Item
2.01. Completion of Acquisition or Disposition of Assets.
On
January 18, 2018 (the “
Closing Date
”), Code Green Apparel Corp. (“
we
”, “
us
”
or the “
Company
”), consummated the transactions contemplated by a Share Exchange Agreement (the “
Exchange
Agreement
” and the “
Exchange
”), by and between the Company, Designer Apparel Group, LLC (“
Designer
Apparel
”) and the sole member of Designer Apparel, Steve Short, on the same day. The Exchange was effective for all
purposes as of January 18, 2018. The Exchange Agreement includes customary representations, warranties, and indemnification obligations
of the parties.
In
connection with the closing of the Exchange, we agreed to: (i) pay Mr. Short, as the sole member of Designer Apparel, $50,000
in cash, of which (A) $25,000 in cash is due and payable no later than 30 days following the Closing Date; and (B) $25,000 in
cash due and payable no later than 180 days following the Closing Date; and to (ii) issue Mr. Short (A) 5,000,000 shares of the
Company’s restricted common stock within 30 days from the Closing Date (the “
Closing Shares
”); (B) 2,500,000
shares of the Company’s restricted common stock within 30 days of the one year anniversary of the Closing Date, provided
the Employment Requirements (described below) are met (the “
1st Anniversary Shares
”); and (C) 2,500,000 shares
of the Company’s restricted common stock within 30 days of the two year anniversary of the Closing Date, provided the Employment
Requirements are met (the “
2nd Anniversary Shares
”, and collectively, with the 1st Anniversary Shares and the
Closing Shares, the “
Shares
”). The “
Employment Requirements
” means that Mr. Short is employed
by the Company in good standing on the applicable date of determination.
The
Exchange Agreement provides that in the event the Company becomes subject to any bankruptcy proceeding prior to the earlier of
(a) the tenth anniversary of the Closing Date; (b) the date that the Company has divested its ownership of Designer Apparel; and
(c) the date Designer Apparel is dissolved, Mr. Short is provided the right, exercisable in writing, within thirty days of Mr.
Short becoming aware of the occurrence of such event, to repurchase the Company’s then entire ownership interest in Designer
Apparel for $10 in cash (a “
Repurchase
”). In the event the Repurchase occurs prior to (a) the payment in full
of the cash payments due under the Exchange Agreement; and/or (b) the issuance in full of the Shares, all remaining cash payments
and Shares, are deemed forfeited, waived and forgiven in their entirety.
The
Exchange Agreement also requires that Mr. Short be afforded the option to serve on the Company’s Board of Directors for
a period of not less than one (1) year following the Closing Date.
As
a result of the Exchange, Designer Apparel became our wholly-owned subsidiary.
A
required condition to the closing of the Exchange Agreement was that the Company enter into an Employment Agreement with
Mr. Short, which employment agreement the parties are still negotiating, and which closing requirement was waived by Mr.
Short prior to closing.
The
foregoing description of the Exchange Agreement is qualified in its entirety by reference to the full text thereof which is filed
as
Exhibit 2.1
to this Current Report on Form 8-K and incorporated herein by reference.