
fifteen (15) days before payment is due, the reserve funds are
insufficient, Grantor shall upon demand pay any deficiency to Lender. The
reserve funds shall be held by Lender as a general deposit and shall
constitute a non-interest-bearing account which Lender may satisfy by
payment of the insurance premiums required to be paid by Grantor as they
become due. Lender does not hold the reserve funds in trust for Grantor,
and Lender is not the agent of Grantor for payment of the insurance
premiums required to be paid by Grantor. The responsibility for the
payment of premiums shall remain Grantor's sole responsibility.
INSURANCE REPORTS. Grantor, upon request of Lender, shall furnish to
Lender reports on each existing policy of insurance showing such
information as Lender may reasonably request including the following: (1)
the name of the insurer; (2) the risks insured; (3) the amount of the
policy; (4) the property insured; (5) the then current value on the basis
of which insurance has been obtained and the manner of determining that
value; and (6) the expiration date of the policy. In addition, Grantor
shall upon request by Lender (however not more open than annually) have an
independent appraiser satisfactory to Lender determine, as applicable, the
cash value or replacement cost of the Collateral.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and except
as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantor's right to possession
and beneficial use shall not apply to any Collateral where possession of the
Collateral by Lender is required by law to perfect Lender's security interest in
such Collateral. Until otherwise notified by Lender, Grantor may collect any of
the Collateral consisting of accounts. At any time and even though no Event of
Default exists, Lender may exercise its rights to collect the accounts and to
notify account debtors to make payments directly to Lender for application to
the Indebtedness. If Lender at any time has possession of any Collateral,
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whether before or aver an Event of Default, Lender shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral if
Lender takes such action for that purpose as Grantor shall request or as Lender,
in Lender's sole discretion, shall deem appropriate under the circumstances, but
failure to honor any request by Grantor shall not of itself be deemed to be a
failure to exercise reasonable care. Lender shall not be required to take any
steps necessary to preserve any rights in the Collateral against prior parties,
nor to protect, preserve or maintain any security interest given to secure the
indebtedness.
LENDER'S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lender's interest in the Collateral or if Grantor fails to
comply with any provision of this Agreement or any Related Documents, including
but not limited to Grantor's failure to discharge or pay when due any amounts
Grantor is required to discharge or pay under this Agreement or any Related
Documents, Lender on Grantor's behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on the Collateral and paying all
costs for insuring, maintaining and preserving the Collateral. All such
expenditures incurred or paid by Lender for such purposes will then bear
interest at the rate charged under the Note from the date incurred or paid by
Lender to the date of repayment by Grantor. All such expenses will become a part
of the Indebtedness and, at Lender's option, will (A) be payable on demand;
(B)be added to the balance of the Note and be apportioned among and be payable
with any installment payments to become due during either (1) the term of any
applicable insurance policy; or (2) the remaining term of the Note; or (C) be
treated as a balloon payment which will be due and payable at the Note's
maturity. The Collateral also will secure payment of these amounts. Such right
shall be in addition to all other rights and remedies to which Lender may be
entitled upon Default.
DEFAULT. Each of the following shall constitute an Event of Default under this
Agreement:
PAYMENT DEFAULT. Borrower fails to make any payment when due under the
Indebtedness.
OTHER DEFAULTS. Borrower or Grantor fails to comply with or to perform any
other term, obligation, covenant or condition contained in this Agreement
or in any of the Related Documents or to comply with or to perform any
term, obligation, covenant or condition contained in any other agreement
between Lender and Borrower or Grantor.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by Borrower or Grantor or on Borrower's or Grantor's
behalf under this Agreement, the Note, or the Related Documents is false
or misleading in any material respect, either now or at the time made or
furnished or becomes false or misleading at any time thereafter.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of any
collateral document to create a valid and perfected security interest or
lien) at any time and for any reason.
INSOLVENCY. The dissolution or termination of Borrower's or Grantor's
existence as a going business, the insolvency of Borrower or Grantor, the
appointment of a receiver for any part of Borrower's or Grantor's
property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against Borrower or Grantor.
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CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower or Grantor
or by any governmental agency against any collateral securing the
Indebtedness. This includes a garnishment of any of Borrower's or
Grantor's accounts, including deposit accounts, with Lender. However, this
Event of Default shall not apply if there is a good faith dispute by
Borrower or Grantor as to the validity or reasonableness of the claim
which is the basis of the creditor or forfeiture proceeding and if
Borrower or Grantor gives Lender written notice of the creditor or
forfeiture proceeding and deposits with Lender monies or a surety bond for
the creditor or forfeiture proceeding, in an amount determined by Lender,
in its sole discretion, as being an adequate reserve or bond for the
dispute.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to Guarantor of any of the Indebtedness or Guarantor dies or
becomes incompetent.
ADVERSE CHANGE. A material adverse change occurs in Borrower's or
Grantor's financial condition, or Lender believes the prospect of payment
or performance of the Indebtedness is impaired.
INSECURITY. Lender in good faith believes itself insecure.
CURE PROVISIONS. If any default, other than a default in payment, is
curable and if Grantor has not been given a notice of a breach of the same
provision of this Agreement within the preceding twelve (12) months, it
may be cured (and no event of default will have occurred) if Grantor,
after receiving written notice from Lender demanding cure of such default:
(1) cures the default within ten (10) days; or (2) if the cure requires
more than ten (10) days, immediately initiates steps which Lender deems in
Lender's sole discretion to be sufficient to cure the default and
thereafter continues and completes all reasonable and necessary steps
sufficient to produce compliance as soon as reasonably practical.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the Florida Uniform Commercial Code. In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:
ACCELERATE INDEBTEDNESS. With respect to each obligation constituting the
Indebtedness as to which an Event of Default has occurred, Lender may
declare the entire unpaid principal balance on and all accrued unpaid
interest on such obligation or obligations (including, without limitation,
the Note) immediately due and payable unless notice and an opportunity to
cure is required by Section 425.105, Wis. Stats., and in that event, all
amounts due under this Agreement shall become payable if such default is
not cured, as provided by that statute, within fifteen (15) calendar days
after Lender has mailed such notice.
ASSEMBLE COLLATERAL. Lender may require Grantor to deliver to Lender all
or any portion of the Collateral and any and all certificates of title and
other documents relating to the Collateral. Lender may require Grantor to
assemble the Collateral and make it available to Lender at a place to be
designated by Lender. Lender also shall have full power to enter upon the
property of Grantor to take possession of and remove the Collateral. If
the Collateral contains other goods not covered by this Agreement at the
time of repossession, Grantor agrees Lender may take such other goods,
provided that Lender makes reasonable efforts to return them to Grantor
after repossession.
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SELL THE COLLATERAL. Lender shall have full power to sell, lease,
transfer, or otherwise deal with the Collateral or proceeds thereof in
Lender's own name or that of Grantor. Lender may sell the Collateral at
public auction or private sale. Unless the Collateral threatens to decline
speedily in value or is of a type customarily sold on a recognized market,
Lender will give Grantor reasonable notice of the time after which any
private sale or any other intended disposition of the Collateral is to be
made. The requirements of reasonable notice shall be met if such notice is
given at least fifteen (15) days before the time of the sale or
disposition. All expenses relating to the disposition of the Collateral,
including without limitation the expenses of retaking, holding, insuring,
preparing for sale and selling the Collateral, shall become a part of the
Indebtedness secured by this Agreement and shall be payable on demand,
with interest at the Note rate from date of expenditure until repaid.
APPOINT RECEIVER. In the event of a suit being instituted to foreclose
this Agreement, Lender shall be entitled to apply at any time pending such
foreclosure suit to the court having jurisdiction thereof for the
appointment of a receiver of any or all of the Collateral, and of all
rents, incomes, profits, issues and revenues thereof, from whatsoever
source. The parties agree that the court shall forthwith appoint such
receiver with the usual powers and duties of receivers in like cases. Such
appointment shall be made by the court as a matter of strict right to
Lender and without notice to Grantor, and without reference to the
adequacy or inadequacy of the value of the Collateral, or to Grantor's
solvency or any other party defendant to such suit. Grantor hereby
specifically waives the right to object to the appointment of a receiver
and agrees that such appointment shall be made as an admitted equity and
as a matter of absolute right to Lender, and consents to the appointment
of any officer or employee of Lender as receiver. Lender shall have the
right to have a receiver appointed to take possession of all or any part
of the Collateral, with the power to protect and preserve the Collateral,
to operate the Collateral preceding foreclosure or sale, and to collect
the Rents from the Collateral and apply the proceeds, over and above the
cost of the receivership, against the Indebtedness. The receiver may serve
without bond if permitted by law. Lender's right to the appointment of a
receiver shall exist whether or not the apparent value of the Collateral
exceeds the Indebtedness by a substantial amount. Employment by Lender
shall not disqualify a person from serving as a receiver.
COLLECT REVENUES, APPLY ACCOUNTS. Lender, either itself or through a
receiver, may collect the payments, rents, income, and revenues from the
Collateral. Lender may at any time in Lender's discretion transfer any
Collateral into Lender's own name or that of Lender's nominee and receive
the payments, rents, income, and revenues therefrom and hold the same as
security for the Indebtedness or apply it to payment of the Indebtedness
in such order of preference as Lender may determine. Insofar as the
Collateral consists of accounts, general intangibles, insurance policies,
instruments, chattel paper, chases in action, or similar property, Lender
may demand, collect, receipt for, settle, compromise, adjust, sue for,
foreclose, or realize on the Collateral as Lender may determine, whether
or not Indebtedness or Collateral is then due. For these purposes, Lender
may, on behalf of and in the name of Grantor, receive, open and dispose of
mail addressed to Grantor; change any address to which mail and payments
are to be sent; and endorse notes, checks, drafts, money orders, documents
of title, instruments and items pertaining to payment, shipment, or
storage of any Collateral. To facilitate collection, Lender may notify
account debtors and obligors on any Collateral to make payments directly
to Lender.
OBTAIN DEFICIENCY. If Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Borrower for any deficiency remaining
on the Indebtedness due to Lender after application of all amounts
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received from the exercise of the rights provided in this Agreement.
Borrower shall be liable for a deficiency even if the transaction
described in this subsection is a sale of accounts or chattel paper.
OTHER RIGHTS AND REMEDIES. Lender shall have all the rights and remedies
of a secured creditor under the provisions of the Uniform Commercial Code,
as may be amended from time to time. In addition, Lender shall have and
may exercise any or all other rights and remedies it may have available at
law, in equity, or otherwise.
ELECTION OF REMEDIES. Except as may be prohibited by applicable law, all of
Lender's rights and remedies, whether evidenced by this Agreement, the Related
Documents, or by any other writing, shall be cumulative and may be exercised
singularly or concurrently. Election by Lender to pursue any remedy will not bar
any other remedy,. and an election to make expenditures or to take action to
perform an obligation of Grantor under this Agreement, after failure to perform,
shall not affect Lender's right to declare a default and exercise its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Agreement. No alteration of or amendment to
this Agreement shall be effective unless given in writing and signed by
the party or parties sought to be charged or bound by the alteration or
amendment.
ATTORNEYS' FEES; EXPENSES. Grantor agrees to pay upon demand all of
Lender's costs and expenses, including Lender's reasonable attorneys' fees
and Lender's legal expenses, incurred in connection with the enforcement
of this Agreement. Lender may hire or pay someone else to help enforce
this Agreement, and Grantor shall pay the costs and expenses of such
enforcement. Costs and expenses include Lender's reasonable attorneys'
fees and legal expenses whether or not there is a lawsuit, including
reasonable attorneys' fees and legal expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. Grantor
also shall pay all court costs and such additional fees as may be directed
by the court.
CAPTION HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Agreement.
GOVERNING LAW. This Agreement will be governed by, construed and enforced
in accordance with federal law and the laws of the State of Florida. This
Agreement has been accepted by Lender in the State of Florida.
CHOICE OF VENUE. If there is a lawsuit, Grantor agrees upon Lender's
request to submit to the jurisdiction of the courts of Sarasota County,
State of Florida.
JOINT AND SEVERAL LIABILITY. All obligations of Borrower and Grantor under
this Agreement shall be joint and several, and all references to Grantor
shall mean each and every Grantor, and all references to Borrower shall
mean each and every Borrower. This means that each Borrower and Grantor
signing below is responsible for all obligations in this Agreement. Where
any one or more of the parties is a corporation, partnership, limited
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liability company or similar entity, it is not necessary for Lender to
inquire into the powers of any of the officers, directors, partners,
members, or other agents acting or purporting to act on the entity's
behalf, and any obligations made or created in reliance upon the professed
exercise of such powers shall be guaranteed under this Agreement.
NO WAIVER BY LENDER. Lender shall not be deemed to have waived any rights
under this Agreement unless such waiver is given in writing and signed
Lender. No delay or omission on the part of Lender in exercising any right
shall operate as a waiver of such right or any other right. A waiver by
Lender of a provision of this Agreement shall not prejudice or constitute
a waiver of Lender's right otherwise to demand strict compliance with that
provision or any other provision of this Agreement. No prior waiver by
Lender, nor any course of dealing between Lender and Grantor, shall
constitute a waiver of any of Lender's rights or of any of Grantor's
obligations as to any future transactions. Whenever the consent of Lender
is required under this Agreement, the granting of such consent by Lender
in any instance shall not constitute continuing consent to subsequent
instances where such consent is required and in all cases such consent may
be granted or withheld in the sole discretion of Lender.
NOTICES. Any notice required to be given under this Agreement shall be
given in writing, and shall be effective when actually delivered, when
actually received by telefacsimile (unless otherwise required by law),
when deposited with a nationally recognized overnight courier, or, if
mailed, when deposited in the United States mail, as first class,
certified or registered mail postage prepaid, directed to the addresses
shown near the beginning of this Agreement. Any party may change its
address for notices under this Agreement by giving written notice to the
other parties, specifying that the purpose of the notice is to change the
party's address. For notice purposes, Grantor agrees to keep Lender
informed at all times of Grantor's current address. Unless otherwise
provided or required by law, if there is more than one Grantor, any notice
given by Lender to any Grantor is deemed to be notice given to all
Grantors.
POWER OF ATTORNEY. Grantor hereby appoints Lender as Grantor's irrevocable
attorney-in-fact for the purpose of executing any documents necessary to
perfect or to continue the security interest granted in this Agreement.
Lender may at any time, and without further authorization from Grantor,
file a carbon, photographic or other reproduction of any financing
statement or of this Agreement for use as a financing statement. Grantor
will reimburse Lender for all expenses for the perfection and the
continuation of the perfection of Lender's security interest in the
Collateral.
SEVERABILITY. If a court of competent jurisdiction finds any provision of
this Agreement to be illegal, invalid, or unenforceable as to any person
or circumstance, that finding shall not make the offending provision
illegal, invalid, or unenforceable as to any other person or circumstance.
If feasible, the offending provision shall be considered modified so that
it becomes legal, valid and enforceable. If the offending provision cannot
be so modified, it shall be considered deleted from this Agreement. Unless
otherwise required by law, the illegality, invalidity, or unenforceability
of any provision of this Agreement shall not affect the legality, validity
or enforceability of any other provision of this Agreement.
SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this
Agreement on transfer of Grantor's interest, this Agreement shall be
binding upon and inure to the benefit of the parties' their successors and
assigns. If ownership of the Collateral becomes vested in a person other
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than Grantor, Lender, without notice to Grantor, may deal with Grantor's
successors with reference to this Agreement and the Indebtedness by way of
forbearance or extension without releasing Grantor from the obligations of
this Agreement or liability under the Indebtedness.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations,
warranties, and agreements made by Grantor in this Agreement shall survive
the execution and delivery of this Agreement, shall be continuing in
nature, and shall remain in full force and effect until such time as
Borrower's Indebtedness shall be paid in full.
TIME IS OF THE ESSENCE. Time Is of the essence in the performance of this
Agreement.
WAIVE JURY. All parties to this Agreement hereby waive the right to any
jury trial in any action, proceeding, or counterclaim brought by any party
against any other party.
DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Agreement. Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America. Words and terms used in the singular shall include
the plural, and the plural shall include the singular, as the context may
require. Words and terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code:
ACCOUNT. The word "Account" means a trade account, account receivable, other
receivable, or other right to payment for goods sold or services rendered owing
to Grantor (or to a third party grantor acceptable to Lender).
AGREEMENT. The word "Agreement" means this Commercial Security Agreement, as
this Commercial Security Agreement may be amended or modified from time to time,
together with all exhibits and schedules attached to this Commercial Security
Agreement from time to time.
BORROWER. The word "Borrower" means Avid sportswear and Golf Corp., and all
other persons and entities signing the Note in whatever capacity.
COLLATERAL. The word "Collateral" means all of Grantor's right, title and
interest in and to all the Collateral as described in the Collateral Description
section of this Agreement.
DEFAULT. The word "Default" means the Default set forth in this Agreement in the
section titled "Default".
ENVIRONMENTAL LAWS. The words "Environmental Laws". mean any and all state,
federal and local statutes, regulations and ordinances relating to the
protection of human health or the environment, including without limitation the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments
and Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARAN), the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other
applicable state or federal laws, rules, or regulations adopted pursuant
thereto.
EVENT OF DEFAULT. The words "Event of Default" mean any of the Events of Default
set forth in this Agreement in the Default section of this Agreement.
GRANTOR. The word "Grantor" means Avid Sportswear and Golf Corp.; and Avid
Sportswear, Inc.
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GUARANTOR. The word "Guarantor" means any guarantor, surety, or accommodation
party of any or all of the Indebtedness.
HAZARDOUS SUBSTANCES. The words "Hazardous Substances". mean materials that,
because of their quantity, concentration or physical, chemical or infectious
characteristics, may cause or pose a present or potential hazard to human health
or the environment when improperly used, treated, stored, disposed of,
generated, manufactured, transposed or otherwise handled. The words "Hazardous
Substances". are used in their very broadest sense and include without
limitation any and all hazardous or toxic substances, materials or waste as
defined by or listed under the Environmental Laws. The term "Hazardous
Substances" also includes, without limitation, petroleum and petroleum
by-products or any fraction thereof and asbestos.
INDEBTEDNESS. The word "Indebtedness" means the indebtedness evidenced by the
Note or Related Documents, including all principal and interest together with
all other indebtedness and costs and expenses for which Borrower is responsible
under this Agreement or under any of the Related Documents. In addition, and
without limitation, the term "Indebtedness" includes all amounts Identified in
the Documents.
LENDER. The word "Lender" means First State Bank, its successors and assigns.
NOTE. The word "Note". means the Note executed by Borrower in the principal
amount of $1,000,000.00 dated November 17, 1999, together with all renewals of,
extensions of, modifications of, refinancings of, consolidations of, and
substitutions for the note or credit agreement.
RELATED DOCUMENTS. The words "Related Documents" mean all promissory notes,
credit agreements, loan agreements, environmental agreements, guaranties,
security agreements, mortgages, deeds of trust, security deeds, collateral
mortgages, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.
BORROWER AND GRANTOR HAVE READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS
COMMERCIAL SECURITY AGREEMENT AND AGREE TO ITS TERMS. THIS AGREEMENT IS DATED
NOVEMBER 17, 1999. THIS AGREEMENT IS GIVEN UNDER SEAL AND IT IS INTENDED THAT
THIS AGREEMENT IS AND SHALL CONSTITUTE AND HAVE THE EFFECT OF A SEALED
INSTRUMENT ACCORDING TO LAW.
13
<PAGE>
GRANTOR:
AVID SPORTSWEAR AND GOLF CORP.
BY: (SEAL)
--------------------------------------------------------
Earl T. Ingarfield, President of Avid Sportswear and
Golf Corp.
AVID SPORTSWEAR, INC.
BY: (SEAL)
--------------------------------------------------------
Earl T. Ingarfield, Vice President of Avid Sportswear
Inc.
BORROWER:
AVID SPORTSWEAR AND GOLF CORP.
BY: (SEAL)
--------------------------------------------------------
Earl T. Ingarfield, President of Avid Sportswear and
Golf Corp.
EXHIBIT 10.09
PROMISSORY NOTE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No. Call Collateral Account Officer Initials
$1,000,000.00 11-17-1999 11-17-2000 4000013363 4000013300 PAT
- -----------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
Any item above containing "***" has been omitted due to text length limitations.
- -----------------------------------------------------------------------------------------------
</TABLE>
Borrower: Avid Sportswear and Golf Corp. Lender: First State Bank
22 South Links Avenue, Suite 204 22 South Links Avenue
Sarasota, Florida 34236 Sarasota, Florida 34236
(941)-929-9000
================================================================================
<TABLE>
<CAPTION>
<S> <C> <C>
Principal Amount: $1,000,000.00 Initial Rate: 9.250% Date of Note: November 17, 1999
</TABLE>
PROMISE TO PAY. Avid Sportswear and Golf Corp. ("Borrower") promises to pay to
First State Bank ("Lender"), or order, in lawful money of the United States of
America, the principal amount of One Million & 00/100 Dollars ($1,000,000.00) or
so much as may be outstanding, together with Interest on the unpaid outstanding
principal balance of each advance. Interest shall be calculated from the date of
each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan in accordance with the following payment
schedule:
First State Bank reserves the right to review loan in 90 days from date of
Promissory Note. Lender may, at its discretion, call entire note due and
payable at that time. It no demand Is made, loan will be reviewed and/or
due on 11-17-2000.
Unless otherwise agreed or required by applicable law, payments will be applied
first to any unpaid collection costs and any late charges, then to any unpaid
interest, and any remaining amount to principal. The annual interest rate for
this Note is computed on a 365/360 basis; that is, by applying the ratio of the
annual interest rate over a year of 360 days, multiplied by the outstanding
principal balance, multiplied by the actual number of days the principal balance
Is outstanding. Borrower will pay Lender at Lender's address shown above or at
such other place as Lender may designate in writing.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an independent index which is the base rate on
corporate loans posted by at least 75% of the nation's 30 largest banks, as
published in the Wall Street Journal (the "Index"). The Index is not necessarily
the lowest rate charged by Lender on its loans. If the Index becomes unavailable
during the term of this loan, Lender may designate a substitute index after
notice to Borrower. Lender will tell Borrower the current Index rate upon
Borrower's request. The interest rate change will not occur more often than each
daily. Borrower understands that Lender may make loans based on other rates as
well. THE INDEX CURRENTLY IS 8.250% PER ANNUM. THE INTEREST RATE TO BE APPLIED
TO THE UNPAID PRINCIPAL BALANCE OF THIS NOTE WILL BE AT A RATE OF 1.000
PERCENTAGE POINT OVER THE INDEX, RESULTING IN AN INITIAL RATE OF 9.250% PER
<PAGE>
ANNUM. NOTICE: Under no circumstances will the effective rate of interest on
this Note be more than the maximum rate allowed by applicable law.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges
are earned fully as of the date of the loan and will not be subject to refund
upon early payment (whether voluntary or as a result of default), except as
otherwise required by law. Except for the foregoing, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments of accrued unpaid interest.
Rather, early payments will reduce the principal balance due. Borrower agrees
not to send Lender payments marked Paid in full," "without recourse," or similar
language. If Borrower sends such a payment, Lender may accept it without losing
any of Lender's rights under this Note, and Borrower will remain obligated to
pay any further amount owed to Lender. All written communications concerning
disputed amounts, including any check or other payment instrument that indicates
that the payment constitutes "payment in full" of the amount owed or that is
tendered with other conditions or limitations or as full satisfaction of a
disputed amount must be mailed or delivered to: First State Bank, 22 South Links
Avenue, Sarasota, FL 34236.
LATE CHARGE. If a payment is 10 days or more late Borrower will be charged
5.000% of the unpaid portion of the regularly scheduled payment or $5.00,
whichever is greater.
INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final
maturity, Lender, at its option, may, if permitted under applicable law,
increase the variable interest rate on this Note to 18.000% per annum, if and to
the extent that the increase does not cause the interest rate to exceed the
maximum rate permitted by applicable law.
DEFAULT. Each of the following shall constitute an event of default ("Event of
Default") under this Note:
PAYMENT DEFAULT. Borrower fails to make any payment when due under this
Note.
OTHER DEFAULTS. Borrower fails to comply with or to perform any other
term, obligation, covenant or condition contained in this Note or in any
of the related documents or to comply with or to perform any term,
obligation, covenant or condition contained in any other agreement between
Lender and Borrower.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf under this Note or
the related documents is false or misleading in any material respect,
either now or at the time made or furnished or becomes false or misleading
at any time thereafter.
INSOLVENCY. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a receiver
for any part of Borrower's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Borrower.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower or by any
governmental agency against any collateral securing the loan. This
2
<PAGE>
includes a garnishment of any of Borrower's accounts, including deposit
accounts, with Lender. However, this Event of Default shall not apply if
there is a good faith dispute by Borrower as to the validity or
reasonableness of the claim which is the basis of the creditor or
forfeiture proceeding and if Borrower gives Lender written notice of the
creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount
determined by Lender, in its sole discretion, as being an adequate reserve
or bond for the dispute.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to any Guarantor of any of the indebtedness or any Guarantor dies
or becomes incompetent, or revokes or disputes the validity of, or
liability under, any guaranty of the indebtedness. In the event of a
death, Lender, at its option, may, but shall not be required to, permit
the Guarantor's estate to assume unconditionally the obligations arising
under the guaranty in a manner satisfactory to Lender, and, in doing so,
cure any Event of Default.
CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent (25%)
or more of the common stock of Borrower.
ADVERSE CHANGE. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of
this Note is impaired.
INSECURITY. Lender in good faith believes itself insecure.
CURE PROVISIONS. If any default, other than a default in payment, is
curable and if Borrower has not been given a notice of a breach of the
same provision of this Note within the preceding twelve (12) months, it
may be cured (and no event of default will have occurred) if Borrower,
after receiving written notice from Lender demanding cure of such default:
(1) cures the default within ten (10) days; or (2) if the cure requires
more than ten (10) days, immediately initiates steps which Lender deems in
Lender's sole discretion to be sufficient to cure the default and
thereafter continues and completes all reasonable and necessary steps
sufficient to produce compliance as soon as reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, and then
Borrower will pay that amount.
ATTORNEYS' FEES; EXPENSES. Lender may hire or pay someone else to help collect
the loan if Borrower does not pay. Borrower also will pay Lender the amount of
these costs and expenses, which includes, subject to any limits under applicable
law, Lender's reasonable attorneys' fees and Lender's legal expenses whether or
not there is a lawsuit, including reasonable attorneys' fees and legal expenses
for bankruptcy proceedings (including efforts to modify or vacate any automatic
stay or injunction), and appeals. If not prohibited by applicable law, Borrower
also will pay any court costs, in addition to all other sums provided by law.
JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any
action, proceeding, or counterclaim brought by either Lender or Borrower against
the other.
GOVERNING LAW. This Note will be governed by, construed and enforced in
accordance with federal law and the laws of the State of Florida. This Note has
been accepted by Lender in the State of Florida.
CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender's request to
submit to the jurisdiction of the courts of Sarasota County, State of Florida.
3
<PAGE>
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $30.00 if Borrower
makes a payment on Borrower's loan and the check.
RIGHT OF SETOFF. Borrower grants to Lender a contractual security interest in
all Borrower's accounts with Lender (whether checking, savings, or some other
account). This includes all accounts Borrower holds jointly with someone else
and all accounts Borrower may open in the future. However, this does not include
any IRA or Keogh accounts, or any trust accounts for which the grant of a
security interest would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts, and, at Lender's option, to
administratively freeze all such accounts to allow Lender to protect Lender's
charge and setoff rights provided in this paragraph.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note may be requested orally by Borrower or as provided in this paragraph.
All oral requests shall be confirmed in writing on the day of the request. All
communications, instructions, or directions by telephone or otherwise to Lender
are to be directed to Lender's office shown above. The following person
currently is authorized to request advances and authorize payments under the
line of credit until Lender receives from Borrower, at Lender's address shown
above, written notice of revocation of his or her authority: EARL T. INGARFIELD,
PRESIDENT OF AVID SPORTSWEAR AND GOLF CORP. Borrower agrees to be liable for all
sums either: (A) advanced in accordance with the instructions of an authorized
person or (B) credited to any of Borrower's accounts with Lender. The unpaid
principal balance owing on this Note at any time may be evidenced by
endorsements on this Note or by Lender's internal records, including daily
computer print-outs. Lender will have no obligation to advance funds under this
Note if: (A) Borrower or any guarantor is in default under the terms of this
Note or any agreement that Borrower or any guarantor has with Lender, including
any agreement made in connection with the signing of this Note; (B) Borrower or
any guarantor ceases doing business or is insolvent; (C) any guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such guarantor's
guarantee of this Note or any other loan with Lender; (D) Borrower has applied
funds provided pursuant to this Note for purposes other than those authorized by
Lender; or (E) LENDER IN GOOD FAITH BELIEVES ITSELF INSECURE.
GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will
not affect the rest of the Note. Borrower does not agree or intend to pay, and
Lender does not agree or intend to contract for, charge, collect, take, reserve
or receive (collectively referred to herein as "charge or collect"), any amount
in the nature of interest or in the nature of a fee for this loan, which would
in any way or event (including demand, prepayment, or acceleration) cause Lender
to charge or collect more for this loan than the maximum Lender would be
permitted to charge or collect by federal law or the law of the State of Florida
(as applicable). Any such excess interest or unauthorized fee shall, instead of
anything stated to the contrary, be applied first to reduce the principal
balance of this loan, and when the principal has been paid in full, be refunded
to Borrower. Lender may delay or forgo enforcing any of its rights or remedies
under this Note without losing them. Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, and notice of dishonor. Upon any change in the
terms of this Note, and unless otherwise expressly stated in writing, no party
who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan or release
any party or guarantor or collateral; or impair, fail to realize upon or perfect
Lender's security interest in the collateral; and take any other action deemed
necessary by Lender without the consent of or notice to anyone. All such parties
also agree that Lender may modify this loan without the consent of or notice to
anyone other than the party with whom the modification is made.
The obligations under this Note are joint and several.
4
<PAGE>
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE.
BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.
THIS NOTE IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS NOTE IS AND SHALL
CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW.
BORROWER:
AVID SPORTSWEAR AND GOLF CORP.
By: /s/ EARL T. INGARFIELD (Seal)
---------------------------------------------------------------
Earl T. Ingarfield, President of Avid Sportswear and Golf Corp.
ATTEST:
/s/ JERRY L. BUSIERE (Corporate Seal)
- ----------------------------------------------------------------
Secretary or Assistant Secretary
5
EXHIBIT 10.10
BUSINESS LOAN AGREEMENT
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LOAN
PRINCIPAL DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
$1,000,000.00 11-17-199 11-17-2000 4000013363 400001330 PAT
References in shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
</TABLE>
Borrower: Avid Sportswear and Golf Corp. Lender: First State Bank
22 South Links Avenue 22 South Links Avenue
Suite 204 Sarasota, FL 34236
Sarasota, FL 34236
THIS BUSINESS LOAN AGREEMENT dated November 17, 1999, is made and executed
between AVID SPORTSWEAR AND GOLF CORP. ("Borrower") and FIRST STATE BANK
("Lender") on the following terms and conditions. Borrower has received prior
commercial loans from Lender or has applied to Lender for a commercial loan or
loans or other financial accommodations, including those which may be described
on any exhibit or schedule attached to this Agreement ("Loan"). Borrower
understands and agrees that: (A) in granting, renewing, or extending any Loan,
Lender is relying upon Borrower's representations, warranties, and agreements as
set forth in this Agreement, and (B) all such Loans shall be and remain subject
to the terms and conditions of this Agreement.
TERM. This Agreement shall be effective as of November 17, 1999, and shall
continue in full force and effect until such time as all of Borrower's Loans in
favor of Lender have been paid in full, in principal, interest, costs, expenses,
attorneys' fees, and other fees and charges, or until November 17, 2000. The
following person currently is authorized to request advances and authorize
payments under the line of credit until Lender receives from Borrower, at
Lender's address shown above, written notice of revocation of his or her
authority: EARL T. INGARFIELD, PRESIDENT OF AVID SPORTSWEAR AND GOLF CORP.
COLLATERAL RECORDS. Borrower does now, and at all times hereafter shall,
keep correct and accurate records of the Collateral, all of which records
shall be available to Lender or Lender's representative upon demand for
inspection and copying at any reasonable time. The above is an accurate
and complete list of all locations at which Borrower keeps or maintains
business records concerning Borrower's collateral.
COLLATERAL SCHEDULES. Concurrently with the execution and delivery of this
Agreement, Borrower shall execute and deliver to Lender schedules in form
and substance satisfactory to the Lender. Thereafter supplemental
schedules shall be delivered according to the following schedule:
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Advance and each subsequent Advance under this Agreement shall be subject to the
<PAGE>
fulfillment to Lender's satisfaction of all of the conditions set forth in this
Agreement and in the Related Documents.
LOAN DOCUMENTS. Borrower shall provide to Lender the following documents
for the Loan: (1) the Note; (2) Security Agreements granting to Lender
security interests in the Collateral; (3) financing statements perfecting
Lender's Security Interests; (4) evidence of insurance as required below;
(5) guaranties; (6) together with all such Related Documents as Lender may
require for the Loan; all in form and substance satisfactory to Lender and
Lender's counsel.
BORROWER'S AUTHORIZATION. Borrower shall have provided in form and
substance satisfactory to Lender properly certified resolutions, duly
authorizing the execution and delivery of this Agreement, the Note and the
Related Documents. In addition, Borrower shall have provided such other
resolutions, authorizations, documents and instruments as Lender or its
counsel, may require.
PAYMENT OF FEES AND EXPENSES. Borrower shall have paid to Lender all fees,
charges, and other expenses which are then due and payable as specified in
this Agreement or any Related Document.
REPRESENTATIONS AND WARRANTIES. The representations and warranties set
forth in this Agreement, in the Related Documents, and in any document or
certificate delivered to Lender under this Agreement are true and correct.
NO EVENT OF DEFAULT. There shall not exist at the time of any Advance a
condition which would constitute an Event of Default under this Agreement
or under any Related Document.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
ORGANIZATION. Borrower is a corporation for profit which is, and at all
times shall be, duly organized, validly existing, and in good standing
under and by virtue of the laws of the State of Nevada. Borrower is duly
authorized to transact business in the State of Florida and all other
states in which Borrower is doing business, having obtained all necessary
filings, governmental licenses and approvals for each state in which
Borrower is doing business. Specifically, Borrower is, and at all times
shall be, duly qualified as a foreign corporation in all states in which
the failure to so qualify would have a material adverse effect on its
business or financial condition. Borrower has the full power and authority
to own its properties and to transact the business in which it is
presently engaged or presently proposes to engage. Borrower maintains an
office at 22 South Links Avenue, Suite 204, Sarasota, FL 34236. Unless
Borrower has designated otherwise in writing, the principal office is the
office at which Borrower keeps its books and records including its records
concerning the Collateral. Borrower will notify Lender of any change in
2
<PAGE>
the location of Borrower's principal office. Borrower shall do ail things
necessary to preserve and to keep in full force and effect its existence,
rights and privileges, and shall comply with all regulations, rules,
ordinances, statutes, orders and decrees of any governmental or
quasi-governmental authority or court applicable to Borrower and
Borrower's business activities.
ASSUMED BUSINESS NAMES. Borrower has filed or recorded all documents or
filings required by law relating to all assumed business names used by
Borrower. Excluding the name of Borrower, the following is a complete list
of all assumed business names under which Borrower does business: NONE.
AUTHORIZATION. Borrower's execution, delivery, and performance of this
Agreement and all the Related Documents have been duly authorized by all
necessary action by Borrower and do not conflict with, result in a
violation of, or constitute a default under (1) any provision of
Borrower's articles of incorporation or organization, or bylaws, or any
agreement or other instrument binding upon Borrower or (2) any law,
governmental regulation, court decree, or order applicable to Borrower or
to Borrower's properties.
FINANCIAL INFORMATION. Each of Borrower's financial statements supplied to
Lender truly and completely disclosed Borrower's financial condition as of
the date of the statement, and there has been no material adverse change
in Borrower's financial condition subsequent to the date of the most
recent financial statement supplied to Lender. Borrower has no material
contingent obligations except as disclosed in such financial statements
LEGAL EFFECT. This Agreement constitutes, and any instrument or agreement
Borrower is required to give under this Agreement when delivered will
constitute, legal, valid, and binding obligations of Borrower enforceable
against Borrower in accordance with their respective terms.
HAZARDOUS SUBSTANCES. Except as disclosed to and acknowledged by Lender in
writing, Borrower represents and warrants that: (1) During the period of
Borrower's ownership of Borrower's Collateral, there has been no use,
generation, manufacture, storage, treatment, disposal, release or
threatened release of any Hazardous Substance by any person on, under,
about or from any of the Collateral. (2) Borrower has no knowledge of, or
reason to believe that there has been (a) any breach or violation of any
Environmental Laws; (b) any use, generation, manufacture, storage,
treatment, disposal, release or threatened release of any Hazardous
Substance on, under, about or from the Collateral by any prior owners or
occupants of any of the Collateral; or (c) any actual or threatened
litigation or claims of any kind by any person relating to such maters.
(3) Neither Borrower nor any tenant, contractor, agent or other authorized
user of any of the Collateral shall use, generate, manufacture, store,
treat, dispose of or release any Hazardous Substance on, under, about or
from any of the Collateral; and any such activity shall be conducted in
compliance with all applicable federal, state, and local laws,
regulations, and ordinances, including without limitation all
Environmental Laws. Borrower authorizes Lender and its agents to enter
upon the Collateral to make such inspections and tests as Lender may deem
3
<PAGE>
appropriate to determine compliance of the Collateral with this section of
the Agreement. Any inspections or tests made by Lender shall be at
Borrower's expense and for Lender's purposes only and shall not be
construed to create any responsibility or liability on the part of Lender
to Borrower or to any other person. The representations and warranties
contained herein are based on Borrower's due diligence in investigating
the Collateral for hazardous waste and hazardous substances. Borrower
hereby (1) releases and waives any future claims against Lender for
indemnity or contribution in the event Borrower becomes liable for cleanup
or other costs under any such laws, and (2) agrees to indemnify and hold
harmless Lender against any and all claims, losses, liabilities, damages,
penalties, and expenses which Lender may directly or indirectly sustain or
suffer resulting from a breach of this section of the Agreement or as a
consequence of any use, generation, manufacture, storage, disposal,
release or threatened release of a hazardous waste or substance on the
properties. The provisions of this section of the Agreement, including the
obligation to indemnify, shall survive the payment of the Indebtedness and
the termination, expiration or satisfaction of this Agreement and shall
not be affected by Lender's acquisition of any interest in any of the
Collateral, whether by foreclosure or otherwise.
LITIGATION AND CLAIMS. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against
Borrower is pending or threatened, and no other event has occurred which
may materially adversely affect Borrower's financial condition or
properties, other than litigation, claims, or other events, if any, that
have been disclosed to and acknowledged by Lender in writing.
TAXES. To the best of Borrower's knowledge, all of Borrower's tax returns
and reports that are or were required to be filed, have been filed, and
all taxes, assessments and other governmental charges have been paid in
full, except those presently being or to be contested by Borrower in good
faith in the ordinary course of business and for which adequate reserves
have been provided.
INFORMATION. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of Borrower to Lender will
be, true and accurate in every material respect on the date as of which
such information is dated or certified; and none of such information is or
will be incomplete by omitting to state any material fact necessary to
make such information not misleading.
LIEN PRIORITY. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or
permitted the filing or attachment of any Security Interests on or
affecting any of the Collateral directly or indirectly securing repayment
of Borrower's Loan and Note, that would be prior or that may in any way be
superior to Lender's Security Interests and rights in and to such
Collateral.
BINDING EFFECT. This Agreement, the Note, all Security Agreements (if
any), and all Related Documents are binding upon the signers thereof, as
4
<PAGE>
well as upon their successors, representatives and assigns, and are
legally enforceable in accordance with their respective terms.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, so long
as this Agreement remains in effect, Borrower will:
NOTICES OF CLAIMS AND LITIGATION. Promptly inform Lender in writing of (1)
all material adverse changes in Borrower's financial condition, and (2)
all existing and all threatened litigation, claims, investigations,
administrative proceedings or similar actions affecting Borrower or any
Guarantor which could materially affect the financial condition of
Borrower or the financial condition of any Guarantor.
FINANCIAL RECORDS. Maintain its books and records in accordance with GAAP,
applied on a consistent basis, and permit Lender to examine and audit
Borrower's books and records at all reasonable times.
FINANCIAL STATEMENTS. Furnish Lender with the following:
(1) ANNUAL STATEMENTS. As soon as available, but in no event later
than ninety (90) days after the end of each fiscal year, Borrower's
balance sheet and income statement for the year ended, reviewed by a
certified public accountant satisfactory to Lender.
(2) TAX RETURNS. As soon as available, but in no event later than
ninety (90) days after the applicable filing date for the tax
reporting period ended, Federal and other governmental tax returns,
prepared by Borrower.
All financial reports required to be provided under this Agreement shall
be prepared in accordance with GAAP, applied on a consistent basis, and
certified by Borrower as being true and correct.
ADDITIONAL INFORMATION. Furnish such additional information and
statements, as Lender may request from time to time.
INSURANCE. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect to
Borrower's properties and operations, in form, amounts, coverages and with
insurance companies acceptable to Lender. Borrower, upon request of
Lender, will deliver to Lender from time to time the policies or
certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled or diminished without at
least thirty (30) days prior written notice to Lender. Each insurance
policy also shall include an endorsement providing that coverage in favor
of Lender will not be impaired in any way by any act, omission or default
of Borrower or any other person. In connection with all policies covering
assets in which Lender holds or is offered a security interest for the
Loans, Borrower will provide Lender with such lender's loss payable or
other endorsements as Lender may require.
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INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports on
each existing insurance policy showing such information as Lender may
reasonably request, including without limitation the following: (1) the
name of the insurer; (2) the risks insured; (3) the amount of the policy;
(4) the properties insured; (5) the then current property values on the
basis of which insurance has been obtained, and the manner of determining
those values; and (6) the expiration date of the policy. In addition, upon
request of Lender (however not more often than annually), Borrower will
have an independent appraiser satisfactory to Lender determine, as
applicable, the actual cash value or replacement cost of any Collateral.
The cost of such appraisal shall be paid by Borrower.
OTHER AGREEMENTS. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any
other party and notify Lender immediately in writing of any default in
connection with any other such agreements.
LOAN PROCEEDS. Use all Loan proceeds solely for the following specific
purposes: AVID SPORTSWEAR AND GOLF CORPORATION AUTHORIZES FIRST STATE BANK
TO WIRE DIRECTLY TO LEVI STRAUSS AND COMPANY AND PAY ALL OUT OF POCKET
EXPENSES.
TAXES, CHARGES AND LIENS. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all
assessments, taxes, governmental charges, levies and liens, of every kind
and nature, imposed upon Borrower or its properties, income, or profits,
prior to the date on which penalties would attach, and all lawful claims
that, if unpaid, might become a lien or charge upon any of Borrower's
properties, income, or profits.
PERFORMANCE. Perform and comply, in a timely manner, with all terms,
conditions, and provisions set forth in this Agreement, in the Related
Documents, and in all other instruments and agreements between Borrower
and Lender. Borrower shall notify Lender immediately in writing of any
default in connection with any agreement.
OPERATIONS. Maintain executive and management personnel with substantially
the same qualifications and experience as the present executive and
management personnel; provide written notice to Lender of any change in
executive and management personnel; conduct its business affairs in a
reasonable and prudent manner.
COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Comply with all laws,
ordinances, and regulations, now or hereafter in effect, of all
governmental authorities applicable to the conduct of Borrower's
properties, businesses and operations, and to the use or occupancy of the
Collateral, including without limitation, the Americans With Disabilities
Act. Borrower may contest in good faith any such law, ordinance, or
regulation and withhold compliance during any proceeding, including
appropriate appeals, so long as Borrower has notified Lender in writing
prior to doing so and so long as, in Lender's sole opinion, Lender's
interests in the Collateral are not jeopardized. Lender may require
Borrower to post adequate security or a surety bond, reasonably
satisfactory to Lender, to protect Lender's interest.
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INSPECTION. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books, accounts, and records
and to make copies and memoranda of Borrower's books, accounts, and
records. If Borrower now or at any time hereafter maintains any records
(including without limitation computer generated records and computer
software programs for the generation of such records) in the possession of
a third party, Borrower, upon request of Lender, shall notify such party
to permit Lender free access to such records at all reasonable times and
to provide Lender with copies of any records it may request, all at
Borrower's expense
COMPLIANCE CERTIFICATES. Unless waived in writing by Lender, provide
Lender at least annually and at the time of each disbursement of Loan
proceeds, with a certificate executed by Borrower's chief financial
officer, or other officer or person acceptable to Lender, certifying that
the representations and warranties set forth in this Agreement are true
and correct as of the date of the certificate and further certifying that,
as of the date of the certificate, no Event of Default exists under this
Agreement.
ENVIRONMENTAL COMPLIANCE AND REPORTS. Borrower shall comply in all
respects with any and all Environmental Laws; not cause or permit to
exist, as a result of an intentional or unintentional action or omission
on Borrower's part or on the part of any third party, on property owned
and/or occupied by Borrower, any environmental activity where damage may
result to the environment, unless such environmental activity is pursuant
to and in compliance with the conditions of a permit issued by the
appropriate federal, state or local governmental authorities; shall
furnish to Borrower promptly and in any event within thirty (30) days
after receipt thereof a copy of any notice, summons, lien, citation,
directive, letter or other communication from any governmental agency or
instrumentality concerning any intentional or unintentional action or
omission on Borrower's part in connection with any environmental activity
whether or not there is damage to the environment and/or other natural
resources.
ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, assignments,
financing statements, instruments, documents and other agreements as
Lender or its attorneys may reasonably request to evidence and secure the
Loans and to perfect all Security Interests.
RECOVERY OF ADDITIONAL COSTS. If the imposition of or any change in any law,
rule, regulation or guideline, or the interpretation or application of any
thereof by any court or administrative or governmental authority (including any
request or policy not having the force of law) shall impose, modify or make
applicable any taxes (except federal, state or local income or franchise taxes
imposed on Lender), reserve requirements, capital adequacy requirements or other
obligations which would (A) increase the cost to Lender for extending or
maintaining the credit facilities to which this Agreement relates, (B) reduce
the amounts payable to Lender under this Agreement or the Related Documents, or
(C) reduce the rate of return on Lender's capital as a consequence of Lender's
obligations with respect to the credit facilities to which this Agreement
relates, then Borrower agrees to pay Lender such additional amounts as will
compensate Lender therefor, within five (5) days after Lender's written demand
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for such payment, which demand shall be accompanied by an explanation of such
imposition or charge and a calculation in reasonable detail of the additional
amounts payable by Borrower, which explanation and calculations shall be
conclusive in the absence of manifest error.
LENDER'S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lender's interest in the Collateral or if Borrower fails to
comply with any provision of this Agreement or any Related Documents, including
but not limited to Borrower's failure to discharge or pay when due any amounts
Borrower is required to discharge or pay under this Agreement or any Related
Documents, Lender on Borrower's behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on any Collateral and paying all
costs for insuring, maintaining and preserving any Collateral All such
expenditures incurred or paid by Lender for such purposes will then bear
interest at the rate charged under the Note from the date incurred or paid by
Lender to the date of repayment by Borrower. All such expenses will become a
part of the Indebtedness and, at Lender's option, will (A) be payable on demand;
(B) be added to the balance of the Note and be apportioned among and be payable
with any installment payments to become due during either (1) the term of any
applicable insurance policy; or (2) the remaining term of the Note; or (C) be
treated as a balloon payment which will be due and payable at the Note's
maturity. Any Collateral also will secure payment of these amounts. Such right
shall be in addition to all other rights and remedies to which Lender may be
entitled upon Default.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
INDEBTEDNESS AND LIENS. (1) Except for trade debt incurred in the normal
course of business and indebtedness to Lender contemplated by this
Agreement, create, incur or assume indebtedness for borrowed money,
including capital leases, (2) sell, transfer, mortgage, assign, pledge,
lease, grant a security interest in, or encumber any of Borrower's assets
(except as allowed as Permitted Liens), or (3) sell with recourse any of
Borrower's accounts, except to Lender.
TRANSFER AND LIENS. Fail to continue to own all of Borrower's assets,
except for routine transfers, use or depletion in the ordinary course of
Borrower's business. Borrower agrees not to create or grant to any person,
except Lender, any lien, security interest, encumbrance, cloud on title,
mortgage, pledge or similar interest in any of Borrower's property, even
in the ordinary course of Borrower's business. Borrower agrees not to
sell, convey, grant, lease, give, contribute, assign, or otherwise
transfer any of Borrower's assets, except for sales of inventory or leases
of goods in the ordinary course of Borrower's business.
CONTINUITY OF OPERATIONS. (1) Engage in any business activities
substantially different than those in which Borrower is presently engaged,
(2) cease operations, liquidate, merge, transfer, acquire or consolidate
with any other entity, change its name, dissolve or transfer or sell
Collateral out of the ordinary course of business, or (3) pay any
dividends on Borrower's stock (other than dividends payable in its stock),
provided, however that notwithstanding the foregoing, but only so long as
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no Event of Default has occurred and is continuing or would result from
the payment of dividends, if Borrower is a "Subchapter S Corporation" (as
defined in the Internal Revenue Code of 1986, as amended), Borrower may
pay cash dividends on its stock to its shareholders from time to time in
amounts necessary to enable the shareholders to pay income taxes and make
estimated income tax payments to satisfy their liabilities under federal
and state law which arise solely from their status as Shareholders of a
Subchapter S Corporation because of their ownership of shares of
Borrower's stock, or purchase or retire any of Borrower's outstanding
shares or alter or amend Borrower's capital structure.
LOANS, ACQUISITIONS AND GUARANTIES. (1 ) Loan, invest in or advance money
or assets, (2) purchase, create or acquire any interest in any other
enterprise or entity, or (3) incur any obligation as surety or guarantor
other than in the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan
to Borrower, whether under this Agreement or under any other agreement,
Lender shall have no obligation to make Loan Advances or to disburse Loan
proceeds if: (1) Borrower or any Guarantor is in default under the terms
of this Agreement or any of the Related Documents or any other agreement
that Borrower or any Guarantor has with Lender; (2) Borrower or any
Guarantor dies, becomes incompetent or becomes insolvent, files a petition
in bankruptcy or similar proceedings, or is adjudged a bankrupt; (3) there
occurs a material adverse change in Borrower's financial condition, in the
financial condition of any Guarantor, or in the value of any Collateral
securing any Loan; or (4) any Guarantor seeks, claims or otherwise
attempts to lima, modify or revoke such Guarantor's guaranty of the Loan
or any other loan with Lender; or (5) Lender in good faith deems itself
insecure, even though no Event of Default shall have occurred.
RIGHT OF SETOFF. Borrower grants to Lender a contractual security interest in
all Borrower's accounts with Lender (whether checking, savings, or some other
account). This includes all accounts Borrower holds jointly with someone else
and all accounts Borrower may open in the future. However, this does not include
any IRA or Keogh accounts, or any trust accounts for which the grant of a
security interest would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts, and, at Lender's option, to
administratively freeze all such accounts to allow Lender to protect Lender's
charge and setoff rights provided in this paragraph.
DEFAULT. Each of the following shall constitute an Event of Default under this
Agreement:
PAYMENT DEFAULT. Borrower fails to make any payment when due under the
Loan.
OTHER DEFAULTS. Borrower fails to comply with or to perform any other
term, obligation, covenant or condition contained in this Agreement or in
any of the Related Documents or to comply with or to perform any term,
obligation, covenant or condition contained in any other agreement between
Lender and Borrower.
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FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf under this
Agreement, the Note or the Related Documents is false or misleading in any
material respect, either now or at the time made or furnished or becomes
false or misleading at any time thereafter.
INSOLVENCY. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a receiver
for any part of Borrower's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Borrower.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of any
collateral document to create a valid and perfected security interest or
lien) at any time and for any reason.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower or by any
governmental agency against any collateral securing the Loan. This
includes a garnishment of any of Borrower's accounts, including deposit
accounts, with Lender. However, this Event of Default shall not apply if
there is a good faith dispute by Borrower as to the validity or
reasonableness of the claim which is the basis of the creditor or
forfeiture proceeding and if Borrower gives Lender written notice of the
creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount
determined by Lender, in its sole discretion, as being an adequate reserve
or bond for the dispute.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or any Guarantor dies
or becomes incompetent, or revokes or disputes the validity of, or
liability under, any Guaranty of the Indebtedness . In the event of a
death, Lender, at its option, may, but shall not be required to, permit
the Guarantor's estate to assume unconditionally the obligations arising
under the guaranty in a manner satisfactory to Lender, and, in doing so,
cure any Event of Default.
CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent (25%)
or more of the common stock of Borrower.
ADVERSE CHANGE. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of
the Loan is impaired.
INSECURITY. Lender in good faith believes itself insecure.
RIGHT TO CURE. If any default, other than a default on Indebtedness, is
curable and if Borrower or Grantor, as the case may be, has not been given
a notice of a similar default within the preceding twelve (12) months, it
may be cured (and no Event of Default will have occurred) if Borrower or
Grantor, as the case may be, after receiving written notice from Lender
demanding cure of such default: (1) cure the default within ten (10) days;
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or (2) if the cure requires more than ten (10) days, immediately initiate
steps which Lender deems in Lender's sole discretion to be sufficient to
cure the default and thereafter continue and complete all reasonable and
necessary steps sufficient to produce compliance as soon as reasonably
practical.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate (including any obligation to make
further Loan Advances or disbursements), and, at Lender's option, all
Indebtedness immediately will become due and payable, all without notice of any
kind to Borrower, except that in the case of an Event of Default of the type
described in the "Involvency" subsection above, such acceleration shall be
automatic and not optional. In addition, Borrower shall have all the rights and
remedies provided in the Related Documents or available at law, in equity or
otherwise. Except as may be prohibited by applicable law, all of Lender's rights
and remedies shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude pursuit
of any other remedy, and an election to make expenditures or to take action to
perform an obligation of Borrower or of any Grantor shall not affect Lender's
right to declare a default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Agreement. No alteration of or amendment to
this Agreement shall be effective unless given in writing and signed by
the party or parties sought to be charged or bound by the alteration or
amendment.
ATTORNEYS' FEES; EXPENSES. Borrower agrees to pay upon demand all of
Lender's costs and expenses, including Lender's reasonable attorneys' fees
and Lender's legal expenses, incurred in connection with the enforcement
of this Agreement. Lender may hire or pay someone else to help enforce
this Agreement, and Borrower shall pay the costs and expenses of such
enforcement. Costs and expenses include Lender's reasonable attorneys'
fees and legal expenses whether or not there is a lawsuit, including
reasonable attorneys' fees and legal expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. Borrower
also shall pay all court costs and such additional fees as may be directed
by the court.
CAPTION HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Agreement.
CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to Lender's
sale or transfer, whether now or later, of one or more participation
interests in the Loan to one or more purchasers, whether related or
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unrelated to Lender. Lender may provide, without any limitation whatsoever
to any one or more purchasers, or potential purchasers, any information or
knowledge Lender may have about Borrower or about any other matter
relating to the Loan, and Borrower hereby waives any rights to privacy
Borrower may have with respect to such matters. Borrower additionally
waives any and all notices of sale of participation interests, as well as
all notices of any repurchase of such participation interests. Borrower
also agrees that the purchasers of any such participation interests will
be considered as the absolute owners of such interests in the Loan and
will have all the rights granted under the participation agreement or
agreements governing the sale of such participation interests. Borrower
further waives all rights of offset or counterclaim that it may have now
or later against Lender or against any purchaser of such a participation
interest and unconditionally agrees that either Lender or such purchaser
may enforce Borrower's obligation under the Loan irrespective of the
failure or insolvency of any holder of any interest in the Loan. Borrower
further agrees that the purchaser of any such participation interests may
enforce its interests irrespective of any personal claims or defenses that
Borrower may have against Lender.
GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY, CONSTRUED AND ENFORCED
IN ACCORDANCE WITH FEDERAL LAW AND THE LAWS OF THE STATE OF FLORIDA. THIS
AGREEMENT HAS BEEN ACCEPTED BY LENDER IN THE STATE OF FLORIDA.
CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender's
request to submit to the jurisdiction of the courts of Sarasota County,
State of Florida.
NO WAIVER BY LENDER. Lender shall not be deemed to have waived any rights
under this Agreement unless such waiver is given in writing and signed by
Lender. No delay or omission on the part of Lender in exercising any right
shall operate as a waiver of such right or any other right. A waiver by
Lender of a provision of this Agreement shall not prejudice or constitute
a waiver of Lender's right otherwise to demand strict compliance with that
provision or any other provision of this Agreement. No prior waiver by
Lender, nor any course of dealing between Lender and Borrower, or between
Lender and any Grantor, shall constitute a waiver of any of Lender's
rights or of any of Borrower's or any Grantor's, obligations as to any
future transactions. Whenever the consent of Lender is required under this
Agreement, the granting of such consent by Lender in any instance shall
not constitute continuing consent to subsequent instances where such
consent is required and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
NOTICES. Any notice required to be given under this Agreement shall be
given in writing, and shall be effective when actually delivered, when
actually received by telefacsimile (unless otherwise required by law),
when deposited with a nationally recognized overnight courier, or, if
mailed, when deposited in the United States mail, as first class,
certified or registered mail postage prepaid, directed to the addresses
shown near the beginning of this Agreement. Any party may change its
address for notices under this Agreement by giving written notice to the
other parties, specifying that the purpose of the notice is to change the
party's address. For notice purposes, Borrower agrees to keep Lender
informed at all times of Borrower's current address. Unless otherwise
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provided or required by law, if there is more than one Borrower, any
notice given by Lender to any Borrower is deemed to be notice given to all
Borrowers.
SEVERABILITY. If a court of competent jurisdiction finds any provision of
this Agreement to be illegal, invalid, or unenforceable as to any
circumstance, that finding shall not make the offending provision illegal,
invalid, or unenforceable as to any other circumstance. If feasible, the
offending provision shall be considered modified so that it becomes legal,
valid and enforceable. If the offending provision cannot be so modified,
it shall be considered deleted from this Agreement. Unless otherwise
required by law, the illegality, invalidity, or unenforceability of any
provision of this Agreement shall not affect the legality, validity or
enforceability of any other provision of this Agreement.
SUBSIDIARIES AND AFFILIATES OF BORROWER. To the extent the context of any
provisions of this Agreement makes it appropriate, including without
limitation any representation, warranty or covenant, the word "Borrower"
as used in this Agreement shall include all of Borrower's subsidiaries and
affiliates. Notwithstanding the foregoing however, under no circumstances
shall this Agreement be construed to require Lender to make any Loan or
other financial accommodation to any of Borrower's subsidiaries or
affiliates.
SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or on
behalf of Borrower shall bind Borrower's successors and assigns and shall
inure to the benefit of Lender, its successors and assigns. Borrower shall
not, however, have the right to assign Borrower's rights under this
Agreement or any interest therein, without the prior written consent of
Lender.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and
agrees that in extending Loan Advances, Lender is relying on all
representations, warranties, and covenants made by Borrower in this
Agreement or in any certificate or other instrument delivered by Borrower
to Lender under this Agreement or the Related Documents. Borrower further
agrees that regardless of any investigation made by Lender, all such
representations, warranties and covenants will survive the extension of
Loan Advances and delivery to Lender of the Related Documents, shall be
continuing in nature, shall be deemed made and redated by Borrower at the
time each Loan Advance is made, and shall remain in full force and effect
until such time as Borrower's Indebtedness shall be paid in full, or until
this Agreement shall be terminated in the manner provided above, whichever
is the last to occur.
TIME IS OF THE ESSENCE. Time is of the essence in the performance of this
Agreement.
WAIVE JURY. All parties to this Agreement hereby waive the right to any
jury trial in any action, proceeding, or counterclaim brought by any party
against any other party.
DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Agreement. Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America. Words and terms used in the singular shall include
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the plural, and the plural shall include the singular, as the context may
require. Words and terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. Accounting
words and terms not otherwise defined in this Agreement shall have the meanings
assigned to them in accordance with generally accepted accounting principles as
in effect on the date of this Agreement:
ADVANCE. The word "Advance" means a disbursement of Loan funds made, or to
be made, to Borrower or on Borrower's behalf on a line of credit or
multiple advance basis under the terms and conditions of this Agreement.
AGREEMENT. The word "Agreement" means this Business Loan Agreement, as
this Business Loan Agreement may be amended or modified from time to time,
together with all exhibits and schedules attached to this Business Loan
Agreement from time to time.
BORROWER. The word "Borrower" means Avid Sportswear and Golf Corp., and
all other persons and entities signing the Note in whatever capacity.
COLLATERAL. The word "Collateral" means all property and assets granted as
collateral security for a Loan, whether real or personal property, whether
granted directly or indirectly, whether granted now or in the future, and
whether granted in the form of a security interest, mortgage, collateral
mortgage, deed of trust, assignment, pledge, chattel mortgage, crop
pledge, chattel mortgage, collateral chattel mortgage, chattel trust,
factor's lien, equipment trust, conditional sale, trust receipt, lien,
charge, lien or title retention contract, lease or consignment intended as
a security device, or any other security or lien interest whatsoever,
whether created by law, contract, or otherwise.
DEFAULT. The word "Default" means the Default set forth in this Agreement
in the section titled "Default".
ENVIRONMENTAL LAWS. The words "Environmental Laws" mean any and all state,
federal and local statutes, regulations and ordinances relating to the
protection of human health or the environment, including without
limitation the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq.
("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986, Pub.
L. No. 99-499 ("SARA"), the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801, et seq. the Resource Conservation and Recovery Act,
42 U.S.C. Section 6901, et seq. or other applicable state or federal laws,
rules, or regulations adopted pursuant thereto
EVENT OF DEFAULT The words "Event of Default" mean any of the Events of
Default set forth in this Agreement in the Default section of this
Agreement.
GAAP. The word "GAAP" means generally accepted accounting principles.
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GRANTOR. The word "Grantor" means each and all of the persons or entities
granting a Security Interest in any Collateral for the Loan, including
without limitation all Borrowers granting such a Security Interest.
GUARANTOR. The word "Guarantor" means any guarantor, surety, or
accommodation party of any or all of the Loan.
GUARANTY. The word "Guaranty" means the guaranty from Guarantor to Lender,
including without limitation a guaranty of all or part of the Note.
INDEBTEDNESS. The word "Indebtedness" means the indebtedness evidenced by
the Note or Related Documents, including all principal and interest
together with all other indebtedness and costs and expenses for which
Borrower is responsible under this Agreement or under any of the Related
Documents IN ADDITION, AND WITHOUT LIMITATION, THE TERM "INDEBTEDNESS"
INCLUDES ALL AMOUNTS IDENTIFIED IN THE CROSS-COLLATERALIZATION, REVOLVING
LINE OF CREDIT AND FUTURE ADVANCES PARAGRAPHS AS CONTAINED IN ONE OR MORE
OF THE RELATED DOCUMENTS.
LENDER. The word "Lender" means First State Bank, its successors and
assigns.
LOAN. The word "Loan" means any and all loans and financial accommodations
from Lender to Borrower whether now or hereafter existing, and however
evidenced, including without limitation those loans and financial
accommodations described herein or described on any exhibit or schedule
attached to this Agreement from time to time.
NOTE. The word "Note" means the Note executed by Borrower in the principal
amount of $1,000,000 00 dated November 17, 1999, together with all
renewals of, extensions of, modifications of, refinancings of,
consolidations of, and substitutions for the note or credit agreement.
PERMITTED LIENS. The words "Permitted Liens" mean (1) liens and security
interests securing Indebtedness owed by Borrower to Lender; (2) liens for
taxes, assessments, or similar charges either not yet due or being
contested in good faith; (3) liens of materialmen, mechanics,
warehousemen, or carriers, or other like liens arising in the ordinary
course of business and securing obligations which are not yet delinquent;
(4) purchase money liens or purchase money security interests upon or in
any property acquired or held by Borrower in the ordinary course of
business to secure indebtedness outstanding on the date of this Agreement
or permitted to be incurred under the paragraph of this Agreement titled
Indebtedness and Liens.; (5) liens and security interests which, as of the
date of this Agreement, have been disclosed to and approved by the Lender
in writing; and (6) those liens and security interests which in the
aggregate constitute an immaterial and insignificant monetary amount with
respect to the net value of Borrower's assets
RELATED DOCUMENTS. The words "Related Documents. mean all promissory
notes, credit agreements, loan agreements, environmental agreements,
15
<PAGE>
guaranties, security agreements, mortgages, deeds of trust, security
deeds, collateral mortgages, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection with
the Loan.
SECURITY AGREEMENT. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract, or
otherwise, evidencing, governing, representing, or creating a Security
Interest.
SECURITY INTEREST. The words "Security Interest" mean, without limitation,
any and all types of collateral security, present and future, whether in
the form of a lien, charge, encumbrance, mortgage, deed of trust, security
deed, assignment, pledge, crop pledge, chattel mortgage, collateral
chattel mortgage, chattel trust, factor's lien, equipment trust,
conditional sale, trust receipt, lien or title retention contract, lease
or consignment intended as a security device, or any other security or
lien interest whatsoever whether created by law, contract, or otherwise.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS
DATED NOVEMBER 17, 1999 THIS AGREEMENT IS GIVEN UNDER SEAL AND IT IS INTENDED
THAT THIS AGREEMENT IS AND SHALL CONSTITUTE AND HAVE THE EFFECT OF A SEALED
INSTRUMENT ACCORDING TO LAW.
BORROWER:
AVID SPORTSWEAR AND GOLF CORP.
By: /s/[EARL T. INGARFIELD] (Seal)
------------------------------
Earl T. Ingarfield
President of Avid Sportswear
and Golf Corp.
LENDER:
FIRST STATE BANK
X /s/[Illegible]
-----------------------------
Authorized Signer
16
EXHIBIT 21.01
SUBSIDIARY OF THE COMPANY
The Company has one wholly-owned subsidiary which is:
AVID SPORTSWEAR, INC., A CALIFORNIA CORPORATION.
1
EXHIBIT 23.01
CONSENT OF INDEPENDENT AUDITORS
Board of Directors
Avid Sportswear & Golf Corp.
Sarasota, Florida
We consent to the use in this Registration Statement of Avid Sportswear & Golf
Corp. on Form 10-SB, of our reports dated April 22, 1999 and March 4, 1999 of
Avid Sportswear, Inc. & Golf Innovations Corp., respectively, for the years
ended December 31, 1998 and 1997, which are part of this Registration Statement,
and to all references to our firm included in this Registration Statement.
/s/ Jones, Jensen & Company
- ----------------------------
Jones, Jensen & Company
Salt Lake City, Utah
November 19, 1999
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 27.01
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated statement of operations of Avid
Sportswear & Golf Corp. and the notes thereto set forth in the filing. This
information is qualified in its entirety by reference to such financial
information.
</LEGEND>
<CIK> 0001100127
<NAME> AVID SPORTSWEAR & GOLF CORP.
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 9-MOS
<FISCAL-YEAR-END> DEC-30-1998 SEP-30-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-30-1998 SEP-30-1999
<CASH> 154,237 0
<SECURITIES> 0 0
<RECEIVABLES> 0 95,572
<ALLOWANCES> 0 0
<INVENTORY> 0 1,357,137
<CURRENT-ASSETS> 176,186 1,484,823
<PP&E> 2,162 979,500
<DEPRECIATION> 0 417,621
<TOTAL-ASSETS> 178,348 3,740,061
<CURRENT-LIABILITIES> 210,000 2,025,402
<BONDS> 0 0
0 0
0 0
<COMMON> 14,612 26,464
<OTHER-SE> (46,264) (1,688,195)
<TOTAL-LIABILITY-AND-EQUITY> 178,348 3,740,061
<SALES> 0 2,340,939
<TOTAL-REVENUES> 0 2,340,939
<CGS> 0 1,623,989
<TOTAL-COSTS> 0 529,677
<OTHER-EXPENSES> 187,170 2,572,968
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (187,170) (2,385,695)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 (2,385,695)
<DISCONTINUED> 0 0
<EXTRAORDINARY> (54,428) (39,870)
<CHANGES> 0 0
<NET-INCOME> (241,548) (2,425,565)
<EPS-BASIC> (0.02) (0.16)
<EPS-DILUTED> (0.02) (0.16)
</TABLE>
