SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
AVID SPORTSWEAR & GOLF CORP.
------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
--------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------
(3) Filing Party:
-------------------------------------------------------
(4) Date Filed:
---------------------------------------------------------
<PAGE>
AVID SPORTSWEAR & GOLF CORP.
22 SOUTH LINKS AVENUE, SUITE 204
SARASOTA, FLORIDA 34326
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
Avid Sportswear & Golf Corp. The special meeting will be held on Thursday,
December 28, 2000, at 9:00 a.m., local time, at the Holiday Inn, 19800 S.
Vermont Avenue, Torrance, California 90502.
Your vote is important and I urge you to vote your shares by proxy,
whether or not you plan to attend the meeting. After you read this proxy
statement, please indicate on the proxy card the manner in which you want to
have your shares voted. Then date, sign and mail the proxy card in the
postage-paid envelope that is provided. If you sign and return your proxy card
without indicating your choices, it will be understood that you wish to have
your shares voted in accordance with the recommendations of the Company's Board
of Directors.
We hope to see you at the meeting.
Sincerely,
/s/ Earl T. Ingarfield
Earl T. Ingarfield
President, Chief Executive Officer
and Chairman
December ___, 2000
<PAGE>
AVID SPORTSWEAR & GOLF CORP.
22 SOUTH LINKS AVENUE, SUITE 204
SARASOTA, FLORIDA 34326
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 28, 2000
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"SPECIAL MEETING") of Avid Sportswear & Golf Corp. (the "COMPANY") will be held
on Thursday, December 28, 2000, at 9:00 a.m., local time, at the Holiday Inn,
19800 S. Vermont Avenue, Torrance, California 90502, for the following purposes,
as more fully described in the attached Proxy Statement:
1. To approve an amendment to the Company's Articles of
Incorporation to increase the authorized common stock to 150,000,000 shares
of common stock;
2. To approve the sale of the Company's debentures pursuant to a Line of
Credit Agreement (the "LINE OF CREDIT") dated as of November 28, 2000, between
the Company and GMF Holdings, as well as the issuance of shares of the Company's
common stock pursuant to the conversion of the debentures and the issuance of
shares of the Company's common stock upon the exercise of warrants issued in
connection with the Line of Credit; and
3. To consider any other matters that may properly come before the
Special Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on December 15,
2000, as the record date for determining the shareholders entitled to notice of
and to vote at the Special Meeting or at any adjournment thereof. A complete
list of the shareholders entitled to vote at the Special Meeting will be open
for examination by any shareholder during ordinary business hours for a period
of ten days prior to the Special Meeting at the executive offices of the
Company, 22 South Links Avenue, Suite 204, Sarasota, Florida 34236.
IMPORTANT
You are cordially invited to attend the Special Meeting in person. In
order to ensure your representation at the meeting, however, please promptly
complete, date, sign and return the enclosed proxy in the accompanying envelope.
If you should decide to attend the Special Meeting and vote your shares in
person, you may revoke your proxy at that time.
By Order of the Board of Directors,
/s/ Earl T. Ingarfield
Earl T. Ingarfield
President, Chief Executive Officer
and Chairman
December ___, 2000
<PAGE>
TABLE OF CONTENTS
PAGE NO.
ABOUT THE MEETING............................................................2
WHAT IS THE PURPOSE OF THE SPECIAL MEETING?......................2
WHO IS ENTITLED TO VOTE?.........................................2
WHO CAN ATTEND THE SPECIAL MEETING?..............................2
WHAT CONSTITUTES A QUORUM?.......................................2
HOW DO I VOTE?...................................................3
WHAT IF I DO NOT SPECIFY HOW MY SHARES ARE TO BE VOTED?..........3
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?...............3
WHAT ARE THE BOARD'S RECOMMENDATIONS?............................3
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?......................3
STOCK OWNERSHIP..............................................................4
BENEFICIAL OWNERS................................................4
DIRECTORS AND EXECUTIVE OFFICERS.................................4
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE..........4
PROPOSAL 1 - AMENDMENT TO THE ARTICLES OF INCORPORATION......................5
RECOMMENDATION OF THE BOARD OF DIRECTORS...............................5
PROPOSAL 2 - ISSUANCE OF COMMON STOCK........................................6
RECOMMENDATION OF THE BOARD OF DIRECTORS...............................6
LINE OF CREDIT.........................................................6
DESCRIPTION OF CAPITAL STOCK...........................................9
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE ARTICLES OF
INCORPORATION, BYLAWS AND NEVADA LAW......................10
OTHER MATTERS...............................................................11
ADDITIONAL INFORMATION......................................................11
APPENDIX "A" A-1
APPENDIX "B" B-1
APPENDIX "C" C-1
APPENDIX "D" D-1
APPENDIX "E" E-1
APPENDIX "F" F-1
APPENDIX "G" G-1
i
<PAGE>
AVID SPORTSWEAR & GOLF CORP.
22 SOUTH LINKS AVENUE, SUITE 204
SARASOTA, FLORIDA 34326
---------------------
PROXY STATEMENT
DECEMBER ___, 2000
-------------------------
This proxy statement contains information related to a special meeting of
shareholders of Avid Sportswear & Golf Corp., to be held on Thursday, December
28, 2000, at 9:00 a.m., local time, at the Holiday Inn, 19800 S. Vermont Avenue,
Torrance, California 90502, and at any postponements or adjournments thereof.
The Company is making this proxy solicitation.
ABOUT THE MEETING
WHAT IS THE PURPOSE OF THE SPECIAL MEETING?
At the special meeting, shareholders will act upon the matters outlined in
the notice of meeting on the cover page of this proxy statement, including the
approval of an amendment to the Company's Articles of Incorporation to increase
the authorized common stock to 150,000,000 shares of common stock and the
approval of the sale of the Company's debentures and the issuance of common
stock pursuant to the conversion of the debentures and the exercise of warrants
in connection with a Line of Credit.
WHO IS ENTITLED TO VOTE?
Only shareholders of record on the close of business on the record date,
December 15, 2000, are entitled to receive notice of the special meeting and to
vote the shares of common stock that they held on that date at the meeting, or
any postponements or adjournments of the meeting. Each outstanding share of
common stock will be entitled to one vote on each matter to be voted upon at the
meeting.
WHO CAN ATTEND THE SPECIAL MEETING?
All shareholders as of the record date, or their duly appointed proxies,
may attend the special meeting, and each may be accompanied by one guest.
Seating, however, is limited. Admission to the meeting will be on a first-come,
first-serve basis. Registration will begin at 8:00 a.m., and seating will begin
at 8:30 a.m. Each shareholder may be asked to present valid picture
identification, such as a driver's license or passport. Cameras, recording
devices and other electronic devices will not be permitted at the meeting.
Please note that if you hold your shares in "street name" (that is,
through a broker or other nominee), you will need to bring a copy of a brokerage
statement reflecting your stock ownership as of the record date and check in at
the registration desk at the meeting.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of common stock outstanding on the record date will
constitute a quorum, permitting the meeting to conduct its business. As of the
record date, 44,479,406 shares of common stock of the Company were outstanding.
Proxies received but marked as abstentions and broker non-votes will be included
in the calculation of the number of shares considered to be present at the
meeting.
2
<PAGE>
HOW DO I VOTE?
If you complete and properly sign the accompanying proxy card and return
it to the Company, it will be voted as you direct. If you are a registered
shareholder and attend the meeting, you may deliver your completed proxy card in
person or vote by ballot at the meeting. "Street name" shareholders who wish to
vote at the meeting will need to obtain a proxy form from the institution that
holds their shares.
WHAT IF I DO NOT SPECIFY HOW MY SHARES ARE TO BE VOTED?
If you submit a proxy but do not indicate any voting instructions, then
your shares will be voted in accordance with the Board of Directors'
recommendations.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy card, you may change your
vote at any time before the proxy is exercised by filing with the Secretary of
the Company either a notice of revocation or a duly executed proxy bearing a
later date. The powers of the proxy holders will be suspended if you attend the
meeting in person and so request, although attendance at the meeting will not by
itself revoke a previously granted proxy.
WHAT ARE THE BOARD'S RECOMMENDATIONS?
Unless you give other instructions on your proxy card, the persons named
as proxy holders on the proxy card will vote in accordance with the
recommendation of the Board of Directors. The Board of Directors' recommendation
is set forth together with the description of each item in this proxy statement.
In summary, the Board of Directors recommends a vote:
o FOR the approval of an amendment to the Company's Articles of
Incorporation to increase the authorized shares of the Company's
common stock to 150,000,000 (see page 5); and
o FOR the sale of the Company's debentures, as well as the issuance of
common stock pursuant to the conversion of the debentures and the
exercise of warrants issued pursuant to the Line of Credit (see page
6).
With respect to any other matter that properly comes before the meeting,
the proxy holders will vote as recommended by the Board of Directors or, if no
recommendation is given, in their own discretion.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
INCREASE IN AUTHORIZED SHARES, ISSUANCE OF SHARES AND OTHER ITEMS. For the
approval of an amendment to the Company's Articles of Incorporation to increase
the authorized shares of the Company's common stock to 150,000,000 shares, the
sale of the Company's debentures, as well as the issuance of common stock
pursuant to the conversion of the debentures and the exercise of warrants issued
pursuant to the Line of Credit and any other item that properly comes before the
meeting, the affirmative vote of the holders of a majority of the shares
represented in person or by proxy and entitled to vote on the item will be
required for approval. A properly executed proxy marked "Abstain" with respect
to any such matter will not be voted, although it will be counted for purposes
of determining whether there is a quorum. Accordingly, an abstention will have
the effect of a negative vote.
If you hold your shares in "street name" through a broker or other
nominee, your broker or nominee may not be permitted to exercise voting
discretion with respect to some of the matters to be acted upon. Thus, if you do
not give your broker or nominee specific instructions, your shares may not be
voted on those matters and will not be counted in determining the number of
shares necessary for approval. Shares represented by such "broker non-votes,"
however, will be counted in determining whether there is a quorum.
3
<PAGE>
STOCK OWNERSHIP
BENEFICIAL OWNERS
As of December 1, 2000, other than directors and executive officers, no
persons owned beneficially more than five per cent (5%) of the Company's common
stock.
DIRECTORS AND EXECUTIVE OFFICERS
The following table shows the amount of common stock of the Company
beneficially owned by the Company's directors, certain executive officers and by
all directors and executive officers as a group as of December 1, 2000. Unless
otherwise indicated, beneficial ownership is direct and the person indicated has
sole voting and investment power. As of December 1, 2000, the Company had
44,479,406 shares of common stock outstanding.
<TABLE>
<CAPTION>
SHARES ACQUIRABLE WITHIN 60 PERCENT
NAME AND ADDRESS BENEFICIALLY OWNED DAYS (1) OF CLASS
---------------- ------------------ -------- --------
<S> <C> <C> <C>
Earl T. Ingarfield(2) 14,256,017 200,000 35.4%
Jerry L. Busiere 100,000 -- *
Thomas L. Browning 1,289,359 200,000 3.2%
Michael LaValliere 1,562,940 200,000 3.8%
David Roderick 1,000,000 -- 2.2%
Barnum Mow 1,200,000 864,477 4.5%
All Officers and Directors as a Group 19,408,316 1,464,477 45.4%
</TABLE>
-----------------------
* Indicates that the ownership percent is less than one percent (1%).
(1) Reflects the number of shares that could be purchased by exercise of options
available at December 1, 2000 or within 60 days thereafter under the
Company's 2000 Stock Incentive Plan.
(2) Includes all stock held by Mr.Ingarfield and Lido Capital Corporation, an
entity in which Mr. Ingarfield is the sole owner, officer and director.
4
<PAGE>
PROPOSAL 1 - AMENDMENT TO THE ARTICLES OF INCORPORATION
Our Company's Board of Directors proposes an amendment to our Company's
Articles of Incorporation to increase the number of authorized shares of common
stock, par value $0.001 per share, from 50,000,000 to 150,000,000 shares.
The amendment to our Company's Articles of Incorporation shall provide for
the authorization of 100,000,000 additional shares of our Company's common
stock. Currently, 44,479,406 shares of our Company's common stock is issued and
outstanding and 2,364,191 shares are reserved for issuance upon the exercise of
certain outstanding options and warrants.
If the amendment to our Company's Articles of Incorporation is adopted,
Articles of Amendment shall be filed with the Nevada Secretary of State so that
the first paragraph of Article IV of the Articles of Incorporation shall be as
follows:
"The amount of the total authorized capital stock of the corporation
shall be ONE HUNDRED FIFTY THOUSAND DOLLARS ($150,000), consisting
of ONE HUNDRED FIFTY MILLION (150,000,000) shares of common stock,
par value $0.001 per share."
Our Company's Board of Directors believes that it is desirable to have
additional authorized shares of common stock available for possible future
financings, including the Line of Credit, if approved, for possible future
acquisition transactions and other general corporate purposes. Having such
additional authorized shares of common stock available for issuance in the
future would give our Company greater flexibility and may allow such shares to
be issued without the expense and delay of a special shareholders' meeting.
Although such issuance of additional shares with respect to future financings
and acquisitions would dilute existing shareholders, management believes that
such transactions would increase the value of our Company to our shareholders.
Recommendation of the Board of Directors
Our Board of Directors unanimously recommends a vote "FOR" the approval of
an amendment to our Company's Articles of Incorporation to increase the number
of authorized shares of common stock, par value $0.001 per share, from
50,000,000 to 150,000,000 shares.
5
<PAGE>
PROPOSAL 2 - ISSUANCE OF COMMON STOCK
On November 28, 2000, the Company entered into a Line of Credit Agreement
(the "LINE OF CREDIT") with GMF Holdings (the "INVESTOR"). Pursuant to the Line
of Credit, our Company may, at its discretion, periodically issue and sell to
the Investor debentures for a total purchase price of up to $10 million. The
Investor may convert at any time, until payment in full of the debentures, all
or any part of the principal amount of the debentures, plus accrued interest,
into shares of our Company's common stock at a price per share equal to an
amount equal to 80% of the lowest closing bid price of our common stock on a
principal trading market for the 20 days immediately preceding the date of
conversion by the Investor. In connection with the Line of Credit, our Company
will also issue warrants to purchase up to 1,680,000 shares of our Company's
common stock to the placement agent. The warrants will have an exercise price of
$0.35 per share. The effectiveness of the issuance of the debentures pursuant to
the Line of Credit and the warrants is conditioned upon our Company registering
with the Securities and Exchange Commission the sale of the common stock
underlying the debentures to be sold to the Investor.
The following description of the Line of Credit does not purport to be
complete and is qualified in its entirety by reference to the Line of Credit
Agreement attached hereto as Appendix "A." Also attached hereto are the
following documents:
o Form of Debenture dated as of November 28, 2000, given by the
Company to the Investor attached hereto as Appendix "B."
o Registration Rights Agreement dated as of November 28, 2000, between
the Company and the Investor attached hereto as Appendix "C."
o Form of Warrant dated as of November 28, 2000, given by the Company
to the May Davis Group, Inc. attached hereto as Appendix "D."
o Registration Rights Agreement dated as of November 28, 2000, between
the Company and the May Davis Group, Inc. attached hereto as
Appendix "E."
o Placement Agent Agreement dated as of November 28, 2000, between the
Company and the May Davis Group, Inc. attached hereto as Appendix
"F."
o Escrow Agreement dated as of November 28, 2000, between the Company,
the May Davis Group, Inc. and First Union National Bank attached
hereto as Appendix "G."
Recommendation Of The Board Of Directors
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE SALE OF COMPANY'S
DEBENTURES AS WELL AS THE ISSUANCE OF COMMON STOCK PURSUANT TO THE LINE OF
CREDIT AND UPON EXERCISE OF WARRANTS ISSUED IN CONNECTION THEREWITH.
LINE OF CREDIT
ADVANCES. Pursuant to the Line of Credit, our Company may periodically
sell debentures to the Investor to raise capital to fund our working capital
needs. The periodic sale of shares is known as an advance. Our Company may
request an advance every 15 days.
MECHANICS. Our Company may, at its discretion, request advances from the
Investor by written notice, specifying the amount requested up to the maximum
advance amount. A closing will be held 25 days after such written notice at
which time our Company will deliver the debentures and the Investor will pay the
advance amount. Our Company has the ability to determine when and if it desires
to draw an advance. The minimum advance amount requirement is $25,000.
6
<PAGE>
COMMITMENT PERIOD. Our Company may request an advance at any time during
the commitment period. The commitment period begins on the date the Securities
and Exchange Commission first declares effective a Registration Statement
registering the sale of the shares of common stock to be issued to the Investor
upon conversion of the debentures under the Line of Credit. The commitment
period expires on the earliest to occur of (i) the date on which the Investor
has made advances totaling $10 million or (ii) November 28, 2002 (i.e., two
years from the date of the Line of Credit).
MAXIMUM ADVANCE AMOUNT. Our Company may not request advances in excess of
a total of $10 million. In addition, each individual advance is subject to a
maximum advance amount based on an average daily volume of our Company's common
stock. Each advance is equal to 150% of the average daily volume of our
Company's common stock multiplied by a bid price factor.
CONVERSION PRICE. The debentures sold under the Line of Credit may be
converted into shares of our Company's common stock at a price per share equal
to an amount equal to 80% of the lowest closing bid price of the common stock on
a principal trading market for the 20 days immediately preceding the date of
conversion by the Investor. Note that the net proceeds to be received by our
Company will be less due to its obligation to pay a placement agent fee of 8.4%
of each advance to the May Davis Group, Inc. See "Net Proceeds" and "Placement
Agent."
NUMBER OF SHARES TO BE ISSUED. Our Company cannot predict the actual
number of shares of common stock that will be issued pursuant to the Line of
Credit, in part, because the conversion price of the shares will fluctuate based
on prevailing market conditions and our Company has not determined the total
amount of advances it intends to draw. Nonetheless, our Company can estimate the
number of shares of common stock that will be issued using certain assumptions.
Assuming our Company requested an advance of the entire $10 million available
under the Line of Credit in a single advance (which is not permitted under the
terms of the Line of Credit) at $.22 per share, then our Company would issue
45,454,545 shares of common stock to the Investor, plus warrants to purchase
1,680,000 shares of common stock to the placement agent. These shares would
represent 50.5% of our Company's outstanding capital stock (51.5% if the shares
to be issued upon exercise of the warrants held by the placement agent are taken
into account) upon issuance. To assist our shareholders in evaluating the number
of shares of common stock which could be issued to the Investor at various
prices, our Company has prepared the following table. This table shows the
number of shares of our Company's common stock that would be issued with and
without warrants at various prices.
7
<PAGE>
<TABLE>
CONVERSION PRICE: $.25 $.30 $.35 $.40 $.50
---------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NO. OF SHARES(1): 40,000,000 33,333,333 28,571,429 25,000,000 20,000,000
TOTAL OUTSTANDING EXCLUDING
WARRANTS(2): 84,479,406 77,812,739 73,050,835 69,479,406 64,479,406
PERCENT OUTSTANDING
EXCLUDING WARRANTS(3): 47.4% 42.8% 39.1% 36.0% 31.0%
NO. OF WARRANTS(4): 1,680,000 1,1680,000 1,680,000 1,680,000 1,680,000
TOTAL OUTSTANDING INCLUDING
WARRANTS(5): 86,159,406 79,492,739 74,730,835 71,159,406 66,159,406
PERCENT OUTSTANDING
INCLUDING WARRANTS(6): 48.4% 44.1% 40.5% 37.5% 32.8%
</TABLE>
------------------------
(1) Represents the number of shares of common stock to be issued to the
Investor upon conversion of the debentures at the prices set forth in the
table.
(2) Represents the total number of shares of common stock outstanding after
the issuance of the shares to the Investor and excludes the issuance of
shares to the placement agent upon the exercise of warrants granted to it.
(3) Represents the shares of common stock to be issued upon conversion of the
debentures as a percentage of the total number shares outstanding,
excluding the warrants issued to the placement agent.
(4) Represents 1,680,000 warrants to be issued to the placement agent.
(5) Represents the total number of shares of common stock outstanding after
the issuance of the shares to the Investor upon conversion of the
debentures, including the issuance of shares to the placement agent upon
the exercise of warrants granted to it.
(6) Represents the shares of common stock to be issued as a percentage of the
total number shares outstanding, including the warrants issued to the
placement agent.
REGISTRATION RIGHTS. Our Company granted to the Investor certain
registration rights. Pursuant to the Registration Rights Agreement, our Company
is obligated to register the sale of the shares of common stock to be issued to
the Investor upon the conversion of the debentures. The cost of this
registration will be borne by our Company.
NET PROCEEDS. Our Company cannot predict the total amount of proceeds to
be raised in this transaction, in part, because our Company has not determined
the total amount of the advances it intends to draw. However, our Company
expects to incur approximately $100,000 of expenses, consisting primarily of
professional fees incurred in negotiating and completing the Line of Credit and
to be incurred in connection with registering the shares upon the Investor's
conversion of the debentures pursuant to the Registration Rights Agreement. In
addition, our Company is obligated to pay the placement agent, May Davis Group,
Inc., a cash placement agent fee equal to 8.4% of each advance.
8
<PAGE>
USE OF PROCEEDS. Our Company intends to use the net proceeds received
under the Line of Credit for general working capital purposes.
PLACEMENT AGENT. Our Company retained the May Davis Group, Inc. to act
as its placement agent in connection with the Line of Credit. For its
services, our Company will pay a cash placement agent fee to the May Davis
Group, Inc. equal to 8.4% of each advance. Further, our Company granted to
the May Davis Group, Inc. warrants to purchase 1,680,000 shares of our
Company's common stock at an exercise price of $0.35 per share. The warrants
are exercisable immediately upon receiving shareholder approval. The May
Davis Group, Inc., has indicated that the warrants will be transferred to the
following:
NUMBER OF
NAME: WARRANTS:
Mark Angelo 420,000
Hunter Singer 420,000
Joseph Donahue 420,000
Robert Farrell 420,000
The exercise price of the warrants will be reduced if our Company issues
or sells shares of common stock for, or issues securities convertible into
shares of common stock with a conversion or exercise price of, less than the
average closing bid prices of our Company's common stock for the 10 trading days
immediately preceding the date of issuance, or in the case of options issued to
employees after 30 days of the employee's start date, the closing bid price on
the date of issuance. In such event, the exercise price of the warrants will be
reduced to the price at which such common stock was issued or sold or to the
exercise price of such convertible securities. All warrants are exercisable for
five years after the date of issuance. The holders of the warrants may, under
certain circumstances, exercise the warrants pursuant to a cashless exercise.
The Company granted certain registration rights to the May Davis Group,
Inc. and any subsequent holder of such warrants, including the parties set forth
above. Pursuant to the Registration Rights Agreement, the Company is obligated
to register the sale of the shares of common stock underlying the warrants. The
cost of this registration will be borne by the Company.
Description of Capital Stock
AUTHORIZED CAPITAL STOCK. The authorized capital stock of our Company
consists of 50,000,000 shares of common stock and 10,000,000 shares of preferred
stock. As of the date hereof, our Company has 44,479,406 shares of common stock
outstanding. The Company also has the following options and warrants
outstanding:
TYPE NUMBER OF SHARES EXERCISE PRICE
Options 600,000 $0.30
Options 864,477 $0.375
Options 475,000 $0.35
Warrants 100,000 $0.50
Warrants 285,714 $1.50
Warrants 39,000 $0.01
The following description is of the material terms of our capital stock.
Additional information may be found in our Company's Articles of Incorporation
included as an exhibit to our Registration Statement on Form 10-SB (as amended)
filed with the Securities and Exchange Commission.
9
<PAGE>
COMMON STOCK. Each share of our 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 our 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 our 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. Our 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 our 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
our 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 our Company or could have voting or
conversion rights that could adversely affect the holders of the outstanding
common stock. Our 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
our Company could discourage potential acquisition proposals and could delay or
prevent a change in control of our Company. Such provisions may also have the
effect of preventing changes in the management of our Company, and preventing
shareholders from receiving a premium on their common stock.
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 our 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 our Company by means of
a proxy contest, tender offer, merger or otherwise, and thereby protect the
continuity of our 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
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 our 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
10
<PAGE>
o 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
our Company may be called by our 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 our Company by precluding a dissident shareholder
from forcing a special meeting to consider removing the Board of Directors or
otherwise.
TRANSFER AGENT AND REGISTRAR. Transfer Online is the transfer agent
and registrar for our common stock. Its address is 227 S.W. Pine Street,
Suite 300, Portland, Oregon 97204.
OTHER MATTERS
As of the date of this proxy statement, our Company knows of no business
that will be presented for consideration at the special meeting other than the
items referred to above. If any other matter is properly brought before the
meeting for action by shareholders, proxies in the enclosed form returned to our
Company will be voted in accordance with the recommendation of our Board of
Directors or, in the absence of such a recommendation, in accordance with the
judgment of the proxy holder.
ADDITIONAL INFORMATION
ADVANCE NOTICE PROCEDURES. Under our Company's bylaws, no business may be
brought before a special meeting unless it is specified in the notice of the
meeting (which includes shareholder proposals that our Company is required to
include in its proxy statement pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934) or is otherwise brought before the meeting by or at the
discretion of the Board or by a shareholder entitled to vote who has delivered
notice to the Company (containing certain information specified in the bylaws)
not less than 120 days nor more than 180 days prior to the first anniversary of
the preceding year's annual meeting. These requirements are separate from and in
addition to the SEC's requirements that a shareholder must meet in order to have
a shareholder proposal included in our Company's proxy statement.
PROXY SOLICITATION COSTS. Our Company is soliciting the enclosed proxies.
The cost of solicting proxies in the enclosed form will be borne by our Company.
Officers and regular employees of our Company may, but without compensation
other than their regular compensation, solicit proxies by further mailing or
personal conversations, or by telephone, telex, facsimile or electronic means.
Our Company will, upon request, reimburse brokerage firms for their reasonable
expenses in forwarding solictation materials to the beneficial owners of stock.
11
<PAGE>
INCORPORATION BY REFERENCE. Certain financial and other information
required pursuant to Item 13 of the Proxy Rules are incorporated by reference to
the Company's Amendment No. 5 to Form 10-SB Registration Statement and quarterly
report on Form 10-QSB for the period ended September 30, 2000, which are being
delivered to the shareholders with this proxy statement In order to facilitate
compliance with Rule 2-02(a) of the Regulation S-X, one copy of the definitive
proxy statement will include a manually signed copy of the accountant's report.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Earl T. Ingarfield
Earl T.Ingarfield
Chief Executive Officer, President
and Chairman
Sarasota, Florida
December ___, 2000
12
<PAGE>
APPENDIX "A"
LINE OF CREDIT AGREEMENT
THIS LINE OF CREDIT AGREEMENT is dated as of the 28th day of November
2000, (the "AGREEMENT") between GMF Holdings (the "INVESTOR") and Avid
Sportswear and Golf Corp., a corporation organized and existing under the laws
of the State of Nevada (the "COMPANY").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investor,
from time to time as provided herein, and the Investor shall purchase up to Ten
Million ($10,000,000) Dollars of Debentures for a total purchase price of Ten
Million ($10,000,000) Dollars; and
WHEREAS, such investments will be made in reliance upon the provisions of
Section 4(2) ("SECTION 4(2)") and the Regulation D ("REGULATION D") of the
Securities Act of 1933, as amended, and the regulations promulgated there under
(the "SECURITIES ACT"), and or upon such other exemption from the registration
requirements of the Securities Act as may be available with respect to any or
all of the investments in the Debentures to be made hereunder; and
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 "ADVANCE" shall mean each occasion the Company elects to
exercise its right to tender an Advance Notice requiring the Investor to advance
funds to the Company, subject to the terms of this Agreement.
Section 1.2 "ADVANCE NOTICE DATE" shall mean each date the Company
delivers to the Investor an Advance Notice requiring the Investor to advance
funds to the Company, subject to the terms of this Agreement. No Advance Notice
Date shall be less than fifteen Trading Days after the prior Advance Notice
Date.
Section 1.3 "ADVANCE DATE" shall mean the date Butler Gonzalez LLP/First
Union Escrow Account is in receipt of the funds from the Investor and Butler
Gonzalez LLP, as the Placement Agent's Counsel, is in possession of free trading
shares from the Company and therefore an Advance by the Investor to the Company
can be made and Butler Gonzalez LLP can release the free trading shares to the
Company. No Advance Date shall be less than twenty-five (25) Trading Days after
an Advance Notice Date.
Section 1.4 "ADVANCE NOTICE" shall mean a written notice to the Investor
setting forth the Advance Amount that the Company requests from the Investor and
Compliance Certification from the Company as attached hereto as Exhibit B.
Section 1.5 "BID PRICE" shall mean, on any date, the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the Principal Market or if
the Common Stock is not traded on a Principal Market, the highest reported bid
price for the Common Stock, as furnished by the National Association of
<PAGE>
Securities Dealers, Inc, for the five trading days immediately preceding such
date.
Section 1.6 "CLOSING" shall mean one of the closings of a purchase and
sale of the Debentures pursuant to Section 2.1.
Section 1.7 "COMMITMENT AMOUNT" shall mean the $10,000,000 up to which the
Investor has agreed to provide to the Company in order to purchase the
Debentures pursuant to the terms and conditions of this Agreement.
Section 1.8 "COMMITMENT PERIOD" shall mean the period commencing on the
earlier to occur of the Effective Date, or (ii) such earlier date as the Company
and the Investor may mutually agree in writing, and expiring on the earliest to
occur of (x) the date on which the Investor shall have purchased Debentures
pursuant to this Agreement in the amount of at least $10,000,000 unless such
date is extended by the Investor, (y) the date this Agreement is terminated
pursuant to Section 2.4, or (z) the date occurring two years from the date
hereof.
Section 1.9 "COMMON STOCK" shall mean the Company's common stock, par
value $0.001 per share.
Section 1.10 "CONDITION SATISFACTION DATE" shall have the meaning set
forth in Section 7.2.
Section 1.11 "DAMAGES" shall mean any loss, claim, damage, liability,
costs and expenses (including, without limitation, reasonable attorney's fees
and disbursements and costs and expenses of expert witnesses and investigation).
Section 1.12 "DEBENTURES" shall mean the Debenture in the form of Exhibit
C annexed hereto.
Section 1.13 "EFFECTIVE DATE" shall mean the date on which the SEC first
declares effective a Registration Statement registering the resale of the
Registrable Securities as set forth in Section 7.2(a).
Section 1.14 "ESCROW AGENT" shall be First Union National Bank or its
successors.
Section 1.15 "ESCROW AGREEMENT" shall mean the document which is annexed
hereto and referenced in Section 7.2 Subparagraph J of this Agreement.
Section 1.16 "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated there under.
Section 1.17 "LEGEND" shall mean that "legend" as set forth in Section
9.1.
Section 1.18 "MARKET PRICE" shall mean the lowest closing Bid Prices of
the Common Stock over the twenty (20) Trading Day period immediately preceding
the date of conversion.
A-2
<PAGE>
Section 1.19 "MATERIAL ADVERSE EFFECT" shall mean any effect on the
business, Bid Price, operations, properties, prospects, or financial condition
of the Company that is material and adverse to the Company and its subsidiaries
and affiliates, taken as a whole, and/or any condition, circumstance, or
situation that would prohibit or otherwise materially interfere with the ability
of the Company to enter into and perform any of its obligations under this
Agreement, the Debenture, the Registration Rights Agreement or the Escrow
Agreement in any material respect.
Section 1.20 "MAXIMUM ADVANCE AMOUNT" shall be equal to one hundred fifty
percent (150%) of the average daily volume of the Company's Common Stock
multiplied by the Purchase Price during the Pricing Period.
Section 1.21 "NASD" shall mean the National Association of Securities
Dealers, Inc.
Section 1.22 "PERSON" shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
Section 1.23 "PLACEMENT AGENT" shall mean May Davis Group, Inc.
Section 1.24 "PURCHASE PRICE" shall be set at 80% of the Market Price.
Section 1.25 "PRINCIPAL MARKET" shall mean the Nasdaq National Market, the
Nasdaq SmallCap Market, the American Stock Exchange, the New York Stock Exchange
or the Over the Counter Bulletin Board ("OTCBB") whichever is at the time the
principal trading exchange or market for the Common Stock.
Section 1.26 "PRICING PERIOD" shall mean the twenty (20) trading day
period beginning on the Advance Notice Date and ending on the closing date of
the particular traunche.
Section 1.27 "REGISTRABLE SECURITIES" shall mean the shares of Common
Stock (i) in respect of which the Registration Statement has not been declared
effective by the SEC, (ii) which have not been sold under circumstances under
which all of the applicable conditions of Rule 144 (or any similar provision
then in force) under the Securities Act (?Rule 144") are met or (iii) which have
not been otherwise transferred to holder who may trade such shares without
restriction under the Securities Act, and the Company has delivered a new
certificate or other evidence of ownership for such securities not bearing a
restrictive legend.
Section 1.28 "REGISTRATION RIGHTS AGREEMENT" shall mean the agreement
regarding the filing of the Registration Statement for the resale of the
Registrable Securities, entered into between the Company and the Investor on the
Subscription Date annexed hereto as Exhibit D.
Section 1.29 "REGISTRATION STATEMENT" shall mean a registration statement
on Form S-3 (if use of such form is then available to the Company pursuant to
the rules of the SEC and, if not, on such other form promulgated by the SEC for
A-3
<PAGE>
which the Company then qualifies and which counsel for the Company shall deem
appropriate, and which form shall be available for the resale of the Registrable
Securities to be registered there under in accordance with the provisions of
this Agreement and the Registration Rights Agreement, and in accordance with the
intended method of distribution of such securities), for the registration of the
resale by the Investor of the Registrable Securities under the Securities Act.
Section 1.30 "REGULATION D" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.31 "SEC" shall mean the Securities and Exchange Commission.
Section 1.32 "SECTION 4(2)" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.33 "SECURITIES ACT" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.34 "SEC DOCUMENTS" shall mean the Form 10-KSB, Form 10-QSB, Form
8-K, Form 10-SB, Form SB-2, or Proxy Statements of the Company as supplemented
to the date hereof, filed by the Company for a period of at twelve (12) months
immediately preceding the date hereof or the Advance Date, as the case may be,
until such time as the Company no longer has an obligation to maintain the
effectiveness of a Registration Statement as set forth in the Registration
Rights Agreement.
Section 1.35 "SUBSCRIPTION DATE" shall mean the date on which this
Agreement is executed and delivered by the parties hereto.
Section 1.36 "TRADING DAY" shall mean any day during which the New York
Stock Exchange shall be open for business.
ARTICLE II
ADVANCES
Section 2.1 INVESTMENTS.
(a) ADVANCES. Upon the terms and conditions set forth herein
(including without limitation, the provisions of Article VII hereof), on any
Advance Date the Company may request an Advance by the Investor by the delivery
of an Advance Notice. The amount of the Debenture that the Investor shall
receive pursuant to such Advance shall be equal to the amount of the Advance
specified in the Advance Notice, which Advance shall not exceed the Maximum
Advance Amount on such date.
Section 2.2 MECHANICS.
(a) ADVANCE NOTICE. At any time during the Commitment Period, the
Company may deliver an Advance Notice to the Investor, subject to the conditions
set forth in Section 2.4; provided, however, the amount for each Advance as
A-4
<PAGE>
designated by the Company in the applicable Advance notice shall not be (i) less
than $25,000, or (ii) more than the Maximum Advance Amount. The aggregate amount
of the Advances pursuant to this Agreement shall not exceed the Commitment
Amount, unless otherwise agreed by the Investor in the Investor's sole and
absolute discretion.
(b) DATE OF DELIVERY OF ADVANCE NOTICE. An Advance Notice shall be
deemed delivered on (i) the Trading Day it is received by facsimile or otherwise
by the Investor if such notice is received prior to 12:00 noon Eastern Time, or
(ii) the immediately succeeding Trading Day if it is received by facsimile or
otherwise after 12:00 noon Eastern Time on a Trading Day or at any time on a day
which is not a Trading Day. No Advance Notice may be deemed delivered, on a day
that is not a Trading Day.
Section 2.3 CLOSINGS. On each Advance Date for an Advance, which shall be
within five (5) Trading Days of an Advance Notice, (i) the Company shall deliver
to the Escrow Agent one or more Debentures at the Investor's option,
representing the amount of the Advance by the Investor pursuant to Section 2.1
herein, registered in the name of the Investor and (ii) the Investor shall
deliver to escrow the amount of the Advance specified in the Advance Notice by
wire transfer of immediately available funds to the Escrow Agent on or before
the Advance Date. In addition, on or prior to the Advance Date, each of the
Company and the Investor shall deliver to the Escrow Agent all documents,
instruments and writings required to be delivered or reasonably requested by
either of them pursuant to this Agreement in order to implement and effect the
transactions contemplated herein. Payment of funds to the Company and delivery
of the Debentures to the Investor shall occur out of escrow in accordance with
the conditions set forth above and those contained in the Escrow Agreement
referred to in Section 7.2(j); provided, however, that to the extent the Company
has not paid the fees, expenses, and disbursements of the Investor's counsel,
Escrow Agent, and the Placement Agent in accordance with Section 13.4, the
amount of such fees, expenses, and disbursements must be paid by the Company in
immediately available funds from the Amount of the Advance held by the Escrow
Agent, at the direction of the Investor, to Investor's counsel, the Escrow
Agent, and the Placement Agent with no reduction in the amount of Debenture on
such Advance Date.
Section 2.4 TERMINATION OF INVESTMENT. The obligation of the Investor to
make an Advance to the Company pursuant to this Agreement shall terminate
permanently (including with respect to an Advance Date that has not yet
occurred) in the event that (i) there shall occur any stop order or suspension
of the effectiveness of the Registration Statement for an aggregate of thirty
(30) Trading Days during the Commitment Period, for any reason other than
deferral or suspensions in accordance with the Registration Rights Agreement as
a result of corporate developments subsequent to the Subscription Date that
would require such Registration Statement to be amended to reflect such event in
order to maintain its compliance with the disclosure requirements of the
Securities Act or (ii) the Company shall at any time fail materially to comply
with the requirements of Section 6.3, 6.4 or 6.6.
Section 2.5 AGREEMENT TO ADVANCE FUNDS.
A-5
<PAGE>
(a) The Investor agrees to advance the amount specified in the
Advance Notice to the Company within five (5) Trading Days after the completion
of each of the following conditions and the other conditions set forth in this
Agreement:
(i) the execution and delivery by the Company, and the
Investor, or this Agreement, and all Exhibits and Attachments hereto;
(ii) delivery into escrow by the Company of the original
Debenture;
(iii) the Company's Registration Statement with respect to the
resale of the Registrable Securities in accordance with the terms of the
Registration Rights Agreement shall have been declared effective by the SEC;
(iv) the Company shall have obtained all permits and
qualifications required by any applicable state for the offer and sale of the
Registrable Securities, or shall have the availability of exemptions therefrom.
The sale and issuance of the Registrable Securities shall be legally permitted
by all laws and regulations to which the Company is subject; and
(v) payment of fees as set forth in Section 13.4 below.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Investor represents and warrants to, and agrees with, the Company that:
Section 3.1 ORGANIZATION AND AUTHORIZATION. Investor is duly incorporated
or organized and validly existing in the jurisdiction of its incorporation or
organization and has all requisite power and authority to purchase and hold the
securities issuable hereunder. The decision to invest and the execution and
delivery of this Agreement by such Investor, the performance by such Investor of
its obligations hereunder and the consummation by such Investor of the
transactions contemplated hereby have been duly authorized and requires no other
proceedings on the part of the Investor. The undersigned has all right, power
and authority to execute and deliver this Agreement and all other instruments
(including, without limitation, the Registration Rights Agreement), on behalf of
the Investor. This Agreement and all other instruments contemplated herein
(including without limitation the Registration Rights Agreement) have been duly
executed and delivered by the Investor and, assuming the execution and delivery
hereof and acceptance thereof by the Company, will constitute the legal, valid
and binding obligations of the Investor, enforceable against the Investor in
accordance with its terms.
Section 3.2 EVALUATION OF RISKS. The Investor has such knowledge and
experience in financial tax and business matters as to be capable of evaluating
the merits and risks of, and bearing the economic risks entailed by, an
investment in the Company and of protecting its interests in connection with
this transaction. It recognizes that its investment in the Company involves a
high degree of risk. The Investor acknowledges that it has been furnished with,
and has carefully read the applicable form of Debenture and form of Registration
Rights Agreement.
A-6
<PAGE>
Section 3.3 INDEPENDENT COUNSEL. The Investor acknowledges that it has
been advised to consult with its own attorney regarding legal matters concerning
the Company and to consult with its tax advisor regarding the tax consequences
of acquiring the securities issuable hereunder.
Section 3.4 NO REGISTRATION. The Investor understands that the Debenture
and Common Stock underlying the Debenture issuable hereunder have not been
registered under the Act or any other securities laws but are being offered and
sold to it in reliance upon specific exemptions from the registration
requirements of Federal and State securities laws and that the Company is
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of the Investor set forth herein
in order to determine the applicability of such exemptions and the suitability
of the Investor to acquire the securities hereunder.
Section 3.5 INVESTMENT PURPOSE. The securities are being purchased by the
Investor for its own account, for investment and without any view to the
distribution, assignment or resale to others or fractionalization in whole or in
part. The Investor is neither an underwriter, nor a dealer in, the Debenture or
the Common Stock issuable on conversion thereof. The Investor agrees not to
assign or in any way transfer the Investor's rights to the securities or any
interest therein and acknowledges that the Company will not recognize any
purported assignment or transfer. No other person has or will have a direct or
indirect beneficial interest in the securities. The Investor agrees not to sell,
hypothecate or otherwise transfer the Investor's securities unless the
securities are registered under Federal and applicable state securities law or
unless, in the opinion of counsel satisfactory to the Company, an exemption from
such laws is available.
Section 3.6 ACCREDITED INVESTOR STATUS. Each Investor is an "accredited
investor" as that term is defined in Rule 501(a)(3) of Regulation D.
Section 3.7 INFORMATION. Such Investor and its advisors (and his or, its
counsel), if any, have been furnished with all materials relating to the
business, finances and operations of the Company and information he deemed
material to making an informed investment decision, which have been requested by
such Investor. Such Investor and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and its management. Neither such
inquiries nor any other due diligence investigations conducted by such Investor
or its advisors, if any, or its representatives shall modify, amend or affect
such Investor's right to rely on the Company's representations and warranties
contained in Section 4 below. Such Investor understands that its investment
involves a high degree of risk. Investor is in a position regarding the Company,
which, based upon employment, family relationship or economic bargaining power,
enabled and enables Investor to obtain information from the Company in order to
evaluate the merits and risks of this investment. Such Investor has sought such
accounting, legal and tax advice, as it has considered necessary to make an
informed investment decision with respect to this transaction.
Section 3.8 RECEIPT OF DOCUMENTS. Such Investor and his or its counsel has
received and read in their entirety: (i) this Agreement and each representation,
warranty and covenant set forth herein, the Escrow Agreement, the Debenture and
the Registration Rights Agreement; (ii) all due diligence and other information
necessary to verify the accuracy and completeness of such representations,
A-7
<PAGE>
warranties and covenants; (iii) the Company's Form 10-SB; (iv) the Company's
Forms 10-QSB for the periods ended March 31, June 30 and September 30, 2000, (v)
the Company's Form SB-2 filed in July 2000; and (vi) answers to all questions
the Investor submitted to the Company regarding an investment in the Company;
and the Investor has relied on the information contained therein and has not
been furnished or relied on any other documents, literature, memorandum or
prospectus.
Section 3.9 REGISTRATION RIGHTS. The parties have entered into the
Registration Rights Agreement.
Section 3.9 NO ADVERTISEMENTS. The Investor is not entering into this
Agreement as a result of or subsequent to any advertisement, article, notice or
other communication published in any newspaper, magazine, or similar media or
broadcast over television or radio, or presented at any seminar or meeting.
Section 3.10 NOT AN AFFILIATE. The Investor is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company. The Investor agrees that following the date of the Agreement it will
not, and will cause its Affiliates not to engage in any short sales, swaps,
purchasing of puts, or other hedging activities with respect to the Common Stock
or any activity that involves the direct or indirect use of Common Stock to
hedge its investment in the Debentures until the expiration of the conversion
period of the Debentures.
Section 3.11 AUTHORIZATION, ENFORCEMENT. This Agreement has been duly and
validly authorized, executed and delivered on behalf of such Investor and is a
valid and binding agreement of such Investor enforceable in accordance with its
terms, except as such enforceability may be limited by general principles of
equity and to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.
Section 3.12 DUE FORMATION OF CORPORATE AND OTHER INVESTORS. If the
Investor is a corporation, trust, partnership or other entity that is not an
individual person, it has been formed and validly exists and has not been
organized for the specific purpose of this transaction and is not prohibited
from doing so.
Section 3.13 DUE AUTHORIZATION OF FIDUCIARY INVESTORS. If the Investor is
purchasing the Securities in a fiduciary capacity for another person or entity,
including without limitation a corporation, partnership, trust or any other
entity, the Investor has been duly authorized and empowered to execute this
Agreement and such other person fulfills all the requirements for this
transaction and agrees to be bound by the obligations, representations,
warranties, and covenants contained herein. Upon request of the Company, the
Investor will provide true, complete and current copies of all relevant
documents creating the Investor, authorizing its investment in the Company
and/or evidencing the satisfaction of the foregoing.
Section 3.14 FURTHER REPRESENTATIONS BY FOREIGN INVESTORS. If Investor is
not a U.S. Person (as defined), such Investor hereby represents that such
Investor is satisfied as to full observance of the laws of such Investor
jurisdiction in connection with any invitation to subscribe for the securities
A-8
<PAGE>
or any use of this Agreement, including: (i) the legal requirements of such
Investor's jurisdiction for the purchase of the securities, (ii) any foreign
exchange restrictions applicable to such purchase, (iii) any governmental or
other consents that may need to be obtained, and (iv) the income tax and other
tax consequences, if any, which may be relevant to the purchase, holding,
redemption, sale, or transfer of the securities. Such Investor's subscription
and payment for, and such Investor's continued beneficial ownership of, the
securities will not violate any applicable securities or other laws of such
Investor's jurisdiction. The term "U.S. Person" as used herein shall mean any
person who is a citizen or resident of the United States or Canada, or any
state, territory or possession thereof, including but not limited to any estate
of any such person, or any corporation, partnership, trust or other entity
created or existing under the laws thereof, or any entity controlled or owned by
any of the foregoing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as stated below or in the SEC documents (the "SEC DOCUMENTS"), the
Company hereby represents and warrants to, and covenants with, the Investors
that the following are true and correct as of the date hereof and as of the
Advance Date:
Section 4.1 ORGANIZATION AND QUALIFICATION. The Company and its
subsidiaries are corporations duly organized and validly existing in good
standing under the laws of the jurisdiction in which they are incorporated, and
have the requisite corporate power to own their properties and to carry on their
business as now being conducted. Each of the Company and its subsidiaries is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted by it makes
such qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect on the
Company and its subsidiaries taken as a whole.
Section 4.2. AUTHORIZATION, ENFORCEMENT, COMPLIANCE WITH OTHER
INSTRUMENTS. (i) The Company has the requisite corporate power and authority to
enter into and perform this Agreement, the Registration Rights Agreement and any
related agreements, and to consummate the transactions contemplated hereby in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
this Agreement, the Registration Rights Agreement and any related agreements by
the Company and the consummation by it of the transactions contemplated hereby
and thereby, shares of Common Stock upon the conversion of the Debentures (the
"DEBENTURE SHARES"), have been duly authorized by the Company's Board of
Directors and no further consent or authorization is required by the Company,
its Board of Directors or its stockholders, (iii) this Agreement and the
Registration Rights Agreement and any related agreements have been duly executed
and delivered by the Company, (iv) this Agreement, the Registration Rights
Agreement and any related agreements constitute the valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by general principles
of equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of creditors' rights and remedies.
Section 4.3 CAPITALIZATION. As of the date hereof, the authorized capital
stock of the Company consists of 50,000,000 shares of Common Stock, of which as
of date hereof, 44,479,406 shares were issued and outstanding, and 10,000,000
A-9
<PAGE>
shares of preferred stock, no par value, of which no shares were issued and
outstanding. All of such outstanding shares have been validly issued and are
fully paid and nonassessable. Except as disclosed in the SEC Documents, no
shares of Common Stock are subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by the Company. Except
for certain convertible loans payable to the Company's CEO and certain directors
as disclosed in the SEC Documents, as of the date of this Agreement, (i) there
are no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its subsidiaries, (ii) there
are no outstanding debt securities and (iii) there are no agreements or
arrangements under which the Company or any of its subsidiaries is obligated to
register the sale of any of their securities under the 1933 Act (except pursuant
to the Registration Rights Agreements). Other than in connection with the
$300,000 of debentures issued in October, 2000, there are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Debenture, the Debenture Shares, the Warrants,
or the Warrant Shares as described in this Agreement. The Company has made
available to the Investors true and correct copies of the Company's Certificate
of Incorporation, as amended and as in effect on the date hereof (the
"CERTIFICATE OF INCORPORATION"), and the Company's By-laws, as in effect on the
date hereof (the "BY-LAWS"), and the terms of all securities convertible into or
exercisable for Common Stock and the material rights of the holders thereof in
respect thereto.
Section 4.4 NO CONFLICT. Except as disclosed in SEC Documents the
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby will not (i)
result in a violation of the Certificate of Incorporation, or By-laws or (ii)
conflict with or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its subsidiaries is a
party, or result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations and the
rules and regulations of The Nasdaq Stock Market Inc.'s OTC Bulletin Board on
which the Common Stock is quoted) applicable to the Company or any of its
subsidiaries or by which any property or asset of the Company or any of its
subsidiaries is bound or affected. Except as disclosed in the Disclosure
Schedule, neither the Company nor its subsidiaries is in violation of any term
of or in default under its Certificate of Incorporation or By-laws or their
organizational charter or by-laws, respectively, or any material contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or
order or any statute, rule or regulation applicable to the Company or its
subsidiaries. The business of the Company and its subsidiaries is not being
conducted, and shall not be conducted in violation of any material law,
ordinance, regulation of any governmental entity. Except as specifically
contemplated by this Agreement and as required under the 1933 Act and any
applicable state securities laws, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
A-10
<PAGE>
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under or contemplated by this Agreement or the Registration
Rights Agreement in accordance with the terms hereof or thereof. All consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof. The Company and its subsidiaries are unaware of any
facts or circumstance, which might give rise to any of the foregoing.
Section 4.6 NO DEFAULT. Except as set forth in Section 4.5 or as described
in the SEC Documents, the Disclosure Schedule, and/or this Agreement the Company
is not in default in the performance or observance of any material obligation,
agreement, covenant or condition contained in any indenture, mortgage, deed of
trust or other material instrument or agreement to which it is a party or by
which it is or its property is bound and neither the execution, nor the delivery
by the Company, nor the performance by the Company of its obligations under this
Agreement or any of the Exhibits or attachments hereto, including the conversion
provision of the Debentures, will conflict with or result in the breach or
violation of any of the terms or provisions of, or constitute a default or
result in the creation or imposition of any lien or charge on any assets or
properties of the Company under, any material indenture, mortgage, deed of trust
or other material agreement applicable to the Company or instrument to which the
Company is a party or by which it is bound, other than anti-dilution provisions
of certain agreements and instruments with respect to warrants and other Common
Stock equivalents, or any statute or the memorandum or Articles of the Company
or any decree, judgment, order rules of regulation of any court or governmental
agency or body having jurisdiction over the Company or its properties, in each
case which default, lien or charge is likely to cause a material adverse effect
on the Company's business and financial condition.
Section 4.7 ABSENCE OF EVENTS OF DEFAULT. Except for matters described in
the SEC Documents, the Disclosure Schedule and/or this Agreement, no Event of
Default, as defined in the respective agreement to which the Company is a party,
and no event which, with the giving of notice or the passage of time or both,
would become an Event of Default (as so defined), has occurred and is
continuing, which would have a material adverse effect on the Company's
business, properties, prospects, financial condition or results of operations.
Section 4.8 GOVERNMENTAL CONSENT, ETC. Except for matters described in the
SEC Documents, the Disclosure Schedule and/or this Agreement and except for any
required registration or filings with applicable federal or state securities
authorities, no consent, approval or authorization of or designation,
declaration or filing with any governmental authority on the part of the Company
is required in connection with the valid execution and delivery of this
Agreement, or the offer, sale or issuance of the securities hereunder, or the
consummation of any other transaction contemplated hereby.
Section 4.9 INTELLECTUAL PROPERTY RIGHTS. The Company and its subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. Except as set forth in the Disclosure Schedule,
A-11
<PAGE>
none of the Company's trademarks, trade names, service marks, service mark
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, government authorizations, trade secrets, or other
intellectual property rights have expired or terminated, or are expected to
expire or terminate in the near future. The Company and its subsidiaries do not
have any knowledge of any infringement by the Company or its subsidiaries of
trademark, trade name rights, patents, patent rights, copyrights, inventions,
licenses, service names, service marks, service mark registrations, trade secret
or other similar rights of others, or of any such development of similar or
identical trade secrets or technical information by others and, except as set
forth on the SEC Documents, the Disclosure Schedule and/or this Agreement , to
the knowledge of the Company, there is no claim, action or proceeding being made
or brought against, or to the Company's knowledge, being threatened against, the
Company or its subsidiaries regarding trademark, trade name, patents, patent
rights, invention, copyright, license, service names, service marks, service
mark registrations, trade secret or other infringement; and the Company and its
subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing. The Company and its subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
their intellectual properties.
Section 4.10 EMPLOYEE RELATIONS. Neither the Company nor any of its
subsidiaries is involved in any labor dispute nor, to the knowledge of the
Company or any of its subsidiaries, is any such dispute threatened. None of the
Company's or its subsidiaries' employees is a member of a union and the Company
and its subsidiaries believe that their relations with their employees are good.
Section 4.11 ENVIRONMENTAL LAWS. The Company and its subsidiaries are (i)
in compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL Laws"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval.
Section 4.12 TITLE. The Company and its subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its subsidiaries, and except as described in the SEC
Documents, the Disclosure Schedule and/or this Agreement, free and clear of all
liens, encumbrances and defects, the Disclosure Schedule and/or this Agreement
such as do not materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the Company and
its subsidiaries. Any real property and facilities held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its subsidiaries.
Section 4.13 INSURANCE. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
A-12
<PAGE>
subsidiaries are engaged. Neither the Company nor any such subsidiary has been
refused any insurance coverage sought or applied for and neither the Company nor
any such subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its subsidiaries, taken as a whole.
Section 4.14 REGULATORY PERMITS. The Company and its subsidiaries possess
all certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, and neither the Company nor any such subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
Section 4.15 INTERNAL ACCOUNTING CONTROLS. The Company and each of its
subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
Section 4.16 NO MATERIALLY ADVERSE CONTRACTS, ETC. Except as set forth in
the SEC Documents, the Disclosure Schedule and/or this Agreement, neither the
Company nor any of its subsidiaries is subject to any charter, corporate or
other legal restriction, or any judgment, decree, order, rule or regulation
which in the judgment of the Company's officers has or is expected in the future
to have a material adverse effect on the business, properties, operations,
financial condition, results of operations or prospects of the Company or its
subsidiaries. Neither the Company nor any of its subsidiaries is a party to any
contract or agreement which in the judgment of the Company's officers has or is
expected to have a material adverse effect on the business, properties,
operations, financial condition, results of operations or prospects of the
Company or its subsidiaries.
Section 4.17 LITIGATION. Except as disclosed in the SEC Documents, the
Disclosure Schedule and/or this Agreement, there is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its subsidiaries, threatened against or affecting the Company,
the Common Stock or any of the Company's subsidiaries, wherein an unfavorable
decision, ruling or finding would (i) have a material adverse effect on the
transactions contemplated hereby (ii) adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of the documents contemplated herein,
or (iii) except as expressly disclosed in the SEC Documents, have a material
adverse effect on the business, operations, properties, financial condition or
results of operation of the Company and its subsidiaries taken as a whole.
A-13
<PAGE>
Section 4.18 TITLE TO ASSETS. Except as set forth in the SEC Documents,
the Disclosure Schedule and/or this Agreement, the Company has good and
marketable title to all properties and material assets described in the SEC
Documents as owned by it, free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest other than such as are not material to
the business of the Company.
Section 4.19 SUBSIDIARIES. Except as disclosed in the SEC Documents, the
Disclosure Schedule and/or this Agreement, the Company does not presently own or
control, directly or indirectly, any interest in any other corporation,
partnership, association or other business entity.
Section 4.20 REQUIRED GOVERNMENTAL PERMITS. Except as set forth in the SEC
Documents, the Disclosure Schedule and/or this Agreement, the Company is in
possession of and operating in compliance with all authorizations, licenses,
certificates, consents, orders and permits from state, federal and other
regulatory authorities which are material to the conduct of its business, all of
which are valid and in full force and effect.
Section 4.21 OTHER OUTSTANDING SECURITIES/FINANCING RESTRICTIONS. As of
the date hereof only, other than warrants and options to acquire shares of
Common Stock as disclosed in the SEC Documents, there are no other warrants and
options registered with the SEC, which are available for sale as unrestricted
("free trading") stock.
Section 4.22 USE OF PROCEEDS. The Company represents that the net proceeds
from this offering will be used for working capital purposes and/or general
corporate purposes. However, in no event shall the net proceeds from this
offering be used by the Company for the payment (or loaned to any such person
for the payment) of any judgment, or other liability, incurred by any executive
officer, officer, director, or employee of the Company.
Section 4.23 FURTHER REPRESENTATION AND WARRANTIES OF THE COMPANY. For so
long as any securities issuable hereunder held by the Investor remain
outstanding, the Company acknowledges, represents, warrants and agrees that it
will use commercially reasonable efforts to maintain the listing of its Common
Stock on the NASDAQ Small Cap Stock Market and/or the OTCBB.
Section 4.24 SEC FILINGS/FULL DISCLOSURE. Since June 1, 2000 the Company
has filed all reports, schedules, forms, statements and other documents required
to be filed by it with the SEC under of the Securities Exchange Act of 1934, as
amended (the "1934 Act"). The Company has delivered to the Investors or their
representatives, or made available through the SEC's website at
http://www.sec.gov., true and complete copies of the SEC Documents. As of their
respective dates, the financial statements of the Company disclosed in the SEC
Documents (the "FINANCIAL STATEMENTS") complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
A-14
<PAGE>
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Investors which is not included in the SEC Documents, contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
Section 4.25 FULL DISCLOSURE. There is no fact known to the Company (other
than general economic conditions known to the public generally) that has not
been disclosed in writing to the Investor that (i) could reasonably be expected
to have a material adverse effect on the financial condition or in the earnings,
business affairs, business prospects, properties or assets of the Company, or
(ii) could reasonably be expected to materially and adversely affect the ability
of the Company to perform its obligations pursuant to this Agreement.
Section 4.26 OPINION OF COUNSEL. Investor shall receive an opinion letter
from counsel to the Company (updated where applicable) prior to each Closing
substantially to the effect that:
(a) the Company is incorporated and validly existing in the
jurisdiction of its incorporation. The Company and/or its subsidiaries are duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions where, to such counsel's knowledge, the Company and/or its
subsidiaries owns or leases properties, maintains employees or conducts
business, except for jurisdictions in which the failure to so qualify would not
have a material adverse effect on the Company, and has all requisite corporate
power and authority to own its properties and conduct its business.
(b) to such counsel's knowledge, except for matters disclosed in the
SEC Documents, there is no action, proceeding or investigation pending, or
threatened against the Company which might result, either individually or in the
aggregate, in any material adverse change in the business or financial condition
of the Company.
(c) to such counsel's knowledge, except for matters disclosed in the
SEC Documents, the Company is not a party to or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency or
instrumentality.
(d) the shares of Common Stock issuable upon the conversion of the
Debentures, based on the Bid Price on the day of such closing, have been duly
authorized and upon issuance will be validly issued under the laws of the
Company's state of incorporation.
(e) this Agreement, the issuance of the Debentures hereunder, and
the shares of Common Stock issuable upon conversion of the Debentures, have been
duly approved by all required corporate action and that all such shares of
Common Stock, upon execution and delivery that shall be validly issued and
outstanding, fully paid and nonassessable.
(f) the issuance of the Debentures and the shares of Common Stock
issuable upon conversion thereof, does not violate the applicable listing
agreement between the Company and any securities exchange or market on which the
Company's securities are listed.
A-15
<PAGE>
(g) the authorized capital stock of the Company consists of
50,000,000 shares of Common Stock, $0.001 par value per share, and 10,000,000
shares of preferred stock.
(h) the Common Stock is registered pursuant to Section 12(g) of the
Securities and Exchange Act of 1934
Section 4.27 OPINION OF COUNSEL. The Company will obtain for the Investor,
at the Company's expense, any and all opinions of counsel which may be
reasonably required in order to convert, exercise or sell the securities
issuable hereunder, including, but not limited to, obtaining for Investors, at
the Company's expense an opinion of counsel, subject only to receipt of a Notice
of Conversion as set forth in the Debenture, duly executed by the Investor which
shall be satisfactory to the Transfer Agent, directing the Transfer Agent to
remove the self-liquidating legend.
Section 4.28 DILUTION. The Company is aware and acknowledges that
conversion of the Debentures could cause dilution to existing shareholder and
could significantly increase the outstanding number of shares of Common Stock.
Section 4.29 TAX STATUS. The Company and each of its subsidiaries has made
or filed all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
ARTICLE V
INDEMNIFICATION
Section 5.1 INDEMNIFICATION. Each of the Company and the Investors agree
to indemnify the other and to hold the other harmless from and against any and
all losses, damages, liabilities, costs and expenses (Including reasonable
attorney's fees) which the other may sustain or incur in connection with the
breach by the indemnifying party of any representation, warranty or covenant
made by it in this Agreement.
ARTICLE VI
COVENANTS OF THE COMPANY
A-16
<PAGE>
Section 6.1 REGISTRATION RIGHTS. The Company shall cause the Registration
Rights Agreement to remain in full force and effect and the Company shall comply
in all material respects with the terms thereof.
Section 6.2 RESERVATION OF COMMON STOCK. The Company shall authorize and
reserve and keep available at all times, free of preemptive rights, a shares of
Common Stock as shall be necessary for the purpose of enabling the Company to
satisfy any obligation to issue shares of Common Stock underlying the
Debentures, such number of shares of Common Stock to be reserved shall be
calculated based upon the Bid Price of the Common Stock from time to time while
such Debentures are outstanding. The number of shares so reserved from time to
time, while such Debentures are outstanding, as theretofore increased or reduced
as hereinafter provided, may be limited to shares issuable under outstanding
Debentures at the Bid Price reduced by the number of shares actually delivered
pursuant to the Debentures and the number of shares so reserved shall be
increased or decreased to reflect potential increases or decreases in the Common
Stock that the Company may thereafter be so obligated to issue.
Section 6.3 LISTING OF COMMON STOCK. The Company further agrees, if the
Company applies to have the Common Stock traded on any Principal Market, other
than the Nasdaq Small Cap Market, it will include in such application the shares
of Common Stock issuable upon the conversion of the Debentures and will take
such other action as is necessary or desirable in the opinion of the investor to
cause the Common Stock to be listed on such other Principal Market as promptly
as possible and will use commercially reasonable efforts to comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the Principal Market.
Section 6.4 EXCHANGE ACT REGISTRATION. The Company will cause its Common
Stock to continue to be registered under Section 12(g) of the Exchange Act, will
use its best efforts to comply in all respects with its reporting and filing
obligations under the Exchange Act, and will not take any action or file any
document (whether or not permitted by Exchange Act or the rules there under to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under said Act.
Section 6.5 LEGENDS. The certificates evidencing the Common Stock to be
sold by the Investor pursuant to Section 9.1 shall be free of legends, except as
set forth herein.
Section 6.6 CORPORATE EXISTENCE. The Company will take all steps necessary
to preserve and continue the corporate existence of the Company.
Section 6.7 NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION: SUSPENSION OF
RIGHT TO MAKE AN ADVANCE. The Company will immediately notify the Investor upon
its becoming aware of the occurrence of any of the following events in respect
of a registration statement or related prospectus relating to an offering of
Registrable Securities; (i) receipt of any request for additional information by
the SEC or any other federal or state governmental authority during the period
of effectiveness of the Registration Statement for amendments or supplements to
the registration statement or related prospectus; (ii) the issuance by the SEC
or any other federal or state governmental authority of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
A-17
<PAGE>
any proceedings for that purpose; (iii) receipt of any notification with respect
to the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
that makes any statement made in the Registration Statement or related
prospectus of any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the Registration Statement, related prospectus or documents so that,
in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (v) the Company's
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate; and the Company will promptly make available to
the Investor any such supplement or amendment to the related prospectus. The
Company shall not deliver to the Investor any Advance Notice during the
continuation of any of the foregoing events.
Section 6.8 EXPECTATIONS REGARDING ADVANCE NOTICES. Within ten (10) days
after the commencement of each calendar quarter occurring subsequent to the
commencement of the Commitment Period, the Company must notify the Investor, in
writing, as to its reasonable expectations as to the dollar amount it intends to
raise during such calendar quarter, if any, through the issuance of Advance
Notices. Such notification shall constitute only the Company's good faith
estimate and shall in no way obligate the Company to raise such amount, or any
amount, or otherwise limit its ability to deliver Advance Notices. The failure
by the Company to comply with this provision can be cured by the Company's
notifying the Investor, in writing, at any time as to its reasonable
expectations with respect to the current calendar quarter.
Section 6.9 CONSOLIDATION; MERGER. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all the assets of the Company to
another entity (a "CONSOLIDATION EVENT") unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument the
obligation to deliver to the investor such shares of stock and/or securities as
the Investor is entitled to receive pursuant to this Agreement.
Section 6.10 ISSUANCE OF DEBENTURES. The sale of the Debentures and the
issuance of the shares of Commons Stock pursuant to conversion hereof shall be
made in accordance with the provision and requirements of Section 4(2) of the
Securities Act, or Regulation D and any applicable state securities law.
ARTICLE VII
CONDITIONS FOR ADVANCE AND CONDITIONS TO CLOSING
Section 7.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO ISSUE
AND SELL THE DEBENTURES. The obligation hereunder of the Company to issue and
sell the Debentures to the Investor incident to each Closing is subject to the
A-18
<PAGE>
satisfaction, or waiver by the Company, at or before each such Closing, of each
of the conditions set forth below.
(a) ACCURACY OF THE INVESTOR'S REPRESENTATION AND WARRANTIES. The
representations and warranties of the Investor shall be true and correct in all
material respects as of the date of this Agreement and as of the date of each
such Closing as though made at each such time.
(b) PERFORMANCE BY THE INVESTOR. The Investor shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Investor at or prior to such Closing.
Section 7.2 CONDITIONS PRECEDENT TO THE RIGHT OF THE COMPANY TO DELIVER AN
ADVANCE NOTICE AND THE OBLIGATION OF THE INVESTOR TO PURCHASE DEBENTURES. The
right of the Company to deliver an Advance Notice and the obligation of the
Investor hereunder to acquire and pay for the Debentures incident to a Closing
is subject to the satisfaction or waiver by the Investor, on (i) the date of
delivery of such Advance Notice and (ii) the applicable Advance Date (each a
"CONDITION SATISFACTION DATE"), of each of the following conditions:
(a) REGISTRATION OF THE COMMON STOCK WITH THE SEC. The Company shall
have filed with the SEC a Registration Statement with respect to the resale of
the Registrable Securities in accordance with the terms of the Registration
Rights Agreement. As set forth in the Registration Rights Agreement, the
Registration Statement shall have previously become effective and shall remain
effective on each Condition Satisfaction Date and (i) neither the Company nor
the Investor shall have received notice that the SEC has issued or intends to
issue a stop order with respect to the Registration Statement or that the SEC
has suspended or withdrawn the effectiveness of the Registration Statement,
either temporarily or permanently, or intends or has threatened to do so (unless
the SEC's concerns have been addressed and the Investor is reasonably satisfied
that the SEC no longer is considering or intends to take such action), and (ii)
no other suspension of the use or withdrawal of the effectiveness of the
Registration Statement or related prospectus shall exist. The Registration
Statement must have been declared effective by the SEC prior to the first
Advance Date.
(b) AUTHORITY. The Company shall have obtained all permits and
qualifications required by any applicable state in accordance with the
Registration Rights Agreement for the offer and sale of the Debentures and the
shares of Common Stock issuable upon the conversion thereof, or shall have the
availability of exemptions therefrom. The sale and issuance of the Debentures
and the shares of Common Stock issuable upon the conversion thereof shall be
legally permitted by all laws and regulations to which the Company is subject.
(c) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company shall be true and correct in all
material respects as of each Condition Satisfaction Date as though made at each
such time (except for representations and warranties specifically made as of a
particular date) with respect to all periods, and as to all events and
circumstances occurring or existing to and including each Condition Satisfaction
A-19
<PAGE>
Date, except for any conditions which have temporarily caused any
representations or warranties herein to be incorrect and which have been
corrected with no continuing impairment to the Company or the Investor.
(d) PERFORMANCE BY THE COMPANY. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement, the Debenture and the Registration
Rights Agreement to be performed, satisfied or complied with by the Company at
or prior to each Condition Satisfaction Date.
(e) NO INJUNCTION. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits or directly and adversely affects any of the transactions contemplated
by this Agreement, and no proceeding shall have been commenced that may have the
effect of prohibiting or adversely affecting any of the transactions
contemplated by this Agreement.
(f) ADVERSE CHANGES. Since the date of filing of the Company's most
recent SEC Document, no event that had or is reasonably likely to have a
Material Adverse Effect has occurred.
(g) NO SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK. The
trading of the Common Stock is not suspended by the SEC or the Principal Market
(if the Common Stock is traded on a Principal Market). The issuance of shares of
Common Stock with respect to the applicable Closing, if any, shall not violate
the shareholder approval requirements of the Principal Market (if the Common
Stock is traded on a Principal market). The Company shall not have received any
notice threatening the listing of the Common Stock on the Principal Market (if
the Common Stock is traded on a Principal Market).
(h) MAXIMUM ADVANCE AMOUNT. The amount of the advance requested by
the Company does not exceed the Maximum Advance Amount.
(i) NO KNOWLEDGE. The Company has no knowledge of any event more
likely than not to have the effect of causing such Registration Statement to be
suspended or otherwise ineffective (which event is more likely than not to occur
within the fifteen (15) Trading Days following the Trading Day on which such
Notice is deemed delivered).
(j) ESCROW AGREEMENT. The parties hereto shall have entered into the
Escrow Agreement in the form annexed hereto.
(k) OTHER. On each Condition Satisfaction Date, the Investor shall
have received and been reasonably satisfied with such other certificates and
documents as shall have been reasonably requested by the Investor in order for
the Investor to confirm the Company's satisfaction of the conditions set forth
in this Section 7.2, including, without limitation, a certificate executed in
either case by an executive officer of the Company and to the effect that all
the conditions to such Closing shall have been satisfied as at the date of each
such certificate.
A-20
<PAGE>
ARTICLE VIII
DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION
Section 8.1 DUE DILIGENCE REVIEW. Prior to the filing of the Registration
Statement the Company shall make available for inspection and review by the
Investor, advisors to and representatives of the Investor, any underwriter
participating in any disposition of the Registrable Securities on behalf of the
Investor pursuant to the Registration Statement, any such registration statement
or amendment or supplement thereto or any blue sky, NASD or other filing, all
financial and other records, all SEC Documents and other filings with the SEC,
and all other corporate documents and properties of the Company as may be
reasonably necessary for the purpose of such review, and cause the Company's
officers, directors and employees to supply all such information reasonably
requested by the Investor or any such representative, advisor or underwriter in
connection with such Registration Statement (including, without limitation, in
response to all questions and other inquiries reasonably made or submitted by
any of them), prior to and from time to time after the filing and effectiveness
of the Registration Statement for the sole purpose of enabling the Investor and
such representatives, advisors and underwriters and their respective accountants
and attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of the Registration Statement.
Section 8.2 NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
(a) The Company shall not disclose non-public information to the
Investor, advisors to or representatives of the Investor unless prior to
disclosure of such information the Company identifies such information as being
non-public information and provides the Investor, such advisors and
representatives with the opportunity to accept or refuse to accept such
non-public information for review. The Company may, as a condition to disclosing
any non-public information hereunder, require the Investor's advisors and
representatives to enter into a confidentiality agreement in form reasonably
satisfactory to the Company and the Investor.
(b) Nothing herein shall require the Company to disclose non-public
information to the Investor or its advisors or representatives, and the Company
represents that it does not disseminate non-public information to any investors
who purchase stock in the Company in a public offering, to money managers or to
securities analysts, provided, however, that notwithstanding anything herein to
the contrary, the Company will, as hereinabove provided, immediately notify the
advisors and representatives of the Investor and, if any, underwriters, of any
event or the existence of any circumstance (without any obligation to disclose
the specific event or circumstance) of which it becomes aware, constituting
non-public information (whether or not requested of the Company specifically or
generally during the course of due diligence by such persons or entities),
which, if not disclosed in the prospectus included in the Registration Statement
would cause such prospectus to include a material misstatement or to omit a
material fact required to be stated therein in order to make the statements,
therein, in light of the circumstances in which they were made, not misleading.
Nothing contained in this Section 8.2 shall be construed to mean that such
persons or entities other than the Investor (without the written consent of the
Investor prior to disclosure of such information) may not obtain non-public
information in the course of conducting due diligence in accordance with the
terms of this Agreement and nothing herein shall prevent any such persons or
A-21
<PAGE>
entities from notifying the Company of their opinion that based on such due
diligence by such persons or entities, that the Registration Statement contains
an untrue statement of material fact or omits a material fact required to be
stated in the Registration Statement or necessary to make the statements
contained therein, in light of the circumstances in which they were made, not
misleading.
ARTICLE IX
LEGENDS
Section 9.1 LEGENDS. The Debentures will bear, and the Common Stock will
also bear a similar a legend, substantially in the form below (the "LEGEND"):
THESE SECURITIES AND THE SHARES ISSUABLE UPON CONVERSION HEREOF,
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE
AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF
COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED.
ARTICLE X
CHOICE OF LAW/JURISDICTION
Section 10.1 CHOICE OF LAW; VENUE; JURISDICTION. This Agreement shall be
governed by and interpreted in accordance with the laws of the State of New York
without regard to the principles of conflict of laws. The parties further agree
that any action between them shall be heard in New York City, New York, and
expressly consent to the jurisdiction and venue of the Supreme Court of New York
and the United States District Court for the Southern District of New York for
the adjudication of any civil action asserted pursuant to this Paragraph.
ARTICLE XI
ASSIGNMENT; TERMINATION
Section 11.1 ASSIGNMENT. Neither this Agreement nor any rights of the
Investor or the Company hereunder may be assigned by either party to any other
person. Notwithstanding the foregoing, (a) the provisions of this Agreement
shall insure to the benefit of, and be enforceable by, any permitted transferee
of any of the Debentures purchased or acquired by the Investor hereunder with
respect to the Common Stock held by such person, and (b) upon the prior written
consent of the Company, which consent shall not unreasonably be withheld, the
Investor's interest in this Agreement may be assigned at any time, in whole or
in part, to any other person or entity (including any affiliate of the Investor)
who agrees to make the representations and warranties contained in Article III
and who agrees to be bound by the covenants of Article V.
A-22
<PAGE>
Section 11.2 TERMINATION. The obligations of the Investor to make Advances
under Article II hereof shall terminate three (3) years after the date hereof.
ARTICLE XII
NOTICES
Section 12.1 NOTICES. All notices, demands, requests, consents, approvals
and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice.
Any notice or other communication requested or permitted to be given
hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designed below (if delivered on a business day
during normal business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received) or (b) on upon
actual receipt of any mailing or delivery, whichever shall first occur. The
addresses for such communications shall be:
If to the Company, to: Avid Sportswear and Golf Corp.
22 South Links Avenue - Suite 204
Sarasota, Fl 34236
Attention: Earl Ingarfield
President and Chief Executive
Officer
Telephone: (941) 330-8051
Facsimile: (941) 366-6017
with a copy to: Kirkpatrick & Lockhart LLP
201 South Biscayne Blvd. - Suite 2000
Miami, Fl 33131
Attention: Clayton E. Parker, Esq.
Telephone: (305) 539-3300
Facsimile: (305) 358-7095
If to the Transfer Agent, to: Transfer On Line
2227 S.W. Pine Street, Suite 300
Portland, Oregon 97204
Attn: Gina Beckett
If to the Investor, at the address listed on Schedule A.
A-23
<PAGE>
Either party hereto may from time to time change its address or facsimile
number for notices under this Section 12.1 by giving at least ten (10) days
prior written notice of such changed address or facsimile number to the other
party hereto.
ARTICLE XIII
MISCELLANEOUS
Section 13.1 COUNTERPARTS/FACSIMILE/AMENDMENTS. This Agreement may be
executed in multiple counterparts, each of which may be executed by less than
all of the parties and shall be deemed to be an original instrument which shall
be enforceable against the parties actually executing such counterparts and all
of which together shall constitute one and the same instrument. Except as
otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents shall be as effective and
enforceable as the original. This Agreement may be amended only by a writing
executed by all parties.
Section 13.2 ENTIRE AGREEMENT. This Agreement, the Exhibits or Attachments
hereto, which include but are not limited to the Debenture, the Escrow
Agreement, and the Registration Rights Agreement set forth the entire agreement
and understanding of the parties relating to the subject matter hereof and
supersedes all prior and contemporaneous agreements, negotiations and
understanding between the parties, both oral and writing relating to the line of
credit.
Section 13.3 REPORTING ENTITY FOR THE COMMON STOCK. The reporting entity
relied upon for the determination of the trading price or trading volume of the
Common Stock on any given Trading Day for the purposes of this Agreement shall
be Bloomberg, L.P. or any successor thereto. The written mutual consent of the
Investor and the Company shall be required to employ any other reporting entity.
Section 13.4 FEES AND EXPENSES.
(a) LEGAL FEES. Each of the parties shall pay its own fees and
expenses (including the fees of any attorneys, accountants, appraisers or others
engaged by such party) in connection with this Agreement and the transactions
contemplated hereby, except that the Company will pay the sum of Twenty Thousand
Dollars ($20,000), to Butler Gonzalez LLP for legal, administrative, and escrow
fees, upon execution of this Agreement. Subsequently on each advance date, the
Company will pay Butler Gonzalez LLP, the sum of Five Hundred ($500) Dollars
for legal, administrative and escrow fees.
(b) PLACEMENT AGENT FEES. Upon the execution of the Agreement the
Company will issue Warrants to purchase one million six hundred eighty thousand
(1,680,000) shares of Common Stock to the May Davis Group (the "PLACEMENT
AGENT"). On each advance date the Company shall pay the Placement Agent an
amount equal to ten percent (10%) of the advance. The Company hereby agrees that
if such payment, as is described above, is not made by the Company on the
Advance Date, such payment will be made at the direction of the Investor as
outlined and mandated by Section 2.3 of this Agreement.
A-24
<PAGE>
Section 13.5 BROKERAGE. Each of the parties hereto represents that it has
had no dealings in connection with this transaction with any finder or broker
who will demand payment of any fee or commission from the other party, other
than the Placement Agent. The Company on the one hand, and the Investor, on the
other hand, agree to indemnify the other against and hold the other harmless
from any and all liabilities to any person claiming brokerage commissions or
finder's fees on account of services purported to have been rendered on behalf
of the indemnifying party in connection with this Agreement or the transactions
contemplated hereby.
Section 13.6 CONFIDENTIALITY. If for any reason the transactions
contemplated by this Agreement are not consummated, each of the parties hereto
shall keep confidential any information obtained from any other party (except
information publicly available or in such party's domain prior to the date
hereof, and except as required by court order) and shall promptly return to the
other parties all schedules, documents, instruments, work papers or other
written information without retaining copies thereof, previously furnished by it
as a result of this Agreement or in connection herein.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
A-25
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Line of Credit
Agreement to be executed by the undersigned, thereunto duly authorized, as of
the date first set forth above.
COMPANY:
AVID SPORTSWEAR AND GOLF CORP.
By: ______________________________________
Name: Earl Ingarfield
Title: President and Chief Executive
Officer
INVESTOR
By: ________________________________
Name:
A-26
<PAGE>
APPENDIX "B"
THIS NOTE, AND THE SECURITIES INTO WHICH IT IS CONVERTIBLE (COLLECTIVELY, THE
"SECURITIES"), HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THE SECURITIES
ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION UNDER REGULATION S
AND/OR REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"). THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED OR SOLD IN
THE UNITED STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S
PROMULGATED UNDER THE ACT) UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT,
PURSUANT TO REGULATION S AND/OR REGULATION D OR PURSUANT TO AVAILABLE EXEMPTIONS
FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND THE COMPANY WILL BE PROVIDED
WITH OPINION OF COUNSEL OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE
TO CONFIRM THAT SUCH EXEMPTIONS ARE AVAILABLE. FURTHER HEDGING TRANSACTIONS
INVOLVING THE SECURITIES MAY NOT BE MADE EXCEPT IN COMPLIANCE WITH THE ACT.
DEBENTURE
AVID SPORTSWEAR & GOLF CORP.
6% CONVERTIBLE DEBENTURE
DUE NOVEMBER ___, 2005
No. ___ $__________
This Debenture is issued by AVID SPORTSWEAR & GOLF CORP., a Nevada
corporation (the "COMPANY"), to ____________________________ (together with its
permitted successors and assigns, the "HOLDER") pursuant to exemptions from
registration under the Securities Act of 1933, as amended.
ARTICLE I.
SECTION 1.01 PRINCIPAL AND INTEREST. For value received, on November ___,
2000, the Company hereby promises to pay to the order of the Holder in lawful
money of the United States of America and in immediately available funds the
principal sum of (US $), together with interest on the unpaid principal of this
Debenture at the rate of six percent (6%) per year (computed on the basis of a
365-day year and the actual days elapsed) from the date of this Debenture until
paid. At the Company's option, the entire principal amount and all accrued
interest shall be either (a) paid to the Holder on the five (5) year anniversary
from the date hereof or (b) converted in accordance with Section 4.02 herein.
<PAGE>
SECTION 1.02 OPTIONAL CONVERSION. The Holder is entitled to convert at any
time and from time to time, until payment in full of this Debenture, all or any
part of the principal amount of the Debenture, plus accrued interest, into
shares (the "CONVERSION SHARES") of the Company's common stock, $0.001 par value
("COMMON STOCK"), at the price per share (the "CONVERSION PRICE") equal to an
amount equal to eighty percent (80%) of the lowest Closing Bid Price of the
Common Stock for the twenty (20) trading days immediately preceding the
Conversion Date (as defined herein). Subparagraphs (a) and (b) above are
individually referred to as a "CONVERSION PRICE". As used herein, "PRINCIPAL
MARKET" shall mean the Nasdaq Bulletin Board System, Nasdaq SmallCap Market, or
American Stock Exchange. If the Common Stock is not traded on a Principal
Market, the Closing Bid Price shall mean, the reported Closing Bid Price for the
Common Stock, as furnished by the National Association of Securities Dealers,
Inc., for the applicable periods. No fraction of shares or scrip representing
fractions of shares will be issued on conversion, but the number of shares
issuable shall be rounded to the nearest whole share. To convert this Debenture,
the Holder hereof shall deliver written notice thereof, substantially in the
form of EXHIBIT "A" to this Debenture, with appropriate insertions (the
"CONVERSION NOTICE"), to the Company at its address as set forth herein. The
date upon which the conversion shall be effective (the "CONVERSION DATE") shall
be deemed to be the date set forth in the Conversion Notice, provided that the
Company or the transfer agent delivers the Conversion Shares within ten (10)
business days after receipt of a Conversion Notice. If such Conversion Shares
are not delivered within such ten (10) business day period, the Conversion Date
shall be the date such shares are actually delivered to the Holder.
SECTION 1.03 RESERVATION OF COMMON STOCK. The Company shall reserve and
keep available out of its authorized but unissued shares of Common Stock, solely
for the purpose of effecting the conversion of this Debenture, such number of
shares of Common Stock as shall from time to time be sufficient to effect such
conversion, based upon the Conversion Price. If at any time the Company does not
have a sufficient number of Conversion Shares authorized and available, then the
Company shall call and hold a special meeting of its stockholders within sixty
(60) days of that time for the sole purpose of increasing the number of
authorized shares of Common Stock.
SECTION 1.04 REGISTRATION RIGHTS. The Company is obligated to register the
resale of the Conversion Shares under the Securities Act of 1933, as amended,
pursuant to the terms of a Registration Rights Agreement, between the Company
and the Holder of even date herewith (the "REGISTRATION RIGHTS AGREEMENT").
SECTION 1.05 INTEREST PAYMENTS. The interest so payable will be paid at the
time of maturity or conversion to the person in whose name this Debenture is
registered. At the time such interest is payable, the Company, in its sole
discretion, may elect to pay interest in cash (via wire transfer or certified
funds) or in the form of Common Stock. In the event of default, as described in
Article III Section 3.01 hereunder, the Holder may elect that the interest be
paid in cash (via wire transfer or certified funds) or in the form of Common
Stock. If paid in the form of Common Stock, the amount of stock to be issued
will be calculated as follows: the value of the stock shall be the Closing Bid
Price on: (i) the date the interest payment is due; or (ii) if the interest
payment is not made when due, the date the interest payment is made. A number of
shares of Common Stock with a value equal to the amount of interest due shall be
issued. No fractional shares will be issued; therefore, in the event that the
B-2
<PAGE>
value of the Common Stock per share does not equal the total interest due, the
Company will pay the balance in cash.
SECTION 1.06 PAYING AGENT AND REGISTRAR. Initially, the Company will act as
paying agent and registrar. The Company may change any paying agent, registrar,
or Company-registrar by giving the Holder not less than ten (10) business days'
written notice of its election to do so, specifying the name, address, telephone
number and facsimile number of the paying agent or registrar. The Company may
act in any such capacity.
SECTION 1.07 SUBORDINATED NATURE OF DEBENTURE. This Debenture and all
payments hereon, including principal or interest, shall be subordinate and
junior in right of payment to all accounts payable of the Company incurred in
the ordinary course of business and/or bank debt of the Company .
ARTICLE II.
SECTION 2.01 AMENDMENTS AND WAIVER OF DEFAULT. The Debenture may be amended
with the consent of the Holder. Without the consent of the Holder, the Debenture
may be amended to cure any ambiguity, defect or inconsistency, to provide for
assumption of the Company obligations to the Holder or to make any change that
does not adversely affect the rights of the Holder.
ARTICLE III.
SECTION 3.01 EVENTS OF DEFAULT. An Event of Default is defined as follows:
(a) failure by the Company to pay amounts due hereunder within fifteen (15)
business days of the date of maturity of this Debenture; (b) failure by the
Company to advise its transfer agent to issue Common Stock to the Holder within
ten (10) business days of the Company's receipt of the attached Notice of
Conversion from Holder; (c) failure by the Company for thirty (30) business days
after notice to it to comply with any of its other agreements in the Debenture;
(d) events of bankruptcy or insolvency; (e) a breach by the Company of its
obligations under the Registration Rights Agreement which is not cured by the
Company within fifteen (15) business days after receipt of written notice
thereof. The Holder may not enforce the Debenture except as provided herein.
SECTION 3.02 FAILURE TO ISSUE UNRESTRICTED COMMON STOCK. As indicated in
Article III Section 3.01, a breach by the Company of its obligations under the
Registration Rights Agreement shall be deemed an Event of Default, which if not
cured within fifteen business (15) days, shall entitle the Holder accelerated
full repayment of all debentures outstanding. The Company acknowledges that
failure to honor a Notice of Conversion shall cause hardship to the Holder.
ARTICLE IV.
SECTION 4.01 RIGHTS AND TERMS OF CONVERSION. This Debenture, in whole or in
part, may be converted at any time following the date of closing, into shares of
Common Stock at a price equal to the Conversion Price as described in Section
1.02 above.
B-3
<PAGE>
SECTION 4.02 RE-ISSUANCE OF DEBENTURE. When the Holder elects to convert a
part of the Debenture, then the Company shall reissue a new Debenture in the
same form as this Debenture to reflect the new principal amount.
SECTION 4.03 LIMITATION ON RIGHT AND POWER TO EXERCISE. Any provision in
this Debenture or any other document to the contrary not withstanding, the
Holder shall not have the right or power to convert this Debenture into Common
Stock, either in whole or in part, and any attempt to do so shall be void, if,
after having given effect to such conversion, the Holder shall be or shall be
deemed to be the beneficial owner of ten percent (10%) or more of the then
outstanding Common Stock within the meaning or for the purposes of Section 13(d)
or 13(g) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
Act"), or as the term "BENEFICIAL OWNER" is defined in Rule 13d-3 of the Act.
SECTION 4.04 TERMINATION OF CONVERSION RIGHTS. The Holder's right to
convert the Debenture into the Common Stock in accordance with paragraph 4.01
shall terminate on the date that is the five (5) year anniversary from the date
hereof and this Debenture shall be automatically converted on that date in
accordance with the formula set forth in Section 4.01 hereof, and the
appropriate shares of Common Stock and amount of interest shall be issued to the
Holder.
ARTICLE V.
SECTION 5.01 ANTI-DILUTION. In the event that the Company shall at any time
subdivide the outstanding shares of Common Stock, or shall issue a stock
dividend on the outstanding Common Stock, the Conversion Price in effect
immediately prior to such subdivision or the issuance of such dividend shall be
proportionately decreased, and in the event that the Company shall at any time
combine the outstanding shares of Common Stock, the Conversion Price in effect
immediately prior to such combination shall be proportionately increased,
effective at the close of business on the date of such subdivision, dividend or
combination as the case may be.
SECTION 5.02 CONSENT OF HOLDER TO SELL COMMON STOCK. So long as any of the
principal of or interest on this Note remains unpaid and unconverted, the
Company shall not, without the prior consent of the Holder, issue or sell (i)
any Common Stock without consideration or for a consideration per share less
than its fair market value determined immediately prior to its issuance, or (ii)
issue or sell any warrant, option, right, contract, call, or other security or
instrument granting the holder thereof the right to acquire Common Stock without
consideration or for a consideration per share less than such Common Stock's
fair market value determined immediately prior to its issuance.
ARTICLE VI.
SECTION 6.01 NOTICE. Notices regarding this Debenture shall be sent to the
parties at the following addresses, unless a party notifies the other parties,
in writing, of a change of address:
If to the Company: Avid Sportswear & Golf Corp.
22 South Links Avenue, Suite 204
Sarasota, Florida 34236
Attention: Earl T. Ingarfield
B-4
<PAGE>
With a copy to: Clayton Parker, Esq.
Kirkpatrick & Lockhart LLP
201 South Biscayne Boulevard, Suite 2000
Miami, Florida 33131
If to Holder: ______________________________________________
______________________________________________
______________________________________________
______________________________________________
SECTION 6.02 GOVERNING LAW. This Debenture shall be deemed to be made under
and shall be construed in accordance with the laws of the State of New York
without giving effect to the principals of conflict of laws thereof. Each of the
parties consents to the jurisdiction of the U.S. District Court sitting in the
Southern District of the State of New York or the state courts of the State of
New York sitting in Manhattan in connection with any dispute arising under this
Debenture and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on FORUM NON CONVENIENS to the bringing
of any such proceeding in such jurisdictions.
SECTION 6.03 SEVERABILITY. The invalidity of any of the provisions of this
Debenture shall not invalidate or otherwise affect any of the other provisions
of this Debenture, which shall remain in full force and effect.
SECTION 6.04 ENTIRE AGREEMENT AND AMENDMENTS. This Debenture represents the
entire agreement between the parties hereto with respect to the subject matter
hereof and there are no representations, warranties or commitments, except as
set forth herein. This Debenture may be amended only by an instrument in writing
executed by the parties hereto.
SECTION 6.05 COUNTERPARTS. This Debenture may be executed in multiple
counterparts, each of which shall be an original, but all of which shall be
deemed to constitute on instrument.
IN WITNESS WHEREOF, with the intent to be legally bound hereby, the
Company as executed this Debenture as of the date first written above.
AVID SPORTSWEAR & GOLF CORP.
By:______________________________________
Name: Earl T. Ingarfield
Title: Chief Executive Officer and President
B-5
<PAGE>
EXHIBIT "A"
NOTICE OF CONVERSION
---------------------
(TO BE EXECUTED BY THE HOLDER IN ORDER TO CONVERT THE NOTE)
TO:
The undersigned hereby irrevocably elects to convert $ of the principal
amount of the above Note into Shares of Common Stock of Avid Sportswear & Golf
Corp. according to the conditions stated therein, as of the Conversion Date
written below.
CONVERSION DATE:
APPLICABLE CONVERSION PRICE:
SIGNATURE:
NAME:
ADDRESS:
A-1
<PAGE>
APPENDIX "C"
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of November
____, 2000, by and among AVID SPORTSWEAR AND GOLF CORP., a Nevada corporation,
with its principal office located at 22 South Links Avenue, Suite 204, Sarasota,
Florida (the "COMPANY"), and the undersigned investors (each, an "INVESTOR" and
collectively, the "INVESTORS").
WHEREAS:
A. The Company and the Investor identified on the line of credit agreement
(the "LINE OF CREDIT INVESTOR") have entered into a Line of Credit, dated as of
the date hereof (the "LINE OF CREDIT AGREEMENT"), pursuant to which the Company
shall issue and sell to the Investor, from time to time as provided in the Line
of Credit Agreement, and the Investor shall purchase up to Ten Million
($10,000,000) Dollars of Debentures (the "LINE OF CREDIT CONVERTIBLE
DEBENTURES")for a total purchase price of Ten Million ($10,000,000) Dollars; and
B. In connection with the sale of the Line of Credit Debentures the
Company is granting to the Line of Credit Investor the right to purchase upon
the conversion of Line of Credit Convertible Debentures the number of shares of
common stock of the Company, par value $0.001 per share (the "COMMON STOCK"
equal to (i) the principal amount of the Debentures (ii) divided by 80% of the
Market Price (as defined in the Line of Credit Agreement) of the Common Stock.
C. To induce the Investors to execute and deliver the Line of Credit
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations there
under, or any similar successor statute (collectively, the "1933 ACT"), and
applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Investors
hereby agree as follows:
1. DEFINITIONS.
-----------
As used in this Agreement, the following terms shall have the following
meanings:
a. "INVESTOR" means an Investor and any transferee or assignee
thereof to whom an Investor assigns its rights under this Agreement and who
agrees to become bound by the provisions of this Agreement in accordance with
Section 9.
b. "PERSON" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof or a governmental agency.
c. "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing one or more Registration
<PAGE>
Statements (as defined below) in compliance with the 1933 Act and pursuant to
Rule 415 under the 1933 Act or any successor rule providing for offering
securities on a continuous or delayed basis ("RULE 415"), and the declaration or
ordering of effectiveness of such Registration Statement(s) by the United States
Securities and Exchange Commission (the "SEC").
d. "REGISTRABLE SECURITIES" means the shares of Common Stock
issuable to Investors pursuant to the Credit Agreement.
e. "REGISTRATION STATEMENT" means a registration statement under the
1933 Act which covers the Registrable Securities.
2. REGISTRATION.
------------
a. MANDATORY REGISTRATION. The Company shall prepare and file with
the SEC a Registration Statement on Form S-3 covering the resale of all of the
Registrable Securities. In the event that Form S-3 is unavailable for such a
registration, the Company shall use such other form as is available for such a
registration. The Company shall cause such Registration Statement to be declared
effective by the SEC prior to the first sale to Investors of the Company's
Common Stock pursuant to the Credit Agreement.
b. INELIGIBILITY FOR FORM S-3. In the event that Form S-3 is not
available for the registration of Registrable Securities hereunder, the Company
shall (i) register the sale of the Registrable Securities on another appropriate
form and (ii) undertake to register the Registrable Securities on Form S-3 as
soon as such form is available, provided that the Company shall maintain the
effectiveness of the Registration Statement then in effect until such time as a
Registration Statement on Form S-3 covering the Registrable Securities has been
declared effective by the SEC.
c. SUFFICIENT NUMBER OF SHARES REGISTERED. In the event the number
of shares available under a Registration Statement filed pursuant to Section
2(a) is insufficient to cover all of the Registrable Securities which Investors
have purchased pursuant to the Credit Agreement, the Company shall amend the
Registration Statement, or file a new Registration Statement (on the short form
available therefore, if applicable), or both, so as to cover all of such
Registrable Securities which Investors have purchased pursuant to the Credit
Agreement as soon as practicable, but in any event not later than fifteen (15)
days after the necessity therefore arises. The Company shall use it best efforts
to cause such amendment and/or new Registration Statement to become effective as
soon as practicable following the filing thereof. For purposes of the foregoing
provision, the number of shares available under a Registration Statement shall
be deemed "insufficient to cover all of the Registrable Securities" if at any
time the number of Registrable Securities issuable on an Advance Notice Date is
greater than the number of shares available for resale under such Registration
Statement.
3. RELATED OBLIGATIONS.
-------------------
a. The Company shall keep the Registration Statement effective
pursuant to Rule 415 at all times until the date on which the Investor shall
have sold all the Registrable Securities covered by such Registration Statement
(the "REGISTRATION PERIOD"), which Registration Statement (including any
C-2
<PAGE>
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with such Registration
Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
under the 1933 Act, as may be necessary to keep such Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the 1933 Act with respect to the disposition of
all Registrable Securities of the Company covered by such Registration Statement
until such time as all of such Registrable Securities shall have been disposed
of in accordance with the intended methods of disposition by the seller or
sellers thereof as set forth in such Registration Statement. In the case of
amendments and supplements to a Registration Statement which are required to be
filed pursuant to this Agreement (including pursuant to this Section 3(b)) by
reason of the Company's filing a report on Form 10-K, Form 10-Q or Form 8-K or
any analogous report under the Securities Exchange Act of 1934, as amended (the
"1934 ACT"), the Company shall have incorporated such report by reference into
the Registration Statement, if applicable, or shall file such amendments or
supplements with the SEC on the same day on which the 1934 Act report is filed
which created the requirement for the Company to amend or supplement the
Registration Statement.
c. The Company shall furnish to each Investor whose Registrable
Securities are included in any Registration Statement, without charge, (i) at
least one copy of such Registration Statement as declared effective by the SEC
and any amendment(s) thereto, including financial statements and schedules, all
documents incorporated therein by reference, all exhibits and each preliminary
prospectus, (ii) ten (10) copies of the final prospectus included in such
Registration Statement and all amendments and supplements thereto (or such other
number of copies as such Investor may reasonably request) and (iii) such other
documents as such Investor may reasonably request from time to time in order to
facilitate the disposition of the Registrable Securities owned by such Investor.
d. The Company shall use its best efforts to (i) register and
qualify the Registrable Securities covered by a Registration Statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States as any Investor reasonably requests, (ii) prepare and file in those
jurisdictions, such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (w) make any change to its certificate of incorporation or by-laws,
(x) qualify to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 3(d), (y) subject itself to general
taxation in any such jurisdiction, or (z) file a general consent to service of
process in any such jurisdiction. The Company shall promptly notify each
Investor who holds Registrable Securities of the receipt by the Company of any
notification with respect to the suspension of the registration or qualification
C-3
<PAGE>
of any of the Registrable Securities for sale under the securities or "blue sky"
laws of any jurisdiction in the United States or its receipt of actual notice of
the initiation or threat of any proceeding for such purpose.
e. As promptly as practicable after becoming aware of such event or
development, the Company shall notify each Investor in writing of the happening
of any event as a result of which the prospectus included in a Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omission to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading (provided that in no event shall such notice contain any
material, nonpublic information), and promptly prepare a supplement or amendment
to such Registration Statement to correct such untrue statement or omission, and
deliver ten (10) copies of such supplement or amendment to each Investor. The
Company shall also promptly notify each Investor in writing (i) when a
prospectus or any prospectus supplement or post-effective amendment has been
filed, and when a Registration Statement or any post-effective amendment has
become effective (notification of such effectiveness shall be delivered to each
Investor by facsimile on the same day of such effectiveness), (ii) of any
request by the SEC for amendments or supplements to a Registration Statement or
related prospectus or related information, and (iii) of the Company's reasonable
determination that a post-effective amendment to a Registration Statement would
be appropriate.
f. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
or the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction within the United States of America and, if such an
order or suspension is issued, to obtain the withdrawal of such order or
suspension at the earliest possible moment and to notify each Investor who holds
Registrable Securities being sold of the issuance of such order and the
resolution thereof or its receipt of actual notice of the initiation or threat
of any proceeding for such purpose.
g. At the reasonable request of any Investor, the Company shall
furnish to such Investor, on the date of the effectiveness of the Registration
Statement and thereafter from time to time on such dates as an Investor may
reasonably request (i) a letter, dated such date, from the Company's independent
certified public accountants in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering, and (ii) an opinion, dated as of such date, of counsel
representing the Company for purposes of such Registration Statement, in form,
scope and substance as is customarily given in an underwritten public offering,
addressed to the Investors.
h. The Company shall make available for inspection by (i) any
Investor and (ii) one firm of accountants or other agents retained by the
Investors (collectively, the "INSPECTORS") all pertinent financial and other
records, and pertinent corporate documents and properties of the Company
(collectively, the "RECORDS"), as shall be reasonably deemed necessary by each
Inspector, and cause the Company's officers, directors and employees to supply
all information which any Inspector may reasonably request; provided, however,
that each Inspector shall agree, and each Investor hereby agrees, to hold in
strict confidence and shall not make any disclosure (except to an Investor) or
use of any Record or other information which the Company determines in good
faith to be confidential, and of which determination the Inspectors are so
notified, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement or is otherwise
C-4
<PAGE>
required under the 1933 Act, (b) the release of such Records is ordered pursuant
to a final, non-appealable subpoena or order from a court or government body of
competent jurisdiction, or (c) the information in such Records has been made
generally available to the public other than by disclosure in violation of this
or any other agreement of which the Inspector and the Investor has knowledge.
Each Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential.
i. The Company shall hold in confidence and not make any disclosure
of information concerning an Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to such Investor and allow such Investor, at the Investor's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
j. The Company shall use its best efforts either to cause all the
Registrable Securities covered by a Registration Statement (i) to be listed on
each securities exchange on which securities of the same class or series issued
by the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange or (ii) secure
designation and quotation of all the Registrable Securities covered by the
Registration Statement on the Nasdaq National Market or The Nasdaq SmallCap
Market or, if, despite the Company's best efforts to satisfy the preceding
clause (i) or (ii), the Company is unsuccessful in satisfying the preceding
clause (i) or (ii), to secure the inclusion for quotation on the National
Association of Securities Dealers, Inc. OTC Bulletin Board for such Registrable
Securities. The Company shall pay all fees and expenses in connection with
satisfying its obligation under this Section 3(j).
k. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, to
facilitate the timely preparation and delivery of certificates (not bearing any
restrictive legend, except as provided in Section 9.1 of the Line of Credit
Agreement) representing the Registrable Securities to be offered pursuant to a
Registration Statement and enable such certificates to be in such denominations
or amounts, as the case may be, as the Investors may reasonably request and
registered in such names as the Investors may request.
l. The Company shall use its best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be registered
C-5
<PAGE>
with or approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities.
m. The Company shall make generally available to its security
holders as soon as practical, but not later than 90 days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the 1933 Act) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement.
n. The Company shall otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC in connection with any
registration hereunder.
o. Within two (2) business days after a Registration Statement which
covers Registrable Securities is ordered effective by the SEC, the Company shall
deliver, and shall cause legal counsel for the Company to deliver, to the
transfer agent for such Registrable Securities (with copies to the Investors
whose Registrable Securities are included in such Registration Statement)
confirmation that such Registration Statement has been declared effective by the
SEC in the form attached hereto as EXHIBIT A.
p. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of Registrable Securities
pursuant to a Registration Statement.
4. OBLIGATIONS OF THE INVESTORS.
----------------------------
Each Investor agrees that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 3(f) or the first
sentence of 3(e), such Investor will immediately discontinue disposition of
Registrable Securities pursuant to any Registration Statement(s) covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or receipt of
notice that no supplement or amendment is required. Notwithstanding anything to
the contrary, the Company shall cause its transfer agent to deliver unlegended
certificates for shares of Common Stock to a transferee of an Investor in
accordance with the terms of the Credit Agreement in connection with any sale of
Registrable Securities with respect to which an Investor has entered into a
contract for sale prior to the Investor's receipt of a notice from the Company
of the happening of any event of the kind described in Section 3(f) or the first
sentence of 3(e) and for which the Investor has not yet settled.
5. EXPENSES OF REGISTRATION.
------------------------
All expenses incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers, legal and accounting
fees shall be paid by the Company.
6. INDEMNIFICATION.
---------------
With respect to Registrable Securities which are included in a
Registration Statement under this Agreement:
C-6
<PAGE>
a. To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless and defend each Investor, the directors,
officers, partners, employees, agents, representatives of, and each Person, if
any, who controls any Investor within the meaning of the 1933 Act or the 1934
Act (each, an "INDEMNIFIED PERSON"), against any losses, claims, damages,
liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys'
fees, amounts paid in settlement or expenses, joint or several (collectively,
"CLAIMS") incurred in investigating, preparing or defending any action, claim,
suit, inquiry, proceeding, investigation or appeal taken from the foregoing by
or before any court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or threatened, whether or not an indemnified
party is or may be a party thereto ("INDEMNIFIED DAMAGES"), to which any of them
may become subject insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon: (i)
any untrue statement or alleged untrue statement of a material fact in a
Registration Statement or any post-effective amendment thereto or in any filing
made in connection with the qualification of the offering under the securities
or other "blue sky" laws of any jurisdiction in which Registrable Securities are
offered ("BLUE SKY FILING"), or the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; (ii) any untrue statement or alleged untrue statement of
a material fact contained in any final prospectus (as amended or supplemented,
if the Company files any amendment thereof or supplement thereto with the SEC)
or the omission or alleged omission to state therein any material fact necessary
to make the statements made therein, in light of the circumstances under which
the statements therein were made, not misleading; or (iii) any violation or
alleged violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively, "VIOLATIONS"). The Company shall
reimburse the Investors and each such controlling person promptly as such
expenses are incurred and are due and payable, for any legal fees or
disbursements or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a): (x) shall not apply to a Claim by an Indemnified Person arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto; (y) shall not be
available to the extent such Claim is based on a failure of the Investor to
deliver or to cause to be delivered the prospectus made available by the
Company, if such prospectus was timely made available by the Company pursuant to
Section 3(e); and (z) shall not apply to amounts paid in settlement of any Claim
if such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
b. In connection with a Registration Statement, each Investor agrees
to severally and not jointly indemnify, hold harmless and defend, to the same
extent and in the same manner as is set forth in Section 6(a), the Company, each
of its directors, each of its officers who signs the Registration Statement or
any amendment or supplement thereto and each Person, if any, who controls the
C-7
<PAGE>
Company within the meaning of the 1933 Act or the 1934 Act and each of the
Company's employees, agents and representatives (each an "INDEMNIFIED PARTY"),
against any Claim or Indemnified Damages to which any of them may become
subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or
Indemnified Damages arise out of or is based upon any Violation, in each case to
the extent, and only to the extent, that such Violation occurs in reliance upon
and in conformity with written information furnished to the Company by such
Investor expressly for use in connection with such Registration Statement or
amendment or supplement thereto; and, subject to Section 6(d), such Investor
will reimburse any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this Section 6(b) and the agreement
with respect to contribution contained in Section 7 shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent shall not be unreasonably
withheld; provided, further, however, that the Investor shall be liable under
this Section 6(b) for only that amount of a Claim or Indemnified Damages as does
not exceed the net proceeds to such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(b) with respect to any prospectus shall not inure to
the benefit of any Indemnified Party if the untrue statement or omission of
material fact contained in the prospectus was corrected and such new prospectus
was delivered to each Investor prior to such Investor's use of the prospectus to
which the Claim relates.
c. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a Claim,
such Indemnified Person or Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses of not more than one counsel for such
Indemnified Person or Indemnified Party to be paid by the indemnifying party,
if, in the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. In the case of an
Indemnified Person, legal counsel referred to in the immediately preceding
sentence shall be selected by the Investors holding a majority in interest of
the Registrable Securities included in the Registration Statement to which the
Claim relates. The Indemnified Party or Indemnified Person shall cooperate fully
with the indemnifying party in connection with any negotiation or defense of any
such action or claim by the indemnifying party and shall furnish to the
indemnifying party all information reasonably available to the Indemnified Party
or Indemnified Person which relates to such action or claim. The indemnifying
party shall keep the Indemnified Party or Indemnified Person fully apprised at
all times as to the status of the defense or any settlement negotiations with
respect thereto. No indemnifying party shall be liable for any settlement of any
action, claim or proceeding effected without its prior written consent,
provided, however, that the indemnifying party shall not unreasonably withhold,
C-8
<PAGE>
delay or condition its consent. No indemnifying party shall, without the prior
written consent of the Indemnified Party or Indemnified Person, consent to entry
of any judgment or enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party or Indemnified Person of a release from all liability
in respect to such claim or litigation. Following indemnification as provided
for hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.
d. The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or Indemnified Damages are incurred.
e. The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party or Indemnified
Person against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited
or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no seller of Registrable Securities guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
--------------------------
With a view to making available to the Investors the benefits of Rule 144
promulgated under the 1933 Act or any similar rule or regulation of the SEC that
may at any time permit the Investors to sell securities of the Company to the
public without registration ("RULE 144") the Company agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
C-9
<PAGE>
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Credit Agreement) and the filing of such reports and other documents is required
for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
---------------------------------
The rights under this Agreement shall be automatically assignable by the
Investors to any transferee of all or any portion of Registrable Securities if:
(i) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment; (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned;
(iii) at or before the time the Company receives the written notice contemplated
by clause (ii) of this sentence the transferee or assignee agrees in writing
with the Company to be bound by all of the provisions contained herein; and (iv)
such transfer shall have been made in accordance with the applicable
requirements of the Line of Credit Agreement.
10. AMENDMENT OF REGISTRATION RIGHTS.
--------------------------------
Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with the written consent of the Company and Investors
who then hold at least two-thirds (2/3) of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company. No such amendment shall be effective to the
extent that it applies to fewer than all of the holders of the Registrable
Securities. No consideration shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of this Agreement
unless the same consideration also is offered to all of the parties to this
Agreement.
11. MISCELLANEOUS.
-------------
a. A Person is deemed to be a holder of Registrable Securities
whenever such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or
election received from the registered owner of such Registrable Securities.
b. Any notices, consents, waivers or other communications required
or permitted to be given under the terms of this Agreement must be in writing
and will be deemed to have been delivered: (i) upon receipt, when delivered
C-10
<PAGE>
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one business day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company: AVID SPORTSWEAR AND GOLF, CORP.
22 South Links Avenue - Suite 204
Sarasota, Florida 34236
Telephone: (941) 330-8051
Facsimile: (941) 366-6017
Attention: Earl Ingarfield
President and Chief Executive Officer
With a copy to: Kirkpatrick & Lockhart LLP
Attention: Clayton Parker
201 South Biscayne Boulevard, Suite 2000
Miami, Florida 33131
Telephone: (305) 539-3300
Facsimile: (305) 358-7095
If to an Investor, to its address and facsimile number on the Schedule of
Investors attached hereto, with copies to such Investor's representatives as set
forth on the Schedule of Investors or to such other address and/or facsimile
number and/or to the attention of such other person as the recipient party has
specified by written notice given to each other party five days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a courier or overnight courier
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. The corporate laws of the State of Nevada shall govern all issues
concerning the relative rights of the Company and the Investors as its
stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York. Each party hereby irrevocably
submits to the non-exclusive jurisdiction of the state and federal courts
sitting in the City of New York, Borough of Manhattan, for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. Each party hereby irrevocably waives
C-11
<PAGE>
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
e. This Agreement, the Line of Credit Agreement and the Escrow
Agreement constitute the entire agreement among the parties hereto with respect
to the subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement, the Line of Credit Agreement and the Escrow Agreement
supersede all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9, this Agreement shall
inure to the benefit of and be binding upon the permitted successors and assigns
of each of the parties hereto.
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in identical counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
j. All consents and other determinations to be made by the Investors
pursuant to this Agreement shall be made, unless otherwise specified in this
Agreement, by Investors holding a majority of the Registrable Securities.
k. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent and no rules of
strict construction will be applied against any party.
C-12
<PAGE>
l. This Agreement is intended for the benefit of the parties hereto
and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
AVID SPORTSWEAR AND GOLF CORP.
By:_________________________________________
Name: Earl Ingarfield
Title: President and Chief Executive Officer
INVESTOR
By:_________________________________________
Name:_______________________________________
Title:______________________________________
C-13
<PAGE>
SCHEDULE OF INVESTORS
---------------------
INVESTOR ADDRESS INVESTOR'S REPRESENTATIVES'
INVESTOR NAME AND FACSIMILE NUMBER ADDRESS AND FACSIMILE NUMBER
------------- -------------------- ----------------------------
SCHEDULE
<PAGE>
EXHIBIT A
---------
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
-------------------------
[TRANSFER AGENT]
ATTN:____________________
Re: AVID SPORTSWEAR AND GOLF CORPORATION.
------------------------------------
Ladies and Gentlemen:
We are counsel to Avid Sportswear and Golf Corporation, a Nevada
corporation (the "COMPANY"), and have represented the Company in connection with
that certain Line of Credit Agreement (the "CREDIT AGREEMENT") entered into by
and among the Company and the investors named therein (collectively, the
"INVESTORS") pursuant to which the Company issued to the Investors shares of its
Common Stock, par value $0.01 per share (the "COMMON STOCK"). Pursuant to the
Credit Agreement, the Company also has entered into a Registration Rights
Agreement with the Investors (the "REGISTRATION RIGHTS AGREEMENT") pursuant to
which the Company agreed, among other things, to register the Registrable
Securities (as defined in the Registration Rights Agreement) under the
Securities Act of 1933, as amended (the "1933 ACT"). In connection with the
Company's obligations under the Registration Rights Agreement, on ____________
____, the Company filed a Registration Statement on Form ________ (File No.
333-_____________) (the "REGISTRATION STATEMENT") with the Securities and
Exchange Commission (the "SEC") relating to the Registrable Securities which
names each of the Investors as a selling stockholder there under.
In connection with the foregoing, we advise you that a member of the SEC's
staff has advised us by telephone that the SEC has entered an order declaring
the Registration Statement effective under the 1933 Act at [ENTER TIME OF
EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after
telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
[ISSUER'S COUNSEL]
By:
---------------------------------
cc: [LIST NAMES OF INVESTORS]
EXHIBIT A
<PAGE>
APPENDIX "D"
WARRANT
-------
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN A FORM REASONABLY
SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THIS WARRANT MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT.
AVID SPORTSWEAR AND GOLF CORP.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.: 00 Number of Shares: 1,680,000
Date of Issuance: November ___ , 2000
Avid Sportswear and Golf Corp., a Nevada corporation (the "COMPANY"), hereby
certifies that, for Ten United States Dollars ($10.00) and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, May Davis Group, Inc., the registered holder hereof or its
permitted assigns, is entitled, subject to the terms set forth below, to
purchase from the Company upon surrender of this Warrant, at any time or times
on or after the date hereof, but not after 11:59 P.M. Eastern Time on the
Expiration Date (as defined herein) 1,680,000 fully paid and nonassessable
shares of Common Stock (as defined herein) of the Company (the "WARRANT SHARES")
at the exercise price per share provided in Section 1(b) below or as
subsequently adjusted; provided, however, that in no event shall the holder be
entitled to exercise this Warrant for a number of Warrant Shares in excess of
that number of Warrant Shares which, upon giving effect to such exercise, would
cause the aggregate number of shares of Common Stock beneficially owned by the
holder and its affiliates to exceed 4.99% of the outstanding shares of the
Common Stock following such exercise, except within 60 days of the Expiration
Date. For purposes of the foregoing proviso, the aggregate number of shares of
Common Stock beneficially owned by the holder and its affiliates shall include
the number of shares of Common Stock issuable upon exercise of this Warrant with
respect to which the determination of such proviso is being made, but shall
exclude shares of Common Stock which would be issuable upon (i) exercise of the
remaining, unexercised Warrants beneficially owned by the holder and its
affiliates and (ii) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company beneficially owned by the holder
and its affiliates (including, without limitation, any convertible notes or
preferred stock) subject to a limitation on conversion or exercise analogous to
the limitation contained herein. Except as set forth in the preceding sentence,
<PAGE>
for purposes of this paragraph, beneficial ownership shall be calculated in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended. For purposes of this Warrant, in determining the number of outstanding
shares of Common Stock a holder may rely on the number of outstanding shares of
Common Stock as reflected in (1) the Company's most recent Form 10-Q or Form
10-K, as the case may be, (2) a more recent public announcement by the Company
or (3) any other notice by the Company or its transfer agent setting forth the
number of shares of Common Stock outstanding. Upon the written request of any
holder, the Company shall promptly, but in no event later than one (1) Business
Day following the receipt of such notice, confirm in writing to any such holder
the number of shares of Common Stock then outstanding. In any case, the number
of outstanding shares of Common Stock shall be determined after giving effect to
the exercise of Warrants (as defined below) by such holder and its affiliates
since the date as of which such number of outstanding shares of Common Stock was
reported.
Section 1.
(a) PLACEMENT AGENT AGREEMENT. This Warrant is one of the common
stock purchase warrants (the "WARRANTS") issued pursuant to the Placement Agent
Agreement dated as of November __, 2000 between the Company and May Davis Group,
Inc. (the "PLACEMENT AGENT AGREEMENT").
(b) DEFINITIONS. The following words and terms as used in this
Warrant shall have the following meanings:
(i) "APPROVED STOCK PLAN" means any employee benefit plan
which has been approved by the Board of Directors of the Company, pursuant to
which the Company's securities may be issued to any employee, officer or
director for services provided to the Company.
(ii) "BUSINESS DAY" means any day other than Saturday,
Sunday or other day on which commercial banks in the City of New York are
authorized or required by law to remain closed.
(iii) "CLOSING BID PRICE" means the closing bid price of
Common Stock as quoted on the Principal Market (as reported by Bloomberg
Financial Markets ("BLOOMBERG") through its "Volume at Price" function).
(iv) "COMMON STOCK" means (i) the Company's common stock,
par value $0.001 per share, and (ii) any capital stock into which such Common
Stock shall have been changed or any capital stock resulting from a
reclassification of such Common Stock.
(v) "EXCLUDED SECURITIES" means, (i) provided such
security is issued at a price which is greater than or equal to the arithmetic
average of the Closing Bid Prices of the Common Stock for the ten (10)
consecutive trading days immediately preceding the date of issuance, any of the
following: (a) any issuance by the Company of securities in connection with a
strategic partnership or a joint venture (the primary purpose of which is not to
raise equity capital), (b) any issuance by the Company of securities as
consideration for a merger or consolidation or the acquisition of a business,
product, license, or other assets of another person or entity and (c) options to
D-2
<PAGE>
purchase shares of Common Stock, provided (I) such options are issued after the
date of this Warrant to employees of the Company within 30 days of such
employee's starting his employment with the Company, and (II) the exercise price
of such options is not less than the CLOSING BID PRICE of the Common Stock on
the date of issuance of such option; and (ii) shares issued to Earl Ingarfield
or Tom Browning upon conversion of the Company's indebtedness to such persons.
(vi) "EXPIRATION DATE" means the date five (5) years from
the Issuance Date of this Warrant or, if such date falls on a Saturday, Sunday
or other day on which banks are required or authorized to be closed in the City
of New York or the State of New York or on which trading does not take place on
the Principal Exchange or automated quotation system on which the Common Stock
is traded (a "HOLIDAY"), the next date that is not a Holiday.
(vii) "ISSUANCE DATE" means the date hereof.
(viii) "OPTIONS" means any rights, warrants or options to
subscribe for or purchase Common Stock or Convertible Securities.
(ix) "OTHER SECURITIES" means (i) those options and
warrants of the Company issued prior to, and outstanding on, the Issuance Date
of this Warrant, (ii) the shares of Common Stock issuable on exercise of such
options and warrants, provided such options and warrants are not amended after
the Issuance Date of this Warrant and (iii) the shares of Common Stock issuable
upon exercise of this Warrant.
(x) "PERSON" means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
(xi) "PRINCIPAL MARKET" means the New York Stock Exchange,
the American Stock Exchange, the Nasdaq National Market, the Nasdaq SmallCap
Market, whichever is at the time the principal trading exchange or market for
such security, or the over-the-counter market on the electronic bulletin board
for such security as reported by BLOOMBERG or, if no bid or sale information is
reported for such security by BLOOMBERG, then the average of the bid prices of
each of the market makers for such security as reported in the "pink sheets" by
the National Quotation Bureau, Inc.
(xii) "REGISTRATION RIGHTS AGREEMENT" means the Registration
Rights Agreement dated as of November ___, 2000 between the Company and May
Davis with respect to the registration rights pertaining to the Common Stock
issuable upon exercise of this Warrant.
(xiii) "SECURITIES ACT" means the Securities Act of 1933, as
amended.
(xiv) "WARRANT" means this Warrant and all Warrants issued
in exchange, transfer or replacement thereof.
(xv) "WARRANT EXERCISE PRICE" shall be $0.35 or as
subsequently adjusted as provided in Section 8 hereof.
D-3
<PAGE>
(xvi) "WARRANT SHARES" means the shares of Common Stock
issuable at any time upon exercise of this Warrant.
(c) OTHER DEFINITIONAL PROVISIONS.
(i) Except as otherwise specified herein, all references
herein (A) to the Company shall be deemed to include the Company's successors
and (B) to any applicable law defined or referred to herein shall be deemed
references to such applicable law as the same may have been or may be amended or
supplemented from time to time.
(ii) When used in this Warrant, the words "HEREIN",
"HEREOF", and "hereunder" and words of similar import, shall refer to this
Warrant as a whole and not to any provision of this Warrant, and the words
"SECTION", "SCHEDULE", and "EXHIBIT" shall refer to Sections of, and Schedules
and Exhibits to, this Warrant unless otherwise specified.
(iii) Whenever the context so requires, the neuter gender
includes the masculine or feminine, and the singular number includes the plural,
and vice versa.
Section 2. EXERCISE OF WARRANT.
(a) Subject to the terms and conditions hereof, this Warrant may
be exercised by the holder hereof then registered on the books of the Company,
pro rata as hereinafter provided, at any time on any Business Day on or after
the opening of business on such Business Day, commencing with the first day
after the Closing Date, and prior to 11:59 P.M. Eastern Time on the Expiration
Date, by (i) delivery of a written notice, in the form of the subscription
notice attached as EXHIBIT A hereto (the "EXERCISE NOTICE"), of such holder's
election to exercise this Warrant, which notice shall specify the number of
Warrant Shares to be purchased, (ii) (A) payment to the Company of an amount
equal to the Warrant Exercise Price(s) applicable to the Warrant Shares being
purchased, multiplied by the number of Warrant Shares (at the applicable Warrant
Exercise Price) as to which this Warrant is being exercised (plus any applicable
issue or transfer taxes) (the "AGGREGATE EXERCISE PRICE") in cash or wire
transfer of immediately available funds or (B) notification to the Company that
this Warrant is being exercised pursuant to a Cashless Exercise (as defined in
Section 2(f)) and (iii) the surrender of this Warrant (or an indemnification
undertaking with respect to this Warrant in the case of its loss, theft or
destruction) to a common carrier for overnight delivery to the Company as soon
as practicable following such date. In the event of any exercise of the rights
represented by this Warrant in compliance with this Section 2(a), the Company
shall on the fifth (5th) Business Day following the date of receipt of the
Exercise Notice, the Aggregate Exercise Price (or notice of a Cashless Exercise)
and this Warrant (or an indemnification undertaking with respect to this Warrant
in the case of its loss, theft or destruction) and, except for a Cashless
Exercise, the receipt of the representations of the holder specified in Section
6 hereof, if requested by the Company (the "EXERCISE DELIVERY DOCUMENTS"), and
if the Common Stock is DTC eligible credit such aggregate number of shares of
Common Stock to which the holder shall be entitled to the holder's or its
designee's balance account with The Depository Trust Company; provided, however,
if the holder who submitted the Exercise Notice requested physical delivery of
any or all of the Warrant Shares, or, if the Common Stock is not DTC eligible
then the Company shall, on or before the fifth (5th) Business Day following
receipt of the Exercise Delivery Documents, issue and surrender to a common
D-4
<PAGE>
carrier for overnight delivery to the address specified in the Exercise Notice,
a certificate, registered in the name of the holder, for the number of shares of
Common Stock to which the holder shall be entitled pursuant to such request.
Upon delivery of the Exercise Notice and Aggregate Exercise Price referred to in
clause (ii)(A) above or notification to the Company of a Cashless Exercise
referred to in Section 2(e), the holder of this Warrant shall be deemed for all
corporate purposes to have become the holder of record of the Warrant Shares
with respect to which this Warrant has been exercised. In the case of a dispute
as to the determination of the Warrant Exercise Price, the Closing Bid Price or
the arithmetic calculation of the Warrant Shares, the Company shall promptly
issue to the holder the number of Warrant Shares that is not disputed and shall
submit the disputed determinations or arithmetic calculations to the holder via
facsimile within one (1) Business Day of receipt of the holder's Exercise
Notice. If the holder and the Company are unable to agree upon the determination
of the Warrant Exercise Price or arithmetic calculation of the Warrant Shares
within one (1) day of such disputed determination or arithmetic calculation
being submitted to the holder, then the Company shall immediately submit via
facsimile (i) the disputed determination of the Warrant Exercise Price or the
Closing Bid Price to an independent, reputable investment banking firm or (ii)
the disputed arithmetic calculation of the Warrant Shares to its independent,
outside accountant. The Company shall cause the investment banking firm or the
accountant, as the case may be, to perform the determinations or calculations
and notify the Company and the holder of the results no later than forty-eight
(48) hours from the time it receives the disputed determinations or
calculations. Such investment banking firm's or accountant's determination or
calculation, as the case may be, shall be deemed conclusive absent manifest
error.
(b) Unless the rights represented by this Warrant shall have
expired or shall have been fully exercised, the Company shall, as soon as
practicable and in no event later than five (5) Business Days after any exercise
and at its own expense, issue a new Warrant identical in all respects to this
Warrant exercised except it shall represent rights to purchase the number of
Warrant Shares purchasable immediately prior to such exercise under this Warrant
exercised, less the number of Warrant Shares with respect to which such Warrant
is exercised.
(c) No fractional Warrant Shares are to be issued upon any pro
rata exercise of this Warrant, but rather the number of Warrant Shares issued
upon such exercise of this Warrant shall be rounded up or down to the nearest
whole number.
(d) If the Company or its Transfer Agent shall fail for any
reason or for no reason to issue to the holder within fifteen (15) Business Days
of receipt of the Exercise Delivery Documents, a certificate for the number of
Warrant Shares to which the holder is entitled or to credit the holder's balance
account with The Depository Trust Company for such number of Warrant Shares to
which the holder is entitled upon the holder's exercise of this Warrant, the
Company shall, in addition to any other remedies under this Warrant or the
Placement Agent Agreement or otherwise available to such holder, pay as
additional damages in cash to such holder on each day the issuance of such
certificate for Warrant Shares is not timely effected an amount equal to .025%
of the product of (A) the sum of the number of Warrant Shares not issued to the
holder on a timely basis and to which the holder is entitled, and (B) the
Closing Bid Price of the Common Stock for the trading day immediately preceding
the last possible date which the Company could have issued such Common Stock to
the holder without violating this Section 2.
D-5
<PAGE>
(e) If within fifteen (15) Business Days after the Company's
receipt of the Exercise Delivery Documents, the Company fails to deliver a new
Warrant to the holder for the number of Warrant Shares to which such holder is
entitled pursuant to Section 2(b) hereof, then, in addition to any other
available remedies under this Warrant or the Placement Agent Agreement, or
otherwise available to such holder, the Company shall pay as additional damages
in cash to such holder on each day after such fifteenth (15th) Business Day that
such delivery of such new Warrant is not timely effected in an amount equal to
0.25% of the product of (A) the number of Warrant Shares represented by the
portion of this Warrant which is not being exercised and (B) the Closing Bid
Price of the Common Stock for the trading day immediately preceding the last
possible date which the Company could have issued such Warrant to the holder
without violating this Section 2.
(f) If the Warrant Shares are not covered by an effective
registration statement for the resale of the Warrant Shares, the holder of this
Warrant may, at its election exercised in its sole discretion, exercise this
Warrant to the extent then exercisable, in lieu of making payment of the
Aggregate Exercise Price in cash, elect instead to receive upon such exercise
the "Net Number" of shares of Common Stock determined according to the following
formula (a "CASHLESS EXERCISE"):
NET NUMBER = (A X B) - (A X C)
------------------------------
B
For purposes of the foregoing A = the total number of Warrant Shares with
formula: respect to which this Warrant is then
being exercised.
B = the Closing Bid Price of the Common
Stock on the date of exercise of
the Warrant.
C = the Warrant Exercise Price then in
effect for the applicable Warrant
Shares at the time of such
exercise.
Section 3. COVENANTS AS TO COMMON STOCK. The Company hereby covenants
and agrees as follows:
(a) This Warrant is, and any Warrants issued in substitution for
or replacement of this Warrant will upon issuance be, duly authorized and
validly issued.
(b) All Warrant Shares which may be issued upon the exercise of
the rights represented by this Warrant will, upon issuance, be validly issued,
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof.
(c) During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized and
reserved at least 100% of the number of shares of Common Stock needed to provide
for the exercise of the rights then represented by this Warrant and the par
value of said shares will at all times be less than or equal to the applicable
Warrant Exercise Price. If at any time the Company does not have a sufficient
D-6
<PAGE>
number of shares of Common Stock authorized and available, then the Company
shall call and hold a special meeting of its stockholders within sixty (60) days
of that time for the sole purpose of increasing the number of authorized shares
of Common Stock.
(d) The Company shall promptly file a registration statement with
the Securities and Exchange Commission to secure the listing of the Warrant
Shares on the Principal Market in accordance with the terms and conditions
regarding the registration rights of holders of Warrants set forth in the
Registration Rights Agreement and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all Warrant Shares from time to
time issuable upon the exercise of this Warrant; and the Company shall so list
on each national securities exchange or automated quotation system, as the case
may be, and shall maintain such listing of, any other shares of capital stock of
the Company issuable upon the exercise of this Warrant if and so long as any
shares of the same class shall be listed on such national securities exchange or
automated quotation system.
(e) The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. The Company will not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the Warrant
Exercise Price then in effect, and (ii) will take all such actions as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of Common Stock upon the exercise of this
Warrant.
(f) This Warrant will be binding upon any entity succeeding to
the Company by merger, consolidation or acquisition of all or substantially all
of the Company's assets.
Section 4. TAXES. The Company shall pay any and all taxes, except any
applicable withholding, which may be payable with respect to the issuance and
delivery of Warrant Shares upon exercise of this Warrant.
Section 5. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise
specifically provided herein, no holder, as such, of this Warrant shall be
entitled to vote or receive dividends or be deemed the holder of shares of
capital stock of the Company for any purpose, nor shall anything contained in
this Warrant be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the holder of this Warrant of the Warrant
Shares which he or she is then entitled to receive upon the due exercise of this
Warrant. In addition, nothing contained in this Warrant shall be construed as
imposing any liabilities on such holder to purchase any securities (upon
exercise of this Warrant or otherwise) or as a stockholder of the Company,
whether such liabilities are asserted by the Company or by creditors of the
D-7
<PAGE>
Company. Notwithstanding this Section 5, the Company will provide the holder of
this Warrant with copies of the same notices and other information given to the
stockholders of the Company generally, contemporaneously with the giving thereof
to the stockholders.
Section 6. REPRESENTATIONS OF HOLDER. The holder of this Warrant, by the
acceptance hereof, represents that it is acquiring this Warrant and the Warrant
Shares for its own account for investment only and not with a view towards, or
for resale in connection with, the public sale or distribution of this Warrant
or the Warrant Shares, except pursuant to sales registered or exempted under the
Securities Act; provided, however, that by making the representations herein,
the holder does not agree to hold this Warrant or any of the Warrant Shares for
any minimum or other specific term and reserves the right to dispose of this
Warrant and the Warrant Shares at any time in accordance with or pursuant to a
registration statement or an exemption under the Securities Act. The holder of
this Warrant further represents, by acceptance hereof, that, as of this date,
such holder is an "accredited investor" as such term is defined in Rule
501(a)(1) of Regulation D promulgated by the Securities and Exchange Commission
under the Securities Act (an "ACCREDITED INVESTOR"). Upon exercise of this
Warrant, other than pursuant to a Cashless Exercise, the holder shall, if
requested by the Company, confirm in writing, in a form satisfactory to the
Company, that the Warrant Shares so purchased are being acquired solely for the
holder's own account and not as a nominee for any other party, for investment,
and not with a view toward distribution or resale and that such holder is an
Accredited Investor. If such holder cannot make such representations because
they would be factually incorrect, it shall be a condition to such holder's
exercise of this Warrant, other than pursuant to a Cashless Exercise, that the
Company receive such other representations as the Company considers reasonably
necessary to assure the Company that the issuance of its securities upon
exercise of this Warrant shall not violate any United States or state securities
laws.
Section 7. OWNERSHIP AND TRANSFER.
(a) The Company shall maintain at its principal executive offices
(or such other office or agency of the Company as it may designate by notice to
the holder hereof), a register for this Warrant, in which the Company shall
record the name and address of the person in whose name this Warrant has been
issued, as well as the name and address of each transferee. The Company may
treat the person in whose name any Warrant is registered on the register as the
owner and holder thereof for all purposes, notwithstanding any notice to the
contrary, but in all events recognizing any transfers made in accordance with
the terms of this Warrant.
(b) The Company is obligated to register the Warrant Shares for
resale under the Securities Act pursuant to the Registration Rights Agreement
and the initial holder of this Warrant (and certain assignees thereof) is
entitled to the registration rights in respect of the Warrant Shares as set
forth in the Registration Rights Agreement.
D-8
<PAGE>
Section 8. ADJUSTMENT OF WARRANT EXERCISE PRICE AND NUMBER OF SHARES.
The Warrant Exercise Price and the number of shares of Common Stock issuable
upon exercise of this Warrant shall be adjusted from time to time as follows:
(a) ADJUSTMENT OF WARRANT EXERCISE PRICE AND NUMBER OF SHARES
UPON ISSUANCE OF COMMON STOCK. If and whenever on or after the Issuance Date of
this Warrant, the Company issues or sells, or is deemed to have issued or sold,
any shares of Common Stock (other than (i) Excluded Securities and (ii) shares
of Common Stock which are issued or deemed to have been issued by the Company in
connection with an Approved Stock Plan or upon exercise or conversion of the
Other Securities) for a consideration per share less than a price (the
"APPLICABLE PRICE") equal to the Warrant Exercise Price in effect immediately
prior to such issuance or sale, then immediately after such issue or sale the
Warrant Exercise Price then in effect shall be reduced to an amount equal to
such consideration per share. Upon each such adjustment of the Warrant Exercise
Price hereunder, the number of Warrant Shares issuable upon exercise of this
Warrant shall be adjusted to the number of shares determined by multiplying the
Warrant Exercise Price in effect immediately prior to such adjustment by the
number of Warrant Shares issuable upon exercise of this Warrant immediately
prior to such adjustment and dividing the product thereof by the Warrant
Exercise Price resulting from such adjustment.
(b) EFFECT ON WARRANT EXERCISE PRICE OF CERTAIN EVENTS. For
purposes of determining the adjusted Warrant Exercise Price under Section 8(a)
above, the following shall be applicable:
(i) ISSUANCE OF OPTIONS. If after the date hereof, the
Company in any manner grants any Options and the lowest price per share for
which one share of Common Stock is issuable upon the exercise of any such Option
or upon conversion or exchange of any convertible securities issuable upon
exercise of any such Option is less than the Applicable Price, then such share
of Common Stock shall be deemed to be outstanding and to have been issued and
sold by the Company at the time of the granting or sale of such Option for such
price per share. For purposes of this Section 8(b)(i), the lowest price per
share for which one share of Common Stock is issuable upon exercise of such
Options or upon conversion or exchange of such Convertible Securities shall be
equal to the sum of the lowest amounts of consideration (if any) received or
receivable by the Company with respect to any one share of Common Stock upon the
granting or sale of the Option, upon exercise of the Option or upon conversion
or exchange of any Convertible Security issuable upon exercise of such Option.
No further adjustment of the Warrant Exercise Price shall be made upon the
actual issuance of such Common Stock or of such Convertible Securities upon the
exercise of such Options or upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in
any manner issues or sells any Convertible Securities and the lowest price per
share for which one share of Common Stock is issuable upon the conversion or
exchange thereof is less than the Applicable Price, then such share of Common
Stock shall be deemed to be outstanding and to have been issued and sold by the
Company at the time of the issuance or sale of such Convertible Securities for
such price per share. For the purposes of this Section 8(b)(ii), the lowest
price per share for which one share of Common Stock is issuable upon such
conversion or exchange shall be equal to the sum of the lowest amounts of
D-9
<PAGE>
consideration (if any) received or receivable by the Company with respect to one
share of Common Stock upon the issuance or sale of the Convertible Security and
upon conversion or exchange of such Convertible Security. No further adjustment
of the Warrant Exercise Price shall be made upon the actual issuance of such
Common Stock upon conversion or exchange of such Convertible Securities, and if
any such issue or sale of such Convertible Securities is made upon exercise of
any Options for which adjustment of the Warrant Exercise Price had been or are
to be made pursuant to other provisions of this Section 8(b), no further
adjustment of the Warrant Exercise Price shall be made by reason of such issue
or sale.
(iii) CHANGE IN OPTION PRICE OR RATE OF CONVERSION. If the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion or exchange of any Convertible
Securities, or the rate at which any Convertible Securities are convertible into
or exchangeable for Common Stock changes at any time, the Warrant Exercise Price
in effect at the time of such change shall be adjusted to the Warrant Exercise
Price which would have been in effect at such time had such Options or
Convertible Securities provided for such changed purchase price, additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold and the number of Warrant Shares issuable upon
exercise of this Warrant shall be correspondingly readjusted. For purposes of
this Section 8(b)(iii), if the terms of any Option or Convertible Security that
was outstanding as of the Issuance Date of this Warrant are changed in the
manner described in the immediately preceding sentence, then such Option or
Convertible Security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued as of the
date of such change. No adjustment pursuant to this Section 8(b) shall be made
if such adjustment would result in an increase of the Warrant Exercise Price
then in effect.
(c) EFFECT ON WARRANT EXERCISE PRICE OF CERTAIN EVENTS. For
purposes of determining the adjusted Warrant Exercise Price under Sections 8(a)
and 8(b), the following shall be applicable:
(i) CALCULATION OF CONSIDERATION RECEIVED. If any Common
Stock, Options or Convertible Securities are issued or sold or deemed to have
been issued or sold for cash, the consideration received therefore will be
deemed to be the net amount received by the Company therefore. If any Common
Stock, Options or Convertible Securities are issued or sold for a consideration
other than cash, the amount of such consideration received by the Company will
be the fair value of such consideration, except where such consideration
consists of marketable securities, in which case the amount of consideration
received by the Company will be the Market Price of such securities on the date
of receipt of such securities. If any Common Stock, Options or Convertible
Securities are issued to the owners of the non-surviving entity in connection
with any merger in which the Company is the surviving entity, the amount of
consideration therefore will be deemed to be the fair value of such portion of
the net assets and business of the non-surviving entity as is attributable to
such Common Stock, Options or Convertible Securities, as the case may be. The
fair value of any consideration other than cash or securities will be determined
jointly by the Company and the holders of Warrants representing at least
two-thirds (b) of the Warrant Shares issuable upon exercise of the Warrants then
outstanding. If such parties are unable to reach agreement within ten (10) days
after the occurrence of an event requiring valuation (the "VALUATION EVENT"),
the fair value of such consideration will be determined within five (5) Business
D-10
<PAGE>
Days after the tenth (10th) day following the Valuation Event by an independent,
reputable appraiser jointly selected by the Company and the holders of Warrants
representing at least two-thirds (b) of the Warrant Shares issuable upon
exercise of the Warrants then outstanding. The determination of such appraiser
shall be final and binding upon all parties and the fees and expenses of such
appraiser shall be borne jointly by the Company and the holders of Warrants.
(ii) INTEGRATED TRANSACTIONS. In case any Option is issued
in connection with the issue or sale of other securities of the Company,
together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the Options
will be deemed to have been issued for a consideration of $.01.
(iii) TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time does not include shares owned or held by or for
the account of the Company, and the disposition of any shares so owned or held
will be considered an issue or sale of Common Stock.
(iv) RECORD DATE. If the Company takes a record of the
holders of Common Stock for the purpose of entitling them (1) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (2) to subscribe for or purchase Common Stock, Options
or Convertible Securities, then such record date will be deemed to be the date
of the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(d) ADJUSTMENT OF WARRANT EXERCISE PRICE UPON SUBDIVISION OR
COMBINATION OF COMMON STOCK. If the Company at any time after the date of
issuance of this Warrant subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, any Warrant Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced and
the number of shares of Common Stock obtainable upon exercise of this Warrant
will be proportionately increased. If the Company at any time after the date of
issuance of this Warrant combines (by combination, reverse stock split or
otherwise) one or more classes of its outstanding shares of Common Stock into a
smaller number of shares, any Warrant Exercise Price in effect immediately prior
to such combination will be proportionately increased and the number of Warrant
Shares issuable upon exercise of this Warrant will be proportionately decreased.
Any adjustment under this Section 8(d) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(e) DISTRIBUTION OF ASSETS. If the Company shall declare or make
any dividend or other distribution of its assets (or rights to acquire its
assets) to holders of Common Stock, by way of return of capital or otherwise
(including, without limitation, any distribution of cash, stock or other
securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement or other similar transaction) (a
"DISTRIBUTION"), at any time after the issuance of this Warrant, then, in each
such case:
D-11
<PAGE>
(i) any Warrant Exercise Price in effect immediately prior
to the close of business on the record date fixed for the determination of
holders of Common Stock entitled to receive the Distribution shall be reduced,
effective as of the close of business on such record date, to a price determined
by multiplying such Warrant Exercise Price by a fraction of which (A) the
numerator shall be the Closing Sale Price of the Common Stock on the trading day
immediately preceding such record date minus the value of the Distribution (as
determined in good faith by the Company's Board of Directors) applicable to one
share of Common Stock, and (B) the denominator shall be the Closing Sale Price
of the Common Stock on the trading day immediately preceding such record date;
and
(ii) either (A) the number of Warrant Shares obtainable
upon exercise of this Warrant shall be increased to a number of shares equal to
the number of shares of Common Stock obtainable immediately prior to the close
of business on the record date fixed for the determination of holders of Common
Stock entitled to receive the Distribution multiplied by the reciprocal of the
fraction set forth in the immediately preceding clause (i), or (B) in the event
that the Distribution is of common stock of a company whose common stock is
traded on a national securities exchange or a national automated quotation
system, then the holder of this Warrant shall receive an additional warrant to
purchase Common Stock, the terms of which shall be identical to those of this
Warrant, except that such warrant shall be exercisable into the amount of the
assets that would have been payable to the holder of this Warrant pursuant to
the Distribution had the holder exercised this Warrant immediately prior to such
record date and with an exercise price equal to the amount by which the exercise
price of this Warrant was decreased with respect to the Distribution pursuant to
the terms of the immediately preceding clause (i).
(f) CERTAIN EVENTS. If any event occurs of the type contemplated
by the provisions of this Section 8 but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then the
Company's Board of Directors will make an appropriate adjustment in the Warrant
Exercise Price and the number of shares of Common Stock obtainable upon exercise
of this Warrant so as to protect the rights of the holders of the Warrants;
provided, except as set forth in section 8(d),that no such adjustment pursuant
to this Section 8(f) will increase the Warrant Exercise Price or decrease the
number of shares of Common Stock obtainable as otherwise determined pursuant to
this Section 8.
(g) NOTICES.
(i) Immediately upon any adjustment of the Warrant
Exercise Price, the Company will give written notice thereof to the holder of
this Warrant, setting forth in reasonable detail, and certifying, the
calculation of such adjustment.
(ii) The Company will give written notice to the holder of
this Warrant at least ten (10) days prior to the date on which the Company
closes its books or takes a record (A) with respect to any dividend or
distribution upon the Common Stock, (B) with respect to any pro rata
subscription offer to holders of Common Stock or (C) for determining rights to
vote with respect to any Organic Change (as defined below), dissolution or
liquidation, provided that such information shall be made known to the public
prior to or in conjunction with such notice being provided to such holder.
D-12
<PAGE>
(iii) The Company will also give written notice to the
holder of this Warrant at least ten (10) days prior to the date on which any
Organic Change, dissolution or liquidation will take place, provided that such
information shall be made known to the public prior to or in conjunction with
such notice being provided to such holder.
Section 9. PURCHASE RIGHTS; REORGANIZATION, RECLASSIFICATION,
CONSOLIDATION, MERGER OR SALE.
(a) In addition to any adjustments pursuant to Section 8 above,
if at any time the Company grants, issues or sells any Options, Convertible
Securities or rights to purchase stock, warrants, securities or other property
pro rata to the record holders of any class of Common Stock (the "PURCHASE
RIGHTS"), then the holder of this Warrant will be entitled to acquire, upon the
terms applicable to such Purchase Rights, the aggregate Purchase Rights which
such holder could have acquired if such holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant immediately
before the date on which a record is taken for the grant, issuance or sale of
such Purchase Rights, or, if no such record is taken, the date as of which the
record holders of Common Stock are to be determined for the grant, issue or sale
of such Purchase Rights.
(b) Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's assets
to another Person or other transaction in each case which is effected in such a
way that holders of Common Stock are entitled to receive (either directly or
upon subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as an "ORGANIC CHANGE." Prior to
the consummation of any (i) sale of all or substantially all of the Company's
assets to an acquiring Person or (ii) other Organic Change following which the
Company is not a surviving entity, the Company will secure from the Person
purchasing such assets or the successor resulting from such Organic Change (in
each case, the "ACQUIRING ENTITY") a written agreement (in form and substance
satisfactory to the holders of Warrants representing at least two-thirds (iii)
of the Warrant Shares issuable upon exercise of the Warrants then outstanding)
to deliver to each holder of Warrants in exchange for such Warrants, a security
of the Acquiring Entity evidenced by a written instrument substantially similar
in form and substance to this Warrant and satisfactory to the holders of the
Warrants (including an adjusted warrant exercise price equal to the value for
the Common Stock reflected by the terms of such consolidation, merger or sale,
and exercisable for a corresponding number of shares of Common Stock acquirable
and receivable upon exercise of the Warrants without regard to any limitations
on exercise, if the value so reflected is less than any Applicable Warrant
Exercise Price immediately prior to such consolidation, merger or sale). Prior
to the consummation of any other Organic Change, the Company shall make
appropriate provision (in form and substance satisfactory to the holders of
Warrants representing a majority of the Warrant Shares issuable upon exercise of
the Warrants then outstanding) to insure that each of the holders of the
Warrants will thereafter have the right to acquire and receive in lieu of or in
addition to (as the case may be) the Warrant Shares immediately theretofore
issuable and receivable upon the exercise of such holder's Warrants (without
regard to any limitations on exercise), such shares of stock, securities or
assets that would have been issued or payable in such Organic Change with
D-13
<PAGE>
respect to or in exchange for the number of Warrant Shares which would have been
issuable and receivable upon the exercise of such holder's Warrant as of the
date of such Organic Change (without taking into account any limitations or
restrictions on the exercisability of this Warrant).
Section 10. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant
is lost, stolen, mutilated or destroyed, the Company shall promptly, on receipt
of an indemnification undertaking (or, in the case of a mutilated Warrant, the
Warrant), issue a new Warrant of like denomination and tenor as this Warrant so
lost, stolen, mutilated or destroyed.
Section 11. NOTICE. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this Warrant
must be in writing and will be deemed to have been delivered: (i) upon receipt,
when delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of receipt is received by the sending party transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one Business Day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:
If to the Holder: May Davis Group, Inc.
1 World Trade Center, Suite 8735
New York, NY 10048
Telephone: (212) 775-7400
Facsimile: (212) 775-8166
Attention: Michael Jacobs
With Copy to: Butler Gonzalez LLP
1000 Stuyvesant Avenue
Suite # 6
Union, NJ 07083
Telephone: (908) 810-8588
Facsimile: (908) 810-0873
Attention: David Gonzalez, Esq.
If to the Company: Avid Sportswear & Golf Corp.
22 South Links Avenue - Suite 204
Sarasota, Fl 34236
Telephone: (941) 330-8051
Facsimile: (941) 366-6017
Attention: Earl Ingarfield, President and Chief
Executive Officer
D-14
<PAGE>
With a copy to: Kirkpatrick & Lockhart
201 South Biscayne Blvd.
Suite 2000
Miami, Fl 33131
Attention: Clayton Parker, Esq.
Telephone: (305) 539-3306
Facsimile: (305) 358-7095
If to a holder of this Warrant, to it at the address and facsimile number set
forth on EXHIBIT C hereto, with copies to such holder's representatives as set
forth on EXHIBIT C, or at such other address and facsimile as shall be delivered
to the Company upon the issuance or transfer of this Warrant. Each party shall
provide five days' prior written notice to the other party of any change in
address or facsimile number. Written confirmation of receipt (A) given by the
recipient of such notice, consent, facsimile, waiver or other communication, (or
(B) provided by a nationally recognized overnight delivery service shall be
rebuttable evidence of personal service, receipt by facsimile or receipt from a
nationally recognized overnight delivery service in accordance with clause (i),
(ii) or (iii) above, respectively.
Section 12. DATE. The date of this Warrant is November ___, 2000. This
Warrant, in all events, shall be wholly void and of no effect after the close of
business on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of Section 8(b) shall continue in full force
and effect after such date as to any Warrant Shares or other securities issued
upon the exercise of this Warrant.
Section 13. AMENDMENT AND WAIVER. Except as otherwise provided herein,
the provisions of the Warrants may be amended and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
holders of Warrants representing at least two-thirds of the Warrant Shares
issuable upon exercise of the Warrants then outstanding; provided that, except
for Section 8(d),no such action may increase the Warrant Exercise Price or
decrease the number of shares or class of stock obtainable upon exercise of any
Warrant without the written consent of the holder of such Warrant.
Section 14. DESCRIPTIVE HEADINGS; GOVERNING LAW. The descriptive headings
of the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. The corporate
laws of the State of Nevada shall govern all issues concerning the relative
rights of the Company and its stockholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Warrant shall be
governed by the internal laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York, or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of New York.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
D-15
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
Earl Ingarfield, its President and Chief Executive Officer, as of the ___ day of
November, 2000.
AVID SPORTSWEAR AND GOLF CORP.
By:________________________________
Name: Earl Ingarfield
Title: President and Chief
Executive Officer
D-16
<PAGE>
EXHIBIT A TO WARRANT
SUBSCRIPTION FORM
TO BE EXECUTED
BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
AVID SPORTSWEAR AND GOLF CORP.
The undersigned holder hereby exercises the right to purchase
_________________ of the shares of Common Stock ("WARRANT SHARES") of Avid
Sportswear and Golf Corp., a Nevada corporation (the "COMPANY"), evidenced by
the attached Warrant (the "WARRANT"). Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Warrant.
1. FORM OF WARRANT EXERCISE PRICE. The Holder intends that payment of
the Warrant Exercise Price shall be made as:
____________ a "CASH EXERCISE" with respect to _________________ Warrant
Shares; and/or
____________ a "CASHLESS EXERCISE" with respect to _______________ Warrant
Shares (to the extent permitted by the terms of the Warrant).
2. PAYMENT OF WARRANT EXERCISE PRICE. In the event that the holder has
elected a Cash Exercise with respect to some or all of the Warrant Shares to be
issued pursuant hereto, the holder shall pay the sum of $___________________ to
the Company in accordance with the terms of the Warrant.
3. DELIVERY OF WARRANT SHARES. The Company shall deliver to the
holder __________ Warrant Shares in accordance with the terms of the Warrant.
Date: _______________ __, ______
Name of Registered Holder
By: _________________________
Name: _________________________
Title:_________________________
A-1
<PAGE>
EXHIBIT B TO WARRANT
FORM OF WARRANT POWER
FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to
________________, Federal Identification No. __________, a warrant to purchase
____________ shares of the capital stock of Avid Sportswear and Golf Corp., a
Nevada corporation, represented by warrant certificate no. _____, standing in
the name of the undersigned on the books of said corporation. The undersigned
does hereby irrevocably constitute and appoint ______________, attorney to
transfer the warrants of said corporation, with full power of substitution in
the premises.
Dated:
By: _________________________
Name: _________________________
Title: _________________________
B-1
<PAGE>
EXHIBIT C TO WARRANT
INVESTORS' ADDRESSES
Name: __________________________________________________________
Address: __________________________________________________________
__________________________________________________________
Name: __________________________________________________________
Address: __________________________________________________________
__________________________________________________________
Name: __________________________________________________________
Address: __________________________________________________________
__________________________________________________________
Name: __________________________________________________________
Address: __________________________________________________________
__________________________________________________________
Name: __________________________________________________________
Address: __________________________________________________________
__________________________________________________________
C-1
<PAGE>
APPENDIX "E"
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of
November _________, 2000, by and among Avid Sportswear and Golf Corp., a Nevada
corporation, with its principal office located at 22 South Links Avenue, Suite
204, Sarasota, Fl (the "COMPANY"), and May Davis Group, Inc., with its principal
office at One World Trade Center, Suite 8735, New York, NY ("MAY DAVIS").
WHEREAS:
A. In connection with the Placement Agent Agreement between the
parties hereto of even date herewith (the "PLACEMENT AGENT AGREEMENT"), the
Company has agreed to issue common stock purchase warrants to purchase an
aggregate of one million six hundred eighty thousand (1,680,000) shares of the
Company's common stock, par value $0.001 per share (the "COMMON STOCK"), at a
fixed exercise price for a term of five (5) years from the date of issuance of
such warrants (individually, a "WARRANT" and collectively, the "WARRANTS").
Capitalized terms not defined herein shall have the meaning ascribed to them in
the Placement Agent Agreement.
B. To induce the Placement Agent to enter to execute and deliver the
Placement Agent Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations there under, or any similar successor statute (collectively, the
"1933 ACT"), and applicable state securities laws, with respect to the shares of
Common Stock issuable upon exercise of the Warrants (the "WARRANT SHARES").
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Warrant Holders hereby agree as follows:
1. DEFINITIONS.
-----------
As used in this Agreement, the following terms shall have
the following meanings:
a. "WARRANT HOLDER" means a Warrant Holder and any
transferee or assignee thereof to whom an Warrant Holder assigns its rights
under this Agreement and who agrees to become bound by the provisions of this
Agreement in accordance with Section 9.
b. "PERSON" means a corporation, a limited liability
company, an association, a partnership, an organization, a business, an
individual, a governmental or political subdivision thereof or a governmental
agency.
<PAGE>
c. "REGISTER," "REGISTERED," and "REGISTRATION"
refer to a registration effected by preparing and filing one or more
Registration Statements (as defined below) in compliance with the 1933 Act and
pursuant to Rule 415 under the 1933 Act or any successor rule providing for
offering securities on a continuous or delayed basis ("RULE 415"), and the
declaration or ordering of effectiveness of such Registration Statement(s) by
the United States Securities and Exchange Commission (the "SEC").
d. "REGISTRABLE SECURITIES" means the shares of
Common Stock issuable to Warrant Holders upon exercise of the Warrants issued
pursuant to the Placement Agent Agreement.
e. "REGISTRATION STATEMENT" means a registration
statement under the 1933 Act which covers the Registrable Securities.
2. REGISTRATION.
------------
a. Subject to the terms and conditions of this
Agreement, the Company shall prepare and use its best efforts to file within
forty (40) days, with the Commission a Registration Statement on Form S-1 or
SB-2 (or, if the Company is then eligible, on Form S-3) under the 1933 Act (the
"INITIAL REGISTRATION STATEMENT") for the registration of 1,680,000 shares of
Common Stock to be issued upon exercise of the Warrants issued pursuant to the
Placement Agent Agreement dated the date hereof and cause such Initial
Registration Statement to be declared effective and to remain effective until
all of the Registrable Securities have been sold. Prior to the filing of the
Initial Registration Statement with the Commission, the Company shall furnish a
copy of the Initial Registration Statement to the Warrant Holders, May Davis and
Butler Gonzalez, LLP for their review and comment together with a selling
shareholder questionnaire in form prepared by the Company. The Warrant Holders,
the Placement Agent and Butler Gonzalez, LLP shall furnish comments on the
Initial Registration Statement and an executed selling shareholder questionnaire
to the Company within twenty four (24) hours of the receipt thereof from the
Company.
b. EFFECTIVENESS OF THE INITIAL REGISTRATION
STATEMENT. The Company shall use its commercially reasonable efforts (i) to have
the Initial Registration Statement declared effective by the SEC by no later
than ninety (90) days after the date hereof (the "SCHEDULED EFFECTIVE DEADLINE")
and (ii) to insure that the Initial Registration Statement and any subsequent
Registration Statement remains in effect throughout the term of this Agreement
subject to the terms and conditions of this Agreement.
c. SUFFICIENT NUMBER OF SHARES REGISTERED. In the
event the number of shares available under a Registration Statement filed
pursuant to Section 2(a) is insufficient to cover all of the Registrable
Securities which are issuable to the Warrant Holders upon exercise of the
Warrants issued pursuant to the Placement Agent Agreement, the Company shall
amend the Registration Statement, or use its commercially reasonable efforts to
file a new Registration Statement (on the short form available therefore, if
E-2
<PAGE>
applicable), or both, so as to cover all of such Registrable Securities issuable
to the Warrant Holders upon exercise of the Warrants issued pursuant to the
Placement Agency Agreement as soon as practicable, but in any event not later
than fifteen (15) business days after the necessity therefore arises. The
Company shall use it best efforts to cause such amendment and/or new
Registration Statement to become effective as soon as practicable following the
filing thereof. For purposes of the foregoing provision, the number of shares
available under a Registration Statement shall be deemed "insufficient to cover
all of the Registrable Securities" if at any time the number of Registrable
Securities issuable upon exercise of the Warrants is greater than the number of
shares available for resale under such Registration Statement.
3. RELATED OBLIGATIONS.
-------------------
a. The Company shall keep the Registration Statement
effective during the term of the Warrant pursuant to Rule 415 at all times until
the date on which the Warrant Holder shall have sold all the Registrable
Securities covered by such Registration Statement (the "REGISTRATION PERIOD"),
which Registration Statement (including any amendments or supplements thereto
and prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading.
b. The Company shall prepare and file with the SEC
such amendments (including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with such
Registration Statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep such Registration
Statement effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in such Registration
Statement. In the case of amendments and supplements to a Registration Statement
which are required to be filed pursuant to this Agreement (including pursuant to
this Section 3(b)) by reason of the Company's filing a report on Form 10-KSB,
Form 10-QSB or Form 8-K or any analogous report under the Securities Exchange
Act of 1934, as amended (the "1934 ACT"), the Company shall incorporate such
report by reference into the Registration Statement, if applicable, or shall
file such amendments or supplements with the SEC on the same day on which the
1934 Act report is filed which created the requirement for the Company to amend
or supplement the Registration Statement.
c. The Company shall furnish to each Warrant Holder
whose Registrable Securities are included in any Registration Statement, without
charge, (i) at least one copy of such Registration Statement as declared
effective by the SEC and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference, all
E-3
<PAGE>
exhibits and each preliminary prospectus, (ii) ten (10) copies of the final
prospectus included in such Registration Statement and all amendments and
supplements thereto (or such other number of copies as such Warrant Holder may
reasonably request) and (iii) such other documents as such Warrant Holder may
reasonably request from time to time in order to facilitate the disposition of
the Registrable Securities owned by such Warrant Holder.
d. The Company shall use its best efforts to (i)
register and qualify the Registrable Securities covered by a Registration
Statement under such other securities or "blue sky" laws of such jurisdictions
in the United States as any Warrant Holder reasonably requests, (ii) prepare and
file in those jurisdictions, such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof during the Registration Period,
(iii) take such other actions as may be necessary to maintain such registrations
and qualifications in effect at all times during the Registration Period, and
(iv) take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (w) make any change to its certificate of incorporation or by-laws,
(x) qualify to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 3(d), (y) subject itself to general
taxation in any such jurisdiction, or (z) file a general consent to service of
process in any such jurisdiction. The Company shall promptly notify each Warrant
Holder who holds Registrable Securities of the receipt by the Company of any
notification with respect to the suspension of the registration or qualification
of any of the Registrable Securities for sale under the securities or "blue sky"
laws of any jurisdiction in the United States or its receipt of actual notice of
the initiation or threat of any proceeding for such purpose.
e. As promptly as practicable after becoming aware
of such event or development, the Company shall notify each Warrant Holder in
writing of the happening of any event as a result of which the prospectus
included in a Registration Statement, as then in effect, includes an untrue
statement of a material fact or omission to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (provided that in no
event shall such notice contain any material, nonpublic information), and
promptly prepare a supplement or amendment to such Registration Statement to
correct such untrue statement or omission, and deliver ten (10) copies of such
supplement or amendment to each Warrant Holder. The Company shall also promptly
notify each Warrant Holder in writing (i) when a prospectus or any prospectus
supplement or post-effective amendment has been filed, and when a Registration
Statement or any post-effective amendment has become effective (notification of
such effectiveness shall be delivered to each Warrant Holder by facsimile on the
same day of such effectiveness), (ii) of any request by the SEC for amendments
or supplements to a Registration Statement or related prospectus or related
information, and (iii) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.
f. The Company shall use its best efforts to prevent
the issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction within the United States of
E-4
<PAGE>
America and, if such an order or suspension is issued, to obtain the withdrawal
of such order or suspension at the earliest possible moment and to notify each
Warrant Holder who holds Registrable Securities being sold of the issuance of
such order and the resolution thereof or its receipt of actual notice of the
initiation or threat of any proceeding for such purpose.
g. At the reasonable request of any Warrant Holder,
the Company shall furnish to such Warrant Holder, on the date of the
effectiveness of the Registration Statement and thereafter from time to time on
such dates as an Warrant Holder may reasonably request (i) a letter, dated such
date, from the Company's independent certified public accountants in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, and (ii) an opinion, dated as
of such date, of counsel representing the Company for purposes of such
Registration Statement, in form, scope and substance as is customarily given in
an underwritten public offering, addressed to the Warrant Holders.
h. The Company shall make available for inspection
by (i) any Warrant Holder and (ii) one firm of accountants or other agents
retained by the Warrant Holders (collectively, the "INSPECTORS") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "RECORDS"), as shall be reasonably deemed
necessary by each Inspector, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request;
provided, however, that each Inspector shall agree, and each Warrant Holder
hereby agrees, to hold in strict confidence and shall not make any disclosure
(except to a Warrant Holder) or use any Record or other information which the
Company determines in good faith to be confidential, and of which determination
the Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement or is otherwise required under the 1933 Act, (b) the release of such
Records is ordered pursuant to a final, non-appealable subpoena or order from a
court or government body of competent jurisdiction, or (c) the information in
such Records has been made generally available to the public other than by
disclosure in violation of this or any other agreement of which the Inspector
and the Warrant Holder has knowledge. Each Warrant Holder agrees that it shall,
upon learning that disclosure of such Records is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the Records deemed confidential.
i. The Company shall hold in confidence and not make
any disclosure of information concerning a Warrant Holder provided to the
Company unless (i) disclosure of such information is necessary to comply with
federal or state securities laws, (ii) the disclosure of such information is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (iii) the release of such information is ordered pursuant to a
subpoena or other final, non-appealable order from a court or governmental body
of competent jurisdiction, or (iv) such information has been made generally
available to the public other than by disclosure in violation of this Agreement
or any other agreement. The Company agrees that it shall, upon learning that
disclosure of such information concerning a Warrant Holder is sought in or by a
E-5
<PAGE>
court or governmental body of competent jurisdiction or through other means,
give prompt written notice to such Warrant Holder and allow such Warrant Holder,
at the Warrant Holder's expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
j. The Company shall use its best efforts either to
cause all the Registrable Securities covered by a Registration Statement (i) to
be listed on each securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange or
(ii) to secure the inclusion for quotation on the National Association of
Securities Dealers, Inc. OTC Bulletin Board for such Registrable Securities. The
Company shall pay all fees and expenses in connection with satisfying its
obligation under this Section 3(j).
k. The Company shall cooperate with the Warrant
Holders who hold Registrable Securities being offered and, to the extent
applicable upon exercise of the Warrants, to facilitate the timely preparation
and delivery of certificates (not bearing any restrictive legend) representing
the Registrable Securities to be offered pursuant to a Registration Statement
and enable such certificates to be in such denominations or amounts, as the case
may be, as the Warrant Holders may reasonably request and registered in such
names as the Warrant Holders may request.
l. The Company shall use its best efforts to cause
the Registrable Securities covered by the applicable Registration Statement to
be registered with or approved by such other governmental agencies or
authorities as may be necessary to consummate the disposition of such
Registrable Securities.
m. The Company shall make generally available to its
security holders as soon as practical, but not later than ninety (90) days after
the close of the period covered thereby, an earnings statement (in form
complying with the provisions of Rule 158 under the 1933 Act) covering a
twelve-month period beginning not later than the first day of the Company's
fiscal quarter next following the effective date of the Registration Statement.
n. The Company shall otherwise use its best efforts
to comply with all applicable rules and regulations of the SEC in connection
with any registration hereunder.
o. Within two (2) business days after a Registration
Statement which covers Registrable Securities is ordered effective by the SEC,
the Company shall deliver, and shall cause legal counsel for the Company to
deliver, to the transfer agent for such Registrable Securities (with copies to
the Warrant Holders whose Registrable Securities are included in such
Registration Statement) confirmation that such Registration Statement has been
declared effective by the SEC in the form attached hereto as EXHIBIT A.
p. The Company shall take all other reasonable
actions necessary to expedite and facilitate disposition by the Warrant Holders
of Registrable Securities pursuant to a Registration Statement.
E-6
<PAGE>
4. OBLIGATIONS OF THE WARRANT HOLDERS.
----------------------------------
Each Warrant Holder agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
3(f) or the first sentence of 3(e), such Warrant Holder will immediately
discontinue disposition of any Registrable Securities pursuant to any
Registration Statement(s) covering such Registrable Securities until such
Warrant Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(e) or receipt of notice that no supplement or
amendment is required. Notwithstanding anything to the contrary, the Company
shall cause its transfer agent to deliver unlegended certificates for shares of
Common Stock to a transferee of an Warrant Holder in accordance with the terms
of the Placement Agreement in connection with any sale of Registrable Securities
with respect to which a Warrant Holder has entered into a contract for sale
prior to the Warrant Holder's receipt of a notice from the Company of the
happening of any event of the kind described in Section 3(f) or the first
sentence of 3(e) and for which the Warrant Holder has not yet settled.
5. EXPENSES OF REGISTRATION.
------------------------
All expenses incurred in connection with registrations,
filings or qualifications pursuant to Sections 2 and 3, including, without
limitation, all registration, listing and qualifications fees, printers, legal
and accounting fees shall be paid by the Company.
6. INDEMNIFICATION.
---------------
With respect to Registrable Securities which are included
in a Registration Statement under this Agreement:
a. To the fullest extent permitted by law, the
Company will, and hereby does, indemnify, hold harmless and defend each Warrant
Holder, the directors, officers, partners, employees, agents, representatives
of, and each Person, if any, who controls any Warrant Holder within the meaning
of the 1933 Act or the 1934 Act (each, an "INDEMNIFIED PERSON"), against any
losses, claims, damages, liabilities, judgments, fines, penalties, charges,
costs, reasonable attorneys' fees, amounts paid in settlement or expenses, joint
or several (collectively, "CLAIMS") incurred in investigating, preparing or
defending any action, claim, suit, inquiry, proceeding, investigation or appeal
taken from the foregoing by or before any court or governmental, administrative
or other regulatory agency, body or the SEC, whether pending or threatened,
whether or not an indemnified party is or may be a party thereto ("INDEMNIFIED
DAMAGES"), to which any of them may become subject insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon: (i) any untrue statement or alleged untrue
statement of a material fact in a Registration Statement or any post-effective
amendment thereto or in any filing made in connection with the qualification of
the offering under the securities or other "blue sky" laws of any jurisdiction
in which Registrable Securities are offered ("BLUE SKY FILING"), or the omission
or alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; (ii) any untrue
E-7
<PAGE>
statement or alleged untrue statement of a material fact contained in any final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading; or (iii) any violation or alleged violation by the Company
of the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable Securities pursuant to a Registration Statement (the
matters in the foregoing clauses (i) through (iii) being, collectively,
"VIOLATIONS"). The Company shall reimburse the Warrant Holders and each such
controlling person promptly as such expenses are incurred and are due and
payable, for any legal fees or disbursements or other reasonable expenses
incurred by them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (x) shall not apply to a Claim by an
Indemnified Person arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by such Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto; (y) shall not be available to the extent such Claim is based
on a failure of the Warrant Holders to deliver or to cause to be delivered the
prospectus made available by the Company, if such prospectus was timely made
available by the Company pursuant to Section 3(e); and (z) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of the Company, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified Person
and shall survive the transfer of the Registrable Securities by the Warrant
Holders pursuant to Section 9.
b. In connection with a Registration Statement, each
Warrant Holders agrees to severally and not jointly indemnify, hold harmless and
defend, to the same extent and in the same manner as is set forth in Section
6(a), the Company, each of its directors, each of its officers , employees,
agents and representatives of the Company each Person, if any, who controls the
Company within the meaning of the 1933 Act or the 1934 Act (each an "INDEMNIFIED
PARTY"), against any Claim or Indemnified Damages to which any of them may
become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such
Claim or Indemnified Damages arise out of or is based upon any Violation, in
each case to the extent, and only to the extent, that such Violation occurs in
reliance upon and in conformity with written information furnished to the
Company by such Warrant Holders expressly for use in connection with such
Registration Statement or amendment or supplement thereto; and, subject to
Section 6(d), such Warrant Holders will reimburse any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such Claim; provided, however, that the indemnity agreement contained in this
Section 6(b) and the agreement with respect to contribution contained in Section
7 shall not apply to amounts paid in settlement of any Claim if such settlement
is effected without the prior written consent of such Warrant Holders, which
consent shall not be unreasonably withheld; provided, further, however, that the
Warrant Holders shall be liable under this Section 6(b) for only that amount of
E-8
<PAGE>
a Claim or Indemnified Damages as does not exceed the net proceeds to such
Warrant Holders as a result of the sale of Registrable Securities pursuant to
such Registration Statement. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such Indemnified
Party and shall survive the transfer of the Registrable Securities by the
Warrant Holders pursuant to Section 9. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section 6(b)
with respect to any prospectus shall not inure to the benefit of any Indemnified
Party if the untrue statement or omission of material fact contained in the
prospectus was corrected and such new prospectus was delivered to each Warrant
Holders prior to such Warrant Holders' use of the prospectus to which the Claim
relates.
c. Promptly after receipt by an Indemnified Person
or Indemnified Party under this Section 6 of notice of the commencement of any
action or proceeding (including any governmental action or proceeding) involving
a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this Section
6, deliver to the indemnifying party a written notice of the commencement
thereof, and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense thereof
with counsel mutually satisfactory to the indemnifying party and the Indemnified
Person or the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses of not more than one counsel for such
Indemnified Person or Indemnified Party to be paid by the indemnifying party,
if, in the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. In the case of an
Indemnified Person, legal counsel referred to in the immediately preceding
sentence shall be selected by the Warrant Holders holding a majority in interest
of the Registrable Securities included in the Registration Statement to which
the Claim relates. The Indemnified Party or Indemnified Person shall cooperate
fully with the indemnifying party in connection with any negotiation or defense
of any such action or claim by the indemnifying party and shall furnish to the
indemnifying party all information reasonably available to the Indemnified Party
or Indemnified Person which relates to such action or claim. The indemnifying
party shall keep the Indemnified Party or Indemnified Person fully apprised at
all times as to the status of the defense or any settlement negotiations with
respect thereto. No indemnifying party shall be liable for any settlement of any
action, claim or proceeding effected without its prior written consent,
provided, however, that the indemnifying party shall not unreasonably withhold,
delay or condition its consent. No indemnifying party shall, without the prior
written consent of the Indemnified Party or Indemnified Person, consent to entry
of any judgment or enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party or Indemnified Person of a release from all liability
in respect to such claim or litigation. Following indemnification as provided
for hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
E-9
<PAGE>
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.
d. The indemnification required by this Section 6
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills are received or Indemnified
Damages are incurred.
e. The indemnity agreements contained herein shall
be in addition to (i) any cause of action or similar right of the Indemnified
Party or Indemnified Person against the indemnifying party or others, and (ii)
any liabilities the indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
------------
To the extent any indemnification by an indemnifying party
is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; provided,
however, that: (i) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of fraudulent misrepresentation; and (ii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
--------------------------
With a view to making available to the Warrant Holders the
benefits of Rule 144 promulgated under the 1933 Act or any similar rule or
regulation of the SEC that may at any time permit the Warrant Holders to sell
securities of the Company to the public without registration ("RULE 144") the
Company agrees to:
a. make and keep public information available, as
those terms are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports
and other documents required of the Company under the 1933 Act and the 1934 Act
so long as the Company remains subject to such requirements (it being understood
that nothing herein shall limit the Company's obligations under Section 4(c) of
the Placement Agent Agreement) and the filing of such reports and other
documents as required by the applicable provisions of Rule 144; and
c. furnish to each Warrant Holder so long as such
Warrant Holder owns Registrable Securities, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting requirements of
Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual
or quarterly report of the Company and such other reports and documents so filed
E-10
<PAGE>
by the Company, and (iii) such other information as may be reasonably requested
to permit the Warrant Holders to sell such securities pursuant to Rule 144
without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
---------------------------------
The rights under this Agreement shall be automatically
assignable by the Warrant Holders to any transferee of all or any portion of
Registrable Securities if: (i) the Warrant Holder agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment; (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned; (iii) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein; and (iv) such transfer shall have been made in
accordance with the applicable requirements of the Placement Agent Agreement.
10. AMENDMENT OF REGISTRATION RIGHTS.
--------------------------------
Provisions of this Agreement may be amended and the
observance thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with the written consent of the
Company and Warrant Holder who then hold at least two-thirds (2/3) of the
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon each Warrant Holders and the Company. No such
amendment shall be effective to the extent that it applies to fewer than all of
the holders of the Registrable Securities. No consideration shall be offered or
paid to any Person to amend or consent to a waiver or modification of any
provision of any of this Agreement unless the same consideration also is offered
to all of the parties to this Agreement.
11. MISCELLANEOUS.
-------------
a. A Person is deemed to be a holder of Registrable
Securities whenever such Person owns or is deemed to own of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more Persons with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of receipt is received by the sending party; or (iii) one
business day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:
E-11
<PAGE>
If to the Company:
AVID SPORTSWEAR AND GOLF CORP.
22 South Links Avenue - Suite 204
Sarasota, Fl 34236
Telephone: (941) 330-8051
Facsimile: (941) 366-6017
Attention: Earl Ingarfield, President and Chief
Executive Officer
with Copy to:
Kirkpatrick & Lockhart LLP
201 South Biscayne Blvd. - Suite 2000
Miami, Fl 33131
Telephone: (305) 539-3300
Facsimile: (305) 358-7095
Attention: Clayton E. Parker, Esq.
If to a Warrant Holder, to its address and facsimile number on the Schedule of
Warrant Holders attached hereto, with copies to such Warrant Holder's
representatives as set forth on the Schedule of Warrant Holders or to such other
address and/or facsimile number and/or to the attention of such other person as
the recipient party has specified by written notice given to each other party
five (5) days prior to the effectiveness of such change. Written confirmation of
receipt (A) given by the recipient of such notice, consent, facsimilie waiver or
other communication, (B) provided by a courier or overnight courier service
shall be rebuttable evidence of personal service, receipt by facsimile or
receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
c. Failure of any party to exercise any right or
remedy under this Agreement or otherwise, or delay by a party in exercising such
right or remedy, shall not operate as a waiver thereof.
d. The corporate laws of the State of Nevada shall
govern all issues concerning the relative rights of the Company and the Warrant
Holders as its stockholders. All other questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York. Each party hereby irrevocably
submits to the non-exclusive jurisdiction of the state and federal courts
sitting in the City of New York, Borough of Manhattan, for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
E-12
<PAGE>
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
e. This Agreement, the Placement Agent Agreement and
the escrow agreement with First Union National Bank (the "ESCROW AGREEMENT")
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement, the Placement Agent Agreement and the Escrow Agreement
supersede all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9, this
Agreement shall inure to the benefit of and be binding upon the permitted
successors and assigns of each of the parties hereto.
g. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
h. This Agreement may be executed in identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
i. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
E-13
<PAGE>
j. All consents and other determinations to be made
by the Warrant Holders pursuant to this Agreement shall be made, unless
otherwise specified in this Agreement, by Warrant Holders holding a majority of
the Registrable Securities.
k. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent
and no rules of strict construction will be applied against any party.
l. This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns, and is not
for the benefit of, nor may any provision hereof be enforced by, any other
Person.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
E-14
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
AVID SPORTSWEAR AND GOLF CORP.
By: ____________________________________
Name: Earl Ingarfield
Title: President and Chief Executive Officer
MAY DAVIS GROUP, INC.
By: ____________________________________
Name: Michael Jacobs
Title:Managing Director
E-15
<PAGE>
<TABLE>
SCHEDULE OF WARRANT HOLDERS
<CAPTION>
WARRANT HOLDER ADDRESS WARRANT HOLDER'S REPRESENTATIVES' ADDRESS
WARRANT HOLDER NAME AND FACSIMILE NUMBER AND FACSIMILE NUMBER
---------------------------------- ----------------------------------------------- ------------------------------------------------
<S> <C> <C>
Mark A. Angelo
Joseph Donahue One World Trade Center One World Trade Center
Robert Farrell 87th Floor 87th Floor
Hunter Singer New York, NY 10048 New York, NY 10048
Facsimile : (212) 774-8166 Facsimile : (212) 774-8166
</TABLE>
E-16
<PAGE>
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[TRANSFER AGENT]
ATTN:
-------------------------------------
RE: AVID SPORTSWEAR AND GOLF CORP.
------------------------------
Ladies and Gentlemen:
We are counsel to Avid Sportswear and Golf Corp., a Nevada
corporation (the "COMPANY"), and have represented the Company in connection with
that certain Placement Agency Agreement (the "PLACEMENT AGENT AGREEMENT")
entered into by and among the Company and the Warrant Holders named therein
(collectively, the "WARRANT HOLDERS") pursuant to which the Company issued to
the Warrant Holders shares of its Common Stock, par value $0.00 per share (the
"COMMON STOCK") upon exercise of the Warrants. Pursuant to the Placement Agent
Agreement, the Company also has entered into a Registration Rights Agreement
with the Warrant Holders (the "REGISTRATION RIGHTS AGREEMENT") pursuant to which
the Company agreed, among other things, to register the Registrable Securities
(as defined in the Registration Rights Agreement) under the Securities Act of
1933, as amended (the "1933 ACT"). In connection with the Company's obligations
under the Registration Rights Agreement, on ____________ ____, the Company filed
a Registration Statement on Form ________ (File No. 333-_____________) (the
"REGISTRATION STATEMENT") with the Securities and Exchange Commission (the
"SEC") relating to the Registrable Securities which names each of the Warrant
Holders as a selling stockholder thereunder.
In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
[ISSUER'S COUNSEL]
By:
-------------------------------------
cc: [LIST NAMES OF WARRANT HOLDERS]
<PAGE>
APPENDIX "F"
AVID SPORTSWEAR AND GOLF CORPORATION
PLACEMENT AGENT AGREEMENT
Dated as of: November ___, 2000
May Davis Group, Inc.
One World Trade Center - Suite 8735
New York, New York, 10048
Ladies and Gentlemen:
The undersigned, Avid Sportswear and Golf Corp., (the "COMPANY"),
hereby agrees with May Davis Group, Inc. ("MAY DAVIS") as
follows:
1. OFFERING. The Company hereby engages May Davis to act as its
exclusive placement agent in connection with the Line of Credit Agreement (as
defined herein) for the issuance and sale by the Company (the "OFFERING") of
Debentures (the "DEBENTURES"), at a price equal to the Purchase Price, as that
term is defined in the Line of Credit Agreement dated the date hereof between
the Company and the investor named therein (the "CREDIT AGREEMENT"), for an
aggregate price of up to $10,000,000. All capitalized terms used herein and not
otherwise defined shall have the same meaning ascribed to them as in the Line of
Credit Agreement. The Investor will be granted certain registration rights with
respect to the Common Stock as more fully set forth in the Registration Rights
Agreement between the Company and the Investor dated the date hereof. The
documents to be executed and delivered in connection with the Offering,
including but not limited to this Agreement, the Line of Credit Agreement, the
Registration Rights Agreement, the escrow agreement with First Union National
Bank (the "ESCROW AGREEMENT"), are referred to sometimes hereinafter
collectively as the "OFFERING MATERIALS." The Debentures are sometimes referred
to hereinafter as the "SECURITIES." May Davis shall not be obligated to sell any
Securities and this Offering by May Davis shall be solely on a "best efforts
basis."
2. INFORMATION.
A. Upon the execution of the Credit Agreement, the Company shall pay
May Davis's Counsel, Butler Gonzalez LLP, Twenty Thousand Dollars ($20,000) for
legal fees and other related expenses. Upon the occurrence of each Closing, the
funds received in respect of the Debentures purchased by the Investor will be
disbursed in accordance with the terms of the Line of Credit Agreement, net of
(i) the commission payable to May Davis, equal to eight and 2/5 percent (8.4%)
of the gross proceeds from the sale of the Debentures, and (ii) Five Hundred
Dollars ($500.00) for legal fees and other expenses related thereto due to May
Davis's counsel and the Escrow Agent.
<PAGE>
B. In addition to the foregoing compensation, the Company shall issue
to May Davis upon the execution of the Credit Agreement the following: (i) a
warrant in substantially the form annexed hereto to purchase one million six
hundred eighty thousand (1,680,000) shares of Common Stock at an exercise price
per share of $0.35, exercisable in part or in whole at any time by May Davis at
its discretion for a period of sixty (60) months from the date of issuance (the
"WARRANT"). The Placement Agent's Warrants shall be issued to the individuals
and in the amounts set forth on Schedule A. May Davis shall be entitled to
certain demand registration rights with respect to the shares of Common Stock
issuable upon exercise of the Warrants pursuant to a registration rights
agreement in substantially the same form annexed hereto (the "PLACEMENT AGENT'S
REGISTRATION RIGHTS AGREEMENT").
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF MAY DAVIS.
A. May Davis represents, warrants and covenants as follows:
(i) May Davis has the necessary power to enter into this
Agreement, the Placement Agent's Registration Rights Agreement and the Escrow
Agreement and to consummate the transactions contemplated hereby and thereby.
(ii) The execution and delivery by May Davis of this Agreement,
the Placement Agent's Registration Rights Agreement, the Escrow Agreement and
the consummation of the transactions contemplated herein and therein will not
result in any violation of, or be in conflict with, or constitute a default
under, any agreement or instrument to which May Davis is a party or by which May
Davis or its properties are bound, or any judgment, decree, order or, to May
Davis's knowledge, any statute, rule or regulation applicable to May Davis. This
Agreement, the Placement Agent's Registration Rights Agreement and the Escrow
Agreement when executed and delivered by May Davis, will constitute the legal,
valid and binding obligations of May Davis, enforceable in accordance with their
respective terms, except to the extent that (a) the enforceability hereof or
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws from time to time in effect and affecting the rights of creditors
generally, (b) the enforceability hereof or thereof is subject to general
principles of equity, or (c) the indemnification provisions hereof or thereof
may be held to be violative of public policy.
(iii) Upon receipt of an executed Line of Credit Agreement, a
Registration Rights Agreement and Escrow Agreement and the documents related
thereto, May Davis will, through the Escrow Agent, promptly forward copies of
the Line of Credit Agreement, Registration Rights Agreement and Escrow Agreement
and the documents related thereto to the Company or its counsel.
(iv) May Davis will not deliver any documents related to the
Offering to any person it does not reasonably believe to be an Accredited
Investor as defined in Rule 501 (a) (3) of Regulation D.
(v) May Davis will not intentionally take any action that it
reasonably believes would cause the Offering to violate the provisions of the
F-2
<PAGE>
1933 Act, the 1934 Act, the respective rules and regulations promulgated there
under (the "RULES AND REGULATIONS") or applicable "Blue Sky" laws of any state
or jurisdiction.
(vi) May Davis shall use all reasonable efforts to determine (a)
whether the Investor is an Accredited Investor and (b) that any information
furnished by the Investor is true and accurate. May Davis shall have no
obligation to insure that (x) any check, note, draft or other means of payment
for the Common Stock will be honored, paid or enforceable against the Investor
in accordance with its terms, or (y) subject to the performance of May Davis's
obligations and the accuracy of May Davis's representations and warranties
hereunder, (1) the Offering is exempt from the registration requirements of the
1933 Act or any applicable state "Blue Sky" law or (2) the Investor is an
Accredited Investor.
(vii) May Davis is a member of the National Association of
Securities Dealers, Inc., and is a broker-dealer registered as such under the
1934 Act and under the securities laws of the states in which the Securities
will be offered or sold by May Davis, unless an exemption for such state
registration is available to May Davis. May Davis is in compliance with all
material rules and regulations applicable to May Davis generally and applicable
to May Davis's participation in the Offering.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
A. The Company represents and warrants as follows:
(i) The execution, delivery and performance of each of this
Agreement, the Line of Credit Agreement, the Escrow Agreement, the Placement
Agent's Registration Rights Agreement and the Registration Rights Agreement
executed by the Investor(s) has been or will be duly and validly authorized by
the Company and is, or with respect to this Agreement, the Line of Credit
Agreement, the Escrow Agreement, the Placement Agent's Registration Rights
Agreement and the Registration Rights Agreement executed with the Investor(s)
will be, a valid and binding agreement of the Company, enforceable in accordance
with its respective terms, except to the extent that (a) the enforceability
hereof or thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws from time to time in effect and affecting the rights
of creditors generally, (b) the enforceability hereof or thereof is subject to
general principles of equity or (c) the indemnification provisions hereof or
thereof may be held to be violative of public policy. Prior to the issuance of
the Securities to be issued pursuant to the transactions contemplated by this
Agreement and the Line of Credit Agreement have been duly authorized. All
corporate action required to be taken for the authorization, issuance and sale
of the Securities has been duly and validly taken by the Company.
(ii) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Line of Credit Agreement. The Company is not
a party to or bound by any instrument, agreement or other arrangement providing
for it to issue any capital stock, rights, warrants, options or other
securities, except for this Agreement and the agreements described herein and as
described in the Line of Credit Agreement and the documents referenced therein.
All issued and outstanding securities of the Company, have been duly authorized
F-3
<PAGE>
and validly issued and are fully paid and non-assessable; the holders thereof
have no rights of rescission or preemptive rights with respect thereto and are
not subject to personal liability solely by reason of being security holders;
and none of such securities was issued in violation of the preemptive rights of
any holders of any security of the Company. The Company has 50,000,000 shares of
authorized Common Stock, 44,479,406 of which will be issued and outstanding as
of the date hereof.
(iii) The Company intends to hold a meeting of shareholders to
increase its authorized Common Stock within sixty (60) days of the date hereof.
The Common Stock to be issued in accordance with Line of Credit Agreement will
be duly authorized and when issued and paid for in accordance with the this
Agreement, the Line of Credit Agreement and the certificates/instruments
representing such Common Stock, will be validly issued, fully-paid and
non-assessable; the holders thereof will not be subject to personal liability
solely by reason of being such holders; such securities are not and will not be
subject to the preemptive rights of any holder of any security of the Company.
(iv) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property
necessary to conduct its business (including, without limitation any real or
personal property stated in the Offering Materials to be owned or leased by the
Company), free and clear of all liens, encumbrances, claims, security interests
and defects of any material nature whatsoever, other than those set forth in the
Offering Materials and liens for taxes not yet due and payable.
(v) There is no litigation or governmental proceeding pending or,
to the best of the Company's knowledge, threatened against, or involving the
properties or business of the Company, except as set forth in the Offering
Materials.
(vi) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of Nevada. Except
as set forth in the Offering Materials, the Company does not own or control,
directly or indirectly, an interest in any other corporation, partnership,
trust, joint venture or other business entity. The Company is duly qualified or
licensed and in good standing as a foreign corporation in each jurisdiction in
which the character of its operations requires such qualification or licensing
and where failure to so qualify would have a material adverse effect on the
Company. The Company has all requisite corporate power and authority, and all
material and necessary authorizations, approvals, orders, licenses, certificates
and permits of and from all governmental regulatory officials and bodies
(domestic and foreign) to conduct its businesses (and proposed business) as
described in the Offering Materials. Any disclosures in the Offering Materials
concerning the effects of foreign, federal, state and local regulation on the
Company's businesses as currently conducted and as contemplated are correct in
all material respects and do not omit to state a material fact. The Company has
all corporate power and authority to enter into this Agreement, the Line of
Credit Agreement, the Placement Agent's Registration Rights Agreement, the
Registration Rights Agreement, and the Escrow Agreement, and to carry out the
provisions and conditions hereof and thereof, and all consents, authorizations,
approvals and orders required in connection herewith and therewith have been
obtained. No consent, authorization or order of, and no filing with, any court,
government agency or other body is required by the Company for the issuance of
the Securities or execution and delivery of the Line of Credit Agreement,
F-4
<PAGE>
Registration Rights Agreement, and the Escrow Agreement except as required by
applicable federal and state securities laws. The Company, since its inception,
has not incurred any liability arising under or as a result of the application
of any of the provisions of the 1933 Act, the 1934 Act or the Rules and
Regulations.
(vii) There has been no material adverse change in the condition
or prospects of the Company, financial or otherwise, from the latest dates as of
which such condition or prospects, respectively, are set forth in the Offering
Materials, the outstanding debt, the property and the business of the Company
conform in all material respects to the descriptions thereof contained in the
Offering Materials.
(viii) Except as set forth in the Offering Materials, the Company
is not in breach of, or in default under, any term or provision of any material
indenture, mortgage, deed of trust, lease, note, loan or line of credit
agreement or any other material agreement or instrument evidencing an obligation
for borrowed money, or any other material agreement or instrument to which it is
a party or by which it or any of its properties may be bound or affected. The
Company is not in violation of any provision of its charter or by-laws or in
violation of any franchise, license, permit, judgment, decree or order, or in
violation of any material statute, rule or regulation. Neither the execution and
delivery of this Agreement, the line of credit agreement, the Placement Agent's
Registration Rights Agreement the Registration Rights Agreement, the Escrow
Agreement, nor the issuance and sale or delivery of the Securities, nor the
consummation of any of the transactions contemplated herein or in the Credit
Agreement, the Placement Agent's Registration Rights Agreement, the Registration
Rights Agreement, and the Escrow Agreement, nor the compliance by the Company
with the terms and provisions hereof or thereof, has conflicted with or will
conflict with, or has resulted in or will result in a breach of, any of the
terms and provisions of, or has constituted or will constitute a default under,
or has resulted in or will result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or pursuant to
the terms of any indenture, mortgage, deed of trust, note, loan or line of
credit agreement or any other agreement or instrument evidencing an obligation
for borrowed money, or any other agreement or instrument to which the Company
may be bound or to which any of the property or assets of the Company is subject
except (a) where such default, lien, charge or encumbrance would not have a
material adverse effect on the Company and (b) as described in the Offering
Materials; nor will such action result in any violation of the provisions of the
charter or the by-laws of the Company or, assuming the due performance by May
Davis of its obligations hereunder, any material statute or any material order,
rule or regulation applicable to the Company of any court or of any foreign,
federal, state or other regulatory authority or other government body having
jurisdiction over the Company.
(ix) Subsequent to the dates as of which information is given in
the Offering Materials, and except as may otherwise be indicated or contemplated
herein or therein, the Company has not (a) issued any securities or incurred any
liability or obligation, direct or contingent, for borrowed money, or (b)
entered into any transaction other than in the ordinary course of business, or
(c) declared or paid any dividend or made any other distribution on or in
respect of its capital stock. Except as described in the Offering Materials, and
except for loans convertible into Common Stock payable to its CEO and certain of
its directors, the Company has no outstanding obligations to any officer or
director of the Company.
F-5
<PAGE>
(x) There are no claims for services in the nature of a finder's
or origination fee with respect to the sale of the Common Stock or any other
arrangements, agreements or understandings that may affect May Davis's
compensation, as determined by the National Association of Securities Dealers,
Inc.
(xi) The Company owns or possesses, free and clear of all liens or
encumbrances and rights thereto or therein by third parties, the requisite
licenses or other rights to use all trademarks, service marks, copyrights,
service names, trade names, patents, patent applications and licenses necessary
to conduct its business (including, without limitation, any such licenses or
rights described in the Offering Materials as being owned or possessed by the
Company) and, except as set forth in the Offering Materials, there is no claim
or action by any person pertaining to, or proceeding, pending or threatened,
which challenges the exclusive rights of the Company with respect to any
trademarks, service marks, copyrights, service names, trade names, patents,
patent applications and licenses used in the conduct of the Company's businesses
(including, without limitation, any such licenses or rights described in the
Offering Materials as being owned or possessed by the Company) except any claim
or action that would not have a material adverse effect on the Company; the
Company's current products, services or processes do not infringe or will not
infringe on the patents currently held by any third party.
(xii) Except as described in the Offering Materials, the Company
is not under any obligation to pay royalties or fees of any kind whatsoever to
any third party with respect to any trademarks, service marks, copyrights,
service names, trade names, patents, patent applications, licenses or technology
it has developed, uses, employs or intends to use or employ, other than to their
respective licensors.
(xiii) Subject to the performance by May Davis of its obligations
hereunder, the Line of Credit Agreement and the offer and sale of the Securities
comply, and will continue to comply, up to the Commitment Period (as defined in
the Line of Credit Agreement) in all material respects with the requirements of
Rule 506 of Regulation D promulgated by the SEC pursuant to the 1933 Act and any
other applicable federal and state laws, rules, regulations and executive
orders. Neither the Offering Materials nor any amendment or supplement thereto
nor any documents prepared by the Company in connection with the Offering will
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. All
statements of material facts in the Offering Materials are true and correct as
of the date of the Offering Materials and will be true and correct on the date
of the Closing.
(xiv) All material taxes which are due and payable from the
Company have been paid in full or adequate provision has been made for such
taxes on the books of the Company except for those taxes disputed in good faith
the Company does not have any tax deficiency or claim outstanding assessed or
proposed against it.
(xv) None of the Company nor any of its officers, directors,
employees or agents, nor any other person acting on behalf of the Company, has,
directly or indirectly, given or agreed to give any money, gift or similar
F-6
<PAGE>
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency or instrumentality
of any government (domestic or foreign) or any political party or candidate for
office (domestic or foreign) or other person who is or may be in a position to
help or hinder the business of the Company (or assist it in connection with any
actual or proposed transaction) which (A) might subject the Company to any
damage or penalty in any civil, criminal or governmental litigation or
proceeding, or (B) if not given in the past, might have had a materially adverse
effect on the assets, business or operations of the Company as reflected in any
of the financial statements contained in the Offering Materials, or (C) if not
continued in the future, might adversely affect the assets, business, operations
or prospects of the Company in the future.
5. CERTAIN COVENANTS AND AGREEMENTS OF THE COMPANY.
The Company covenants and agrees at its expense and without any expense
to May Davis as follows:
A. To advise May Davis of any material adverse change in the Company's
financial condition, prospects or business or of any development materially
affecting the Company or rendering untrue or misleading any material statement
in the Offering Materials occurring at any time as soon as the Company is either
informed or becomes aware thereof.
B. To use its commercially reasonable efforts to cause the Common Stock
issuable in connection with the Line of Credit Agreement and upon exercise of
the Convertible Debentures to be qualified or registered for sale on terms
consistent with those stated in the Registration Rights Agreement and under the
securities laws of such jurisdictions as May Davis and the Investor shall
reasonably request, provided that such states and jurisdictions do not require
the Company to qualify as a foreign corporation. Qualification, registration and
exemption charges and fees shall be at the sole cost and expense of the Company.
C. Upon written request, to provide and continue to provide the to each
holder of Securities, copies of all quarterly financial statements and audited
annual financial statements prepared by or on behalf of the Company, other
reports prepared by or on behalf of the Company for public disclosure and all
documents delivered to the Company's stockholders.
D. To deliver, during the Commitment Period, to May Davis, upon May
Davis's request, in the manner provided in Section 10(B) of this Agreement,
within forty five (45) days, a statement of its income for each such quarterly
period, and its balance sheet and a statement of changes in stockholders' equity
as of the end of such quarterly period, all in reasonable detail, certified by
its principal financial or accounting officer; (ii) within ninety (90) days
after the close of each fiscal year, its balance sheet as of the close of such
fiscal year, together with a statement of income, a statement of changes in
stockholders' equity and a statement of cash flow for such fiscal year, such
balance sheet, statement of income, statement of changes in stockholders' equity
and statement of cash flow to be in reasonable detail and accompanied by a copy
of the certificate or report thereon of independent auditors if audited
F-7
<PAGE>
financial statements are prepared; and (iii) a copy of all documents, reports
and information furnished to its stockholders at the time that such documents,
reports and information are furnished to its stockholders.
E. To comply with the terms of the Line of Credit Agreement, the
Registration Rights Agreement, and the Escrow Agreement.
F. To ensure that any transactions between or among the Company, or any
of its officers, directors and affiliates be on terms and conditions that are no
less favorable to the Company, than the terms and conditions that would be
available in an "arm's length" transaction with an independent third party.
6. INDEMNIFICATION.
A. The Company hereby agrees that it will indemnify and hold May
Davis and each officer, director, shareholder, employee or representative of May
Davis, and each person controlling, controlled by or under common control with
May Davis within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act or the SEC's Rules and Regulations promulgated there under (the "RULES
AND REGULATIONS"), harmless from and against any and all loss, claim, damage,
liability, cost or expense whatsoever (including, but not limited to, any and
all reasonable legal fees and other expenses and disbursements incurred in
connection with investigating, preparing to defend or defending any action, suit
or proceeding, including any inquiry or investigation, commenced or threatened,
or any claim whatsoever or in appearing or preparing for appearance as a witness
in any action, suit or proceeding, including any inquiry, investigation or
pretrial proceeding such as a deposition) to which May Davis or such indemnified
person of May Davis may become subject under the 1933 Act, the 1934 Act, the
Rules and Regulations, or any other federal or state law or regulation, common
law or otherwise, arising out of or based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in (a) Section 4 of this
Agreement, (b) the Offering Materials (except those written statements relating
to May Davis given by an indemnified person for inclusion therein), (c) any
application or other document or written communication executed by the Company
or based upon written information furnished by the Company filed in any
jurisdiction in order to qualify the Common Stock under the securities laws
thereof, or any state securities commission or agency; (ii) the omission or
alleged omission from documents described in clauses (a), (b) or (c) above of a
material fact required to be stated therein or necessary to make the statements
therein not misleading; or (iii) the breach of any representation, warranty,
covenant or agreement made by the Company in this Agreement. The Company further
agrees that upon demand by an indemnified person, at any time or from time to
time, it will promptly reimburse such indemnified person for any loss, claim,
damage, liability, cost or expense actually and reasonably paid by the
indemnified person as to which the Company has indemnified such person pursuant
hereto. Notwithstanding the foregoing provisions of this Paragraph 6(A), any
such payment or reimbursement by the Company of fees, expenses or disbursements
incurred by an indemnified person in any proceeding in which a final judgment by
a court of competent jurisdiction (after all appeals or the expiration of time
to appeal) is entered against May Davis or such indemnified person as a direct
result of May Davis or such person's gross negligence or willful misfeasance
will be promptly repaid to the Company.
F-8
<PAGE>
B. May Davis hereby agrees that it will indemnify and hold the Company
and each officer, director, shareholder, employee or representative of the
Company, and each person controlling, controlled by or under common control with
the Company within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act or the Rules and Regulations, harmless from and against any and all
loss, claim, damage, liability, cost or expense whatsoever (including, but not
limited to, any and all reasonable legal fees and other expenses and
disbursements incurred in connection with investigating, preparing to defend or
defending any action, suit or proceeding, including any inquiry or
investigation, commenced or threatened, or any claim whatsoever or in appearing
or preparing for appearance as a witness in any action, suit or proceeding,
including any inquiry, investigation or pretrial proceeding such as a
deposition) to which the Company or such indemnified person of the Company may
become subject under the 1933 Act, the 1934 Act, the Rules and Regulations, or
any other federal or state law or regulation, common law or otherwise, arising
out of or based upon (i) the conduct of May Davis or its officers, employees or
representatives in its acting as Placement Agent for the Offering or (ii) the
breach of any representation, warranty, covenant or agreement made by May Davis
in this Agreement (iii) any false or misleading information provided to the
Company by one of the May Davis indemnified persons.
C. Promptly after receipt by an indemnified party of notice of
commencement of any action covered by Section 6(A) or 6(B), the party to be
indemnified shall, within five (5) business days, notify the indemnifying party
of the commencement thereof; the omission by one indemnified party to so notify
the indemnifying party shall not relieve the indemnifying party of its
obligation to indemnify any other indemnified party that has given such notice
and shall not relieve the indemnifying party of any liability outside of this
indemnification if not materially prejudiced thereby. In the event that any
action is brought against the indemnified party, the indemnifying party will be
entitled to participate therein and, to the extent it may desire, to assume and
control the defense thereof with counsel chosen by it which is reasonably
acceptable to the indemnified party. After notice from the indemnifying party to
such indemnified party of its election to so assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under such
Section 6(A) or 6(B) for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof, but the
indemnified party may, at its own expense, participate in such defense by
counsel chosen by it, without, however, impairing the indemnifying party's
control of the defense. Subject to the proviso of this sentence and
notwithstanding any other statement to the contrary contained herein, the
indemnified party or parties shall have the right to choose its or their own
counsel and control the defense of any action, all at the expense of the
indemnifying party if, (i) the employment of such counsel shall have been
authorized in writing by the indemnifying party in connection with the defense
of such action at the expense of the indemnifying party, or (ii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
such indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses of one additional counsel shall be borne by the
indemnifying party; provided, however, that the indemnifying party shall not, in
F-9
<PAGE>
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstance, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys at any time for all such indemnified parties. No
settlement of any action or proceeding against an indemnified party shall be
made without the consent of the indemnifying party.
D. In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in Section 6(A) or 6(B)
is due in accordance with its terms but is for any reason held by a court to be
unavailable on grounds of policy or otherwise, the Company and May Davis shall
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with the investigation
or defense of same) which the other may incur in such proportion so that May
Davis shall be responsible for such percent of the aggregate of such losses,
claims, damages and liabilities as shall equal the percentage of the gross
proceeds paid to May Davis and the Company shall be responsible for the balance;
provided, however, that no person guilty of fraudulent misrepresentation within
the meaning of Section 11(f) of the 1933 Act shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. For
purposes of this Section 6(D), any person controlling, controlled by or under
common control with May Davis, or any partner, director, officer, employee,
representative or any agent of any thereof, shall have the same rights to
contribution as May Davis and each person controlling, controlled by or under
common control with the Company within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act and each officer of the Company and each director
of the Company shall have the same rights to contribution as the Company. Any
party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim for contribution may be made against the other party under this
Section 6(D), notify such party from whom contribution may be sought, but the
omission to so notify such party shall not relieve the party from whom
contribution may be sought from any obligation they may have hereunder or
otherwise if the party from whom contribution may be sought is not materially
prejudiced thereby. The indemnity and contribution agreements contained in this
Section 6 shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any indemnified person or any termination
of this Agreement.
7. PAYMENT OF EXPENSES.
The Company hereby agrees to bear all of the expenses in connection
with the Offering, including, but not limited to the following: filing fees,
printing and duplicating costs, advertisements, postage and mailing expenses
with respect to the transmission of Offering Materials, registrar and transfer
agent fees, Escrow Agent fees and expenses, fees of the Company's counsel and
accountants, issue and transfer taxes, if any, and counsel fees and expenses.
8. CONDITIONS OF CLOSING
Closing shall be held at the offices of May Davis or its counsel. The
obligations of May Davis hereunder shall be subject to the continuing accuracy
F-10
<PAGE>
of the representations and warranties of the Company herein as of the date
hereof and as of the Date of Closing (the "CLOSING DATE") with respect to the
Company as if it had been made on and as of such Closing Date; the accuracy on
and as of the Closing Date of the statements of the officers of the Company made
pursuant to the provisions hereof; and the performance by the Company on and as
of the Closing Date of its covenants and obligations hereunder and to the
following further conditions:
A. At the Closing, May Davis shall receive the opinion of Kirkpatrick &
Lockhart, dated as of the date of the Closing, which opinion shall be in form
and substance reasonably satisfactory to counsel for May Davis.
B. At or prior to the Closing, counsel for May Davis shall have been
furnished such documents, certificates and opinions as they may reasonably
require for the purpose of enabling them to review or pass upon the matters
referred to in this Agreement and the Offering Materials, or in order to
evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
C. At and prior to the Closing, (i) there shall have been no material
adverse change nor development involving a prospective change in the condition
or prospects or the business activities, financial or otherwise, of the Company
from the latest dates as of which such condition is set forth in the Offering
Materials; (ii) there shall have been no transaction, not in the ordinary course
of business, entered into by the Company which has not been disclosed in the
Offering Materials or to May Davis in writing; (iii) except as set forth in the
Offering Materials, the Company shall not be in default under any provision of
any instrument relating to any outstanding indebtedness for which a waiver or
extension has not been otherwise received which would cause a material adverse
effect on the properties or business of the Company; (iv) except as set forth in
the Offering Materials, the Company shall not have issued any securities (other
than those to be issued as provided in the Offering Materials) or with respect
to convertible securities outstanding as of the date hereof and certain
directors or declared or paid any dividend or made any distribution of its
capital stock of any class and there shall not have been any change in the
indebtedness (long or short term) or liabilities or obligations of the Company
(contingent or otherwise) except for indebtedness payable to its CEO and certain
directors and trade payable debt; (v) no material amount of the assets of the
Company shall have been pledged or mortgaged, except as indicated in the
Offering Materials; and (v) no action, suit or proceeding, at law or in equity,
against the Company or affecting any of its properties or businesses shall be
pending or threatened before or by any court or federal or state commission,
board or other administrative agency, domestic or foreign, wherein an
unfavorable decision, ruling or finding could materially adversely affect the
businesses, prospects or financial condition or income of the Company, except as
set forth in the Offering Materials.
D. The Closing, May Davis shall have received a certificate of the
Company signed by an executive officer and chief financial officer, dated as of
the applicable Closing, to the effect that the conditions set forth in
subparagraph (C) above have been satisfied and that, as of the applicable
closing, the representations and warranties of the Company set forth herein are
true and correct.
F-11
<PAGE>
9. TERMINATION.
This Agreement shall be co-terminus with, and terminate upon the same
terms and conditions as those set forth in, the Line of Credit Agreement. The
rights of the Investor and the obligations of the Company under the Registration
Rights Agreement, and the rights of May Davis and the obligations of the Company
shall survive the termination of this Agreement unabridged.
10. MISCELLANEOUS.
A. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but all which shall be deemed to be
one and the same instrument.
B. Any notice required or permitted to be given hereunder shall be
given in writing and shall be deemed effective when deposited in the United
States mail, postage prepaid, or when received if personally delivered or faxed
( upon confirmation of receipt received by the sending party), addressed as
follows:
To May Davis:
May Davis Group, Inc.
One World Trade Center - Suite 8735
New York, New York 10048
Attention: Michael Jacobs
with a copy to:
Butler Gonzalez LLP
1000 Stuyvesant Avenue, Suite #6
Union, NJ 07083
Fax: (908) 810-0973
Attention: David Gonzalez, Esq.
To the Company:
Avid Sportswear and Golf Corp.
22 South Links Avenue - Suite 204
Sarasota, FL 34236
Attention: Earl Ingarfield
F-12
<PAGE>
with copy to:
Kirkpatrick & Lockhart, LLP
201 South Biscayne Blvd., Suite 2000
Miami, FL 33131
Attention: Clayton Parker, Esq.
or to such other address of which written notice is given to the others.
C. This Agreement shall be governed by and construed in all respects
under the laws of the State of New York, without reference to its conflict of
laws rules or principles. Any suit, action, proceeding or litigation arising out
of or relating to this Agreement shall be brought and prosecuted in such federal
or state court or courts located within the State of New York as provided by
law. The parties hereby irrevocably and unconditionally consent to the
jurisdiction of each such court or courts located within the State of New York
and to service of process by registered or certified mail, return receipt
requested, or by any other manner provided by applicable law, and hereby
irrevocably and unconditionally waive any right to claim that any suit, action,
proceeding or litigation so commenced has been commenced in an inconvenient
forum.
D. This Agreement and the other agreements referenced herein contain
the entire understanding between the parties hereto and may not be modified or
amended except by a writing duly signed by the party against whom enforcement of
the modification or amendment is sought.
E. If any provision of this Agreement shall be held to be invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision of this Agreement.
[SIGNATURE PAGE TO FOLLOW]
F-13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
AVID SPORTSWEAR AND GOLF CORP.
By:_______________________________
Name: Earl Ingarfield
Title: President and Chief Executive Officer
MAY DAVIS GROUP, INC.
By:______________________________
Name: Michael Jacobs
Title: Managing Director
F-14
<PAGE>
WARRANTS
--------
Warrant Holder Amount
-------------- ------
The May Davis Group
Mark A. Angelo
Joseph Donohue
Hunter Singer
Robert Farrell
<PAGE>
APPENDIX "G"
ESCROW AGREEMENT
----------------
THIS ESCROW AGREEMENT (this "AGREEMENT") is made and entered into as
of November ___, 2000, by AVID SPORTSWEAR AND GOLF CORP., a Nevada Corporation
(the "COMPANY"); THE MAY DAVIS GROUP, a Maryland corporation (the "PLACEMENT
AGENT"); and FIRST UNION NATIONAL BANK, a national banking association, as
Escrow Agent hereunder (the "ESCROW AGENT").
I. BACKGROUND
-------------
WHEREAS, the Company through the Placement Agent on November __, 2000
entered into a line of credit agreement (the "LINE OF CREDIT AGREEMENT") wherein
the Company shall issue and sell to the Investor, from time to time, and the
Investor shall purchase up to Ten Million ($10,000,000) Dollars of Debentures
for a total purchase price of Ten Million ($10,000,000) Dollars, (the
"PROCEEDS"). The Line of Credit Agreement provides that the investor shall
deposit the purchase price of the securities purchased pursuant to the Line of
Credit Agreement in a segregated escrow account to be held by Escrow Agent in
order to effectuate a disbursement of the Proceeds to the Company at a closing
to be held as set forth in the Line of Credit Agreement (the "CLOSING").
WHEREAS, the Placement Agent intends to sell Debentures as the
Company's agent (the "OFFERING").
WHEREAS, Escrow Agent has agreed to accept, hold, and disburse the
funds deposited with it in accordance with the terms of this agreement.
WHEREAS, in order to establish the escrow of funds and to effect the
provisions of the Line of Credit Agreement, the parties hereto have entered into
this Agreement.
NOW THEREFORE, in consideration of the foregoing, it is hereby agreed
as follows:
1. DEFINITIONS. The following terms shall have the following
meanings when used herein:
a. "ESCROW FUNDS" shall mean the funds deposited with the
Escrow Agent pursuant to this Agreement.
b. "JOINT WRITTEN DIRECTION" shall mean a written direction
executed by the Placement Agent and the Company directing Escrow Agent to
disburse all or a portion of the Escrow Funds or to take or refrain from taking
any action pursuant to this Agreement.
c. "ESCROW PERIOD" shall begin with the termination of the
Offering and shall terminate upon the earlier to occur of the following dates:
<PAGE>
(i) The date upon which the Escrow Agent confirms
that it has received in the Escrow Account all of the Proceeds;
(ii) The expiration of twenty (20) days from the date
of termination of the Offering (unless extended by mutual written agreement
between the Company and the Placement Agent with a copy of such extension to the
Escrow Agent); or
(iii) The date upon which a determination is made by
the Company and the Placement Agent to terminate the Offering prior to the sale
of all the Common Stock.
During the Escrow Period, the Company and the Placement Agent are aware that
they are not entitled to any funds received into escrow and no amounts deposited
in the Escrow Account shall become the property of the Company or the Placement
Agent or any other entity, or be subject to the debts of the Company or the
Placement Agent or any other entity.
2. APPOINTMENT OF AND ACCEPTANCE BY ESCROW AGENT. The Placement
Agent and the Company hereby appoint Escrow Agent to serve as Escrow Agent
hereunder. Escrow Agent hereby accepts such appointment and, upon receipt by
wire transfer of the Escrow Funds in accordance with Section 3 below, agrees to
hold, invest and disburse the Escrow Funds in accordance with this Agreement.
3. CREATION OF ESCROW FUNDS. On or prior to the date of the
commencement of the Offering, the parties shall establish an escrow account with
the Escrow Agent, which escrow account shall be entitled as follows: Avid Sports
Wear and Golf/May Davis Group, Inc. Escrow Account for the deposit of the Escrow
Funds. The Placement Agent will instruct subscribers to wire funds to the
account of the Escrow Agent as follows:
Bank: First Union National Bank of New Jersey
Routing # 031201467
Account # 2020000659170
Name on Account: Butler Gonzalez LLP/First Union Escrow Account
Name on Sub-Account: Avid Sportswear and Golf, Corp./May Davis Group,
Inc. Escrow Account
Reference Sub-Account # _____-00
Attn: Robert Mercado (732) 452-3005
Carmela Agugliaro (732) 452-3005
Only wire transfers shall be accepted.
4. DEPOSITS INTO THE ESCROW ACCOUNT. The Placement Agent agrees
that they shall promptly deliver all monies received from subscribers for the
payment of the Common Stock to the Escrow Agent for deposit in the Escrow
Account.
G-2
<PAGE>
5. DISBURSEMENTS FROM THE ESCROW ACCOUNT.
a. At such time as Escrow Agent has collected and deposited
instruments of payment in the total amount of the Escrow Funds, Escrow Agent
shall notify the Company and the Placement Agent. The Escrow Agent will continue
to hold such funds until Placement Agent and Company execute a Joint Written
Direction directing the Escrow Agent to disburse the Proceeds pursuant to Joint
Written Direction signed by the Company. In disbursing such funds, Escrow Agent
is authorized to rely upon such Joint Written Direction from Company and may
accept any signatory from the Company listed on the signature page to this
Agreement and any signature from the Placement Agent that Escrow Agent already
has on file.
In the event the Escrow Agent does not receive the amount of the
Escrow Funds from the investors, the Escrow Agent shall notify the Company and
the Placement Agent. Upon receipt of payment instructions from the Company, the
Escrow Agent shall refund to each subscriber without interest the amount
received from each investor, without deduction, penalty, or expense to the
subscriber. The purchase money returned to each subscriber shall be free and
clear of any and all claims of the Company, the Placement Agent or any of their
creditors.
In the event the Escrow Agent does receive the amount of the Escrow
Funds prior to expiration of the Escrow Period, in no event will the Escrow
Funds be released to the Company until such amount is received by the Escrow
Agent in collected funds. For purposes of this Agreement, the term "COLLECTED
FUNDS" shall mean all funds received by the Escrow Agent which have cleared
normal banking channels and are in the form of cash.
6. COLLECTION PROCEDURE. The Escrow Agent is hereby authorized to
forward each wire for collection and, upon collection of the proceeds of each
wire deposit the collected proceeds in the Escrow Account.
Any wires returned unpaid to the Escrow Agent shall be returned to
the Placement Agent. In such cases, the Escrow Agent will promptly notify the
Company of such return.
If the Company rejects any subscription for which the Escrow Agent
has already collected funds, the Escrow Agent shall promptly issue a refund
check or wire to the rejected subscriber. If the Company rejects any
subscription for which the Escrow Agent has not yet collected funds but has
submitted the subscriber's wire for collection, the Escrow Agent shall promptly
issue a check or wire the amount of the subscriber's wire to the rejected
subscriber after the Escrow Agent has cleared such funds. If the Escrow Agent
has not yet submitted a rejected subscriber's wire for collection, the Escrow
Agent shall promptly remit the subscriber's wire directly to the subscriber. The
Company shall provide payment instructions to the Escrow Agent.
7. SUSPENSION OF PERFORMANCE: DISBURSEMENT INTO COURT. If at any
time, there shall exist any dispute between the Company and the Placement Agent
with respect to holding or disposition of any portion of the Escrow Funds or any
G-3
<PAGE>
other obligations of Escrow Agent hereunder, or if at any time Escrow Agent is
unable to determine, to Escrow Agent's sole satisfaction, the proper disposition
of any portion of the Escrow Funds or Escrow Agent's proper actions with respect
to its obligations hereunder, or if the parties have not within thirty (30) days
of the furnishing by Escrow Agent of a notice of resignation pursuant to Section
9 hereof, appointed a successor Escrow Agent to act hereunder, then Escrow Agent
may, in its sole discretion, take either or both of the following actions:
a. suspend the performance of any of its obligations
(including without limitation any disbursement obligations) under this Escrow
Agreement until such dispute or uncertainty shall be resolved to the sole
satisfaction of Escrow Agent or until a successor Escrow Agent shall be
appointed (as the case may be); provided however, Escrow Agent shall continue to
invest the Escrow Funds in accordance with Section 8 hereof; and/or
b. petition (by means of an interpleader action or any
other appropriate method) any court of competent jurisdiction in any venue
convenient to Escrow Agent, for instructions with respect to such dispute or
uncertainty, and to the extent required by law, pay into such court, for holding
and disposition in accordance with the instructions of such court, all funds
held by it in the Escrow Funds, after deduction and payment to Escrow Agent of
all fees and expenses (including court costs and attorneys' fees) payable to,
incurred by, or expected to be incurred by Escrow Agent in connection with
performance of its duties and the exercise of its rights hereunder.
c. Escrow Agent shall have no liability to the Company, the
Placement Agent, or any person with respect to any such suspension of
performance or disbursement into court, specifically including any liability or
claimed liability that may arise, or be alleged to have arisen, out of or as a
result of any delay in the disbursement of funds held in the Escrow Funds or any
delay in with respect to any other action required or requested of Escrow Agent.
8. INVESTMENT OF ESCROW FUNDS. The Escrow Agent shall deposit the
Escrow Funds in a non-interest bearing money market account.
If Escrow Agent has not received a Joint Written Direction at any
time that an investment decision must be made, Escrow Agent shall invest the
Escrow Funds, or such portion thereof, as to which no Joint Written Direction
has been received, in investments described above. The foregoing investments
shall be made by the Escrow Agent. Notwithstanding anything to the contrary
contained, Escrow Agent may, without notice to the parties, sell or liquidate
any of the foregoing investments at any time if the proceeds thereof are
required for any release of funds permitted or required hereunder, and Escrow
Agent shall not be liable or responsible for any loss, cost or penalty resulting
from any such sale or liquidation. With respect to any funds received by Escrow
Agent for deposit into the Escrow Funds or any Joint Written Direction received
by Escrow Agent with respect to investment of any funds in the Escrow Funds
after ten o'clock, a.m., New Jersey time, Escrow Agent shall not be required to
G-4
<PAGE>
invest such funds or to effect such investment instruction until the next day
upon which banks in New Jersey are open for business.
9. RESIGNATION AND REMOVAL OF ESCROW AGENT. Escrow Agent may resign
from the performance of its duties hereunder at any time by giving thirty (30)
days' prior written notice to the parties or may be removed, with or without
cause, by the parties, acting jointly, by furnishing a Joint Written Direction
to Escrow Agent, at any time by the giving of ten (10) days' prior written
notice to Escrow Agent as provided herein below. Upon any such notice of
resignation or removal, the representatives of the Placement Agent and the
Company identified in Sections 15.a.(iv) and 15.b.(iv) below, jointly shall
appoint a successor Escrow Agent hereunder, which shall be a commercial bank,
trust company or other financial institution with a combined capital and surplus
in excess of $10,000,000.00. Upon the acceptance in writing of any appointment
as Escrow Agent hereunder by a successor Escrow Agent, such successor Escrow
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Escrow Agent, and the retiring Escrow
Agent shall be discharged from its duties and obligations under this Escrow
Agreement, but shall not be discharged from any liability for actions taken as
Escrow Agent hereunder prior to such succession. After any retiring Escrow
Agent's resignation or removal, the provisions of this Escrow Agreement shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Escrow Agent under this Escrow Agreement. The retiring Escrow Agent shall
transmit all records pertaining to the Escrow Funds and shall pay all funds held
by it in the Escrow Funds to the successor Escrow Agent, after making copies of
such records as the retiring Escrow Agent deems advisable and after deduction
and payment to the retiring Escrow Agent of all fees and expenses (including
court costs and attorneys' fees) payable to, incurred by, or expected to be
incurred by the retiring Escrow Agent in connection with the performance of its
duties and the exercise of its rights hereunder.
10. LIABILITY OF ESCROW AGENT.
a. Escrow Agent shall have no liability or obligation with
respect to the Escrow Funds except for Escrow Agent's willful misconduct or
gross negligence. Escrow Agent's sole responsibility shall be for the
safekeeping, investment, and disbursement of the Escrow Funds in accordance with
the terms of this Agreement. Escrow Agent shall have no implied duties or
obligations and shall not be charged with knowledge or notice or any fact or
circumstance not specifically set forth herein. Escrow Agent may rely upon any
instrument, not only as to its due execution, validity and effectiveness, but
also as to the truth and accuracy of any information contained therein, which
Escrow Agent shall in good faith believe to be genuine, to have been signed or
presented by the person or parties purporting to sign the same and conform to
the provisions of this Agreement. In no event shall Escrow Agent be liable for
incidental, indirect, special, and consequential or punitive damages. Escrow
Agent shall not be obligated to take any legal action or commence any proceeding
in connection with the Escrow Funds, any account in which Escrow Funds are
deposited, this Agreement or the Purchase Agreement, or to appear in, prosecute
or defend any such legal action or proceeding. Escrow Agent may consult legal
counsel selected by it in any event of any dispute or question as to
construction of any of the provisions hereof or of any other agreement or its
G-5
<PAGE>
duties hereunder, or relating to any dispute involving any party hereto, and
shall incur no liability and shall be fully indemnified from any liability
whatsoever in acting in accordance with the opinion or instructions of such
counsel. The Company and the Placement Agent jointly and severally shall
promptly pay, upon demand, the reasonable fees and expenses of any such counsel.
b. The Escrow Agent is hereby authorized, in its sole
discretion, to comply with orders issued or process entered by any court with
respect to the Escrow Funds, without determination by the Escrow Agent of such
court's jurisdiction in the matter. If any portion of the Escrow Funds is at any
time attached, garnished or levied upon under any court order, or in case the
payment, assignment, transfer, conveyance or delivery of any such property shall
be stayed or enjoined by any court order, or in any case any order judgment or
decree shall be made or entered by any court affecting such property or any part
thereof, then and in any such event, the Escrow Agent is authorized, in its sole
discretion, to rely upon and comply with any such order, writ judgment or decree
which it is advised by legal counsel selected by it, binding upon it, without
the need for appeal or other action; and if the Escrow Agent complies with any
such order, writ, judgment or decree, it shall not be liable to any of the
parties hereto or to any other person or entity by reason of such compliance
even though such order, writ judgment or decree may be subsequently reversed,
modified, annulled, set aside or vacated.
11. INDEMNIFICATION OF ESCROW AGENT. From and at all times after the
date of this Agreement, the parties jointly and severally, shall, to the fullest
extent permitted by law and to the extent provided herein, indemnify and hold
harmless Escrow Agent and each director, officer, employee, attorney, agent and
affiliate of Escrow Agent (collectively, the "INDEMNIFIED PARTIES") against any
and all actions, claims (whether or not valid), losses, damages, liabilities,
costs and expenses of any kind or nature whatsoever (including without
limitation reasonable attorney's fees, costs and expenses) incurred by or
asserted against any of the Indemnified Parties from and after the date hereof,
whether direct, indirect or consequential, as a result of or arising from or in
any way relating to any claim, demand, suit, action, or proceeding (including
any inquiry or investigation) by any person, including without limitation the
parties to this Agreement, whether threatened or initiated, asserting a claim
for any legal or equitable remedy against any person under any statute or
regulation, including, but not limited to, any federal or state securities laws,
or under any common law or equitable cause or otherwise, arising from or in
connection with the negotiation, preparation, execution, performance or failure
of performance of this Agreement or any transaction contemplated herein, whether
or not any such Indemnified Party is a party to any such action or proceeding,
suit or the target of any such inquiry or investigation; provided, however, that
no Indemnified Party shall have the right to be indemnified hereunder for
liability finally determined by a court of competent jurisdiction, subject to no
further appeal, to have resulted from the gross negligence or willful misconduct
of such Indemnified Party. If any such action or claim shall be brought or
asserted against any Indemnified Party, such Indemnified Party shall promptly
notify the Company and the Placement Agent hereunder in writing, and the
Placement Agent and the Company shall assume the defense thereof, including the
employment of counsel and the payment of all expenses. Such Indemnified Party
shall, in its sole discretion, have the right to employ separate counsel (who
may be selected by such Indemnified Party in its sole discretion) in any such
G-6
<PAGE>
action and to participate and to participate in the defense thereof, and the
fees and expenses of such counsel shall be paid by such Indemnified Party,
except that the Placement Agent and/or the Company shall be required to pay such
fees and expense if (a) the Placement Agent or the Company agree to pay such
fees and expenses, or (b) the Placement Agent and/or the Company shall fail to
assume the defense of such action or proceeding or shall fail, in the sole
discretion of such Indemnified Party, to employ counsel reasonably satisfactory
to the Indemnified Party in any such action or proceeding, (c) the Placement
Agent and the Company is the plaintiff in any such action or proceeding or (d)
the named or potential parties to any such action or proceeding (including any
potentially impleaded parties) include both the Indemnified Party, the Company
and/or the Placement Agent and the Indemnified Party shall have been advised by
counsel that there may be one or more legal defenses available to it which are
different from or additional to those available to the Company or the Placement
Agent. The Placement Agent and the Company shall be jointly and severally liable
to pay fees and expenses of counsel pursuant to the preceding sentence, except
that any obligation to pay under clause (a) shall apply only to the party so
agreeing. All such fees and expenses payable by the Company and/or the Placement
Agent pursuant to the foregoing sentence shall be paid from time to time as
incurred, both in advance of and after the final disposition of such action or
claim. The obligations of the parties under this section shall survive any
termination of this Agreement, and resignation or removal of the Escrow Agent
shall be independent of any obligation of Escrow Agent.
The parties agree that neither payment by the Company or the
Placement Agent of any claim by Escrow Agent for indemnification hereunder shall
impair, limit, modify, or affect, as between the Placement Agent and the
Company, the respective rights and obligations of Placement Agent, on the one
hand, and the Company, on the other hand, under the Placement Agency Agreement.
12. EXPENSES OF ESCROW AGENT. Except as set forth in Section 11 the
Company shall reimburse Escrow Agent for all of its reasonable out-of-pocket
expenses, including attorneys' fees, travel expenses, telephone and facsimile
transmission costs, postage (including express mail and overnight delivery
charges), copying charges and the like. All of the compensation and
reimbursement obligations set forth in this section shall be payable by the
Company, upon demand by Escrow Agent. The obligations of the Company under this
section shall survive any termination of this Agreement and the resignation or
removal of Escrow Agent.
13. WARRANTIES.
a. Placement Agent makes the following representations and
warranties to Escrow Agent:
(i) Placement Agent has full power and authority to
execute and deliver this Escrow Agreement and to perform its obligations
hereunder.
G-7
<PAGE>
(ii) This Escrow Agreement has been duly approved by
all necessary corporate action of Placement Agent, including any necessary
shareholder approval, has been executed by duly authorized officers of the
Placement Agent, enforceable in accordance with its terms.
(iii) The execution, delivery, and performance of the
Placement Agent of this Agreement will not violate, conflict with, or cause a
default under the certificate of incorporation or bylaws of Placement Agent, any
applicable law or regulation, any court order or administrative ruling or degree
to which the Placement Agent is a party or any of its property is subject, or
any agreement, contract, indenture, or other binding arrangement.
(iv) Michael Jacobs has been duly appointed to act as
the representative of The May Davis Group, Inc., hereunder and has full power
and authority to execute, deliver, and perform this Escrow Agreement, to execute
and deliver any Joint Written Direction, to amend, modify, or waive any
provision of this Agreement, and to take any and all other actions as the
Placement Agent's representative under this Agreement, all without further
consent or direction form, or notice to, the Placement Agent or any other party.
(v) No party other than the parties hereto and the
Investors have, or shall have, any lien, claim or security interest in the
Escrow Funds or any part thereof. No financing statement under the Uniform
Commercial Code is on file in any jurisdiction claiming a security interest in
or describing (whether specifically or generally) the Escrow Funds or any part
thereof.
(vi) All of the representations and warranties of the
Placement Agent contained herein are true and complete as of the date hereof and
will be true and complete at the time of any disbursement from the Escrow Funds.
b. The Company makes the following representations and
warranties to Escrow Agent:
(i) The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Nevada,
and has full power and authority to execute and deliver this Escrow Agreement
and to perform its obligations hereunder.
(ii) This Escrow Agreement has been duly approved by
all necessary corporate action of the Company, including any necessary
shareholder approval, has been executed by duly authorized officers of the
Company, enforceable in accordance with its terms.
(iii) The execution, delivery, and performance by the
Company of this Escrow Agreement is in accordance with the Purchase Agreement
and will not violate, conflict with, or cause a default under the certificate of
incorporation or bylaws of the Company, any applicable law or regulation, any
court order or administrative ruling or decree to which the Company is a party
G-8
<PAGE>
or any of its property is subject, or any agreement, contract, indenture, or
other binding arrangement, including without limitation to the Securities
Purchase Agreement, to which the Company is a party.
(iv) Earl Ingarfield has been duly appointed to act
as the representatives of the Company hereunder and has full power and authority
to execute, deliver, and perform this Escrow Agreement, to execute and deliver
any Joint Written Direction, to amend, modify or waive any provision of this
Agreement and to take all other actions as the Company's Representative under
this Agreement, all without further consent or direction from, or notice to, the
Company or any other party.
(v) No party other than the parties hereto and the
Investors have, or shall have, any lien, claim or security interest in the
Escrow Funds or any part thereof. No financing statement under the Uniform
Commercial Code is on file in any jurisdiction claiming a security interest in
or describing (whether specifically or generally) the Escrow Funds or any part
thereof.
(vi) All of the representations and warranties of the
Company contained herein are true and complete as of the date hereof and will be
true and complete at the time of any disbursement from the Escrow Funds.
14. CONSENT TO JURISDICTION AND VENUE. In the event that any party
hereto commences a lawsuit or other proceeding relating to or arising from this
Agreement, the parties hereto agree that the United States District Court for
the District of New Jersey shall have the sole and exclusive jurisdiction over
any such proceeding. If all such courts lack federal subject matter
jurisdiction, the parties agree that the Superior Court Division of New Jersey,
Chancery Division of Essex County shall have sole and exclusive jurisdiction.
Any of these courts shall be proper venue for any such lawsuit or judicial
proceeding and the parties hereto waive any objection to such venue. The parties
hereto consent to and agree to submit to the jurisdiction of any of the courts
specified herein and agree to accept the service of process to vest personal
jurisdiction over them in any of these courts.
15. NOTICE. All notices and other communications hereunder shall be
in writing and shall be deemed to have been validly served, given or delivered
five (5) days after deposit in the United States mails, by certified mail with
return receipt requested and postage prepaid, when delivered personally, one (1)
day delivered to any overnight courier, or when transmitted by facsimile
transmission and upon confirmation of receipt and addressed to the party to be
notified as follows:
If to Placement Agent, to: The May Davis Group, Inc.
One World Trade Center
New York, NY 10048
Attention: Michael Jacobs
Facsimile: (212) 775-8166
G-9
<PAGE>
With a Copy to: Butler Gonzalez, LLP
1000 Stuyvesant Avenue
Suite #6
Union, NJ 07083
Attention: David Gonzalez, Esq.
Facsimile: (908) 810-0973
If to Company, to: Avid Sportswear and Golf, Corp.
22 South Links Avenue - Suite 204
Sarasota, Fl 33015
Attn: Earl Ingarfield President
and Chief Executive Officer
Facsimile: (941) 366- 6017
With copy to: Kirkpatrick & Lockhart
201 South Biscayne Blvd.
Suite 2000
Miami, Fl 33131
Attn: Clayton Parker, Esq.
Facsimile: (305) 358-7095
If to Escrow Agent, to: First Union National Bank,
407 Main Street
Metuchen, NJ 08840
Attention: Robert Mercado
Carmela Agugliaro
Facsimile: (732) 452-3005
Or to such other address as each party may designate for itself by like notice.
16. AMENDMENTS OR WAIVER. This Agreement may be changed, waived,
discharged or terminated only by a writing signed by the parties hereto. No
delay or omission by any party in exercising any right with respect hereto shall
operate as waiver. A waiver on any one occasion shall not be construed as a bar
to, or waiver of, any right or remedy on any future occasion.
17. SEVERABILITY. To the extent any provision of this Agreement is
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition, or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
18. GOVERNING LAW. This Agreement shall be construed and interpreted
in accordance with the internal laws of the State of New Jersey without giving
effect to the conflict of laws principles thereof.
19. ENTIRE AGREEMENT. This Agreement constitutes the entire
Agreement between the parties relating to the holding, investment, and
G-10
<PAGE>
disbursement of the Escrow Funds and sets forth in their entirety the
obligations and duties of the Escrow Agent with respect to the Escrow Funds.
20. BINDING EFFECT. All of the terms of this Agreement, as amended
from time to time, shall be binding upon, inure to the benefit of and be
enforceable by the respective heirs, successors and assigns of the Placement
Agent, the Company, or the Escrow Agent.
21. EXECUTION OF COUNTERPARTS. This Agreement and any Joint Written
Direction may be executed in counter parts, which when so executed shall
constitute one and same agreement or direction.
22. TERMINATION. Upon the first to occur of the disbursement of all
amounts in the Escrow Funds pursuant to Joint Written Directions or the
disbursement of all amounts in the Escrow Funds into court pursuant to Section 7
hereof, this Agreement shall terminate and Escrow Agent shall have no further
obligation or liability whatsoever with respect to this Agreement or the Escrow
Funds.
[SIGNATURE PAGE TO FOLLOW]
G-11
<PAGE>
IN WITNESS WHEREOF the parties have hereunto set their hands and
seals the day and year above set forth.
AVID SPORTSWEAR AND GOLF,
CORP.
By:
------------------------------------------
Name: Earl Ingarfield
Title: President and Chief Executive Officer
FIRST UNION NATIONAL BANK
By:
------------------------------------------
Name: Robert Mercado
Title: As Escrow Agent
THE MAY DAVIS GROUP, INC.
By:
------------------------------------------
Name: Michael Jacobs
Title: Managing Director
G-12
