<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For The Quarterly Period Ended December 31, 1999
[ ] Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ____________
Commission file number 033-07811NY
GARY PLAYER DIRECT, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
DELAWARE 93-0943925
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1428 PHILIPS LANE, SUITE 302, SAN LUIS OBISPO, CALIFORNIA 93401
(Address of Principal Executive Offices)
(805) 783-1011
(Issuer's Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of: December 31, 1999: 9,999,546
Common Stock
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE> 2
GARY PLAYER DIRECT, INC.
FORM 10-QSB
FOR THE QUARTER ENDED DECEMBER 31, 1999
INDEX
PAGE
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets - for the Nine Months ended
December 31, 1999 (Unaudited) and fiscal year ended March 31,
1999. ...............................................................3
Consolidated Statements of Operations - for the Three Months
and Nine Months ended December 31, 1999 and 1998 (Unaudited).........4
Consolidated Statements of Cash Flows - for the Nine Months
ended December 31, 1999 and 1998 (Unaudited). .......................5
Condensed Notes to Consolidated Financial Statements -
December 31, 1999. ..................................................6
ITEM 2. Management's Discussion and Analysis or Plan of Operation...........10
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings...................................................15
ITEM 2. Changes in Securities and use of Proceeds...........................15
ITEM 3. Defaults upon Senior Securities.....................................15
ITEM 4. Submission of Matters to a Vote of Security Holders.................15
ITEM 5. Other Information...................................................15
ITEM 6. Exhibits and Reports on Form 8-K....................................16
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
GARY PLAYER DIRECT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND MARCH 31, 1999
<TABLE>
<CAPTION>
DECEMBER 31, 1999 MARCH 31, 1999
----------------- --------------
<S> <C> <C>
(UNAUDITED)
ASSETS
Current Assets-
Cash $ 564,629 $ 249,545
Accounts receivable -- 2,001
Inventories 89,586 355,226
Prepaid expenses and other -- 230,041
------------ ------------
Total current assets 654,215 836,813
Furniture, Fixtures, Property and Equipment, net 26,980 241,856
Other assets -- 807,791
------------ ------------
Total Assets $ 681,195 $ 1,886,460
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable and accrued liabilities $ 9,088,704 $ 7,332,273
Notes payable 5,468,843 4,404,220
Customer refunds, deferred revenue and allowance for returns 4,135,213 4,837,136
------------ ------------
Total current liabilities 18,692,760 16,573,629
Notes Payable -- 650,000
Stockholders' Deficit
Common stock, par value $.001 per share - authorized 9,990 5,795
50,000,000 shares, issued and outstanding 9,999,546 and
5,794,758, shares respectively
Preferred stock, par value $.001 per share - authorized 5,000,000 shares -- --
Series B convertible preferred stock - authorized 750,750 shares -- --
Capital in excess of par value 20,036,910 13,012,466
Common stock subscribed -- (60,711)
Accumulated deficit (38,058,465) (28,294,719)
------------ ------------
Total Stockholders' Deficit (18,011,565) (15,337,169)
------------ ------------
Total Liabilities and Stockholders' Deficit $ 681,195 $ 1,886,460
============ ============
</TABLE>
The accompanying condensed notes are an integral part of these
statements.
3
<PAGE> 4
GARY PLAYER DIRECT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
DECEMBER 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
THREE THREE NINE NINE
MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED
DECEMBER DECEMBER DECEMBER DECEMBER
31, 1999 31, 1998 31, 1999 31, 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Gross Sales $ 170,936 $ 2,187,010 $ 1,610,625 $12,153,918
Less allowances for returns and discounts 92,752 1,264,311 963,256 6,120,319
----------- ----------- ----------- -----------
Net Sales 78,184 922,699 647,369 6,033,599
Cost of goods sold 414,104 1,109,035 916,545 3,101,183
----------- ----------- ----------- -----------
Gross Profit (loss) (335,920) (186,336) (269,176) 2,932,416
Operating expenses
Telemarketing and infomercial expenses 836,982 880,288 1,382,745 3,791,983
Selling expenses 175,758 561,043 728,890 2,551,572
General and administrative 1,692,916 1,368,159 3,559,944 2,155,180
Depreciation and amortization 45,315 24,090 82,681 61,636
Litigation settlement expense -- 14,533 -- 66,247
----------- ----------- ----------- -----------
Total operating expenses 2,750,971 2,848,113 5,754,260 8,626,618
----------- ----------- ----------- -----------
Operating loss (3,086,891) (3,034,449) (6,023,436) (5,694,202)
----------- ----------- ----------- -----------
Other expenses
Interest expense (1,298,748) (410,251) (2,460,815) (2,378,481)
Other expenses, net (26,575) (401,529) (49,799) (317,143)
Loss on liquidation (1,229,696) -- (1,229,696) --
----------- ----------- ----------- -----------
Total other expenses (2,555,019) (811,780) (3,740,310) (2,695,624)
----------- ----------- ----------- -----------
NET LOSS (5,641,910) (3,846,229) (9,763,746) (8,389,826)
=========== =========== =========== ===========
Weighted average shares
of common stock outstanding 8,529,345 1,852,696 6,984,999 1,804,258
=========== =========== =========== ===========
Net loss per share -
Basic and diluted $ (0.66) $ (2.08) $ (1.40) $ (4.65)
=========== =========== =========== ===========
</TABLE>
The accompanying condensed notes are an integral part of these statements.
4
<PAGE> 5
GARY PLAYER DIRECT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED DECEMBER 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(9,763,746) $(8,389,826)
Adjustments to reconcile net loss to net cash
used in operating activities:
Estimated loss in liquidation 1,229,696 --
Depreciation and amortization 110,823 61,636
Amortization of discount on debt -- 1,550,857
Issuance of Class A warrants for new notes payable 100,000 --
Issuance of common stock for consulting services 721,965 14,441
Issuance of common stock to employees 30,086 720
Issuance of common stock for loans and extensions 1,664,116 1,285,605
Issuance of common stock for vendor settlements 60,312 --
Warrants for extension 8,750
Changes in assets and liabilities
Accounts receivables 2,001 (17,865)
Inventories 88,998 73,124
Prepaid expenses and other 144,518 (226,533)
Other assets (50,544) (253,306)
Write off of IPO costs 984,161
Accounts payable and accrued liabilities 1,756,431 2,282,876
Customer refunds, deferred revenue and allowance for returns (701,923) 1,176,678
----------- -----------
Net cash used in operating activities (4,607,267) (1,448,682)
----------- -----------
Net Cash flows from investing activity:
Purchases of equipment (5,143) (226,825)
Cash flows from financing activities:
Proceeds from issuance of debt 489,269 2,435,552
Proceeds from sale of common stock 4,452,160
Proceeds from subscribed common stock 60,711
Debt payments (74,646)
Lease deposits (11,534)
IPO costs incurred (821,186)
----------- -----------
Net cash provided by financing activities 4,922,351 1,376,007
----------- -----------
Net increase (decrease) in cash 315,084 (72,675)
Cash at beginning of period 249,545 129,008
----------- -----------
Cash at end of period $ 564,629 $ 56,333
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 85,993 $ 3,602
----------- -----------
Supplemental disclosure of non-cash financing activity:
Issuance of common stock for notes and extensions $ 1,664,116 $ 1,285,605
----------- -----------
----------- -----------
Issuance of common stock for consulting fees $ 721,965 $ 14,441
----------- -----------
Issuance of common stock for employee services $ 30,086 $ 720
----------- -----------
Issuance of common stock for vendor settlements $ 60,312
Issuance of warrants for note payable and extension $ 100,000 $ 8,750
</TABLE>
The accompanying condensed notes are an integral part of these statements.
5
<PAGE> 6
GARY PLAYER DIRECT, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
(UNAUDITED)
1. GENERAL
The accompanying unaudited interim financial statements of Gary Player Direct
Inc. (the "Company") include the accounts of the Company and its wholly-owned
subsidiaries, after elimination of all significant inter-company transactions,
accounts and profits. These statements include all adjustments which, in the
opinion of management, are necessary to fairly present the financial position of
the Company as of December 31, 1999, and the cash flows for the three months
ended and nine months ended December 31, 1999 and 1998. The results of
operations for this interim period are not necessarily indicative of results to
be expected for the full year.
These interim financial statements should be read in conjunction with the
summary of Significant Accounting Policies and other Notes to Financial
Statements included in the Company's annual audited financial statements for the
year ended March 31, 1999. Certain prior year amounts have been reclassified to
conform with the current period presentation.
Subsequent to December 31, 1999 the Company entered into an agreement with an
Assignee, assigning the Company's assets for the benefit of creditors (see note
3). The Assignee will be responsible for disposing of the assets of the Company.
It is anticipated that the assets of the Company's wholly owned subsidiaries
will be foreclosed upon by secured creditors. As a result thereof, the Company
was forced to lay-off employees and cease operations. Therefore, the
accompanying financial statements reflect assets valued at estimated net
realizable value as of December 31, 1999.
2. DESCRIPTION OF BUSINESS
The Company has been engaged principally in the direct marketing within the
United States and Canada of Gary Player brand golf clubs pursuant to an
exclusive license from the Gary Player Group, Inc. ("GPG"). The Company's golf
clubs are currently marketed and sold under the names Gary Player Black Knight
and Gary Player.
On March 29, 1999, Grafix Corporation completed a merger (the "1999 Merger") in
which the Company, formerly known as Golf One Industries, Inc. d/b/a Gary Player
Direct ("Golf One") merged with and into Grafix, and the Company changed its
name to "Gary Player Direct Inc." Pursuant to the terms of the Agreement of
Merger, the Company issued 3,817,244 shares of its common stock to Golf One's
shareholders and lenders, resulting in a change of control of the Company. As
part of the merger with Golf One, the Company effected a 1-for-20 reverse split
of its issued and outstanding common stock. As of March 31, 1999, the Company
had 5,794,758 shares of common stock issued and outstanding, including the
3,817,244 shares owed by Golf One's former shareholders and lenders,
The Company as Grafix Corporation designed, developed, assembled and distributed
golf products, clothing and accessories worldwide utilizing the Carrera (R)
brand name and logo, pursuant to an exclusive licensing agreement with Carrera
Optyl GmBh, a subsidiary of Safilo SpG ("Safilo"), owner of the Carrera brand
name. The Company has discontinued Grafix's operations including the sale of
Carrera Golf brand name products. Upon closing of the 1999 Merger, the Company's
operations, which had ceased on or about September 30, 1998, became that of
those conducted by Golf One since 1995.
Golf One Industries, Inc. was incorporated in Delaware in October 1995. In
November 1995, the Company acquired Rhino Marketing, Inc. ("Rhino"), which was
engaged in the direct marketing of golf clubs and accessories. On
6
<PAGE> 7
October 10, 1995, Rhino entered into a licensing agreement with Robert Mann, a
well-known golf professional, to endorse the Rhino Rifle brand name golf clubs
and accessories. Rhino commenced sales of golf clubs under the Bob Mann brand
name in November 1995 and terminated the Mann licensing agreement in January
1997. After the termination of this licensing agreement in January 1997 the
Company discontinued active operations of Rhino.
The Company's second subsidiary, Gran Prix, was formed by the Company in
January, 1997 as a wholly-owned subsidiary of the Company, and commenced sales
of golf clubs and related golf products and accessories under the Gary Player
Gran Prix brand name in February, 1997. Such sales were made through
direct-marketing pursuant to an exclusive long-term direct marketing agreement
between the Company and Gary Player Golf Equipment, Inc. ("GPGE"). The Gary
Player Gran Prix line of golf products was discontinued by Gran Prix on or about
the date of the 1999 Merger.
As a result of the 1999 Merger, substantially all of the operations of the
Company related to the operations of the Gary Player line of branded products.
In November 1996, the Company obtained the exclusive right to market and sell
golf clubs and golf accessories and apparel under the name "Gary Player" on a
direct marketing basis in the United States and Canada.
The 1999 Merger was accounted for as a purchase of the Company by Golf One in a
"reverse acquisition " because the existing stockholders of the Company did not
have voting control of the combined entity after the transaction. In a reverse
acquisition, the accounting treatment differs from the form of the transaction,
as the continuing legal entity is not considered to be acquirer and the
financial statement are those of the accounting acquirer (Golf One), including
any comparative prior year financial statements presented by the combined entity
after the business transaction. Accordingly, the 1998 financial statements of
the Company will consist of the comparative historical statement of the Golf
One, with accompanying disclosure concerning the change in capital structure
effected by the acquisition.
In connection with the 1999 Merger, the Company changed its fiscal year-end from
September 30 to March 31, which is the fiscal year end of Golf One.
3. SUBSEQUENT EVENT- LIQUIDATION
Subsequent to December 31,1999 the Company entered into an agreement with an
Assignee, assigning the Company's assets for the benefit of creditors. The
Assignee will be responsible for disposing of the assets of the Company. It is
anticipated that the assets of the Company's subsidiaries will be foreclosed
upon by secured creditors. As a result thereof, the Company was forced to
lay-off employees and cease operations. Therefore, the accompanying financial
statements reflect assets valued at estimated net realizable value as of
December 31, 1999. All liabilities of the Company and its subsidiaries have been
recorded at their historical cost basis. Inventory, machinery and equipment
valuations are based on appraisals obtained for the Assignee by an independent
third party. Other assets have been written down to their estimated realizable
value, if any. Amounts realized from the sale of assets will be applied to
outstanding obligations of the Company in the same priority as in a bankruptcy
proceeding. It is at least reasonably possible that the amounts expected to be
realized in the liquidation process will change in the future. Future reporting
will reflect any changes in estimated values based on the most current
information available.
In an effort to restructure the Company, the Board made an extensive search to
find a strategic partner or a merger candidate to resolve the operating
difficulties experienced by the Company. As a result of the Company's
significant liabilities and pending and threatened litigation, the Company was
unsuccessful in completing any acquisitions, mergers or sales transactions. The
Company considered seeking protection under the United States Bankruptcy Code,
but believed that executing a General Assignment for the Benefit of Creditors
would be more effective and allow for a greater potential recovery to the
creditors of the Company. The Company's management has evaluated its options in
light of the Company's financial condition. On advice of counsel and despite the
efforts of management to avoid closing, the Company had no option but to have a
liquidation performed by an independent Assignee under a General Assignment for
the Benefit of Creditors. A General Assignment for the Benefit of Creditors is a
liquidation proceeding which is a more productive alternative to a Bankruptcy
under Chapter 7 in most cases. California law provides for an orderly
liquidation of assets by an independent Assignee.
7
<PAGE> 8
Upon the occurrence of the General Assignment for the Benefit of Creditors, The
Gary Player Group's Direct Marketing Agreement with the Company was
automatically terminated and The Gary Player Group revoked the license in favor
of the Company to utilize the name Gary Player Direct as the Company's corporate
name. The Company cannot change its corporate name until its shareholders have
approved of an amendment to the Company's Certificate of Incorporation. Until
such time as the name is formally changed, the Company will go back to using the
name Grafix Corporation as a d/b/a. The Direct Marketing Agreement between the
Company and The Gary Player Group contains specific provisions that provide for
the immediate termination of the Direct Marketing Agreement based on insolvency,
bankruptcy or the making of an assignment for the benefit of creditors. On
February 6, 2000, Mr. Player and certain persons associated with The Player
Group were threatened with litigation by a creditor of the Company purporting to
represent himself and a number of other creditors of the Company who had not
received payments for clubs that were purchased at salvage value or at retail
value. This further harmed the relationship between the Company and Mr. Player
and the Player Group. The Company did receive a letter prior to the General
Assignment from The Gary Player Group revoking the license and canceling the
Direct Marketing Agreement based upon the financial condition of the Company and
the continual stream of customer complaints regarding the Company's business
practices.
In addition, Mr. Player and The Player Group notified the Company on numerous
occasions that Mr. Player's reputation built throughout five decades of golf has
been irreparably harmed by constant complaints from members of the general
public who purchased golf equipment, apparel, and accessories from the Company
and did not receive such goods or did not receive a refund when they returned
such goods pursuant to the Company's money-back guarantee. Mr. Player has also
notified the Company that numerous Attorney General investigations of the
Company's business practices have hurt his professional relationships in other
areas of his business. As a result of the financial condition of the Company and
the reputational damage done to Gary Player and The Gary Player Group, the
Company was unsuccessful in finalizing an asset purchase agreement to obtain a
perpetual license to utilize the name Gary Player and the associated trademarks.
Under existing bankruptcy law and case law decisions applicable in California
and Delaware, a Chapter 11 debtor-in-possession cannot compel a licensor (such
as The Gary Player Group) to consent to an assignment of the licensee's rights
under a license agreement to a third party without the explicit consent of the
licensor. The Company was unable to obtain such consent from The Gary Player
Group so the commencement of a Chapter 11 proceeding would bring no benefit to
the creditors and would increase costs to the Company.
The initial adjustment to net realizable value of the assets as of December
31,1999 as compared to historical cost is as follows:
<TABLE>
<CAPTION>
Estimated
Net Realizable Historical
Asset Description Value Cost
-------------- ----------
<S> <C> <C>
Inventories $ 89,586 $ 266,228
Other Current Assets -- 85,523
Furniture, Fixtures and Equipment 26,980 136,176
Other Assets 858,336
---------- ----------
$ 116,566 $1,346,263
</TABLE>
4. EQUITY TRANSACTIONS
During the three months ended December 31,1999 the Company sold 2,678,402 shares
of Common Stock to one offshore accredited investor, resulting in proceeds of
$3,099,598 through a Regulation S offering.
The Company issued 100,000 shares of its Common Stock to a secured creditor for
extension of its outstanding obligation of $205,984 pursuant to an agreement
entered into November 30, 1999. The Company recorded $650,000 in expense during
the quarter related to these shares based on their fair market value on the date
of the agreement.
The Company issued 20,000 shares as additional consideration to a noteholder for
a loan of $20,000 made to the Company during July. The Company recorded $40,000
in expense during the quarter related to these shares based on their fair market
value on the date of the loan.
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<PAGE> 9
The Company issued 50,000 shares to a noteholder in consideration for extension
of a loan. The Company recorded $150,000 in interest expense during the quarter
related to these shares based on their fair market value at the time of the
extension.
The company issued 3,000 shares to a vendor in settlement of a trade obligation.
The Company relieved a liability of $10,000 during the quarter related to these
shares.
The Company issued 80,000 shares in exchange for consulting services. The
Company recorded $210,000 in expense during the quarter related to these shares
based on the fair market value at the date of the agreement.
5. LOSS PER SHARE
Common share equivalents were not considered as they would be anti-dilutive and
had no impact on the loss per share for the three month periods presented. There
were no dilutive stock options or warrants for the nine month periods ended
December 31, 1999 and 1998.
6. SUBSEQUENT EVENTS
During January, 2000 the Company sold 187,768 shares of Common Stock to one
offshore accredited investor, resulting in proceeds of $300,000 through a
Regulation S offering. During February, 2000 the Company's bank accounts were
levied upon by creditors on two occasions resulting in approximately $100,000
being removed from these accounts.
See also Note 3 "Subsequent Event - Liquidation".
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis should be read in conjunction
with the financial statements and notes thereto appearing elsewhere in this
report.
LIQUIDITY, CAPITAL RESOURCES, AND FINANCIAL CONDITION
The Company is experiencing serious liquidity difficulties as a result
of the lack of significant revenue from operations. Subsequent to December
31,1999 the Company entered into an agreement with an Assignee, assigning the
Company's assets for the benefit of creditors. The Assignee will be responsible
for disposing of the assets of the Company. It is anticipated that the assets of
the Company's subsidiaries will be foreclosed upon by secured creditors. As a
result thereof, the Company was forced to lay-off employees and cease
operations. Therefore, the accompanying financial statements reflect assets
valued at estimated net realizable value as of December 31, 1999. All
liabilities of the Company and its subsidiaries have been recorded at their
historical cost basis. Inventory, machinery and equipment valuations are based
on appraisals obtained for the Assignee by an independent third party. Other
assets have been written down to their estimated realizable value, if any.
Amounts realized from the sale of assets will be applied to outstanding
obligations of the Company in the same priority as in a bankruptcy proceeding.
It is at least reasonably possible that the amounts expected to be realized in
the liquidation process will change in the future. Future reporting will reflect
any changes in estimated values based on the most current information available.
The initial adjustment to net realizable value of the assets as of December
31,1999 as compared to historical cost is as follows:
<TABLE>
<CAPTION>
Estimated
Net Realizable Historical
Asset Description Value Cost
-------------- ----------
<S> <C> <C>
Inventories $ 89,586 $ 266,228
Other Current Assets -- 85,523
Furniture, Fixtures and Equipment 26,980 136,176
Other Assets 858,336
---------- ----------
$ 116,566 $1,346,263
</TABLE>
Since inception, the Company's cash requirements have exceeded its cash
flows from operations and, at December 31, 1999, the Company had a working
capital deficit of $18,011,565. As a result, the Company has depended on loans
and sales of securities to fund its operations. The Company has been dependent
upon the proceeds of securities offerings and loans to implement its growth
strategy and finance its short-term working capital requirements. Subsequent to
the date of the 1999 Merger, the Company has continued to sustain substantial
losses and has had substantially reduced sales of its golf products.
During the period ended December 31, 1999, the Company raised an
aggregate of $4,452,160 net of offering costs, through the sale of capital
stock, as follows: (i) the Company sold 3,651,549 shares of Common Stock and
(ii) the Company issued promissory notes in the aggregate amount of $489,269
bearing interest at rates ranging from 12% to 15% per annum and issued 242,500
shares of Common Stock to the lenders in connection with these loans.
At December 31, 1999, the Company had outstanding borrowings of
$5,468,843, of which the Company was in default on $4,818,843 of the outstanding
indebtedness.
At December 31, 1999, the Company had customer refunds payable,
deferred revenue and allowances for returns totaling $4,135,213.
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RESULTS OF OPERATIONS
Three Months Ended December 31, 1999 Compared to Three Months Ended December 31,
1998
Net sales for the three months ended December 31, 1999 were $78,184, as compared
to net sales of $922,699 for the three months ended December 31, 1998. Net sales
were derived from gross sales of $170,936 and $2,187,010 for the three months
ended December 31, 1999 and 1998, respectively. The decrease in net sales was
due to lack of working capital and accompanying unavailability of products for
sale. Substantially all sales in the three months ended December 31, 1999 and
1998 were generated by telemarketing.
The Company recorded allowances for returns of $92,752 and $1,264,311 of net
sales for the three months ended December 31, 1999 and 1998, respectively. The
Company establishes allowances for returns at the time of recording sales based
on its historical return rates.
Cost of goods sold was $414,104 for the three months ended December 31, 1999, as
compared to cost of goods sold of $1,109,035 for the three months ended December
31, 1998, and the gross margins were a negative $335,920 and $186,336,
respectively, during these quarters. The Company had limited sales during the
quarter ended December 31, 1999 due to working capital constraints. The cost of
sales for the quarter ended December 31, 1999 includes adjustments for
realizable value of inventory, promotions and shrinkage. As a result, the
Company recorded a negative gross profit for the quarter ended December 31, 1999
of $335,920.
Operating expenses were $2,750,971 for the quarter ended December 31, 1999, a
decrease of 3.4% as compared to operating expenses of $2,848,113 for the quarter
ended December 31, 1998.
Telemarketing, infomercial, and selling expenses were $836,982 for the three
months ended December 31, 1999, a decrease of 4.9% from these expenses of
$880,288 for the three months ended December 31, 1998. These expenses include
production and advertising and commissions, royalties, and related fees,
salaries, wages and benefits of management personnel involved in sales and
marketing, customer service and sales support, fees paid to the credit card
processor and lead generation costs. These expenses decreased in the three
months ended December 31, 1999 due principally to a reduction in sales, staff,
and advertising due to working capital constraints.
General and administrative expenses were $1,692,916 for the three months ended
December 31, 1999, an increase of 23.7% as compared to general and
administrative expenses of $1,368,159 for the three months ended December 31,
1998. General and administrative expenses include primarily salaries and
benefits of executive officers and administrative personnel, consulting fees,
rent and utilities. This increase is principally due to public reporting
requirements and litigation, causing an increase in consulting fees (including
shares issued to consultants), legal fees, accounting fees, commissions and use
of temporary service agencies.
Interest expense was $1,298,748 for the three months ended December 31, 1999, an
increase of 317% as compared to interest expense of $410,251 for the three
months ended December 31, 1998. This increase was primarily due to extension
fees and loan fees paid in shares of the Company.
The Company recorded an estimated loss on liquidation of $1,229,696 during the
quarter ended December 31, 1999, resulting from the subsequent assignment of the
company's assets for the benefit of creditors and the cessation of operations.
As a result of the foregoing, the Company incurred a net loss of $5,641,910 for
the three months ended December 31, 1999, as compared to a net loss of
$3,846,229 for the three months ended December 31, 1998.
Nine Months Ended December 31, 1999 Compared to December 31, 1998
Net sales for the nine months ended December 31, 1999 were $647,369, as compared
to net sales of $6,033,599 for the nine months ended December 31, 1998. Net
sales were derived from gross sales of $1,610,625 and $12,153,918 for the nine
months ended December 31, 1999 and 1998, respectively. The decrease in net sales
was due to lack of working capital and accompanying unavailability of product.
Substantially all sales in the nine months ended December 31, 1999 and 1998 were
generated by telemarketing.
11
<PAGE> 12
The Company recorded allowances for returns of 59.8% and 50.4% of gross sales
for the nine months ended December 31, 1999 and 1998, respectively. The Company
establishes allowances for returns at the time of recording sales based on its
historical return rates.
Cost of goods sold was $916,545 the nine months ended December 31, 1999, as
compared to cost of goods sold of $3,101,183 for the nine months ended December
31, 1998.
Operating expenses were $5,754,260 for the nine months ended December 31, 1999,
a decrease of 33.3% as compared to operating expenses of $8,626,618 for the nine
months ended December 31, 1998.
Telemarketing, infomercial, and selling expenses were $2,111,635 for the nine
months ended December 31, 1999, a decrease of 66.7% from selling expenses of
$6,343,554 for the nine months ended December 31, 1998. These expenses include
production and advertising and commissions, royalties, and related fees,
salaries, wages and benefits of management personnel involved in sales and
marketing, customer service and sales support, fees paid to the credit card
processor and lead generation costs. These expenses decreased in the six months
ended December 31, 1999 due principally to lower sales volumes resulting from
lack of working capital.
General and administrative expenses were $3,559,984 for the nine months ended
December 31, 1999, an increase of 60.3% as compared to general and
administrative expenses of $2,221,427 for the nine months ended December 31,
1998. General and administrative expenses include primarily salaries and
benefits of executive officers and administrative personnel, consulting fees,
rent and utilities. The increase in these expenses was due principally to public
reporting requirements and litigation, causing an increase in consulting
services (including consultants paid in common stock of the Company), legal
fees, accounting fees and expenses associated with the relocation of the
Company's offices.
Interest expense was $2,460,815 for the nine months ended December 31, 1999, an
increase of 3.5% as compared to interest expense of $2,378,481 for the nine
months ended December 31, 1998.
The company recorded an estimated loss on liquidation of $1,229,696 during the
quarter ended December 31, 1999, resulting from the subsequent assignment of the
company's assets for the benefit of creditors and the cessation of operations.
As a result of the foregoing, the Company incurred a net loss of $9,763,746 for
the nine months ended December 31, 1999, as compared to a net loss of $8,389,826
for the nine months ended December 31, 1998.
PLAN OF OPERATION FOR THE COMPANY
On March 29, 1999, Grafix Corporation completed a merger (the "1999
Merger") with Golf One, in which Golf One merged with and into the Company, and
the Company changed its name to "Gary Player Direct, Inc." Pursuant to the terms
of the Agreement of Merger, a copy of which was filed as an exhibit in a Current
Report on Form 8-K filed with the Securities and Exchange Commission on April
14, 1999, and which is incorporated herein by reference, the Company issued
3,817,244 shares of its common stock to Golf One's shareholders and lenders,
resulting in a change of control of the Company. As part of the merger with Golf
One, the Company effected a 1:20 reverse split of its issued and outstanding
common stock. As of March 31, 1999, the Company had 5,794,758 shares of common
stock issued and outstanding, including the 3,817,244 shares owned by Golf One's
former shareholders. The Company's NASD trading symbol was changed from "CRRA"
to "GPLY" to reflect the Company's changed name following the 1999 Merger.
As part of the 1999 Merger, Messrs. Arnold Guttenberg and Clifford
Cozier resigned as directors of the Company. Mr. Kenneth Krausman remained as
the sole director of the Company, and Mr. Alfonso J. Cervantes and Mr. Robert J.
Friedland were appointed directors of the Company. The Board of Directors also
appointed Mr. Cervantes as President, Chief Executive Officer, Chairman of the
Board and Secretary of the Company, Mr. Joseph A. DePanfilis as Executive Vice
President, Mr. Richard S. Schonfeld as Chief Financial Officer and Treasurer,
and Mr. Krausman as Senior Vice President, Business and Legal Affairs. Mr.
Krausman resigned from all of his positions with the Company on September 1,
1999.
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<PAGE> 13
Messrs. Cervantes and Friedland resigned from all of their positions on October
14, 1999 in connection with a certain Succession Plan and Agreement effective on
October 14, 1999. Messrs. DePanfilis and Schonfeld also resigned in July, 1999
and May, 1999, respectively.
As a result of the 1999 Merger, substantially all of the operations of
the Company related to the operations of the Gary Player line of branded
products. As a result of a lack of financing affecting the Carrera Golf branded
products during the fiscal year ended December 31, 1998 and for the subsequent
period up until the 1999 Merger and a deterioration in relations between the
Company and Citizen's Trading Group of Japan ("Citizen"), the Company has not
recognized revenue from the sale of Carrera Golf branded products since December
31, 1998. The Company is currently reviewing its relationship with Citizen and
its licensing arrangement with Carrera.
The 1999 Merger was accounted for as a purchase of the Company by Golf
One in a "reverse acquisition" because the pre-existing stockholders of the
Company did not have voting control of the combined entity after the 1999
Merger. In a reverse acquisition, the accounting treatment differs from the
legal form of the transaction, as the continuing legal entity is not considered
to be the acquirer and the financial statements of the combined entity are those
of the accounting acquirer (Golf One), including any comparative prior year
financial statements presented by the combined entity after the business
combination. Accordingly, the financial statements of the Company presented
herein are the comparative historical financial statements of Golf One, the
accounting acquirer, with accompanying disclosure concerning the change in
capital structure effected at the acquisition date.
In connection with the 1999 Merger, the Company changed its fiscal year
end from December 31st to March 31st, which is the fiscal year end of Golf One.
Other material developments during the quarter ended December 31, 1999
include the Company's execution of an agreement to transition the Company's
prior management and Board of Directors. Effective October 14, 1999, the Company
entered into a Succession Plan and Agreement (the "Succession Plan and
Agreement") pursuant to which the existing Board of Directors and senior
management of the Company were replaced with new directors and senior
management. Additional information regarding the Succession Plan and Agreement
is contained in a press release issued by the Company on October 19, 1999 which
was filed as an exhibit to a Current Report on Form 8-K filed October 25, 1999.
The Succession Plan and Agreement was also filed with the Commission as an
exhibit to the aforementioned 8-K report.
The Company executed a General Assignment for the Benefit of Creditors
on February 22, 2000. The Assignee is The Hamer Group of Sherman Oaks,
California.
Since inception, the Company's cash requirements have exceeded its cash
flow from operations and, at December 31, 1999, the Company had a working
capital deficit of $18,011,565. As a result, the Company had been dependent on
loans and sales of securities to continue its operations. In addition, at
December 31, 1999 the Company has reported in its 10-QSB current liabilities of
approximately $18.6 Million and losses for the nine months ended December 31,
1999 in excess of $9.5 Million. During the past several weeks, the Company's
bank accounts have been levied upon by creditors of the Company making
operations extremely difficult to continue.
The Company is a public company required to file reports with the
Securities & Exchange Commission. As of October 1999, certain SEC reports had
not been filed by the Company and on October 19, 1999, the Company's common
stock was delisted from trading on the NASDAQ OTC Bulletin Board. Upon assuming
control of the Company in October of 1999, the Company's present Board of
Directors took appropriate steps to comply with the Company's reporting
obligations and relist the common stock on the NASDAQ OTC Bulletin Board.
The Company completed its outstanding SEC reports and subsequently the
Company's common stock was approved for quotation on the NASDAQ OTC Bulletin
Board on or about January 14, 2000. The financial statements prepared for the
September 30, 1998 and March 31, 1999 fiscal years and subsequent periods
revealed the existence of liabilities well in excess of those anticipated by the
Board.
In an effort to restructure the Company, the Board made an extensive
search to find a strategic partner or a merger candidate to resolve the
operating difficulties experienced by the Company. As a result of the Company's
significant
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<PAGE> 14
liabilities and pending and threatened litigation, the Company was unsuccessful
in completing any acquisitions, mergers or sales transactions. The Company
considered seeking protection under the United States Bankruptcy Code, but
believed that executing a General Assignment for the Benefit of Creditors would
be more effective and allow for a greater potential recovery to the creditors of
the Company. The Company's management has evaluated its options in light of the
Company's financial condition. On advice of counsel and despite the efforts of
management to avoid closing, the Company had no option but to have a liquidation
performed by an independent Assignee under a General Assignment for the Benefit
of Creditors. A General Assignment for the Benefit of Creditors is a liquidation
proceeding which is a more productive alternative to a Bankruptcy under Chapter
7 in most cases. California law provides for an orderly liquidation of assets by
an independent Assignee.
Upon the occurrence of the General Assignment for the Benefit of
Creditors, The Gary Player Group's Direct Marketing Agreement with the Company
was automatically terminated and The Gary Player Group revoked the license in
favor of the Company to utilize the name Gary Player Direct as the Company's
corporate name. The Company cannot change its corporate name until its
shareholders have approved of an amendment to the Company's Certificate of
Incorporation. Until such time as the name is formally changed, the Company will
go back to using the name Grafix Corporation as a d/b/a. The Direct Marketing
Agreement between the Company and The Gary Player Group contains specific
provisions that provide for the immediate termination of the Direct Marketing
Agreement based on insolvency, bankruptcy or the making of an assignment for the
benefit of creditors. On February 6, 2000, Mr. Player and certain persons
associated with The Player Group were threatened with litigation by a creditor
of the Company purporting to represent himself and a number of other creditors
of the Company who had not received payments for clubs that were purchased at
salvage value or at retail value. This further harmed the relationship between
the Company and Mr. Player and the Player Group. The Company did receive a
letter prior to the General Assignment from The Gary Player Group revoking the
license and canceling the Direct Marketing Agreement based upon the financial
condition of the Company and the continual stream of customer complaints
regarding the Company's business practices. Mr. Player and The Player Group
notified the Company on numerous occasions that Mr. Player's reputation built
throughout five decades of golf has been irreparably harmed by constant
complaints from members of the general public who purchased golf equipment,
apparel, and accessories from the Company and did not receive such goods or did
not receive a refund when they returned such goods pursuant to the Company's
money-back guarantee. Mr. Player has also notified the Company that numerous
Attorney General investigations of the Company's business practices have hurt
his professional relationships in other areas of his business. As a result of
the financial condition of the Company and the reputational damage done to Gary
Player and The Gary Player Group, the Company was unsuccessful in finalizing an
asset purchase agreement to obtain a perpetual license to utilize the name Gary
Player and the associated trademarks. Under existing bankruptcy law and case law
decisions applicable in California and Delaware, a Chapter 11
debtor-in-possession cannot compel a licensor (such as The Gary Player Group) to
consent to an assignment of the licensee's rights under a license agreement to a
third party without the explicit consent of the licensor. The Company was unable
to obtain such consent from The Gary Player Group so the commencement of a
Chapter 11 proceeding would bring no benefit to the creditors and would increase
costs to the Company.
The Company has not decided whether it is going to conduct a
dissolution following the assignment. In addition, upon the occurrence of the
Assignment, it is anticipated that the secured creditors of the Company's
subsidiaries Gran Prix Marketing, Inc. and Rhino Marketing, Inc. will foreclose
on the assets of those entities.
The Hamer Group, Inc. will notify all creditors of the Company by mail
as to the procedures to be followed for the submission of claims against the
Assignment estate. The Assignee will furnish creditors with a claim form which
should be completed and returned to the Assignee in accordance with the
instructions to be furnished by the Assignee.
YEAR 2000
As a result of the Company's cessation of operations and the Assignment
discussed herein, the Company has ceased its Year 2000 computer hardware and
software systems analysis and programs.
SAFE HARBOR STATEMENT
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<PAGE> 15
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. Statements contained in this
report that are not historical facts are forward-looking statements that involve
risks and uncertainties that could cause actual results to differ materially
from those stated in the forward-looking statements. Factors that could cause
actual results to differ materially include, among others: general economic
conditions, changes in laws and government regulations, fluctuations in demand
for the Company's products, the Company's ability to consummate strategic
alliances, technology development problems, and the Company's ability to
successfully finance future plant and equipment plans, as well as its current
ongoing operations.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Please see Item 3, "Legal Proceedings" of the Company's Form 10-KSB for
the fiscal year ended March 31, 1999 (the "1999 Form 10-KSB") as filed with the
Securities and Exchange Commission on December 7, 1999 for a description of the
Company's litigation during the quarter ended December 31, 1999. The Company
settled the litigation matter captioned Murphy et al. vs. Golf One Industries,
Inc. et al. upon the following material terms: defendants' payment of
$205,954.16 to plaintiffs net of previously made payments in monthly
installments of approximately $8,000 through July 2001; plaintiffs' exercise of
certain warrants to purchase 100,000 of the Company's restricted common stock;
dismissal of the appointment of a receiver and the pending action; and exchange
of mutual general releases and termination of the plaintiffs' security interests
and liens against the Company and its subsidiaries. The Company did not make the
$8,000 payment due plaintiffs on February 15, 2000.
ITEM 2. CHANGES IN SECURITIES
During the three months ended December 31, 1999 and the subsequent
period through the date of this report: the Company sold 2,687,402 shares of
common stock resulting in net proceeds of $3,099,598 through a Regulation S
offering to one offshore accredited investor; the Company issued 100,000 shares
of common stock upon the exercise of warrants in connection with the
aforementioned settlement of the litigation captioned Murphy et al. v. Golf One
Industries, Inc. et al.; the Company issued 20,000 shares of common stock to a
lender as consideration for a loan of $20,000 made to the Company in July, 1999.
The Company issued 50,000 shares to a noteholder in consideration for extension
of a loan. The Company recorded $150,000 in interest expense during the quarter
related to these shares based on their fair market value at the time of the
extension. The Company issued 3,000 shares to a vendor in settlement of a trade
obligation. The Company relieved a liability of $10,000 during the quarter
related to these shares. The Company issued 80,000 shares in exchange for
consulting services. No underwriters were involved in these transactions. Such
securities were issued pursuant to the exemption from registration under Section
4(2) of the Securities Act of 1933, Regulation D, and/or Regulation S.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Please see Item 3, "Legal Proceedings" and Note G and Note K to the
Consolidated Financial Statements of the 1999 Form 10-KSB filed with the
Securities and Exchange Commission on December 7, 1999 for a description of the
Company's defaults upon senior securities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the shareholders during the
quarter ended December 31, 1999.
ITEM 5. OTHER INFORMATION
During the quarter ended September 30, 1999, and the quarter ended
December 31, 1999 the Company obtained several loans from different private
parties to fund its operations.
During the quarter ended December 31, 1999, the Company issued shares
of the Company's common stock to various individuals and entities resulting in
gross proceeds of $3,099,598 to the Company.
On December 31, 1999 Mr. Sheldon Silver converted $6,245, of
indebtedness that the Company owed to him in consideration for the receipt of
12,490 shares of the Company's common stock for a conversion price of $2.00 per
share.
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<PAGE> 16
SUBSEQUENT EVENTS
In January, 2000 the Company entered into a sublease with Tri-Counties
Association for the Disabled. The sublease is for a term ending on June 30, 2000
and provides for the leasing of approximately 3,050 square feet of office space
in San Luis Obispo, California at a rental of approximately $4,200.00 per month.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
10.1 Settlement Agreement dated as of November 30, 1999 settling
litigation in Murphy et al. vs. Golf One Industries, Inc. et
al.
10.2 Sublease dated January 10, 2000
10.3 Form of General Assignment
b) Current Reports on Form 8-K During Quarter Ended December 31, 1999:
1. Current Report on Form 8-K Regarding an Event on October 14,
1999 as filed October 25, 1999 with the U.S. Securities and
Exchange Commission with respect to Item 5 thereof.
2. Current Report on Form 8-K Regarding an Event on October 28,
1999 as filed November 3, 1999 with the U.S. Securities and
Exchange Commission with respect to Item 4 thereof.
3. Current Report on Form 8-K regarding an Event on November 10,
1999 as filed December 9, 1999 with the U.S. Securities and
Exchange Commission with respect to Item 4 thereof.
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<PAGE> 17
SIGNATURE
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GARY PLAYER DIRECT, INC.
By: /s/ Marc B. Player
------------------------------
Marc B. Player,
Chief Executive Officer
(Principal Executive Officer)
/s/ Carl Casareto
------------------------------
Carl Casareto,
Executive Vice President and Treasurer
(Principal Financial Officer)
Date: February 22, 2000
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<PAGE> 1
Exhibit 10.1
SETTLEMENT AGREEMENT
This Settlement Agreement ("this Agreement") is made and entered into
as of December 2, 1999, between and among Robert Murphy, individually and as
Trustee of The Murphy Family Trust; Alex Trebek, individually and as Trustee of
Gargoyle Productions, Ltd. Retirement Trust; Futura Investments, Inc., a
California corporation, on behalf of itself and as successor in interest to
Forest Lake Associates; Donald Bergman, individually and as administrator of
Futura Investments, Inc. Defined Benefits Pension Plan; and Rescor, Inc., a
California corporation (collectively, "Plaintiffs"), and Gary Player Direct,
Inc., a Delaware corporation ("GPD") and Gran Prix Marketing, Inc.
(collectively, "Defendants"), with reference to the following facts:
A. On or about July 7, 1998, Donald Bergman, Robert Murphy, and
Alex Trebek (collectively, "Investors") entered into a
Settlement Agreement with Golf One Industries, Inc. ("Golf
One"), A. J. Cervantes and Norm A. Kunin. On or about August
10, 1998, the parties entered into a First Amendment to
Settlement Agreement. On or about November 10, 1998, the
parties entered into a Second Amendment to Settlement
Agreement. The Settlement Agreement, as amended by the First
and Second Amendments, is hereinafter referred to as the
"Original Settlement Agreement."
B. Plaintiffs were the beneficiaries of the Original Settlement
Agreement. Plaintiffs contend that they did not receive what
they were entitled to pursuant to the Original Settlement
Agreement. On or about, May 11, 1999, Plaintiffs filed a
complaint (the "Complaint") in the Los Angeles Superior Court
Case No. BC210133 (the "Lawsuit"). On or about July 29, 1999,
the Court granted Plaintiffs' motion to appoint a receiver
("Receiver").
C. On or about August 18, 1999, Plaintiffs and Defendants entered
into an agreement (the "August Settlement Agreement") to
resolve all of the claims set forth in the Complaint. Certain
payments were made to Plaintiffs pursuant to the August
Settlement Agreement. Plaintiffs contend that Defendants are
in default under the August Settlement Agreement.
D. Plaintiffs are the holders of 90,000 Class B warrants (the
"Class B Warrants"). The Class B Warrants are convertible into
shares of restricted common stock of GPD upon the payment of
$.20 per share.
E. The parties now desire to enter into an agreement whereby all
claims of Plaintiffs set forth in the Complaint or pursuant to
the August Settlement Agreement will be resolved, all on the
terms and conditions set forth below.
With reference to and reliance upon the foregoing facts, THE PARTIES
HEREBY AGREE AS FOLLOWS:
1. Delivery of Stock. On or before December 15, 1999 or as soon
thereafter as the transfer agent can comply with the
requirements of this Section 1, GPD shall issue to Plaintiffs
100,000 shares of its restricted common stock (the "New
Shares"). The New Shares shall be issued in exchange for the
Class B Warrants and as
<PAGE> 2
additional consideration to Plaintiffs for the agreements
contained herein. The New Shares shall not be issued until the
Class B Warrants are surrendered to GPD (which surrender has
been completed by the Plaintiffs and is acknowledged by GPD)
and until Plaintiffs have delivered to GPD written notice
setting forth how the New Shares are to be allocated among the
Plaintiffs (which delivery of notice has been completed by the
Plaintiffs and is acknowledged by GPD).
2. Payment to Plaintiffs. Defendants agree to pay to Plaintiffs
the sum of $205,954.16 in full settlement of all claims
against GPD including without limitations the claims set forth
in the Complaint or under the August Settlement Agreement.
Prior to the date hereof, GPD made a payment of $25,000 to
Plaintiffs. After such payment, the unpaid balance is
$180,954.16. The parties agree to reduce such sum by $18,000,
which $18,000 shall be applied as the payment owing to convert
the Class B Warrants into the New Shares pursuant to Section 1
above. The remaining balance of $162,954.16 shall be paid in
20 equal installments of $8,000 each, on the 15th day of each
month, commencing December 15, 1999, and continuing until July
15, 2001, with the remaining sum of $2,954.16 due on August
15, 2001. Each check shall be made payable to Donald Bergman.
In the event GPD concludes a public or private debt or equity
financing with net proceeds to GPD in excess of $2.5 million,
GPD will retire any then outstanding balance of such
$162,954.16. Any check due on a weekend or a holiday shall be
due on the next business day.
3. Dismissal of Receiver and Entry of Stipulation Judgment.
Plaintiffs agree that they will not take any further action to
cause a Receiver to be appointed for GPD and, if one has been
appointed, will take all necessary action to cause the
Receiver to be dismissed and will take all necessary action
for the authorization of the appointment of a Receiver to be
dismissed. In the event GPD fails to make any of the payments
specified in Section 2 by the due date specified therein,
Defendants agree that a judgment may be entered against them
in the aggregate amount of all unpaid payments specified in
Section 2 in full satisfaction of all claims set forth in the
Complaint. Defendants agree to execute a Stipulation for
Judgment for such purpose, which Stipulation shall be held by
counsel for Plaintiffs pending such payments. It is agreed
that such Stipulation may be filed with the court at any time
after the due date if any of said payments have not been made,
and that the aggregate amount of the unpaid payments specified
in Section 2 shall be the amount set forth in the Stipulation,
provided that such Stipulation shall not be filed unless
Defendants and their counsel have been furnished with written
notice of any such default and the specified default remains
uncured for five (5) days after receipt of such notice. If
payment in full of the sums specified in Section 2 has been
made prior to filing the Stipulation with the court, the
Stipulation shall be marked void and returned to counsel for
Defendants and the Lawsuit shall be dismissed with prejudice.
Evidence of such dismissal (including the Plaintiff's lodging
of an appropriate Request for Dismissal with Prejudice
consistent with this Agreement) shall be promptly provided to
counsel for Defendants.
4. Mutual General and Special Releases.
A. Except for the obligations created hereunder, each of
the Plaintiffs hereby, for himself and his or itself
and its successors and assigns, forever
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<PAGE> 3
releases, relieves and discharges each of the
Defendants and his or its agents, representatives,
consultants, employees, officers, directors,
shareholders, partners, predecessors, subsidiaries,
related entities and affiliates, attorneys,
successors and assigns including GPD's current and
former directors, officers, consultants, and
attorneys from any and all claims, demands, actions,
cause or causes of action, suits, debts, sums of
money, controversies, damages, obligations, and
liabilities of every kind and nature, whether known
or unknown, suspected or unsuspected, vested or
contingent, and whether or not concealed or hidden,
in law, equity or otherwise, that have existed or may
have existed, or that do exist as of the date this
Agreement is entered into as set forth above,
including without limitation any claim set forth or
which could have been set forth in the Complaint and
any and all security interests, liens, or other
encumbrances held by any of the Defendants against
GPD and/or any of its subsidiaries or their
respective assets.
B. Except for the obligations created hereunder, each of
the Defendants hereby, for himself and his or itself
and its successors and assigns, forever releases,
relieves and discharges each of the Plaintiffs and
his or its agents, representatives, consultants,
employees, officers, directors, shareholders,
partners, predecessors, subsidiaries, related
entities and affiliates, attorneys, successors and
assigns, from any and all claims, demands, actions,
cause or causes of action, suits, debts, sums of
money, controversies, damages, obligations, and
liabilities of every kind and nature, whether known
or unknown, suspected or unsuspected, vested or
contingent, and whether or not concealed or hidden,
in law, equity or otherwise, that have existed or may
have existed, or that do exist as of the date this
Agreement is entered into as set forth above,
including without limitation any claim set forth or
which could have been set forth in the Complaint.
C. Each party hereto acknowledges and agrees that the
facts in respect to which this release is given may
turn out to be other than or different than expected,
and expressly, knowingly and voluntarily waives any
and all benefits and rights granted pursuant to
Section 1542 or the Civil Code of the State of
California with which section it is familiar and
which section reads as follows:
"A general release does not extend to claims
which the creditor does not know or suspect
to exist in his favor at the time of
executing the release, which if known by
him, must have materially affected his
settlement with the debtor."
D. Each party hereto understands and realizes that there
may exist at this time claims herein released, the
nature of which has not yet been discovered. It is
expressly understood and agreed that the possibility
that such a claim exists has been explicitly taken
into account in determining the considerations to be
given for this release and that a portion of that
consideration, having been bargained for in full
knowledge of the
3
<PAGE> 4
possibility of such unknown claims, was given in
exchange for this release.
E. Each party hereto represents and warrants that no
claim or right that is released or dismissed under
this Agreement has been transferred, hypothecated,
assigned or given away by that party prior to the
date of this Agreement.
5. Covenant Not to Sue. Without limiting in any way the releases
set forth above, and subject to the performance of the terms,
conditions, obligations and promises herein contained, each
party hereto hereby covenants and warrants that it will not
sue or otherwise commence or prosecute, or cause to be
commenced or prosecuted, any action or proceeding, civil,
criminal, administrative, or otherwise, related in any way to
any matter released by this Agreement.
6. Disputed Claims. It is expressly understood and agreed that
this Agreement is being made solely for the purpose of
avoiding the expense and inconvenience of litigation and that
it is not to be construed as an admission on the part of any
party hereto of any unlawful, wrongful or improper conduct or
of any liability to any other party, all of which is expressly
denied.
7. Further Acts. The parties agree to cooperate in the
implementation of the terms of this Settlement Agreement and
to execute such documents as may reasonably be necessary to
carry out same within three (3) days of receipt of a written
request therefor including without limitation the execution
and delivery of UCC termination statements attached hereto to
be signed by Plaintiffs and any other UCC termination
statements consistent with this Agreement and prepared and
submitted by GPD to the Defendants.
8. Representations of the Parties. Each of the parties
represents, warrants and agrees as follows:
a. Such party has received independent legal advice from
attorneys of its choice with respect to the
advisability of making this settlement and entering
into this Agreement. Prior to the execution of this
Agreement the attorneys for each party reviewed this
Agreement at length and had an opportunity to make
any desired changes.
b. Such party has made such investigation of the facts
pertaining to this Agreement, and of all other
matters related hereto, as such party deems
necessary.
c. This Agreement has been carefully read by, the
contents hereof are known and understood by, and it
is signed voluntarily by, each person executing this
Agreement.
d. Each party executing this Agreement on behalf of a
party warrants and represents that his is fully
authorized to do so and that his signature on this
Agreement shall bind said party to the terms and
provisions of this Agreement.
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<PAGE> 5
e. This Agreement is intended to be final and binding
and to be effective as a full and final accord and
satisfaction of any and all disputes between the
parties. Each party is relying upon the finality of
this Agreement as a material factor inducing said
party's decision to settle said dispute.
f. None of the claims settled hereby have been
transferred or assigned to a third party.
9. General Provisions.
A. Binding Upon Successors. All the terms of this
Agreement shall be binding upon, inure to the benefit
of and be enforceable by the successors, assigns and
heirs of the parties hereto.
B. Integration Clause. This Agreement constitutes the
whole and only existing and binding agreement between
the parties hereto concerning the releases granted
between and among them and supersedes all prior
understandings on that subject, whether written or
oral. Other than the representations and warranties
expressly stated as such in this Agreement, there are
no warranties, promises or representations of any
kind, express or implied, upon which any party has
relied in entering into this Agreement.
C. Amendments. This Agreement may be modified or amended
only by writing signed by the party to be charged.
D. Counterparts. This Agreement may be executed in
counterparts.
E. Counsel. Each party has been represented by counsel
in the negotiation and execution of this Agreement,
and shall be responsible for its costs and attorney's
fees incurred in connection with this Agreement and
its preparation.
F. Headings. The headings in this Agreement are for the
convenience of the reader only and are not to be
considered in any construction of this Agreement.
G. Preparation of Agreement. This Agreement was prepared
as a result of discussions between the parties hereto
and shall be interpreted fairly and in accordance
with its plain meaning and not construed as if
prepared exclusively or primarily on behalf of or by
either of the parties hereto.
H. Gender and Number. As used in this Agreement,
masculine, feminine or neuter gender and the singular
or plural number shall each be deemed to include the
other wherever and whenever the context or
construction so dictates.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Settlement
Agreement as of the date set for above.
"GARY PLAYER DIRECT, INC." "GRAN PRIX MARKETING, INC."
By: By:
--------------------------------- ----------------------------------
Carl Casareto, Executive Carl Casareto, Executive
Vice President Vice President
"MURPHY" "TREBEK"
- ------------------------------------ -------------------------------------
Robert Murphy, Individually and as Alex Trebek, Individually and as
Trustee of The Murphy Family Trust Trustee of Gargoyle Productions, Ltd.
Retirement Trust
"BERGMAN" "FUTURA INVESTMENTS, INC."
By:
- ------------------------------------ -------------------------------------
Donald Bergman, Individually and on Donald Bergman, President
Behalf of Futura Investments, Inc.,
Defined Benefits Pension Plan
"RESCOR, INC."
By:
---------------------------------
Donald Bergman, President
6
<PAGE> 1
Exhibit 10.2
STANDARD SUBLEASE
1. PARTIES. This Sublease, dated, for reference purposes only, January
10, 2000, is made by and between Tri-Counties Association for the
Developmentally Disabled, Inc. ("Sublessor") and Gary Player Direct, Inc.
("Sublessee").
2. PREMISES. Sublessor hereby subleases to Sublessee and Sublessee
hereby subleases form Sublessor for the term, at the rental, and upon all of the
conditions set forth herein, that certain real property, including all
improvements therein, and commonly known by the street address of 1428 Philips
Lane, Suited 203 located in the County of San Luis Obispo, State of California
and generally described as approximately 3050 square feet of second floor
professional office space.
3. TERM.
3.1 TERM. The Term of this Sublease shall be for the period of
time beginning on the date Sublessor notifies Sublessee of Master Lessor's
effective consent to this Sublease and ending on June 30, 2000 unless sooner
terminated pursuant to any provision hereof.
4. RENT.
4.1 BASE RENT. Sublessee shall pay to Sublessor as Base Rent
for the Premises equal monthly payments of $4,236.82 in advance, on the first
day of each month of the term hereof. Sublessee shall pay Sublessor upon the
execution hereof as Base Rent in the sum of $7202.59, which is approximately the
Base Rent which shall be owed from the Sublease commencement date through
February 29, 2000. Once the actual commencement date of the Sublease is
determined, if the actual Base Rent owed by Sublessee for such time is less than
$7,202.59, the difference shall be credited by Sublessor to the Base Rent due in
March 2000.
4.2 RENT DEFINED. All monetary obligations of Sublessee to
Sublessor under the terms of this Sublease (except for the Security Deposit) are
deemed to be rent ("Rent"). Rent shall be payable in lawful money of the United
States to Sublessor at the address stated herein or to such other persons or as
such other places as Sublessor may designate in writing.
5. SECURITY DEPOSIT. Sublessee shall deposit with Sublessor upon
execution hereof $4,236.82 as security for Sublessee's faithful performance of
Sublessee's obligation hereunder.
6. USE
6.1 AGREED USE. The premises shall be used and occupied only
for professional office uses and purposes directly related to Sublessee's
Business and for no other purpose.
6.2 ACCEPTANCE OF PREMISES AND LESSEE. Sublessee acknowledges
that:
(a) It has been advised by Brokers to satisfy itself
with respect to the condition of the Premises (including but not limited to
electrical, HVAC and fire sprinkler system, security, environmental aspects, and
compliance with Applicable Requirements), and their suitability for Sublessee's
intended use.
(b) Sublessee has made such investigation as it deems
necessary with reference to such
matters and assumes all responsibility therefore as the same relate to its
occupancy of the Premises, and accepts the Premises in "AS IS" condition, and;
(c) Neither Sublessor, Sublessor's agents, nor any
Broker has made any oral or written
representations or warranties with respect to said matters other than as set
forth in this Sublease.
In addition, Sublessor acknowledges that:
(a) Broker has made no representation, promises or
warranties concerning Sublessee's ability to honor the Sublease or suitability
to occupy the Premises, and;
<PAGE> 2
(b) It is Sublessor's sole responsibility to
investigate the financial capability and/or suitability of all proposed tenants.
7. MASTER LEASE
7.1 Sublessor is the lessee of the Premises by virtue of a
lease, hereinafter the "Master Lease", a copy of which is attached hereto marked
Exhibit 1, wherein Keith Bruington is the lessor, hereinafter the "Master
Lessor".
7.2 This Sublease is and shall be at all times subject and
subordinate to the Master Lease.
7.3 The terms, conditions and respective obligations of
Sublessor and Sublessee to each other under this Sublease shall be the terms and
conditions of the Master Lease except for those provisions of the Master Lease
which are directly contradicted by this Sublease in which event the terms of
this Sublease document shall control over the Master Lease. Therefore, for the
purpose of this Sublease, wherever in the Master Lease the word "Lessor" is used
is shall be deemed to mean the Sublessor herein and wherever in the Master Lease
the word "Lessee" is used it shall be deemed to mean the Sublessee herein.
Notwithstanding the foregoing. Sublessor shall not be liable for Master Lessor's
obligations in Paragraph 5.2.2, 5.3.1, 6A, 8, 10.1, 13, 18 and 29 of the Master
Lease; provided, however, to the extent Master Lessor breaches any of its
obligations under such provisions of the Master Lease. Sublessor shall
diligently prosecute its rights against Master Lessor on receipt of written
request from Sublessee and/or Sublessor shall assign its rights against Master
Lessor to Sublessee, on request.
7.4 During the term of this Sublease and for all periods
subsequent for obligations which have arisen after the commencement date of the
term and prior to the termination of this Sublease. Sublessee does hereby
expressly assume and agree to perform and comply with, for the benefit of
Sublessor and Master Lessor, each and every obligation of Sublessor under the
Master Lease except for the following paragraphs which are excluded therefrom:
Paragraph 39. Sublessee shall not have any right or option to extend the
Sublease term beyond June 30, 2000.
7.5 The obligations that Sublessee has assumed under paragraph
7.4 hereof are hereinafter referred to as the "Sublessee's Assumed Obligations".
The obligations that Sublessee has not assumed under paragraph 7.4 hereof are
hereinafter referred to as the "Sublessor's Remaining Obligations".
7.6 Sublease shall hold Sublessor free and harmless from all
liability, judgements, costs, damages, claims or demands, including reasonable
attorney's fees, arising out of Sublessee's failure to comply with or perform
Sublessee's Assumed Obligations, except to the extent that any of the foregoing
is attributed to the negligence or willful misconduct of Sublessor and/or Master
Lessor or any of their respective agents, servants, employees or contractors.
7.7 Sublessor agrees to maintain the Master Lease during the
entire term of the Sublease, subject, however, to any earlier termination of the
Master Lease without the fault of the Sublessor, and to comply with or to
perform Sublessor's Remaining Obligations and to hold Sublessee free and
harmless from any liability, judgements, costs, damages, claim or demands
arising out of Sublessor's failure to comply with or perform Sublessor's
Remaining Obligations.
7.8 Sublessor represents to Sublessee that the Master Lease is
in full force and affect and that no default exists on the part of any Party to
the Master Lease.
8. ASSIGNMENT OF SUBLEASE AND DEFAULT.
8.1 Sublessor hereby assigns and transfers to Master Lessor
the Sublessor's interest in this Sublease, subject however to the provisions of
Paragraph 8.2 hereof.
8.2 Master Lessor, by executing this document, agrees that
until a Default shall occur in the performance of Sublessor's Obligations under
the Master Lease, that Sublessor may receive, collect and enjoy the Rent
accruing under this Sublease. However, if Sublessor shall Default in this
performance of its obligations to
<PAGE> 3
Master Lessor then Master Lessor may, at its option, receive and collect
directly from Sublessee all Rent owing and to be owed under this Sublease.
Master Lessor shall not, by reason of this assignment of the Sublease nor by
reason of the collection of the Rent for the Sublessee, be deemed liable to
Sublessee for any failure of the Sublessor to perform and comply with
Sublessor's Remaining Obligations.
8.3 Sublessor hereby irrevocably authorizes and directs
Sublessee upon receipt of any written notice from the Master Lessor stating that
a Default exists in the performance of Sublessor's obligations under the Master
Lease, to pay to Master Lessor the Rent due and to become due under the
Sublease. Sublessor agrees that Sublessee shall have the right to rely upon such
statement and request from Master Lessor, and that Sublessee shall pay such Rent
to Master Lessor without any obligations or right to inquire as to whether such
Default exists and notwithstanding any notice from or claim from Sublessor to
the contrary and Sublessor shall have no right or claim against Sublessee for
any such Rent so paid by Sublessee.
8.4 No changes or modifications shall be made to this Sublease
without the consent of Master Lessor.
9. CONSENT OF MASTER LESSOR.
9.1 In the event that the Master Lease requires that Sublessor
obtain the consent of Master Lessor to any subletting by Sublessor than, this
Sublease shall not be effective unless, within ten days of the date hereof.
Master Lessor signs this Sublease thereby giving its consent to this Subletting.
9.2 In the event that the obligations of the Sublessor under
the Master Lease have been guaranteed by third parties then neither this
Sublease, nor the Master Lessor's consent, shall be effective unless, within 10
days of the date hereof, said guarantors sign this Sublease thereby giving their
consent to this Sublease.
9.3 In the event that the Master Lessor does give consent
then:
(a) Such consent shall not release Sublessor of its
obligations of alter the primary liability of Sublessor to pay the Rent and
perform and comply with all of the obligations of Sublessor to be performed
under the Master Lease.
(b) The acceptance of Rent by Master Lessor from
Sublessee or anyone else liable under the Master Lease shall not be deemed a
waiver by Master Lessor of any provisions of the Master Lease.
(c) The consent of this Sublease shall not constitute
a consent to any subsequent subletting or assignment.
(d) In the event of any Default of Sublessor under
the Master Lease. Master Lessor may proceed directly against Sublessor, any
guarantors or anyone else liable under the Master Lease of this Sublease without
first exhausting Master Lessor's remedies against any other person or entity
liable thereon to Master Lessor.
(e) Master Lessor may consent to subsequent
subletting and assignments of the Master Lease or this Sublease or any
amendments or modifications thereto without notifying Sublessor or anyone else
liable under the Master Lease and without obtaining their consent and such
action shall not relieve such persons from liability (however, Sublessee shall
not sub sub-lease or assign its subleasehold interest without Sublessor's
consent).
(f) In the event that the Sublessor shall Default in
its obligations under the Master Lease, then Master Lessor, at its option and
without being obligated to do so, may require Sublessee to attorn to Master
Lessor in which event Master Lessor shall undertake the obligations of Sublessor
under this Sublease from the time of the exercise of said option to termination
of this Sublease but Master Lessor shall not be liable for any prepaid Rent nor
any Security Deposit paid by Sublessee, nor shall Master Lessor be liable for
any other Defaults of the Sublessor under the Sublease.
9.4 The signature of the Master Lessor and any Guarantors of
Sublessor at the end of this document shall constitute their consent to the
terms of this Sublease.
<PAGE> 4
9.5 Master Lessor acknowledges that, to the best of Master
Lessor's knowledge, no Default presently exists under the Master Lease of
obligations to be performed by Sublessor and that the Master Lease is in full
force and effect.
9.6 In the event that Sublessor Defaults under its obligations
to be performed under the Master Lease by Sublessor, Master Lessor agrees to
deliver the Sublessee a copy of any such notice of Default. Sublessee shall have
the right to cure any Default of Sublessor described in any notice of Default
within ten days after service of such notice of Default on Sublessee. If such
Default is cured by Sublessee then Sublessee shall have the right of
reimbursement and offset from and against Sublessor.
10. BROKERS FEE.
10.1 Upon execution hereof by all parties, Sublessor shall pay
to Rossetti Company a licensed real estate broker,("Broker"), a fee as set forth
in a separate agreement between Sublessor and Broker.
11. ATTORNEY'S FEE. If any party of the Broker named herein brings an
action to enforce the terms hereof or to declare rights hereunder, the
prevailing party in any such action, on trial and appeal, shall be entitled to
his reasonable attorney's fee to be paid by the losing party as fixed by the
Court.
12. ADDITIONAL PROVISIONS. (If there are no provisions, draw a line
from the point to the next printed word after the space left here. If there are
additional provisions place the same here).
13. REPRESENTATIONS AND INDEMNITIES REGARDING BROKER RELATIONSHIPS.
Sublessor and Sublessee each represent and warrant to the other that it has had
no dealing with any broker (other than Rossetti company) in connection with this
Sublease, and that no one other than said named broker is entitled to any
commission or finder's fee in connection herewith. Sublessor and Sublessee do
hereby each agree to indemnify, protect, defend and hold the other harmless from
and against any liability for compensation or charges which may be claimed by
any such unnamed broker or finder or similar party by reason of any dealings or
actions of the indemnifying party, including any costs, expenses and attorney's
fees incurred with respect thereto.
14. PARKING RIGHTS. Sublesse shall have exclusive use of the ten
parking spaces provided for in Section 1 of the Master Lease.
15. FIXTURIZATION RIGHTS. Upon full execution of this Sublease,
Subleasee may enter onto the Premises for its use, but Sublessee shall not have
the right to occupy the Premises for its business until after Master Lessor
consents to this Sublease. If Master Lessor fails to consent to this Sublease,
Subleasee accepts all risk and responsibility for the cost of fixturizing the
Premises and hereby waives any and all claims against Sublessor for Sublessee's
costs in connection therewith.
16. INDEMNITY. Sublessor hereby agrees to indemnify, protect, defend
and hold Sublessee harmless from and against all liabilities, claims, suits,
actions and costs (including reasonable attorney's fees and costs) arising out
of or in connection with any injury of damage to person or property which
occurred in or about the Premises and/or the Building prior to the commencement
of the Sublease term as a result of the negligence or willful misconduct of
Sublessor, including without limitation taking any and all action and paying any
and all expenses (subject to the Sublessee's ordinary wear and tear or
negligence during the term of Sublease) in order to surrender the Premises to
the Master Lessor in compliance with Section 12 of the Master Lease at the
expiration of this Sublease and Master Lease.
17. DISPOSITION OF SECURITY DEPOSIT. The security deposit shall be
maintained in Sublessor's interest-bearing checking account and may be
commingled with Sublessor's other funds. Any balance of the security deposit and
interest thereon shall be returned by Sublessor to Sublessee within 30 days
after termination of the Sublease, subject to any rights which Sublessor may
have in the security deposit as a result of Sublessee's breach of the Sublease.
<PAGE> 5
SIGNATURES
TRI-COUNTIES ASSOCIATION
FOR THE DEVELOPMENTALLY
DISABLED,INC.
By: /s/ Laura Owens
---------------------------------
Laura Owens,
Chief Financial Officer
GARY PLAYER DIRECT, INC.
By: /s/ Barbara Nunez
---------------------------------
Barbara Nunez,
Corporate Secretary
<PAGE> 1
Exhibit 10.3
GENERAL ASSIGNMENT
THIS ASSIGNMENT, made this __________ day of February, 2000 between
Gary Player Direct, Inc., a Delaware Corporation, with an address at 1428
Philips Lane, Suite 203, San Luis Obispo, CA 93401 hereinafter referred to as
ASSIGNOR, to The C.F. Boham Company, Inc., dba: The Hamer Group of Los Angeles,
California, hereinafter referred to as ASSIGNEE.
WITNESSETH: That whereas the said Assignor is indebted to diverse
persons, and is desirous of providing for the payment of same, so far as is in
his power, by an assignment of all his property for that purpose:
NOW, THEREFORE, the undersigned Gary Player Direct, Inc., a Delaware
Corporation, 1428 Philips Lane, Suite 203, San Luis Obispo, CA 93401 as
Assignor, for a valuable consideration, receipt of which is hereby acknowledged,
does hereby make the following General Assignment for the benefit of Assignor's
creditors to The Hamer Group, as Assignee, of Los Angeles, California, under the
following terms and conditions:
1. Assignor does hereby grant, bargain, sell, assign, and transfer to
Assignee, its successors and assigns, in trust for the ultimate benefit of
Assignor's creditors generally, all of the property and assets of the Assignor
of every kind and nature and whatsoever situated, whether in possession,
reversion, remainder, or expectancy, both real and personal, and any interest or
equity therein not exempt from execution; included therein are all merchandise,
furniture, fixtures, machinery, equipment, raw materials, merchandise in
process, book accounts, books, accounts receivable, cash on hand, all chose in
action (personal or otherwise), insurance policies, and all other property of
every kind and nature owned by the Assignor, and without limiting the generality
of the foregoing, including all of the assets pertaining to that certain
distribution of golf related equipment business known as Gary Player Direct,
Inc., a Delaware Corporation located at 1428 Philips Lane, Suite 203, City of
San Luis Obispo, County of Santa Maria, State of California.
2. Assignor agrees to deliver to Assignee all books of account and
records, to execute and deliver all additional necessary documents immediately
upon request by Assignee, and to endorse all indicia of ownership where required
by Assignee, in order to complete the transfer of all assets to Assignee as
intended by this Assignment including, but not limited to, all of Assignor's
real and personal property and/or Assignor's interest therein, including
mortgages, deeds of trust, motor vehicles and patent rights. Assignee is hereby
authorized to execute all endorsements and demands requiring Assignor's
signature, in the name of Assignor. Assignor further authorizes Assignee to
apply for any deposits, refunds (including specifically, among all others,
claims for refund of taxes paid) or claims wherever necessary, in the name of
Assignor. Assignee is authorized to direct all Assignor's United States mail to
be delivered to Assignee, and Assignee is expressly authorized and directed to
open said mail as agent of Assignor; and to do any thing or act which the
Assignee in its sole and arbitrary discretion deems necessary or advisable to
effectuate the purposes of this assignment.
3. Assignor and Assignee agree to the following:
(a) This instrument transfers legal title and
possession to Assignee of all of said herein above described assets, and,
Assignee, in its own discretion, may determine whether to continue all, or part,
of the business operations, or to
<PAGE> 2
liquidate said assets; if Assignee deems it advisable he may operate the
business.
(b) Assignee, at its discretion, may sell and
dispose of said assets upon such terms and conditions as it may see fit, at
public or private sale, provided, however, that Assignee shall use its best
efforts to maximize the proceeds from the sale and disposition of said assets;
Assignee shall not be personally liable in any manner, and Assignee's
obligations shall be in a representative capacity, only, as an Assignee for the
general benefit of Assignor's creditors. Said Assignee shall administer this
estate to the best of its ability but it is expressly understood that the
assignee, the assignee's agents, servants or employees shall be liable only for
reasonable care and diligence in said administration, and it shall not be liable
for any act or thing done by the assignee, its agents, servants, or employees in
good faith in connection herewith.
(c) From the proceeds of sale, collections,
operations or other sources, Assignee shall pay itself and retain as Assignee
all of his charges and expenses, together with his own reasonable remuneration
and fee.
i) The Assignee fee shall be fixed at $50,000.00 plus $100,000 for
administrative expenses including legal fees to Assignor's attorney.
Assignee may also pay from said administrative proceeds a remuneration to its
agents and the reasonable fees of his attorney, and may pay a reasonable fee to
Assignor's attorney. Assignee may also pay from said proceeds the costs and
expenses incurred by any creditor who may have levied an attachment or other
lien on any assets of the Assignor. Reasonable and customary administrative
expenses shall also be paid out of proceeds. All of the aforementioned amounts
are to be determined at Assignee's sole but reasonable discretion and judgment.
(d) Assignee may compromise claims, complete or
reject Assignor's executory contracts, discharge at its option any liens on said
assets and any indebtedness which under law is entitled to priority of payment;
Assignee shall have the power to borrow money, hypothecate and pledge the
assets, and to do all matters and things that said Assignor could have done
prior to this Assignment. Any act or thing done by Assignee hereunder shall bind
the assignment estate and the Assignee only in its capacity as Assignee for the
benefit of creditors. Assignee shall have the right to sue as the successor of
the Assignor, or Assignee is hereby given the right and power to institute and
prosecute legal proceedings in the name of the Assignor, the same as if the
Assignor had itself instituted and prosecuted such proceedings or actions;
Assignee is hereby authorized and has the right to defend all actions instituted
against the Assignor, and to appear on behalf of the Assignor in all proceedings
(legal or otherwise) in which Assignor is a party. Assignor does hereby appoint
Assignee as the Assignor's attorney in fact with full power to act for and in
the place of the Assignor in such actions or proceedings or in any other
matters; including the right to verify all pleadings or other documents on
behalf of Assignor.
(e) Assignor agrees (that provided any such
claim may, by operation of law be not assignable), to make any and all claims
for refund of taxes which may be due from the Director of Internal Revenue for
tax refunds, or otherwise, and to forthwith upon receipt of any such refunds pay
them over to Assignee, and hereby empowers Assignee, as attorney in fact of
Assignor, to make all claims for refunds which may be made by an attorney in
fact.
2
<PAGE> 3
(f) After paying all costs and expenses of
administration and all fees and all allowed priority claims, Assignee shall
distribute to all unsecured creditors, pro rata, the remaining net proceeds of
this assignment estate; and said payments to be made until all assets are
exhausted, or these creditors are paid, or settled, in full; thereafter, the
surplus of monies and property, if any, to be transferred and conveyed to
Assignor. If any undistributed dividends to creditors or any reserve or other
funds not to exceed $3,500.00 in the aggregate shall remain unclaimed for a
period of one year after issuance of dividend checks by the Assignee, then the
same shall become the property of Assignee and used to supplement its fees for
services rendered for administering this Assignment.
(g) It is agreed and understood that this
transaction is a common law assignment for the benefit of Assignor's creditors.
(h) The Assignor understands that pursuant to
California Code of Civil Procedure Section 1802(c) the Assignor shall provide
the Assignee at the time of making of the assignment a list of creditors, equity
holders, and any other parties in interest, which shall include the names,
addresses, cities, states, and ZIP Codes for each person together with an amount
of the person's anticipated claim in the assignment proceedings. The schedule
(Exhibit A) is to be signed under penalty of perjury by the Assignor's
representative.
(i) The Assignor will provide a list of all accounts
receivable along with complete name, address, Zip Codes and full amount owed
along with all pertinent copies of invoices, shipping records and proof of
delivery. The schedule (Exhibit B) is to be signed under penalty of perjury by
the Assignor's representative.
[REMAINDER INTENTIONALLY OMITTED]
3
<PAGE> 4
ACCEPTED THIS ________ day of February, 2000
Gary Player Direct, Inc. a
Delaware Corporation
- -------------------------
The Hamer Group, Assignee
By:
-----------------------------
Marc B. Player
Chief Executive Officer
4
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<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 564,629
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 89,586
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<PP&E> 26,980
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0
0
<COMMON> 9,990
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