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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
Amendment No. 1
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NUMBER: 0-26738
BOYDS WHEELS, INC.
(Name of Small Business Issuer in its Charter)
CALIFORNIA 93-1000272
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8380 CERRITOS AVE., STANTON, CALIFORNIA 90680
(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number, including area code: (714) 952-4038
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act:
Title of Securities
COMMON STOCK, NO PAR VALUE
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 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
--- ---
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. / /
State issuer's revenues for its most recent fiscal year. $ 17,796,110
As of March 29, 1996, the issuer had 2,484,593 shares of Common Stock, no par
value, outstanding.
The aggregate market value of the voting stock held by non-affiliates of the
issuer on March 25, 1996 was $ 18,377,796
DOCUMENTS INCORPORATED BY REFERENCE
(1) Proxy Statement for Shareholder Meeting to be held on June 12, 1996: Part
III.
Transitional Small Business Disclosure Format (check one): Yes ; No X
--- ---
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PART III
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a)(1) List of Exhibits:
Number Description
1.1** Form of Underwriting Agreement by and among the Registrant, certain
Selling Shareholders of the Registrant, Cruttenden Roth Incorporated
and Black & Registrant, Inc.
3.1** Articles of Incorporation as filed with the California Secretary of
State on April 27, 1988.
3.2** Amended and Restated Articles of Incorporation filed with the
California Secretary of State on December 12, 1991.
3.3** Amended and Restated Articles of Incorporation filed with the
California Secretary of State on October 13, 1994.
3.4** Certificate of Determination of Preferences of Series A Redeemable
Preferred Stock of Registrant filed with the California Secretary
of State on November 2, 1994.
3.5** Agreement of Merger by and between Registrant and Boyds Ultra Violet,
Inc. filed with the California Secretary of State on November 2,
1994.
3.6** Bylaws of the Registrant, as amended and restated, including proposed
amendment thereto.
4.1** Warrant held by Specialty Blanks, Inc. to purchase $200,000 of Common
Stock dated March 1, 1993, with Addendum dated September 24, 1993.
4.2** Form of Warrant held by Robert E. Fitzgerald to purchase 10,560
shares of Common Stock and Ty Rogers to purchase 2,640 shares of
Common Stock.
4.3** Warrant held by Karl Kantarjian to purchase 10,000 shares of Common
Stock dated as of November 3, 1994.
4.4** Form of 9% Convertible Promissory Note due June 30, 1996.
4.5** Form of Warrant issued in 1994 Private Placement held as of the date
hereof by Messrs. Gills and Fitzgerald.
4.6** Option to Purchase Common Stock by and between the Registrant and
Brad Fanshaw dated as of May 19, 1993.
4.7** 1995 Stock Option Plan.
4.8** Form of Representatives' Warrant Agreement by and between the
Registrant, Cruttenden Roth Incorporated and Black & Registrant, Inc.
5.1** Opinion of Rutan & Tucker.
10.1** Loan & Security Agreement dated February 8, 1995 by and between
Registrant and Comerica Bank - California, including Guaranty of
Boyd Coddington.
10.2** Amended and Restated Agreement dated as of December 30, 1994 by and
between Registrant, Boyd Coddington and Specialty Blanks, Inc.
10.3** Amended and Restated Continuing Guaranty dated as of December 30,
1994 by and between Boyd Coddington and Diane Coddington and
Specialty Blanks, Inc.
10.4** License Agreement dated November 1, 1993 between Registrant and
Velocity Distribution, Inc.
10.5** Letter dated March 20, 1995 memorializing agreement between
Registrant and Hot Rods by Boyd concerning inter-company account
balance.
10.6** Standard Industrial Lease between Registrant and A & P Leasing
Registrant dated April 9, 1992 (8350 Cerritos Avenue).
10.7** Standard Industrial Lease between Registrant and Currie Family Trust
dated July 17, 1994 (8402 Cerritos Avenue).
10.8** Standard Industrial Lease between Registrant and Currie Family Trust
dated October 1, 1994 (8400 Cerritos Avenue).
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Exhibit
Number Description
- -------- -----------
10.9** Standard Industrial/Commercial Single-Tenant Lease between Boyd and
Diane Coddington and Duane and Carole Logsdon dated June 15, 1992
(8380 Cerritos Avenue and 10541 Ashdale Street).
10.10** Assignment of Real Property Lease Rights of Boyd and Diane
Coddington to Registrant dated September 29, 1994 (8380 Cerritos
Avenue and 10541 Ashdale Street), and Assignment of Equipment Lease
Rights.
10.11** Standard Industrial/Commercial Single-Tenant Lease between Registrant
and Hopper Shop Equipment Sales dated January 11, 1995. (8250
Cerritos Avenue).
10.12** Letter Agreements between Registrant and Codde, Inc. to lease a
tractor and trailer, dated January 1, 1995 and May 1, 1995.
10.13** Equipment Lease between Registrant and Financial Federal Credit,
dated March 10, 1995.
10.14** Equipment Lease between Registrant and Financial Federal Credit,
dated March 22, 1995.
10.15** Textron Financial Corp. Master Lease Schedule, Master Lease Agreement
and Guaranty, dated August 14, 1992.
10.16** Master Lease Schedule by and between Citicorp Leasing Inc. and
Registrant dated January 23, 1995.
10.17** Automobile purchase agreement between Boyd Coddington and Richard
Hibbard Chevrolet, Inc., dated May 23, 1994.
10.18** Guaranty of Boyd and Diane Coddington and Hot Rods by Boyd to
Financial Federal Credit, dated March 10, 1995.
10.19** Marketing/Promotion Agreement by and among the Registrant, Boyd
Coddington and Hot Rods by Boyd, Inc.
10.20** Option Agreement by and among the Registrant, Boyd and Diane
Coddington and Hot Rods by Boyd, Inc.
10.21** Employment Agreement by and between the Registrant and Boyd
Coddington.
10.22** Employment Agreement by and between the Registrant and Brad Fanshaw.
10.23** Loan Agreement, Business Loan Agreement and Security Agreements, each
dated July 24, 1995, between the Registrant and Eldorado Bank.
10.24** Equipment Lease between Registrant and Financial Federal Credit dated
July 21, 1995
10.25 Settlement Agreement and General Release dated February 15, 1996
10.26 Agreement for the Purchase and Sale of Assets of Velocity
Distribution, Inc. dated February 15, 1996.
10.27+ Loan Agreement and Security Agreements, each dated November 11, 1995
between the Registrant and Eldorado Bank
- --------------------
** Previously filed as a like numbered Exhibit to the Company's Registration
Statement on Form SB-2 dated September 15, 1995 (Registration No.
33-94064-LA) and incorporated herein by reference.
+ Previously filed.
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<TABLE>
<CAPTION>
(a)(2) Index to Financial Statements Page
----
<S> <C>
Report of Independent Accountants................................................... F-1
Balance Sheet at December 31, 1995.................................................. F-2
Statements of Income for the Years Ended December 31, 1994 and 1995................. F-3
Statement of Shareholders' Equity for the Years Ended December 31, 1994 and 1995.... F-4
Statements of Cash Flows for the Years Ended December 31, 1994 and 1995............. F-5
Notes to Financial Statements....................................................... F-7
</TABLE>
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the last quarter of the
fiscal year ended December 31, 1995.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this Amendment No. 1 to be signed on its
behalf by the undersigned, thereunto duly authorized.
BOYDS WHEELS, INC.
Dated: June 11, 1996 By: /s/ Rex Ours
---------------------------------
Rex Ours, Chief Financial Officer
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EXHIBIT 10.25
CONFIDENTIAL CONFIDENTIAL
SETTLEMENT AGREEMENT AND GENERAL RELEASE
THIS SETTLEMENT AGREEMENT AND GENERAL RELEASE ("Agreement") is entered
into by and among BOYDS WHEELS, INC., a California Corporation (the "Company")
and BOYD CODDINGTON ("Coddington"), on the one part, and BRAD FANSHAW
("Fanshaw") on the other part, on the date(s) herein indicated.
RECITALS
A. Fanshaw and the Company are parties to that certain Employment
Agreement dated January 1, 1995, pursuant to which Fanshaw has been employed as
the President of the Company.
B. Fanshaw, Charlotte Fanshaw ("C. Fanshaw"), Coddington and Diane
Coddington ("D. Coddington") are the shareholders of Velocity Distribution,
Inc., a California corporation ("Velocity"). Concurrently with the execution of
this Agreement, the Company, Coddington, D. Coddington, Fanshaw, C. Fanshaw and
Velocity shall execute that certain Agreement for the Purchase and Sale of
Assets dated of even date herewith (the "Asset Purchase Agreement") pursuant to
which the Company will acquire the assets of Velocity and will assume certain of
the liabilities of Velocity.
C. The parties desire to and do intend by this Agreement to resolve all
their disputes and differences and to discharge each other from any and all
liability with reference thereto.
AGREEMENT
NOW THEREFORE, for full and valuable consideration, and based upon the
foregoing recitals and the terms, conditions, covenants and agreements contained
herein, the parties agree as follows:
1. Releasees.
(a) Except for the obligations expressly provided for in this Agreement
or the Asset Purchase Agreement or any options to purchase stock of the Company
held by Fanshaw (the "Options"), Fanshaw, for himself and for each of his
successors, predecessors, assigns, heirs, officers, partners, agents and
representatives (the "Fanshaw Releasors"), hereby releases, acquits and forever
discharges the Company, Coddington, as well as each of their affiliates,
employees, officers, directors, trustees, partners, shareholders, attorneys,
servants, representatives, principals, guarantors, sureties, insurers and
agents, past and present, and each of them, whether known or unknown, disclosed
or undisclosed,
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and their respective heirs, successors and assigns (the "Company Released
Parties"), of and from any and all actions, suits, causes of action, claims,
liabilities, indebtedness, debts, demands, sums of money, obligations,
agreements, controversies, contracts, covenants, judgments, orders, rights to
injunctive or declaratory relief, breaches of contract, breaches of duty of any
relationships, acts, omissions, promises, representations, administrative
claims, arbitration rights, liens, claims of lien, loss of services,
controversies, expenses, damages, costs, attorneys' fees and liabilities of
whatever kind or nature in law, equity or otherwise, whether known or unknown,
liquidated or unliquidated, matured or unmatured which the Fanshaw Releasors
ever had, now have or may have against the Company Released Parties, or any of
them, including without limitation, arising out of or relating to Fanshaw's
employment by the Company and Velocity and his respective interests in said
companies.
(b) Except for the obligations expressly provided for in this
Agreement, the Asset Purchase Agreement and/or the Options, the Company and
Coddington, for themselves and for each of their successors, predecessors,
assigns, heirs, officers, partners, agents and representatives (the "Company
Releasors"), each hereby releases, acquits and forever discharges the Fanshaw
Releasors, as well as each of their affiliates, employees, officers, directors,
trustees, partners, shareholders, attorneys, servants, representatives,
principals, guarantors, sureties, insurers and agents, past and present, and
each of them, whether known or unknown, disclosed or undisclosed, and their
respective heirs, successors and assigns (the "Fanshaw Released Parties"), of
and from any and all actions, suits, causes of action, claims, liabilities,
indebtedness, debts, demands, sums of money, obligations, agreements,
controversies, contracts, covenants, judgments, orders, rights to injunctive or
declaratory relief, breaches of contract, breaches of duty of any relationships,
acts, omissions, promises, representations, administrative claims, arbitration
rights, liens, claims of lien, loss of services, controversies, expenses,
damages, costs, attorneys' fees and liabilities of whatever kind or nature in
law, equity or otherwise, whether known or unknown, liquidated or unliquidated,
matured or unmatured which the Company Releasors ever had, now have or may have
against the Fanshaw Released Parties, or any of them, including without
limitation, arising out of or relating to Fanshaw's employment by the Company
and Velocity and Fanshaw's respective interests in said companies.
2. Settlement Amount.
(a) In consideration for the release and covenants and conditions set
forth herein, the Company shall pay to Fanshaw the sum of Two Hundred
Twenty-Five Thousand ($225,000) (the "Cash Payment") payable upon execution of
this Agreement, and shall issue to Fanshaw within ten (10) business days from
the execution of this
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Agreement, shares of common stock of the Company with a fair market value equal
to Fifty Thousand Dollars ($50,000) (the "Stock Payment"). The Cash Payment and
the Stock Payment shall be referred to herein as the "Settlement Amount." The
fair market value and the price per share of the shares of common stock (the
"Shares") to be issued hereunder as the Stock Payment portion of the Settlement
Amount shall be determined by reference to the last reported sale price of the
common stock of the Company as reported by NASDAQ as of the most recent trading
day preceding the date of this Agreement, or if no such sales are then being
reported, the average of the highest reported bid and lowest reported asked
prices as furnished by the National Association of Securities Dealers, Inc.,
through NASDAQ as of the most recent trading day preceding the date of this
Agreement. If no price is determinable as described above, the fair market value
of such Shares shall be as reasonably determined by the Board of Directors of
the Company. Said amounts also constitute a full and complete settlement and
compromise of all disputed claims arising out of or related to Fanshaw's
employment with the Company or the separation of that employment. The parties
agree that One Hundred Twenty-Five Thousand Dollars ($125,000) of the Settlement
Amount represents compensation for asserted emotional distress, physical and
personal injury and pain and suffering arising out of or relating to the claims
released herein by Fanshaw which the parties intend to be damages under Section
104(a)(2) of the Internal Revenue Code of 1986, as amended (the "Section
104(a)(2) Payment"), and the remaining One Hundred Fifty Thousand Dollars
($150,000) represents consideration for the covenant not to compete described in
Section 10 below.
(b) If the Company proposes to register (including for this purpose a
registration effected by the Company for any shareholder other than Fanshaw) any
of stock or other securities under the Securities Act of 1933 (the "Securities
Act") in connection with the public offering of such securities solely for cash
(other than a registration relating solely to the sale of securities to employ
participants in a Company Stock Plan or a sale with respect to a transaction to
which Rule 145, promulgated under the Securities Act or any successor to such
Rule, is applicable or otherwise pursuant to a registration on Form S-4), the
Company shall, at such time, promptly upon beginning work on such registration
give Fanshaw written notice of such registration. Upon the written request of
Fanshaw given within ten (10) business days after mailing of such notice by the
Company in accordance with this Section 2(b), the Company shall, subject to the
following provisions, use all reasonable efforts to cause to be included in such
public offering at the Company's expense all of the Shares that Fanshaw has
requested to be registered. (Notwithstanding the foregoing sentence, Fanshaw
shall be responsible for the payment of all underwriting commissions and
discounts allocable to the sale of Fanshaw's Shares). The Company shall not be
required under this Section 2(b) to include any of Fanshaw's Shares in an
underwritten offering of the Company's common stock unless Fanshaw accepts such
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terms of the underwriting as agreed upon between the Company and the
underwriters selected by it, which terms shall be the same as those offered to
the other selling shareholders; provided, however, this registration right shall
not be subject to abatement by the Company's underwriters.
3. Non-Admission of Liability.
It is understood and agreed by the parties that each of the parties
hereto agrees and understands that this Agreement is a good faith compromise and
settlement of disputed claims, and does not, nor shall it be construed as or
referred to as constituting, directly or indirectly, an admission of any
liability on the part of any party, or as an admission that any party has
suffered damages.
4. General Nature of Release.
The Releases set forth above in Section 1 of this Agreement are general
releases of all claims, demands, causes of action, obligations, damages and
liabilities of any nature whatsoever that are described in the Releases and are
intended to encompass all known and unknown, foreseen and unforeseen claims
which the parties may have against each other, or any of them, except for any
claims which may arise from the terms of this Agreement or the Asset Purchase
Agreement or any options to purchase stock of the Company held by Fanshaw.
5. Termination of Employment.
Effective as of February 13, 1996 (the "Effective Date"), Fanshaw shall
resign as an officer and director of the Company.
6. Risk of Additional or Different Facts.
Each of the parties acknowledges that he or it may hereafter discover
facts different from or in addition to those which he or it now knows or
believes to be true, and he or it expressly agrees to assume the risk of the
possible discovery of additional or different facts, and agrees that this
Agreement shall be and remain effective in all respects regardless of such
additional or different facts.
7. Release of Section 1542 Rights.
Further, each of the parties expressly agrees that he or it waives and
relinquishes all rights and benefits he or it may have
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under Section 1542 of the Civil Code of the State of California. That section
reads as follows:
Section 1542. [Certain claims not affected by general release.] 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.
8. Neutral Reference.
Fanshaw agrees to direct all prospective employer's inquires regarding
references to Boyd Coddington. Upon inquiry from prospective employers to Boyd
Coddington, Coddington agrees to provide a neutral reference for Fanshaw
consisting of Fanshaw's dates of employment, final position, and the information
set forth in the last sentence of Section 11(d) below. Except as set forth
herein, the Company and Fanshaw agree that no comments, either positive or
negative, will be made about Fanshaw's past performance or his reason for
leaving.
9. Tax Indemnity.
Fanshaw understands and agrees that he shall be exclusively liable for
the payment of all taxes, or other state or federal charges, that are due as a
result of the receipt of the consideration referred to in Section 2 and Section
10 of this Agreement. The parties each agree that such consideration is not
subject to withholding by the Company and Fanshaw directs the Company not to
withhold any sums from the payment of the consideration set forth herein.
Fanshaw agrees that if the Internal Revenue Service (the "IRS") or any state or
local taxing authority determines that all or a portion of the Section 104(a)(2)
Payment is not excludable from his gross income, he will indemnify the Company
for any monies (including taxes, interest and penalties, but excluding employer
contributions such as employer's share of FICA) owed to or assessed by the IRS
or any state or local taxing authority as a result of such determination.
Fanshaw further agrees to indemnify the Company for any attorneys' fees and/or
expenses incurred if the Company is required to take action to enforce this
Section 9.
10. Covenant Not to Compete.
(a) In consideration of the payment of One Hundred Fifty Thousand
Dollars of the Settlement Amount (the "Non-Compete Payment") to Fanshaw, and in
order to induce the Company to execute the Asset Purchase Agreement and this
Agreement, Fanshaw hereby
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agrees that, for a period of five (5) years from the date of this Agreement (the
"Restricted Period"), he shall not:
(i) directly or indirectly, own (through any form of ownership
other than ownership of securities of a publicly-held corporation of
which Fanshaw owns, or has real or contingent rights to own, less than
five percent (5%) of any class of outstanding securities), finance,
manage, operate, control, join or participate in the ownership,
management, operation or control, or be employed or connected as a
director, officer, principal, agent, employee, employer, adviser,
consultant, partner or in any other individual or representative
capacity whatsoever, either for his own benefit or for the benefit of
any other person or entity of whatever kind, with, of or by, any
business, firm, corporation (governmental or private) or any other
entity of whatever kind (a "Fanshaw Affiliate"), which is, directly or
indirectly, competitive with any aspect of the "Company Business" as
hereinafter defined, as carried on prior to the date hereof and as of
the date hereof, in any foreign country or state of the United States
in which the Company has carried on or, as of the date hereof, is
carrying on business in respect of any Company Business; and without
limiting the provisions of this Subsection (a)(i),
(ii) (1) directly or indirectly canvass or solicit any of the
customers of the Company or its affiliates to purchase goods or
services of the type described in Section 10(c) below, from any other
person or entity, provided that Fanshaw shall not be deemed to be in
breach of this provision if a Fanshaw Affiliate does so without
Fanshaw's recommendation or involvement; (2) directly or indirectly
request or advise any customer, supplier or licensor of the Company or
its affiliates or any person engaging in business activities or
transactions with the Company or its affiliates to withdraw, curtail or
cancel its business or such activities or transactions with the Company
or its affiliates; or (3) directly or indirectly seek to obtain or
obtain from any licensor of the Company or its affiliates, any license
with respect to goods or services of the type specified in Section
10(c) below.
(b) As used in this Section 10: the term "at the date hereof" shall
mean the Effective Date hereof; and "affiliate" shall mean any entity
controlling, controlled by or under common control with the Company.
(c) The term "Company Business" is defined, for purposes of this
Agreement as the design, manufacture, distribution and/or marketing of aluminum
wheels, motorcycle wheels, go-cart wheels, custom wheels, steering wheels and
OEM wheels (collectively "Wheels"), billet aluminum accessories and car care
products for
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the automotive aftermarket. The Company Business shall be defined, for purposes
of this Agreement, in its broadest sense.
(d) Notwithstanding anything in this Agreement to the contrary, Fanshaw
shall not be precluded by this Agreement from directly or indirectly owning,
financing, managing, operating, controlling or being employed by or otherwise
connected with any business, firm, or entity which is engaged in the retail or
wholesale distribution and marketing of Wheels, billet aluminum accessories and
car care products for the automotive aftermarket, and not in the design and/or
manufacture of such products.
(e) During the Restricted Period, Fanshaw shall keep secret and retain
in strictest confidence and shall not use for the benefit of himself or others,
all confidential matters of the Company relating to the Company Business,
including, without limitation, "know how", trade secrets, customer lists,
details of client or consultant contracts, pricing policies, operational
methods, marketing plans or strategies, product development techniques or plans,
business acquisition plans, new personnel acquisition plans, methods of
manufacture, technical processes, design and design projects, inventions and
research projects of the Company (the "Confidential Information") learned by
Fanshaw heretofore or hereafter. The obligations of confidentiality and
nondisclosure imposed upon Fanshaw pursuant to this Agreement shall not apply
when:
(i) The Confidential Information disclosed to Fanshaw was in
the public domain at the time of disclosure, or at any time after
disclosure has become (except by breach of this Agreement or by other
improper means as defined in California Civil Code Section 3426.1) a
part of the public domain by publication or otherwise; or
(ii) Disclosure is made pursuant to subpoena or other legal
process; or
(iii) Disclosure is made pursuant to the prior written consent
of the Company.
(f) All memoranda, notes, lists, records and other documents (and all
copies thereof), including such items stored in computer memories, on
microfiche, or by any other means made or compiled by or on behalf of Fanshaw,
or made available to Fanshaw relating to the Company are and shall be the
Company's property and shall be delivered to the Company immediately upon
execution of this Agreement. Fanshaw agrees not to retain any written or other
tangible material containing any information concerning or disclosing any of the
Confidential Information. Upon execution of this Agreement, Fanshaw shall
deliver to the Company all Company keys, credit cards, codes and any and all
other Company belongings.
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(g) During the Restricted Period, Fanshaw shall not, directly or
indirectly, hire or solicit any employee of the Company or of its affiliates or
encourage such employee to terminate such employment, provided that Fanshaw
shall not be deemed to be in breach of this provision if a Fanshaw Affiliate
does so without Fanshaw's recommendation or involvement.
(h) During the Restricted Period, Fanshaw shall not, directly or
indirectly, encourage any consultant then under contract with the Company or any
of its affiliates to terminate such relationship.
(i) Fanshaw acknowledges that legal remedies at law for a violation of
this Agreement will not be adequate and that the damage to the Company and/or
its affiliates as a result of such violation will be irreparable. Consequently,
the Company and/or its affiliates shall each be entitled, as a matter of right,
and in addition to any other remedies available at law or in equity, to have
this Agreement specifically enforced by any court of competent jurisdiction, it
being agreed that any breach or threatened breach of this Agreement would cause
irreparable injury to the Company and its affiliates, and that money damages
will not provide an adequate remedy to the Company; therefore, the Company and
its affiliates shall be entitled to immediate temporary and permanent injunctive
relief and other appropriate equitable relief, without the posting of any bond
or other security by the Company, for any such breach or threatened breach. Such
relief shall be in addition to any other relief to which the Company may be
entitled at law or in equity.
(j) In addition to the remedies provided to the Company pursuant to
Section 10(i) above, if a court of competent jurisdiction shall finally
determine (with appeals exhausted or waived) that Fanshaw has breached any of
the terms of this Section 10, Fanshaw shall forfeit the Non-Compete Payment
provided in this Section 10 and, whether or not the court finds that the
non-compete provisions are lawfully enforceable, he shall forthwith, upon demand
by the Company, reimburse the Company for any such amounts already paid under
Section 2, in an amount which represents the pro rata portion of the Non-Compete
Payment relating to any remaining term of the Restricted Period. For example, if
a breach is determined to have occurred when three (3) years remain in the
Restricted Period, Fanshaw shall reimburse the Company an amount equal to Ninety
Thousand Dollars ($90,000).
11. Confidentiality.
(a) The Company and Coddington promise and agree not to disclose,
either directly or indirectly, in any manner whatsoever, any information of any
kind regarding the terms of this Agreement, including, but not limited to, the
amount and characterization of any payments under the Settlement Agreement, to
any person or
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organization, including, but not limited to, representatives of local, state or
federal agencies, members of the press and media, present and former officers,
employees and agents of the Company, and other members of the public, except
that the Company shall not be prohibited from providing any appropriate
disclosures or information as may be required under any applicable local, state
or federal law, including, without limitation, the federal securities laws.
(b) Fanshaw promises and agrees not to disclose, either directly or
indirectly, in any manner whatsoever, any information of any kind regarding the
terms of this Agreement, including, but not limited to, the amount and
characterization of any payments under the Settlement Agreement, to any person
or organization, including, but not limited to, representatives of local, state
or federal agencies, members of the press and media, present and former
officers, employees and agents of the Company, and other members of the public,
except that Fanshaw shall not be prohibited from providing any appropriate
disclosures or information as may be required under any applicable local, state
or federal law, including, without limitation, the federal securities laws.
(c) In the event of a breach by the other party, of the terms of this
Section 11, the nonbreaching party may commence an action at law for damages to
pursue its available legal or equitable remedies, including, but in no way
limited to, attorneys' fees. In the event that a party takes steps to seek
relief from an alleged breach of this Section 11, all of the provisions of this
Agreement shall remain in full force and effect.
(d) This Section 11 shall not prohibit the parties from (i) discussing
the consideration being provided pursuant hereto with their tax advisors, (ii)
discussing the underlying claims or the terms of this Agreement with their
attorneys, counselors or medical doctors, (iii) advising a governmental taxing
authority of the said consideration or of the existence of this Agreement in
response to a question or questions posed by such taxing authority, (iv)
testifying pursuant to a court order or a subpoena which has been issued by a
governmental agency and which appears valid on its face, or (v) stating "the
matter has been resolved and the terms of the resolution are confidential" in
response to an inquiry. No party shall issue any press releases concerning this
Agreement or the settlement contemplated hereby or otherwise provide any
information to any media regarding the terms of this Agreement except that any
party may state:
The President of Boyds Wheels, Inc., Brad J. Fanshaw, has resigned to
pursue other business ventures. Boyds Wheels' C.E.O., Boyd Coddington
said, "Brad joined the Company in 1991 and was an integral part of its
growth and success during his tenure. We wish him success in his new
endeavors."
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<PAGE> 10
12. No Actions to be Brought or Assisted.
Except for the obligations expressly provided for in this Agreement or
in the Asset Purchase Agreement or any options to purchase stock of the Company
held by Fanshaw, the parties each covenant and agree never to commence, aid in
any way, prosecute or cause to be commenced or prosecuted any action or other
proceeding based upon any claims, demands, causes of action, obligations,
damages or liabilities which are the subject of this Agreement, or to assist
others in the prosecution of any claims or actions against any of the released
parties. Fanshaw agrees to indemnify and to hold the Company Released Parties
harmless from and against any and all claims, including court costs and
attorneys' fees, from or in connection with any action or proceeding brought,
assisted, or prosecuted contrary to the provisions of this Agreement. The
Company agrees to indemnify and to hold the Fanshaw Released Parties harmless
from and against any and all claims, including court costs and attorneys' fees,
from or in connection with any action or proceeding brought, assisted or
prosecuted contrary to the provisions of this Agreement.
13. Non-Assignment of Claim.
The parties each warrant that he or it has made no assignment and will
make no assignment of any claim, chose in action, right of action, or any right
of any kind whatsoever, embodied in any of the claims and allegations referred
to herein, and that no other person or entity of any kind (other than as
expressly mentioned above) had or has any interest in any of the demands,
obligations, actions, causes of action, debts, liabilities, rights, contracts,
damages, attorneys' fees, costs, expenses, losses or claims referred to herein.
14. Binding Effect on Successors and Assigns.
This Agreement and all the terms and provisions hereof, shall be
binding upon and shall inure to the benefit of the parties and their respective
heirs, legal representatives, successors and assigns.
15. Execution in Counterparts.
This Agreement may be executed in multiple counterparts, each of which
shall be considered an original but all of which shall constitute one agreement.
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<PAGE> 11
16. Interpretation.
Should any portion, word, clause, phrase, sentence or section of this
Agreement be declared void or unenforceable, such portion shall be considered
independent and severable from the remainder, the validity of which shall remain
unaffected. Whenever required by the context, as used in this Agreement the
singular number shall include the plural, and the masculine gender shall include
the feminine and neuter.
17. Attorneys Fees.
Should any legal action, arbitration or other proceeding be commenced
to secure the performance of this Agreement and in obtaining any appropriate
relief based thereon, the party prevailing in such legal action, arbitration or
other proceeding shall, in addition to such other relief as may be awarded, be
entitled to recover costs and reasonable attorneys' fees.
18. Entire Agreement.
This Agreement constitutes the entire agreement between the parties who
have executed it and supersedes any and all other agreements, understandings,
negotiations, or discussions, either oral or in writing, express or implied,
between the parties to this Agreement. The parties to this Agreement each
acknowledge that no representations, inducements, promises, agreements, or
warranties, oral or otherwise, have been made by them, or anyone acting on their
behalf, which are not embodied in this Agreement, that they have not executed
this Agreement in reliance on any such representations, inducements, promise,
agreement or warranty, and that no representation, inducement, promise,
agreement or warranty not contained in this Agreement, including, but not
limited to, any purported supplements, modifications, waivers, or terminations
of this Agreement, shall be valid or binding, unless executed in writing by all
of the parties to this Agreement.
19. Failure to Assert Right is Not Waiver.
Failure to insist on compliance with any term, covenant or condition
contained in this Agreement shall not be deemed a waiver of that term, covenant,
or condition, nor shall any waiver or relinquishment of any right or power
contained in this Agreement at any one time or more times be deemed a waiver or
relinquishment of any right or power at any other time or times.
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<PAGE> 12
20. Governing Law.
This Agreement is made and entered into in the State of California and
shall in all respects be interpreted, enforced and governed under the laws of
said State.
21. Knowing and Voluntary Agreement.
This Agreement in all respects has been voluntarily and knowingly
executed by the parties hereto. Fanshaw specifically represents that he is
represented by counsel, that he has been given the opportunity to consult with
his attorney, and that he has consulted with his attorney to his satisfaction
concerning the terms and conditions of this Agreement. Fanshaw further
represents that he has carefully read and fully understands all of the
provisions of this Agreement, and that he is voluntarily entering into this
Agreement.
22. No Further Action.
Each party hereby covenants and agrees that he or it will not, at any
time hereafter, attempt to assert any claim or commence, maintain or prosecute
any action at law, in equity or otherwise, against the other party described
herein, nor any of them individually, on account of any claimed loss, damage,
claim, demand, action or cause of action of any kind and nature, whether known
or unknown, released by this Agreement. This Agreement may be pleaded as a full
and complete defense to, and the parties hereby consent that it may be used as
the basis for, an injunction against any action, suit, or other proceeding based
upon any claims, demands, liabilities, suits, debts, liens, contracts,
agreements, promises, damages, obligations, losses, costs, expenses or causes of
action, of every kind, released by this Agreement.
23. Their Own Costs.
Each party to this action and/or this Agreement shall bear and sustain
his own costs and disbursements incurred in its preparation and negotiation.
24. Method of Dispute Resolution.
The parties agree that any controversy or dispute arising from or in
connection with this Agreement, its interpretation, performance or termination,
shall, upon demand of a party, be submitted to and decided by binding
arbitration. The arbitration shall be conducted pursuant to Part 3, Title 9 of
the California Code of Civil Procedure (Sections 1280-1288.8). Discovery,
including depositions for the purpose of discovery, shall be
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<PAGE> 13
broadly permitted, and the provisions of Code of Civil Procedure Section 1283.05
shall apply. Any demand to arbitrate, for purposes of the statute of
limitations, shall have the same effect as if suit had been filed on the date
the demand is made. The arbitration shall occur in Orange County, California.
The parties shall agree upon an arbitrator twenty-one (21) days after the demand
is made, and if the parties fail to so agree, then any of them may apply to the
court for an order appointing an arbitrator meeting the requirements of this
section. The decision of the arbitrator shall be final and binding, and shall be
subject to confirmation, correction or vacation in accordance with the
provisions of Code of Civil Procedure Sections 1285-1287.4. Any application,
petition or other proceeding (i) to enforce the award or the provisions of this
Agreement, (ii) to the extent that the arbitrator does not have the power or
authority to resolve or grant the relief sought, and/or (iii) for provisional or
equitable relief pending appointment of the arbitrator, shall be commenced in
the appropriate state or federal courts having jurisdiction in Orange County,
California and the parties hereby consent to jurisdiction and venue in such
courts.
25. Execution of Asset Purchase Agreement.
Concurrently with the execution of this Agreement, the parties agree to
execute the Asset Purchase Agreement.
26. Director and Officer Insurance.
The Company agrees to continue coverage of Brad Fanshaw on its Director
and Officer Liability policy until December 31, 1998.
27. Notices.
Any notices pursuant to this Agreement, shall be given by registered or
certified mail return receipt requested addressed as follows:
If to Buyer: Boyds Wheels, Inc.
8380 Cerritos Avenue
Stanton, California 90680
Attn: Boyd Coddington,
Chief Executive Officer
With a copy to: Rutan & Tucker
611 Anton Boulevard, Suite 1400
Costa Mesa, California 92626
Attn: Evridiki (Vicki) Dallas, Esq.
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<PAGE> 14
If to Fanshaw: Brad Fanshaw
12461 Country Lane
Santa Ana, California 92705
With a copy to: Sheppard, Mullin, Richter & Hampton
19th Floor, 501 West Broadway
San Diego, California 92101-3505
Attn: Guy Halgren, Esq.
If to Coddington: Boyd Coddington
8380 Cerritos Avenue
Stanton, California 90680
(or at such other address or to such other person or persons as may be
designated by notice in writing) and shall be deemed delivered two business days
after placed in the mail.
28. Securities Filings.
Fanshaw agrees to execute any and all reporting forms required pursuant
to the Securities Act of 1933 and 1934 in connection with the Company, and all
such forms shall be subject to review by the Company prior to filing.
29. Indemnification.
The Company agrees to indemnify Fanshaw and hold him harmless from
liability to third parties in his capacity as an officer and director of the
Company and of Velocity and to advance any expenses incurred by him in defending
any such proceedings to the full extent authorized or permitted by the
provisions of Section 317 of the General Corporation Law of California. Fanshaw
shall give the Company notice in writing as soon as practicable of any claim
made against him for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to Rex A. Ours (Attn: Chief
Financial Officer) (or such other address as the Company shall designate in
writing to Fanshaw). Fanshaw agrees to give the Company such information and
cooperation as it may reasonably require. In the event the Company shall be
obligated to pay the expenses of any proceeding against Fanshaw, the Company, if
appropriate, shall be entitled to assume the defense of such proceeding, with
counsel reasonably acceptable to Fanshaw, upon the delivery to Fanshaw of
written notice of its election so to do. After delivery of such notice, approval
of such counsel by Fanshaw and the retention of such counsel by the Company, the
Company will not be liable to Fanshaw under this Agreement for any fees of
counsel subsequently incurred by Fanshaw with respect to the same proceeding,
provided that (i) Fanshaw shall have the right to employ his counsel in any such
proceeding at his expense; and (ii) if (A) the employment of counsel by Fanshaw
has been previously authorized by the Company, (B) Fanshaw shall have reasonably
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<PAGE> 15
concluded that there may be a conflict of interest between the Company and
Fanshaw in the conduct of any such defense or (C) the Company shall not, in
fact, have employed counsel to assume the defense of such proceeding, then the
fees and expenses of Fanshaw's counsel shall be at the expense of the Company.
Fanshaw understands and acknowledges that the Company has undertaken or may be
required in the future to undertake with the SEC to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company's right under public policy to indemnify Fanshaw. Any other provision
herein to the contrary notwithstanding, the Company shall not be obligated
pursuant to the terms of this Section: (1) to indemnify or advance expenses to
Fanshaw with respect to proceedings or claims initiated or brought voluntarily
by Fanshaw and not way of defense, except with respect to proceedings brought to
establish or enforce a right to indemnification under this Agreement or any
other statute or law or otherwise as required under applicable law; (b) to
indemnify Fanshaw for expenses or liabilities of any type whatsoever (including,
but not limited to, judgments, fines, ERISA, excise taxes or penalties and
amounts paid in settlement) which have been actually paid directly to Fanshaw by
an insurance carrier under a policy of officers' and directors' liability
insurance maintained by the Company, without further liability from Fanshaw for
reimbursement of any such amounts, and (c) to indemnify Fanshaw for expenses or
the payment of profits arising from the purchase and sale by Fanshaw of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any other similar statute.
IN WITNESS WHEREOF, the undersigned have executed this Settlement
Agreement and General Release on the dates set forth hereinafter.
CAUTION! READ BEFORE SIGNING
DATED: _________, 1996 BOYDS WHEELS, INC.,
a California corporation
By:
-----------------------------------
Boyd Coddington,
Chief Executive Officer
By:
-----------------------------------
Rex Ours,
Chief Financial Officer
and Secretary
[Signatures continued on following page]
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<PAGE> 16
DATED: _________, 1996 ----------------------------------------
BOYD CODDINGTON
DATED: _________, 1996
----------------------------------------
BRAD FANSHAW
APPROVED AS TO FORM
AND CONTENT:
SHEPPARD MULLIN RICHTER RUTAN & TUCKER
& HAMPTON
By: By:
--------------------------- ------------------------------------
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<PAGE> 1
Exhibit 10.26
AGREEMENT FOR THE PURCHASE AND SALE OF ASSETS
THIS AGREEMENT FOR THE PURCHASE AND SALE OF ASSETS (the "Agreement") is
effective as of the 15th day of February, 1996, by and between VELOCITY
DISTRIBUTION, INC., a California corporation ("Seller"), BRAD FANSHAW and
CHARLOTTE FANSHAW (the "Fanshaws"), BOYD CODDINGTON and DIANE CODDINGTON
("Coddington") and BOYDS WHEELS, INC., a California corporation ("Buyer"). The
Buyer is sometimes referred to herein as "The Company".
W I T N E S S E T H:
WHEREAS, Seller is the holder of an exclusive worldwide license to
market promotional clothing and accessories bearing Buyer's logos and
trademarks.
WHEREAS, Seller wishes to sell and dispose of its assets and
certain of its liabilities; and
WHEREAS, Buyer wishes to purchase such assets and assume certain of
Seller's liabilities on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
SALE OF ASSETS
1.1 Assets. Subject to the terms and conditions set forth in this
Agreement and for the consideration specified in Section 1.2 below, at the
Closing, as hereinafter defined, Seller hereby agrees to sell and transfer to
Buyer, and Buyer hereby agrees to purchase, the Assets set forth on Exhibit 1.1
hereto, wherever located and regardless of whether reflected on the balance
sheet of Seller (collectively, the "Assets").
1.2 Assumption of Certain Disclosed Liabilities. At the Closing, Buyer
shall assume only those debts, obligations and liabilities of Seller described
in Exhibit 1.2 hereto (the "Assumed Liabilities"), including, without
limitation, wages payable by Velocity to Charlotte Fanshaw in the amount of
Fifty-Three Thousand Nine Hundred Eighty-One Dollars and Ninety-Three Cents
($53,981.93) ("Wages Payable"). In addition, the Company agrees to pay to
Charlotte Fanshaw an amount equal to Six Thousand Five Hundred Thirty-Eight and
46/100 Dollars ($6,538.46) as compensation for services rendered to Velocity for
the period September 1, 1995 through November 11, 1995 ("Additional Wages"). The
Wages Payable and the Additional Wages are referred to herein as "Wages". Buyer
shall pay to Charlotte Fanshaw at the Closing, an amount equal to Thirty-Four
Thousand Forty-Two Dollars ($34,042) as part payment of the Wages, and the
balance of Twenty-Six Thousand Four Hundred
<PAGE> 2
Seventy-Eight Dollars and Thirty-Nine Cents ($26,478.39) for the Wages shall be
paid in three equal monthly installments of Eight Thousand Eight Hundred
Twenty-Six Dollars and Thirteen Cents ($8,826.13) on March 10, 1996, April 10,
1996 and May 10, 1996. Such amounts constitute full and complete payment of all
Wages payable to Charlotte Fanshaw.
1.3 Disclaimer Concerning Other Liabilities. Except for the specific
liabilities assumed by Buyer pursuant to Section 1.2 hereof, Buyer does not
assume and shall not be required to assume, pay or discharge any duties,
obligations or liabilities of Seller whatsoever, past, present or future, fixed
or contingent, direct or indirect, known or unknown, express or implied. Without
limiting the generality of the foregoing, except as provided in Section 1.2,
Buyer does not assume and shall not be required to assume, pay or discharge any
of the following liabilities, obligations or undertakings of Seller:
(a) any accounts payable of Seller;
(b) any debt, obligation or liability under or pursuant to any
lease, contract or other agreement;
(c) any accrued liabilities at the Closing Date for salaries,
wages, vacation pay, payroll taxes, and other fringe benefits,
including without limitation unemployment insurance, disability
insurance and FICA;
(d) except as indicated in Exhibit 1.2 or pursuant to Section
2.4 of this Agreement, any liability or obligation for any local,
state, federal or foreign income, sales, franchise, employment,
payroll, gross receipts, property or other such taxes of any kind
whatsoever;
(e) any and all liabilities or claims arising or resulting
from or in respect of the employment by Seller of any person prior to
the Closing, including liabilities or claims for wages, vacation,
holiday, sick or personal leave pay, termination or severance pay,
worker's compensation, or other employment related payments, and any
contributions to any pension, insurance or other employee benefit plan
for which Seller has an obligation measured by or accrued with
reference to Seller's employment of any person or services rendered
pursuant to such employment prior to the Closing Date.
1.4 Indemnity. Seller is and shall continue to be solely and
exclusively liable for all the foregoing matters and shall pay any liabilities
and obligations of every kind or character hereinabove enumerated before the
same shall become delinquent and will indemnify and hold Buyer harmless from and
against any and all costs, claims, liabilities and expense, including reasonable
attorneys' fees and costs of defense incurred in investigating or defending any
such claim.
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<PAGE> 3
ARTICLE II
CLOSING
The Closing of the sale of the Assets shall take place at the offices
of Rutan & Tucker on __, 1996, or at such other time as may be agreed upon by
the parties hereto (the "Closing Date").
ARTICLE III
MUTUAL GENERAL RELEASE
3.1 Releasees.
(a) Except for the obligations expressly provided for in this
Agreement, the Settlement Agreement and General Release (the
"Settlement Agreement") of even date herewith between the Company and
Boyd Coddington, on the one part, and Brad Fanshaw, on the other part,
or any options to purchase stock of the Buyer held by Fanshaw, (the
"Options"), the Fanshaws, for themselves and for each of their
successors, predecessors, assigns, heirs, officers, partners, agents
and representatives (the "Fanshaw Releasors"), each hereby releases,
acquits and forever discharges the Buyer, Coddington, as well as each
of their affiliates, employees, officers, directors, trustees,
partners, shareholders, attorneys, servants, representatives,
principals, guarantors, sureties, insurers and agents, past and
present, and each of them, whether known or unknown, disclosed or
undisclosed, and their respective heirs, successors and assigns (the
"Company Released Parties"), of and from any and all actions, suits,
causes of action, claims, liabilities, indebtedness, debts, demands,
sums of money, obligations, agreements, controversies, contracts,
covenants, judgments, orders, rights to injunctive or declaratory
relief, breaches of contract, breaches of duty of any relationships,
acts, omissions, promises, representations, administrative claims,
arbitration rights, liens, claims of lien, loss of services,
controversies, expenses, damages, costs, attorneys' fees and
liabilities of whatever kind or nature in law, equity or otherwise,
whether known or unknown, liquidated or unliquidated, matured or
unmatured which the Fanshaw Releasors ever had, now have or may have
against the Company Released Parties, or any of them, including without
limitation, arising out of or relating to their employment by the Buyer
and Velocity and their respective interests in said companies.
(b) Except for the obligations expressly provided for in this
Agreement, the Settlement Agreement and/or the Options, the Buyer and
Coddington, for themselves and for each of their successors,
predecessors, assigns, heirs, officers, partners, agents and
representatives (the "Company Releasors"), each hereby releases,
acquits and forever discharges the Fanshaw Releasors, as well as each
of their
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<PAGE> 4
affiliates, employees, officers, directors, trustees, partners,
shareholders, attorneys, servants, representatives, principals,
guarantors, sureties, insurers and agents, past and present, and each
of them, whether known or unknown, disclosed or undisclosed, and their
respective heirs, successors and assigns (the "Fanshaw Released
Parties"), of and from any and all actions, suits, causes of action,
claims, liabilities, indebtedness, debts, demands, sums of money,
obligations, agreements, controversies, contracts, covenants,
judgments, orders, rights to injunctive or declaratory relief, breaches
of contract, breaches of duty of any relationships, acts, omissions,
promises, representations, administrative claims, arbitration rights,
liens, claims of lien, loss of services, controversies, expenses,
damages, costs, attorneys' fees and liabilities of whatever kind or
nature in law, equity or otherwise, whether known or unknown,
liquidated or unliquidated, matured or unmatured which the Company
Releasors ever had, now have or may have against the Fanshaw Released
Parties, or any of them, including without limitation, arising out of
or relating to their employment by the Company and Velocity and their
respective interests in said companies.
3.2 General Nature of Release. The Releases set forth above in Article
III of this Agreement are general releases of all claims, demands, causes of
action, obligations, damages and liabilities of any nature whatsoever that are
described in the Releases and are intended to encompass all known and unknown,
foreseen and unforeseen claims which the parties may have against each other, or
any of them, except for any claims which may arise from the terms of this
Agreement, the Settlement Agreement or the Options.
3.3 Risk of Additional or Different Facts. Each of the parties
acknowledges that he, she or it may hereafter discover facts different from or
in addition to those which he, she or it now knows or believes to be true, and
he, she or it expressly agrees to assume the risk of the possible discovery of
additional or different facts, and agrees that this Agreement shall be and
remain effective in all respects regardless of such additional or different
facts.
3.4 Release of Section 1542 Rights. Further, each of the parties
expressly agrees that he, she or it waives and relinquishes all rights and
benefits he, she or it may have under Section 1542 of the Civil Code of the
State of California. That section reads as follows:
Section 1542. [Certain claims not affected by general
release.] 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.
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<PAGE> 5
ARTICLE IV
INDEMNITY
4.1 Buyer's Indemnity. Buyer agrees to indemnify and defend the
Fanshaws against, to hold the Fanshaws harmless against and to reimburse the
Fanshaws for, any actual damage, loss, cost or expense (including attorneys'
fees and costs of investigation incurred in defending against and/or settling
such damage, loss, cost or expense or claim and any amounts paid in settlement
thereof) reasonably incurred by the Fanshaws in connection with any claim or
suit brought by any third party against the Fanshaws involving or arising out of
the conduct by the Company of the business of the Velocity division on or after
November 11, 1995.
4.2 Duration of Indemnity. The indemnity set forth in Section 4.1 shall
survive the Closing. Any matter concerning which a claim has been asserted
hereunder which is pending or unresolved at the end of such periods shall
continue to be governed by the terms and conditions of this Article IV until
finally terminated or otherwise resolved.
4.3 Notification and Participation. The Fanshaws agree to notify the
Buyer of any liabilities, claims, litigation or proceeding that reasonably
appears to involve matters covered by the indemnities set forth herein promptly
upon its discovery or notification thereof, whether before or after the Closing
Date.
4.4 Limitation on Claims. No claim for indemnity pursuant to Section
4.1 shall be made unless and until the total of such claim and all similar
claims exceeds Five Thousand Dollars ($5,000). If the total of such claims
exceeds Five Thousand Dollars ($5,000), all such claims (and not merely that
amount in excess of Five Thousand Dollars ($5,000)) shall be payable hereunder.
ARTICLE V
OTHER PROVISIONS
5.1 Covenant Not to Compete. In consideration of the payment of
Twenty-Four Thousand Five Hundred Eighty-Four and 61/100 Dollars ($24,584.61)
(the "Non-Compete Payment"), payable in three equal monthly installments of
$8,194.87, payable on each of March 10, 1996, April 10, 1996 and May 10, 1996,
Charlotte Fanshaw ("C. Fanshaw") agrees that, for a period of five (5) years
from the date of this Agreement (the "Restricted Period"), she shall not:
(a) (i) directly or indirectly, own (through any form of
ownership other than ownership of securities of a
publicly-held corporation of which C. Fanshaw owns, or has
real or contingent rights to own, less than five percent (5%)
of any class of outstanding securities), finance, manage,
operate, control, join or participate
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<PAGE> 6
in the ownership, management, operation or control, or be
employed or connected as a director, officer, principal,
agent, employee, employer, adviser, consultant, partner or in
any other individual or representative capacity whatsoever,
either for her own benefit or for the benefit of any other
person or entity of whatever kind, with, of or by, any
business, firm, corporation (governmental or private) or any
other entity of whatever kind (a "Fanshaw Affiliate"), which
is, directly or indirectly, competitive with any aspect of the
"Company Business" as hereinafter defined, as carried on prior
to the date hereof and as of the date hereof, in any foreign
country or state of the United States in which the Company has
carried on or, as of the date hereof, is carrying on business
in respect of any Company Business; and without limiting the
provisions of this Subsection (a)(i),
(ii) (1) directly or indirectly canvass or solicit any of the
customers of the Company or its affiliates to purchase goods
or services of the type described in Section 5.1(c) below,
from any other person or entity, provided that C. Fanshaw
shall not be deemed to be in breach of this provision if a
Fanshaw Affiliate does so without any of the Fanshaws'
recommendation or involvement; (2) directly or indirectly
request or advise any customer, supplier or licensor of the
Company or its affiliates or any person engaging in business
activities or transactions with the Company or its affiliates
to withdraw, curtail or cancel its business or such activities
or transactions with the Company or its affiliates; or (3)
directly or indirectly seek to obtain or obtain from any
licensor of the Company or its affiliates, any license with
respect to goods or services of the type specified in Section
5.1(c) below.
(b) As used in this Article V: the term "at the date hereof"
shall mean the Effective Date hereof; and "affiliate" shall mean any
entity controlling, controlled by or under common control with the
Company.
(c) The term "Company Business" is defined, for purposes of
this Agreement, as the design, manufacture, distribution and/or
marketing of aluminum wheels, motorcycle wheels, go-cart wheels, custom
wheels, steering wheels and OEM wheels (collectively "Wheels"), billet
aluminum accessories and car care products for the automotive
aftermarket. The Company Business shall be defined, for purposes of
this Agreement, in its broadest sense.
(d) Notwithstanding anything in this Agreement to the
contrary, the Fanshaws shall not be precluded by this Agreement from
directly or indirectly owning, financing, managing, operating,
controlling or being employed by or
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<PAGE> 7
otherwise connected with any business, firm, or entity which is engaged
in the retail or wholesale distribution and marketing of Wheels, billet
aluminum accessories and car care products for the automotive
aftermarket and not in the design and/or manufacture of such products.
(e) During the Restricted Period, C. Fanshaw shall keep secret
and retain in strictest confidence and shall not use for the benefit of
herself or others, all confidential matters of the Company relating to
the Company Business, including, without limitation, "know how", trade
secrets, customer lists, details of client or consultant contracts,
pricing policies, operational methods, marketing plans or strategies,
product development techniques or plans, business acquisition plans,
new personnel acquisition plans, methods of manufacture, technical
processes, design and design projects, inventions and research projects
of the Company (the "Confidential Information") learned by C. Fanshaw
heretofore or hereafter. The obligations of confidentiality and
nondisclosure imposed upon C. Fanshaw pursuant to this Agreement shall
not apply when:
(i) The Confidential Information disclosed to C.
Fanshaw was in the public domain at the time of disclosure, or
at any time after disclosure has become (except by breach of
this Agreement or by other improper means as defined in
California Civil Code Section 3426.1) a part of the public
domain by publication or otherwise; or
(ii) Disclosure is made pursuant to subpoena or other
legal process; or
(iii) Disclosure is made pursuant to the prior
written consent of the Company.
(f) All memoranda, notes, lists, records and other documents
(and all copies thereof), including such items stored in computer
memories, on microfiche, or by any other means made or compiled by or
on behalf of C. Fanshaw, or made available to C. Fanshaw relating to
the Company are and shall be the Company's property and shall be
delivered to the Company immediately upon execution of this Agreement.
C. Fanshaw agrees not to retain any written or other tangible material
containing any information concerning or disclosing any of the
Confidential Information. Upon execution of this Agreement, C. Fanshaw
shall deliver to the Company all Company keys, credit cards, codes and
any and all other Company belongings.
(g) During the Restricted Period, C. Fanshaw shall not,
directly or indirectly, hire or solicit any employee of the Company or
of its affiliates or encourage such employee to terminate such
employment, provided that C. Fanshaw shall not
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<PAGE> 8
be deemed to be in breach of this provision if a Fanshaw Affiliate does
so without any of the Fanshaws' recommendation or involvement.
(h) During the Restricted Period, C. Fanshaw shall not,
directly or indirectly, encourage any consultant then under contract
with the Company or any of its affiliates to terminate such
relationship.
(i) C. Fanshaw acknowledges that legal remedies at law for a
violation of this Agreement will not be adequate and that the damage to
the Company and/or its affiliates as a result of such violation will be
irreparable. Consequently, Buyer and/or its affiliates shall each be
entitled, as a matter of right, and in addition to any other remedies
available at law or in equity, to have this Agreement specifically
enforced by any court of competent jurisdiction, it being agreed that
any breach or threatened breach of this Agreement would cause
irreparable injury to Buyer and its affiliates, and that money damages
will not provide an adequate remedy to Buyer; therefore, Buyer and its
affiliates shall be entitled to immediate temporary and permanent
injunctive relief and other appropriate equitable relief, without the
posting of any bond or other security by Buyer, for any such breach or
threatened breach. Such relief shall be in addition to any other relief
to which the Company may be entitled at law or in equity.
(j) In addition to the remedies provided to the Company
pursuant to Section 5.1(i) above, if a court of competent jurisdiction
shall finally determine (with appeals exhausted or waived) that C.
Fanshaw has breached any of the terms of this Article V, C. Fanshaw
shall forfeit the Non-Compete Payment provided in this Article V and,
whether or not the court finds that the non-compete provisions are
lawfully enforceable, she shall forthwith, upon demand by the Company,
reimburse the Company for any such amounts in an amount which
represents the pro rata portion of the Non-Compete Payment relating to
any remaining term of the Restricted Period.
5.2 Bulk Sales. Buyer hereby waives compliance by Seller with the
provisions of the Uniform Commercial Code and other applicable statutes of any
jurisdiction relating to the bulk transfer of property. Seller agrees to
indemnify Buyer against, to hold Buyer harmless against and to reimburse Buyer
for, any actual damage, loss, cost or expense (including attorneys' fees and
costs of investigation incurred in defending against and/or settling such
damage, loss, cost or expense or claim therefor and any amounts paid in
settlement thereof) reasonably incurred by Buyer by reason of the failure of
Seller to comply with any such law, other than liabilities which Buyer shall
have expressly assumed pursuant to this Agreement.
-8-
<PAGE> 9
5.3 Notices. Any notices pursuant to this Agreement, shall be given by
registered or certified mail return receipt requested addressed as follows:
If to Buyer: Boyds Wheels, Inc.
8380 Cerritos Avenue
Stanton, California 90680
Attn: Boyd Coddington,
Chief Executive Officer
With a copy to: Rutan & Tucker
611 Anton Boulevard, Suite 1400
Costa Mesa, California 92626
Attn: Evridiki (Vicki) Dallas, Esq.
If to Seller: Velocity Distribution, Inc.
_______________________________
_______________________________
Attn: Boyd Coddington and
Brad Fanshaw
If to Fanshaw: Brad and Charlotte Fanshaw
12461 Country Lane
Santa Ana, California 92705
With a copy to: Sheppard, Mullin, Richter & Hampton
19th Floor, 501 West Broadway
San Diego, California 92101-3505
Attn: Guy Halgren, Esq.
If to Coddington: Boyd and Diane Coddington
_______________________________
_______________________________
_______________________________
(or at such other address or to such other person or persons as may be
designated by notice in writing) and shall be deemed delivered two business days
after placed in the mail.
5.4 Entire Agreement; Amendments and Waivers. This Agreement, together
with all exhibits, schedules and statements delivered pursuant to the terms of
this Agreement, constitutes the entire agreement between the parties hereto and
supersedes any prior agreement and understanding of the parties in connection
herewith. The parties to this Agreement each acknowledge that no
representations, inducements, promises, agreements, or warranties, oral or
otherwise, have been made by them, or anyone acting on their behalf, which are
not embodied in this Agreement, that they have not executed this Agreement in
reliance on any such representations, inducements, promise, agreement or
warranty, and that no representation, inducement, promise, agreement or warranty
not contained in this Agreement, including, but not limited to, any purported
supplements, modifications, waivers, or terminations of this Agreement, shall be
valid or binding, unless executed in
-9-
<PAGE> 10
writing by all of the parties to this Agreement. No supplement, modification or
waiver of this Agreement shall be binding unless executed in writing by the
party to be bound thereby. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar), nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided. Except for the obligations expressly
provided for in the Agreement or in the Settlement Agreement or any options to
purchase stock of the Company held by Fanshaw, the parties each covenant and
agree never to commence, aid in any way, prosecute or cause to be commenced or
prosecuted any action or other proceeding based upon any claims, demands, causes
of action, obligations, damages or liabilities which are the subject of this
Agreement, or to assist others in the prosecution of any claims or actions
against any of the released parties.
5.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
5.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
5.7 Headings. The headings of the several Articles and Sections herein
are inserted for convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.
5.8 No Assignments. This Agreement may not be assigned by operation of
law or otherwise without the written consent of the other party hereto.
5.9 Other Agreements. Effective upon the Closing Date, the License
Agreement dated November 1, 1993, by and between Seller and the Company shall
terminate. This Agreement supersedes that certain Letter of Agreement attached
hereto as Exhibit 5.9 in its entirety.
5.10 Non-Assignment of Claim. The parties each warrant that he, she or
it has made no assignment and will make no assignment of any claim, chose in
action, right of action, or any right of any kind whatsoever, embodied in any of
the claims and allegations referred to herein, and that no other person or
entity of any kind (other than as expressly mentioned above) had or has any
interest in any of the demands, obligations, actions, causes of action, debts,
liabilities, rights, contracts, damages, attorneys' fees, costs, expenses,
losses or claims referred to herein.
5.11 Binding Effect on Successors and Assigns. This Agreement and all
the terms and provisions hereof, shall be binding upon and shall inure to the
benefit of the parties and their respective heirs, legal representatives,
successors and assigns.
-10-
<PAGE> 11
5.12 Interpretation. Should any portion, word, clause, phrase, sentence
or section of this Agreement be declared void or unenforceable, such portion
shall be considered independent and severable from the remainder, the validity
of which shall remain unaffected. Whenever required by the context, as used in
this Agreement the singular number shall include the plural, and the masculine
gender shall include the feminine and neuter.
5.13 Attorneys Fees. Should any legal action, arbitration or other
proceeding be commenced to secure the performance of this Agreement and in
obtaining any appropriate relief based thereon, the party prevailing in such
legal action, arbitration or other proceeding shall, in addition to such other
relief as may be awarded, be entitled to recover costs and reasonable attorneys'
fees.
5.14 Failure to Assert Right is Not Waiver. Failure to insist on
compliance with any term, covenant or condition contained in this Agreement
shall not be deemed a waiver of that term, covenant, or condition, nor shall any
waiver or relinquishment of any right or power contained in this Agreement at
any one time or more times be deemed a waiver or relinquishment of any right or
power at any other time or times.
5.15 Knowing and Voluntary Agreement. This Agreement in all respects
has been voluntarily and knowingly executed by the parties hereto. Fanshaws
specifically represent that they are represented by counsel, that they have been
given the opportunity to consult with their attorney, and that they have
consulted with their attorney to their satisfaction concerning the terms and
conditions of this Agreement. Fanshaws further represent that they have
carefully read and fully understand all of the provisions of this Agreement, and
that they are voluntarily entering into this Agreement.
5.16 Their Own Costs. Each party to this action and/or this Agreement
shall bear and sustain his or her own costs and disbursements incurred in its
preparation and negotiation.
5.17 Method of Dispute Resolution. The parties agree that any
controversy or dispute arising from or in connection with this Agreement, its
interpretation, performance or termination, shall, upon demand of a party, be
submitted to and decided by binding arbitration. The arbitration shall be
conducted pursuant to Part 3, Title 9 of the California Code of Civil Procedure
(Sections 1280-1288.8). Discovery, including depositions for the purpose of
discovery, shall be broadly permitted, and the provisions of Code of Civil
Procedure Section 1283.05 shall apply. Any demand to arbitrate, for purposes of
the statute of limitations, shall have the same effect as if suit had been filed
on the date the demand is made. The arbitration shall occur in Orange County,
California. The parties shall agree upon an arbitrator twenty-one (21) days
after the demand is made, and if the parties fail to so agree, then any of them
may apply to the court for an order appointing an
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<PAGE> 12
arbitrator meeting the requirements of this section. The decision of the
arbitrator shall be final and binding, and shall be subject to confirmation,
correction or vacation in accordance with the provisions of Code of Civil
Procedure Sections 1285-1287.4. Any application, petition or other proceeding
(i) to enforce the award or the provisions of this Agreement, (ii) to the extent
that the arbitrator does not have the power or authority to resolve or grant the
relief sought, and/or (iii) for provisional or equitable relief pending
appointment of the arbitrator, shall be commenced in the appropriate state or
federal courts having jurisdiction in Orange County, California and the parties
hereby consent to jurisdiction and venue in such courts.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf by its duly authorized representative as
of the date first above written.
"BUYER" BOYDS WHEELS, INC.
By:________________________________
Its Chief Executive Officer
By: _______________________________
Its Chief Financial Officer
FANSHAW: ___________________________________
BRAD FANSHAW
___________________________________
CHARLOTTE FANSHAW
CODDINGTON: ___________________________________
BOYD CODDINGTON
___________________________________
DIANE CODDINGTON
"SELLER" VELOCITY DISTRIBUTION, INC.
By:________________________________
Its Secretary
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<PAGE> 13
EXHIBIT 1.1
Assets
<TABLE>
<S> <C>
Cash $23,610.00
Trade Accounts Receivable 8,787.00
Inventory 30,795.00
Property and Equipment
Mirror 1,820
Display Racks 3,250
Computer 1,000
Office Equipment 1,495
Design Tooling 7,568
Mailing 5,000
-----
Total Proprietary and Equipment 20,133.00
Accumulative Depreciation (4,288.00)
Other Assets 633.00
---------
Total Assets 79,670.00
=========
</TABLE>
<PAGE> 14
EXHIBIT 1.2
The Assumed Liabilities
<TABLE>
<S> <C>
Trade Accounts Payable $ 8,336.00
Income Tax Payable 5,109.00
Wages Payable (to Charlotte Fanshaw) 53,981.93
Loan From Stockholders 13,920.00
-----------
Total Liabilities $ 81,346.93
===========
</TABLE>
<PAGE> 15
EXHIBIT 2.1
Net Book Value
<PAGE> 16
EXHIBIT 2.2
Instruments
<PAGE> 17
EXHIBIT 5.4
Litigation
None
